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Financial sector development and energy poverty: empirical evidence from developing countries
Muhammad Khan1, Muhammad Tariq Majeed2
1Department of Social Sciences, IQRA University (Islamabad Campus), 05 Khayaban-E-Johar, H-09, Islamabad, Pakistan. khann.muhammad@gmail.com.
Financial sector development significantly reduces energy poverty in developing nations. Growth, foreign investment, and urbanization also enhance energy access, offering key policy insights.
Area of Science:
- Economics
- Development Studies
- Energy Economics
Background:
- Energy poverty remains a critical challenge in developing countries.
- Financial sector development is increasingly recognized as a potential driver of economic progress.
- Understanding the nexus between finance and energy access is crucial for sustainable development.
Purpose of the Study:
- To empirically investigate the impact of financial sector development on energy poverty in developing economies.
- To identify other key socio-economic factors influencing energy access.
Main Methods:
- Econometric analysis of data from 110 developing economies (1990-2020).
- Employed pooled OLS, fixed-effects, random-effects models, and Driscoll-Kraay robust standard errors.
- Utilized system Generalized Method of Moments (GMM) to address endogeneity concerns.
Main Results:
- Financial sector development demonstrates a significant positive effect in alleviating energy poverty.
- Economic growth, foreign direct investment, and urbanization were found to support improved energy service accessibility.
Conclusions:
- Strengthening financial sectors is a viable strategy for reducing energy poverty.
- Integrated policies considering economic growth, FDI, and urbanization are essential for enhancing energy access in developing nations.
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