DIGITAL FINANCE, INSTITUTIONAL QUALITY AND GREEN TRANSITION: A SYSTEM-GMM ANALYSIS OF FINTECH’S ROLE IN RENEWABLE INVESTMENT

Abstract

Renewable energy financing in the Global South remains inadequate due to structural impediments like institutional weakness, policy uncertainty, and limited access to capital markets. This study investigates the dynamic interplay between financial technology (fintech) and renewable energy investment (REINV) across 60 developing countries from 2010 to 2023. Leveraging a robust panel dataset (N=840) and applying a System-GMM estimation strategy, the analysis explores how various fintech components, including foreign portfolio investment (FPI), mobile payments, digital lending, and crowdfunding, affect REINV. Empirical findings demonstrate that FPI significantly drives REINV 1.112), while mobile payments (0.789), digital lending (0.445), and crowdfunding (0.334) also contribute meaningfully to investment inflows. Importantly, the positive interaction between FPI and institutional quality (0.189) underscores the role of governance in enhancing fintech’s impact on green finance. The robustness of these findings is confirmed through alternative estimation techniques and sub-sample analyses. Policy implications emphasize the importance of financial openness, digital infrastructure development, regulatory clarity, and institutional reform to optimize fintech’s role in clean energy transitions. The study recommends capacity-building, targeted policy toolkits, and enhanced data integration to support inclusive and sustainable fintech ecosystems in the Global South.