Unlocking Financial Inclusion through Solar Technologies in Rural Malawi

Energy poverty has been a prominent issue in sub-Saharan Africa, especially in rural areas, with over 600 million people having no electricity access in 2023. The rapid population growth exacerbates the issue, making it more challenging to meet their energy needs. Off-grid solar is considered one of the most cost-effective and rapid solutions to provide energy access for rural households in remote areas. Financial inclusion is another development priority that allows low-income households to mitigate financial risks by relieving capital constraints. The connection between off-grid solar technology adoption and financial inclusion remains understudied. Utilizing a primary household-level panel data in rural Malawi, this paper investigates the mechanisms of how solar technology adoption leads to mobile money adoption, therefore promoting financial inclusion. Our results reveal that solar technology leads to mobile money usage through both the pay-as-you-go financing scheme and at-home phone charging effects. Further, we measure bank account ownership and informal savings groups participation and find that solar technologies can also enhance financial inclusion.