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Money talks, green walks: Does financial inclusion promote green sustainability in Africa?

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  • Eshun, Samuel Fiifi
  • Kočenda, Evžen

Abstract

This study explores the dynamic relationship between financial inclusion and green sustainability across 38 African countries. We construct an environmental pollution index and a financial inclusion index covering the period 2000–2021 to account for the several dimensions within both indicators and employ them in the System GMM approach. We also test for intra-regional heterogeneity in Africa. Our empirical results show that financial inclusion, while economically beneficial, poses a significant risk of environmental degradation and has a distinctive inverted U-shaped relationship. A direct link between increases in financial inclusion and pollution alters at a turning point, beyond which further financial inclusion increases enhance green sustainability. The same pattern is observed for aggregate output. The results hold even when we control for a score of macro-level determinants. Our analysis highlights intra-regional heterogeneity, revealing differences in impact across income levels and regional groups within Sub-Saharan Africa. These results remain robust for alternative proxies of green sustainability. We offer valuable insights for policymakers to promote sustainability through inclusive financial practices and policies in Sub-Saharan Africa.

Suggested Citation

  • Eshun, Samuel Fiifi & Kočenda, Evžen, 2025. "Money talks, green walks: Does financial inclusion promote green sustainability in Africa?," Global Finance Journal, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:glofin:v:64:y:2025:i:c:s104402832400142x
    DOI: 10.1016/j.gfj.2024.101070
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    Keywords

    Environmental pollution index; Financial inclusion index; Environmental; Social and governance (ESG); Corporate social responsibility (CSR); Green sustainability; Sub-Saharan Africa (SSA);
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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