Unlocking Environmental Sustainability through Financial Inclusion: Evidence from Developing Economies

This study examines the correlation among financial inclusion, technological innovation, and greenhouse gas emissions in developing nations. The analysis utilizes a sample of 50 developing countries spanning the years 2004 to 2020 to identify trends. Principal component analysis is utilized to develop composite indicators for financial inclusion and technological innovation, derived from normalized variables. This study investigates the effects of financial inclusion and technological innovation on greenhouse gas emissions by employing the Driskoll-Kraay standard errors and Feasible Generalized Least Squares methodologies. The estimation results reveal that both financial inclusion and technological innovation are associated with higher GHG emissions when considered separately. However, in terms of moderation, an increase in technological innovation significantly reduces greenhouse gas emissions while simultaneously enhancing financial inclusion. Countries characterized by inclusive financial systems and advanced technologies are likely to exhibit reduced carbon footprints, as a result of more efficient resource allocation and the implementation of cleaner technologies. Policymakers are encouraged to formulate strategies that foster an inclusive financial framework and ensure fair access to technological innovations, with the aim of reducing greenhouse gas emissions.