Financial technology and human development in Africa: The moderating impact of energy poverty

Rilwan Sakariyahu, Fatima Oyebola Etudaiye-Muhtar, Rodiat Lawal and Olayinka Oyekola
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Rilwan Sakariyahu: Business School, Edinburgh Napier University
Fatima Oyebola Etudaiye-Muhtar: Ilorin Business School, University of Ilorin
Rodiat Lawal: School of Finance and Management, SOAS University of London

No 2302, Discussion Papers from University of Exeter, Department of Economics

Abstract: Several studies in the academic literature have identified the critical role of financial technology (fintech) in improving socio-economic conditions of nations, measured by human development index (HDI). However, despite the efforts to increase HDI using fintech, the ranking of African countries on the index table remains low. Given that access to electricity is imperative for fintech, and fundamental to human development, we provide novel evidence by investigating the degree to which the prevailing energy poverty in Africa affects the success of fintech on human development on the continent. Employing a number of econometric techniques which include linear (OLS, Prais-Winsten), instrumental-variable (GMM) and non-linear (M-M Quantile) regression models, our empirical framework is robust to heteroscedasticity, endogeneity, and cross-sectional dependence among countries. Our results show that fintech has a significant positive impact on human development and the impact remains consistent irrespective of the estimation methods employed. However, when we split our sample based on regions and income classification proposed by the World Bank, our results show that the impact of fintech, when interacted with access to electricity, on human development is more pronounced in the upper-middle, high-income, Eastern, Central and Southern countries. The Western countries have not significantly benefitted from fintech adoption, perhaps because those countries fall in the low-income categories and have a high prevalence of energy challenge. In light of the current state of human development in Africa, our study advocates for more investment in energy infrastructure for the rapid realization of the gains of fintech.

Keywords: fintech; human development; energy poverty; access to electricity; sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: C22 O43 Q4 Q43 Q48 Q55 (search for similar items in EconPapers)
Date: 2023-02-15
New Economics Papers: this item is included in nep-afr, nep-dev, nep-ene, nep-fdg and nep-pay
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