Financial inclusion and energy access in sub-Saharan Africa

Improving access to adequate forms of energy in sub-Saharan Africa (SSA) is a challenging task, and an ongoing debate has continued regarding policies and interventions that can effectively alleviate energy poverty (EP). This study contributes to the literature by conducting a state-dependent analysis using nonlinear panel data with local projections that allow the dynamics of EP to vary under different regimes. Our findings highlight the influence of financial inclusion and institutional quality on shaping the dynamics of energy affordability in SSA over the period 2004–2019. Specifically, we find that higher quality governance is required for the low-carbon transition to enhance household access to energy infrastructure. We also demonstrate an asymmetric response of EP to institutional quality related to the degree of access to finance. Overcoming governance issues and strengthening the financial system are critical for SSA to combat energy vulnerability and make the low-carbon transition viable. • A state-dependent analysis of energy poverty is conducted for sub-Saharan Africa • Nonlinear panel data local projections are implemented • We emphasize the role of financial inclusion and institutional quality in shaping energy access • The low-carbon transition requires better governance to improve household access to energy services • Overcoming governance issues and strengthening the financial system are critical to addressing energy poverty.