Unlocking energy access: unravelling the role of financial institution development in alleviating energy poverty in South Asia

• Impact of financial institutions development (FID) on energy poverty is explored. • FID ensures its long-run alleviating effect on energy poverty. • Improved infrastructure and fewer political barriers ease energy poverty. • High energy costs and income inequality worsen energy poverty. Access to energy is fundamentally important for social welfare, economic prosperity, and sustainable development. Despite notable global progress, energy poverty remains a persistent challenge in developing regions—particularly in South Asia—where millions of people still lack access to electricity and clean cooking solutions. In this context, the development of financial institutions plays a crucial role in facilitating investments, mobilizing capital, and expanding access to modern energy services. This study examines the role of financial institutions development in alleviating energy poverty across South Asian countries. To achieve its objectives, the research employs a dynamic panel Autoregressive Distributed Lag (PMG) approach using data from seven South Asian countries over the period from 2000 to 2022. The key findings indicate that financial institutions development significantly contributes to alleviating energy poverty in the long run, while short run effect is insignificant. Among the other variables examined, enhanced energy infrastructure and lower political barriers are found to reduce energy poverty, whereas higher income levels and rising energy costs worsen energy poverty over time. Overall, short-term impacts are weak, with energy costs being the only factor exhibiting a lagged adverse effect. These findings offer evidence-based policy guidance for South Asian economies to help remove barriers to energy access and support the achievement of universal energy access goals.