“Determinants of Digital Financial Inclusion and its Impact on Micro Enterprises” Ease of doing Business, A Comprehensive Review

Abstract

This study investigates the determinants of digital financial inclusion (DFI) and its influence on the ease of doing business for micro-enterprises in India. Utilizing data from the World Bank's Enterprises Survey of Micro Firms (ESM) 2022, encompassing 998 micro-enterprises, this research examines variables related to access and usage of digital finance. Two categories of independent variables—digital resource capability and firms' and owners' characteristics—are analyzed as explanatory factors for DFI. Analysis of variance (ANOVA) is employed to assess disparities in perceived business obstacles between micro-enterprises with and without access to digital finance. Additionally, a logistic regression model is constructed to identify the determinants of DFI. The findings indicate that DFI plays a significant role in mitigating business obstacles related to regulation and market externalizes for micro-enterprises. Moreover, results from both the logistic regression model and marginal effects estimation underscore the importance of factors such as internet access, educational attainment, and owner experience in facilitating DFI among micro-enterprises. This study offers insights valuable to diverse stakeholders including government agencies, entrepreneurship promoters, financial institutions, and international organizations involved in promoting digital financial inclusion. A noteworthy contribution of this study lies in its examination of the determinants of DFI specifically among micro-enterprises in India, leveraging extensive and specific data collected by the World Bank. By shedding light on this under explored area, the study contributes to a deeper understanding of the factors influencing digital financial inclusion in the context of India's micro-enterprise sector.