Can Fintech development improve the financial inclusion of village and township banks? Evidence from China

Enhancing the financial inclusion of financial institutions enables more vulnerable groups to obtain opportunities to access loans—an essential prerequisite for achieving the United Nations' Sustainable Development Goals. The main purpose of this study is to explore whether the development of Fintech impacts the financial inclusion of village and township banks (VTBs). Using the micro survey data of 900 VTBs, this paper empirically analyzes the impact of financial technology on the financial inclusion of VTBs and explores the mediating role of mobile banking adoption. The results demonstrate that the development of Fintech can improve the financial inclusion of VTBs through the application of mobile banking. Notably, VTBs can significantly contribute to financial inclusion by adopting an online and offline service model, though mobile banking is substituting physical branches with the rapid development of financial technology. Further analysis finds that the development of Fintech has prompted VTBs to increase the inclusiveness of loans to rural households, loans to poor households, and loans to small and micro enterprises. Furthermore, rural credit institutions and city commercial banks as the main shareholders are conducive to strengthening the role of Fintech in promoting the financial inclusion of VTBs. Finally, the development of Fintech has a stronger competitive incentive for VTBs located in the eastern regions.