Financial Inclusion and Electricity Consumption: A Cross-Country Study of Upper-Middle and Lower-Middle Income Countries

Electricity consumption's positive impact on household well-being, education, and quality of life is well-documented. Yet, providing accessible and affordable electricity remains a global governance challenge. This study explores the potential of financial inclusion to extend electricity consumption. Investigating the relationship empirically, we analyze the effect of financial inclusion on per capita electricity consumption across countries. Using annual data from 2004 to 2021, we employ various econometric models (such as ordinary least squares, fixed effect, random effect, panel corrected standard errors, feasible general least square, Generalized Method of Moments, and Driscoll-Kraay approach) to examine this nexus in both upper-middle and lower-middle income countries. The study unveils a positive association between financial inclusion and per capita electricity consumption across the overall sample and income subgroups. Robustness checks further underscore the consistency of our findings across income categories. In light of our findings, policymakers could consider leveraging financial inclusion initiatives as strategic measures to bolster electricity consumption across both upper- and lower-middle-income countries.