Digital financial inclusion in micro enterprises: understanding the determinants and impact on ease of doing business from World Bank survey

The study aims to identify the determinants of digital financial inclusion (DFI) and its role in micro enterprises' ease of doing business. The study is based on the World Bank's Enterprises Survey of Micro Firms (ESM) 2022 data of 998 micro-enterprises. The variables that measure access and use of digital finance are extracted from the data. Two sets of independent variables, namely digital resource capability and firms and owners' characteristics, are taken as explanatory variables of digital financial inclusion. Analysis of variance (ANOVA) has been applied to analyze the difference in perceived business obstacles across the micro-enterprises with and without access and use of digital finance. Further, a logistic regression model is developed to analyze the determinants of DFI. The findings of the study reveal that digital financial inclusion helps to face obstacles in business regulation and handle market externalities. Further, estimates of both the logistic regression model and marginal effects suggest that access to the internet, education, and owner experience are instrumental in digital financial inclusion among micro-enterprises. This study may be helpful for various stakeholders, such as the government, promoters of entrepreneurship, banks, and international organizations working in digital financial inclusion. The originality of the study lies in exploring the determinants of DFI among micro-enterprises, which are still unexplored in the case of India using extensive and specific micro enterprise's data collected by the World Bank.

Amar Johri, Mohammad Asif, Preeti Tarkar, Waseem Khan, Rahisha, Mohammad Wasiq