The benefits of small business FinTech lending: Evidence from entrepreneurs’ consumption structure

Abstract

Utilizing data on 160,000 individually-owned micro and small enterprises (MSEs) and the consumption of their entrepreneurs from the Ant Group, the FinTech giant, we show that MSEs' usage of FinTech credit is followed by a significant reduction in their entrepreneurs' food consumption as a percentage of total consumption, which is driven by an increase in their non-food consumption. It confirms FinTech credit's role in enhancing consumption structure, an important manifestation of the life quality, of MSE entrepreneurs who constitute the vast majority of the private-sector working population. Further analysis shows that the effect takes place through FinTech credit's positive impact on MSEs' operation. A series of robustness tests ensure that the results are not simply driven by endogeneity. Furthermore, the effect is especially evident for entrepreneurs with greater e-commerce operation experience, in less favorable financial condition, and located in cities with greater ease of doing business and more developed digital financial inclusion system.