Digital divide or dividend? The impact of digital finance on the migrants' entrepreneurship in less developed regions of China

Entrepreneurial activity has been documented as an important mechanism to achieve poverty alleviation. In line with this, providing access to entrepreneurial finance for disadvantaged groups has been a prominent policy tool. The advent of digital finance may prove a game changer in that it could substantially lower the threshold to access entrepreneurial finance, particularly for disadvantaged entrepreneur who have a hard time accessing formal sources of finance. This study explores whether the availability of digital finance indeed increases the propensity and the quality of entrepreneurship among Chinese migrants. The paper applies data of the China Migrants Dynamic Survey in 2018 and the China's digital financial inclusion index. The results show that local digital financial development is indeed positively associated with entrepreneurial probability and quality. Moreover, the three sub-dimensions of digital finance (e.g., breadth of coverage, depth of use and level of digitization) also increase the likelihood of migrants' entrepreneurship. From the perspective of entrepreneurial motivation, digital finance has a significant positive impact on not only the migrants' choice of necessity-based entrepreneurship, but also on the selection of opportunity-based entrepreneurship. In addition, this paper finds that the facilitating role of digital finance on entrepreneurship is more prominent for migrants who lived in rural regions, with lower educational levels, experienced cross-provincial mobility, not belonging to a member of party organization and whose parents do not have good education background and local hukou, which reflects the inclusiveness of digital finance in reversing the financing disadvantage of vulnerable groups. Though this study is set in the context of China, the principle that access to digital finance increases the propensity of entrepreneurship as well as its quality likely translates to other contexts in the developing world. • The rise of digital finance has provided more diversified financing sources for the entrepreneurship of disadvantaged groups. • We explore the role of digital finance development on the entrepreneurial behavior of Chinese migrants from multiple levels. • Digital finance is conducive to enhancing the entrepreneurial probability and quality of migrants in less developed areas. • The sub-dimensions of breadth of coverage, depth of use and level of digitization can promote the migrants’ entrepreneurship. • Digital finance development promotes both migrants’ necessity-based entrepreneurship and opportunity-based entrepreneurship. • It is more prominent for migrants in rural regions, with lower educational levels or experienced cross-provincial mobility. • It is more significant for migrants who are not party members or parents without good education background and local hukou. • The inclusiveness of digital finance in stimulating entrepreneurship can inspire common prosperity for developing countries.