TOPIC- The Impact of Digital Financial Inclusion on Small and Medium Enterprises (SMEs) in Rural India

Abstract

This study explores the transformative role of digital financial inclusion (DFI) on the growth and sustainability of Small and Medium Enterprises (SMEs) in rural India. In recent years, initiatives such as the Digital India campaign, Jan Dhan Yojana, UPI, and the spread of digital banking/mobile banking has helped to bridge the financial accessibility difference in underprivileged areas. This study examines how access to digital financial services—such as mobile payments, digital banking, and digital credit—has influenced the operational efficiency, market reach, and financial robustness of rural SMEs.

Secondary data-based qualitative analysis technique has been used in the research. The key data sources comprise Ministry of MSME Annual Reports (2016–2024), RBI and NPCI Reports, Global Findex Database of the World Bank; NITI Aayog reports, IFC reports, industry reports. Thematic analysis of data and trend evaluation, helps to assess indicators such as digital payment adoption, credit availability, and SME survival rates post-DFI interventions.

As per the preliminary data digital financial tools and the performance of small and medium sized entreprises (SMEs) shows a positive correlation. This positive association indicates increased formalisation, improved access to working capital, and enhanced participation in ecommerce platforms. Further, the research highlights a number of ongoing problems , such as lack of digital financial literacy, lack of trust in digital financial systems, and infrastructural limitations. The objective of this research is to empower rural SMEs as engines of inclusive economic development by synthesising cross-sectoral insights and providing policy-relevant recommendations to optimise digital financial ecosystems.