From Expanding Scale to Enhancing Effectiveness: The Effects of Fiscal Support on the Development of Inclusive Finance in China

The development of inclusive finance in China is distinctly characterized by fiscal support. As inclusive finance urgently needs to undergo a high-quality transition from "expanding scale and coverage" to "improving quality and effectiveness," clarifying the actual effects of fiscal support is crucial. To this end, this paper distinguishes between "scale expansion" in the sense of the direct objective and "effectiveness enhancement" in the sense of the fundamental objective of inclusive finance development, divides fiscal support into direct and indirect support, and constructs a multisector theoretical model incorporating heterogeneous demand-side agents. Based on provincial panel data from 2016 to 2023, it then identifies the effects of fiscal support from the perspective of the urban–rural income gap. The results show that direct fiscal support promotes both the "scale expansion" and "effectiveness enhancement" of inclusive finance, but its promoting effect on "scale expansion" is significantly stronger than that on "effectiveness enhancement." By improving the underlying economic and social environment, indirect fiscal support also effectively promotes both "scale expansion" and "effectiveness enhancement." Further analysis shows that incremental rewards for agriculture-related lending can strengthen financial institutions' willingness to supply, while interest subsidies for guaranteed entrepreneurial loans can unlock the demand potential of market participants; the two instruments can promote the "effectiveness enhancement" of inclusive finance from the supply side and the demand side, respectively. This paper provides a reference for deepening the conceptual foundations of inclusive finance development in China and optimizing the structure of fiscal support to advance its high-quality development.