Digital Financial Inclusion and Financial Vulnerability Analysis of the Household Economy - Empirical Evidence Based on CFPS

Abstract

The global landscape of digital financial inclusion aims to extend broader, more accessible, and cost-efficient financial services via digital channels to those marginalized by conventional financial systems. Particularly in developing countries, household economic and financial fragility remains a pressing concern. Economic vulnerability denotes the incapacity of households to withstand unforeseen difficulties in the wake of economic downturns, precipitating a significant deterioration in living standards. This research investigates the role of digital financial inclusion in diminishing household economic vulnerability and enhancing the efficacy of financial services to address this challenge. Employing a fuzzy rough set algorithm to examine the China Family Panel Studies (CFPS) dataset, our analysis identifies critical factors of household economic vulnerability and their interaction with digital financial inclusion services. Findings demonstrate that digital financial services markedly reduce household economic vulnerability, evidenced by a 12% improvement in household solvency and a 20% uplift in financial resilience. Rural and lower-income families derive the most significant benefits from digital financial inclusion. Furthermore, the study underscores the importance of advancing financial literacy and refining financial product design as pivotal strategies in mitigating household economic vulnerability. This research offers valuable insights for policymakers and financial service providers on leveraging digital technology to bolster household economic stability.