Estimating the effect of (mobile)banking coverage on installed off-grid solar photovoltaic capacities in countries of sub-Saharan Africa

Abstract

Affordable access to electricity has long been found to be a key lever for social and economic development. Over 600 million people in sub-Saharan Africa (SSA) still lacked such in 2016. Given the pertaining issues in grid extension, off-grid solar photovoltaic (PV) applications promise a cheap and scalable way to provide those households without access to the grid with electricity. Research on the diffusion of solar PV applications and other renewable sources of energy suggests, that a lack of financing options and access to financial services poses a hurdle for households to invest into such technologies. The success of off-grid solar PV applications across SSA over the past years coincides with a surge of mobile bank accounts. This dissertation attempts to answer the question, if the diffusion of solar PV applications was impacted by an increased access to financial services through traditional and/or mobile bank accounts. To do so, data on installed solar PV capacities and the percentage of the population using traditional or mobile bank accounts across 38 countries of sub-Saharan Africa in 2011, 2014 and 2017 are analyzed in two cross-sectional regression models. The findings suggest that a 1% increase in the percentage of the population owning a bank account increases installed solar PV capacities between 0.15 MW for any bank account in 2014 and 0.44 MW for mobile bank accounts in 2017. However, these results display a high degree of uncertainty, which is mainly related to issues of data availability as well as potentially omitted variables in the employed models. More research is required to overcome uncertainty and potentially unravel causal mechanisms at play in order to inform policy makers and development agencies about the potential win-win combination of mobile bank accounts and off-grid electrification.