Digital financial inclusion and environmental sustainability in Africa: the moderating effect of income inequality

Abstract

PurposeThis study examines the effect of digital financial inclusion (DFI) on climate change in African countries, taking into account the moderating effect of income inequality.Design/methodology/approachThis study employs panel data from 53 African countries between 2004 and 2021 and utilises the random-effects model and two-step generalised method of moments (GMM) to estimate the relationships amongst DFI, income inequality, CO2 emissions and renewable energy consumption (REC).FindingsOur findings reveal that increased accessibility to automated teller machines (ATMs) leads to a reduction in CO2 emissions and an increase in REC. However, the effect of ATMs on CO2 emissions is stronger for individuals with lower incomes, whereas REC is higher for those with higher incomes. Additionally, mobile cellular subscriptions (MCS) increase both CO2 emissions and REC; however, when income inequality is considered, it results in a reduction in CO2 emissions and an increase in REC. Furthermore, Internet usage reduces CO2 emissions and increases REC in Africa, with income inequality levels further improving its contribution.Practical implicationsATM accessibility and energy efficiency are means to mitigate carbon dioxide emissions and encourage the adoption of renewable energy sources.Originality/valueThis study is one of the first to explore the effects of income inequality on DFI, CO2 emissions and REC, highlighting its importance in Africa and its potential impact on environmental sustainability.