Inclusive Green Growth and Financial Inclusion in Africa: The Moderating Role of Productive Capacity, Panel Data Analysis

ABSTRACT Inequality, climate change, and poverty are the three interrelated key challenges of the global community today. Inclusive green growth is a comprehensive measure addressing these problems from a Sustainable Development perspective. Accordingly, the objective of this paper was to analyze inclusive green growth, considering the role of financial inclusion on the three pillars of sustainable development: economy, society, and environment, in Africa. The study has also aimed to investigate the moderating role of productive capacity in the nexus between financial inclusion and inclusive green growth. The study analyzed a panel of 31 African countries from 2012 to 2022. The study has found that productive capacity has a threshold effect on the relation between financial inclusion and inclusive green growth components. The effect of financial inclusion on inclusive green growth changes its sign from negative to positive at the productive capacity index (3.2405201). Thus, countries with better productive capacity have the potential to mitigate the negative effects of financial inclusion on inclusive green growth. Hence, the policymakers need to align financial inclusion with better productive capacity components to dampen the negative effect it has on inclusive green growth.