Mitigating the impact of climate change on poverty in Africa: the moderating role of financial inclusion

This study examines the role of financial inclusion in mitigating the impact of climate change on poverty, using the ninth wave of the Afrobarometer survey across 39 African countries. Using a battery of econometric estimators to address the endogeneity of financial inclusion, we highlight the following key findings. We find robust evidence that financial inclusion significantly moderates the adverse effect of climate-related disasters (i.e., droughts and flooding) on poverty in Africa. Heterogeneity analyses reveal that this effect is more pronounced among females than males and in lower-income countries than middle-income countries. Uniquely, we argue and empirically demonstrate that having a personal financial account is a more effective climate-mitigating strategy for reducing poverty than having a financial account belonging to someone else in the household. We outline the key implications of these findings to guide policy and practice.