The Power of the Fintech to Control Pollution: the Case of the Mobile Money in Somalia

Abstract

Financial technology is a crucial component for developing the financial sector, which has an undulating effect on the economy's well-being. The financial institutions enable the economic agents to invest in the real sector to boost productivity and drive economic growth. This paper examines the causal link between mobile money and carbon emission in Somalia to discover if mobile money can be used to control pollution and tackle environmental deterioration. This study uses quarterly data spanning from 2012 to 2020. This study used the ARCH model to analyze the conditional variance of time series with the nature of the temporal dependence. This study found that mobile money is negatively associated with carbon emissions, while population growth, affluence, urbanization, and energy consumption increase pollution, negatively affecting the environment. Mobile money has the potential to be used for pollution control as it offers access to clean and affordable energy sources that lessen carbon emissions. This study found that mobile money has a causal relationship with carbon emissions, and their relationship is unidirectional. Our results show that mobile money is an affordable tool to provide financial services such as insurance, credit saving, remittance, and government transfers to those dealing with environmental realities.

The Impact of Fintech Development on Air Pollution

“…Extending the literature to environmental pollution and Fintech, we notice that most studies have shown that Fintech can reduce environmental pollution and promote sustainable development [ 25 , 26 , 27 ]. In terms of greenhouse gases, some researchers have found that the development of Fintech can significantly reduce carbon dioxide emissions [ 28 , 29 , 30 ]. However, to date, little is known about the green attributes of Fintech [ 25 ].…”

Smartphone use increases the likelihood of making short-sighted financial decisions

“…Facilitated by mobile banking and other similar financial apps, most financial activities (e.g., making a deposit, taking out a loan, and making investments) take place on mobile devices especially through smartphones (Frost, 2020). By March 2020, 776.08 million people adopt mobile transactions in China (Daxue Consulting, 2021) so that the value of apps in emerging markets is expected to exceed $870 billion in 2026 (Maynard, 2022).…”