The Role of Digital Financial Inclusion in Microenterprise Growth: Evidence from Kohima, Nagaland

Abstract

This research examines how digital financial inclusion—particularly the use of Unified Payments Interface (UPI), digital accessibility, and loan acquisition—affects the growth of microenterprises in Kohima, Nagaland, India. By analyzing primary data collected from 612 participants, a multinomial logistic regression analysis is utilized to evaluate how these factors influence four self-reported categories of business growth: No Growth, Low, Moderate, and High. The findings indicate that the use of UPI and the approval of loans significantly increase the chances of achieving higher growth outcomes. The marginal effects suggest that frequent UPI users are more than 12% more likely to report substantial growth. Analysis of Interaction displays that the positive impact of UPI on growth is enlarged when it is paired with access to credit. These results display the potential of digital financial tools to stand-in inclusive entrepreneurial development in semi-urban and under-researched areas. The recommendations for policy focus on incorporating data on digital usage into microcredit assessments, promoting financial technology education, and creating localized strategies to enhance digital infrastructure in northeastern India. These notable findings provide valuable insights into digital inclusion and business development in India's lesser-researched areas.