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Unlocking the potential of digital finance: digital bank credit’s impact on traditional banking for SMEs in China

Author

Listed:
  • Yuhong Huang

    (Southwestern University of Finance and Economics)

  • Jiale Jia

    (Southwestern University of Finance and Economics)

  • Yingwei Ren

    (Chengdu Textile College)

Abstract

Based on the China Micro and Small Enterprise Survey and Digital Financial Inclusion Index, this paper studies the influence and mechanism of the credit development of digital bank on traditional credit of banks. The empirical results show that there is a crowding out effect of digital credit on the demand of bank traditional credit of small and micro enterprises (SMEs). And due to the rent-seeking problem in traditional bank credit business, digital credit significantly reduces the rent-seeking motivation of SMEs to maintain the bank-enterprise relationships, and reduces the entertainment expenses, including hosting meals, giving gifts, especially those involving high-end venues and the presentation of expensive gifts; while for SMEs with the demand of bank credit, the rent-seeking motivation and entertainment expenses increase significantly. Moreover, the crowding out effect of digital credit mainly occurs in SMEs without bank-enterprise relationships and areas with low degree of financial marketization. The research conclusion has certain guiding significance for adjusting the market layout and optimizing small and micro credit business.

Suggested Citation

  • Yuhong Huang & Jiale Jia & Yingwei Ren, 2025. "Unlocking the potential of digital finance: digital bank credit’s impact on traditional banking for SMEs in China," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 15(2), pages 317-351, June.
    • Handle: RePEc:spr:eurase:v:15:y:2025:i:2:d:10.1007_s40822-024-00301-y
    DOI: 10.1007/s40822-024-00301-y
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    More about this item

    Keywords

    Digital credit; Credit demand; Bank-enterprise relationships; Rent-seeking;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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