Financial inclusion for a greener Africa: unlocking low-carbon development through technology

This study examines how financial inclusion influences carbon intensity in 35 Sub-Saharan African countries over the period 2000–2022, with particular attention to the mediating role of technological innovation. Grounded in financial development theory and the energy ladder framework, the analysis explores both the direct effects of expanded financial access on environmental performance and the indirect channels through which these effects materialize. Using panel data and a range of robust econometric approaches, including two-way fixed effects, instrumental variable estimation and extensive robustness checks, the results show that greater financial inclusion is associated with lower carbon intensity, largely by enabling investment in cleaner technologies and improving energy efficiency. Mediation analysis identifies technological innovation as a critical transmission mechanism, though its effectiveness varies with institutional quality and income levels. Further heterogeneity analysis reveals that financial inclusion tends to raise carbon intensity in low-income countries while reducing it in upper-middle-income economies, underscoring the role of economic development, regulatory capacity and supporting infrastructure. Regional evidence confirms that the environmental gains from financial inclusion are most pronounced in contexts with supportive policy environments and technological readiness. The findings imply that financial inclusion can be a powerful lever for low-carbon transition in Sub-Saharan Africa, but its success depends on alignment with technological, institutional and policy frameworks.