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

Samuel Eshun and Evžen Kočenda

Global Finance Journal, 2025, vol. 64, issue C

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.

Keywords: Environmental pollution index; Financial inclusion index; Environmental; Social and governance (ESG); Corporate social responsibility (CSR); Green sustainability; Sub-Saharan Africa (SSA) (search for similar items in EconPapers)
JEL-codes: C23 E44 F64 K32 O55 Q43 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Money Talks, Green Walks: Does Financial Inclusion Promote Green Sustainability in Africa? (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:64:y:2025:i:c:s104402832400142x

DOI: 10.1016/j.gfj.2024.101070

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