Impact of Remittances on Renewable Energy Consumption in Sub-Saharan Africa

Purpose - The aim of this study is to investigate the relationship between remittances and renewable energy consumption in Sub-Saharan Africa, with the role of financial development as a moderating factor. Design/Methodology/Approach - This study utilizes the Generalized Method of Moments (GMM) model to analyze balanced panel data spanning 2000 to 2022 for 31 Sub-Saharan African countries. The GMM method is chosen for its ability to address potential endogeneity issues in panel data analysis. Additionally, the Granger Causality Test, based on the Dumitrescu and Hurlin approach, was applied to validate the robustness of the findings and identify directional relationships between the variables. Findings - The results reveal a negative association between remittances and renewable energy consumption, indicating that remittances, in isolation, may not drive clean energy adoption in Sub-Saharan Africa. However, when financial development is incorporated as a moderating factor, the interaction between remittances and financial development positively affects renewable energy consumption. This finding highlights the critical role of a well-developed financial sector in overcoming barriers to channeling remittances into sustainable energy projects. Research Implications - The study underscores the importance of implementing policies that lower financial barriers to renewable energy adoption while promoting financial development as a catalyst to maximize the potential of remittance inflows. By fostering a supportive environment to redirect remittances toward green energy investments, policymakers can facilitate a cleaner energy transition, contributing to regional socioeconomic and environmental sustainability goals. These insights provide actionable recommendations to integrate remittance flows into broader energy and development strategies.