The Role of Digital Finance, Financial Inclusion, and Institutional Quality in Driving Renewable Energy Investment and Energy Transition in Developing Countries

Abstract

This study investigates the role of digital financial inclusion (DFI) and institutional quality in promoting renewable energy investment across a panel of 1,000 observations. Using Probit and Logit models, the analysis examines how DFI, institutional factors, and their interaction influence the likelihood of investment in renewable energy, while controlling for key socio-economic and infrastructural variables. The results demonstrate that DFI positively contributes to renewable energy investment, particularly when complemented by strong institutional frameworks. Furthermore, education, urbanization, and infrastructure quality emerge as significant determinants, highlighting the multifaceted drivers of clean energy transitions. The study offers important policy implications, advocating for integrated strategies that align digital finance, institutional reforms, human capital development, and energy market stabilization to advance sustainable energy goals. These findings contribute to the growing body of literature on the intersection of fintech, governance, and environmental sustainability, with relevance for policymakers in developing and emerging economies.