The role of financial inclusion in adoption of solar photovoltaic systems: A case of Uganda

Abstract

Globally, renewable energy technologies, such as solar photovoltaic (PV) contribute significantly to sustainable development. However, adoption of solar PV is limited in many developing countries. Governments have rolled out policy strategies like financial inclusion to stimulate deployment of modern energy technologies. Notwithstanding, little is known about financial inclusion and household solar PV adoption. Using two waves of Uganda National Household Survey data covering 28,913 households, this paper examines the effect of financial inclusion on adoption of solar PV. The study employed logit model and pooled ordinary least squares for estimation. Taking endogeneity into account, we find that financial inclusion has a strong positive effect on solar PV adoption. The estimates show that unit increase in financial inclusion increases the likelihood of residential solar PV adoption by 3.6% (p < 0.01). This finding is consistent across all robustness checks. The findings further suggest that use of mobile money is more important for solar PV adoption. The study identified household income and education as possible pathways through which financial inclusion influences solar PV adoption. Thus, policy makers and renewable energy practitioners should continue prioritizing financial inclusion particularly use of mobile money and financial remittances so as stimulate adoption of solar PV.