Nexus between digital financial services, renewable energy, and environmental sustainability in Sub-Saharan Africa

Abstract

This study examines how digital financial services (DFS) influence environmental sustainability in Sub-Saharan Africa, with renewable energy considered as a complementary factor. Using a dynamic panel System-GMM model and data from 47 Sub-Saharan African countries spanning 1995 to 2022, the analysis explores both aggregated and disaggregated measures of DFS, including access and usage dimensions. The findings reveal that environmental sustainability is highly persistent, with past performance strongly shaping current outcomes. DFS access significantly improves environmental performance by enabling households and small firms to invest in renewable energy and sustainable practices, while DFS usage alone has little impact unless tied to green financial products. Renewable energy not only enhances sustainability directly but also amplifies the positive effects of DFS, confirming a strong complementarity between the two. Structural factors including foreign direct investment support sustainability, while population growth and resource-intensive economic expansion undermine it. The results suggest that DFS should be treated as a lever for climate action, with policies that expand access into underserved communities, embed renewable financing within digital products, and align investment flows with green development priorities.