Dual Pathways of Digital Finance Inclusion in Alleviating Rural Multidimensional Poverty: Empowerment through Financial Literacy and Strengthening Risk Resilience

This paper investigates how digital financial inclusion alleviates rural multidimensional poverty through two interrelated mechanisms: financial literacy empowerment and risk resilience enhancement. We find that Digital Financial Inclusion (DFI) significantly reduces multidimensional poverty by improving households’ access to financial resources and by promoting human capital investment. The poverty reducing effects are more pronounced among households with lower income, limited savings, or higher exposure to environmental and income shocks. Further mechanism analysis confirms that financial literacy empowerment operates by enhancing financial knowledge, optimizing household resource allocation, and stimulating investment in education and productive assets, while risk resilience enhancement functions by expanding liquidity access, facilitating emergency credit, and mitigating vulnerability to health and income shocks. Together, these mechanisms demonstrate that Digital Financial Inclusion (DFI) not only strengthens household economic capabilities but also reduces their exposure to multidimensional deprivation. These findings provide robust empirical evidence that digital financial inclusion serves as an effective instrument for capability enhancement and vulnerability reduction, offering new insights for inclusive growth and rural poverty alleviation in the digital era.