Sustainable Finance: Bridging Circular Economy Goals and Financial Inclusion in Developing Economies

Edosa Getachew Taera () and Zoltan Lakner ()
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Edosa Getachew Taera: School of Economic & Regional Sciences, Hungarian University of Agriculture and Life Sciences, Pater Karoly Street-1, 2100 Godollo, Hungary
Zoltan Lakner: Institute of Agricultural and Food Economics, Hungarian University of Agriculture and Life Sciences, Pater Karoly Street-1, 2100 Godollo, Hungary

World, 2025, vol. 6, issue 2, 1-22

Abstract: Sustainable finance is critical for solving global concerns such as climate change, social inequality, and fostering a circular economy, which seeks to decouple economic progress from resource extraction and waste production. This study explores how sustainable finance tools, such as green bonds, microfinance, and impact investing, can advance financial inclusion and sustainable development in developing countries. Employing a mixed-methods approach that encompasses financial analysis alongside case studies from Sub-Saharan Africa, Asia, and Latin America, the study discerns both successful initiatives and ongoing challenges in reconciling CE objectives with financial accessibility. The results indicate that the global green bond issuance exceeded $575 billion in 2023, while efforts toward financial inclusion have enabled mobile money access for over 70% of the adult population in Sub-Saharan Africa. Nevertheless, the uptake of CE remains constrained, with merely 7.2% of materials within the global economy being classified as circular. These findings emphasize the necessity for integrated policies and innovative financial instruments to dismantle systemic obstacles and amplify sustainable finance solutions in resource-limited contexts. The study contributes to the literature by building on the existing frameworks and offering an integrated approach that provides empirical insights and pragmatic strategies for policymakers and financial institutions to enhance sustainable development and foster equitable economic growth, addressing gaps in traditional finance and regulatory frameworks to support circular economy adoption in resource-constrained nations.

Keywords: sustainable finance; circular economy; financial inclusion; green bonds; microfinance; impact investing; developing economies; sustainable development (search for similar items in EconPapers)
JEL-codes: G15 G17 G18 L21 L22 L25 L26 Q42 Q43 Q47 Q48 R51 R52 R58 (search for similar items in EconPapers)
Date: 2025
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