Unlocking financial inclusion through solar technology adoption in Malawi

Financial inclusion and energy access are development priorities in sub-Saharan Africa (SSA), particularly in rural areas. Many households in SSA struggle to attain access to financial services including mobile money, bank accounts, and informal loans, which allow households to mitigate financial risks by relieving capital constraints and promoting investment and asset accumulation. At the same time, over 600 million people in SSA had no electricity access in 2023. Off-grid solar is considered one of the most cost-effective, feasible, and rapid solutions to provide energy access for rural households. Using data from a 1138-household two-wave quasi-experimental impact evaluation focused on solar technology adoption and impacts in rural Malawi, we explore the association between financial inclusion and solar technology adoption. We hypothesize that adoption of solar technologies catalyzes use of mobile money – a financial inclusion mechanism common throughout SSA. We find that households with solar home systems are 40 percentage points more likely to use mobile money, while those with standalone solar technologies are 32 percentage points more likely to do so. Through mediation analysis, we confirm that access to reliable phone charging is the main pathway connecting solar adoption and mobile money use. We also observe an approximately two-fold increase in participation in informal savings groups associated with solar adoption, likely through increased access to mobile money, which allows people to easily and securely pool finances. The connection between solar adoption and increased access to two key financial inclusion mechanisms suggests a win-win outcome for policymakers seeking to improve energy access and opportunities for economic growth through financial inclusion in rural Africa.