Governance thresholds, financial intermediation and the renewable energy transition: implications for sustainable development in Sub-Saharan Africa

This study develops an institutional-complementarity framework to test whether governance quality shapes the developmental effectiveness of financial intermediation and the renewable energy transition in Sub-Saharan Africa. Using an unbalanced panel of 35 countries (2005–2023), we apply second-generation unit-root and cointegration tests, two-step system GMM, Hansen panel threshold regression, panel FMOLS, and method-of-moments quantile regression. Financial intermediation significantly promotes sustainable development, whereas renewable energy consumption shows a negative reduced-form effect attributable to the continued dominance of traditional biomass over modern renewables in the region's energy mix. Governance quality both directly raises sustainable development and operates as a nonlinear threshold: below the estimated breakpoint (GQ = −0.421), financial intermediation yields no significant development dividend; above it, the effect becomes strongly positive and roughly four times larger. These findings establish institutional quality as a precondition for financial and renewable-energy policies to deliver development gains and inform a governance-sequenced policy agenda for Sub-Saharan Africa.