Sustainable energy and financial inclusion: a pathway for South Asia’s financial transformation

Purpose Sustainable economic growth, based on the development of the financial system, has become one of the main aims of South Asian governments. This study analyzes the factors that strengthen the financial system of South Asian countries. Thus, this study aims to determine the impact of financial accessibility and sustainable energy on financial development in South Asian countries. Design/methodology/approach Data is gathered from six South Asian countries: Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka from 1991 to 2020. The current study utilizes numerous econometric approaches such as cross-sectionally autoregressive distributed lag (CS-ARDL), cross-sectionally augmented distributed lag (CS-DL), Driscoll and Kraay (D-K) and augmented mean group (AMG) models because of the presence of cross-sectional dependency, heteroscedasticity, autocorrelation and nonstationarity. Findings Findings reveal that financial accessibility and sustainable energy positively impact the financial development of South Asian countries. As such, governments and policymakers should strengthen their financial systems and financial institutions, which helps in promoting financial development. Moreover, they can offer incentives in taxes and subsidies for investment in sustainable energy projects to enhance their appeal to potential investors. Investment in research and development of sustainable energy projects should be raised to enhance advancement. Originality/value The first contribution of this study is to determine the impact of financial accessibility and sustainable energy on financial development in South Asian countries. Because of data availability, the current study took six South Asian countries, namely, Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka and took data from 1991 to 2020. Secondly, to minimize the issues of cross-sectional dependency and autocorrelation, heteroscedasticity and nonstationary, the current study employs novel econometric approaches such as the CS-ARDL model, CS-DL model, D-K model, and AMG model to identify this problem which has been overlooked in preceding literature.