The power of financial innovation in neutralizing carbon emissions: the case of mobile money in Somalia

Financial innovation is a crucial component of fnancial sector development that impacts economic well-being. This study examines the causal link between mobile money and car-
bon emissions in Somalia to determine the link between fnancial innovation and carbon emissions. This study used quarterly data from 2010 to 2020 and the bound cointegra-
tion and Johansen methods to investigate the cointegration between variables. This study uses an autoregressive distributed model to estimate the model’s short-run dynamics and long-term efects. Carbon emission is the dependent variable, while energy consumption, afuence, mobile money, population growth, and urbanization are the explanatory vari-
ables. This study reveals that mobile money and afuence reduce carbon emissions in the short and long run. Moreover, although population growth and urbanization are positively
related to carbon emissions in the long run, their short-run impacts on carbon emissions are insignifcant. The study also revealed that energy consumption insignifcantly afects
carbon emissions in the short and long run. Urbanization is the dominant factor contrib-uting to carbon emissions, whereas mobile money efectively reduces carbon emissions.
Our results imply that mobile money is instrumental in providing fnancial services such as insurance, credit savings, remittances, and government transfers to people dealing with
environmental realities.