The nexus of green finance and financial efficiency in Sub-Saharan Africa

Chi Aloysius Ngong; Charles O. Manasseh; Chi Aloysius Ngong; Charles O. Manasseh

doi:10.3934/InnoEcon.2026005

Innovation Economics

2026, Volume 1, Issue 1: 86-104. doi: 10.3934/InnoEcon.2026005

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Research article

The nexus of green finance and financial efficiency in Sub-Saharan Africa

Chi Aloysius Ngong ^{1
,
,},
Charles O. Manasseh ²

1.
Department of Accounting, University of Bamenda, Bambili, 237, Cameroon
2.
Department of Banking & Finance, University of Nigeria, Enugu, 234, Nigeria

Received: 05 April 2026 Revised: 18 August 2026 Accepted: 21 August 2026 Published: 26 August 2026
JEL Codes: G1, G2, Q2, Q5

This paper explores the nexus of green finance and financial efficiency in Sub-Saharan African nations from 2011 to 2024. The autoregressive distributed lag technique is applied for the results estimation. The variables include environmental protection expenses, carbon footmark of bank credits, and green bonds as exogenous variables. Financial efficiency was the endogenous variable. The research shows that environmental protection expenses positively influences financial efficiency via enhancing market stability and investor confidence. The carbon footmark of bank credits negatively impacts financial efficiency. Green bonds insignificantly affect financial efficiency because of the weak green finance market. The governments should strengthen green funding projects by expanding the green bonds' market via tax incentives for sustainable investments and enforce environmental sustainability goals regulations to enhance financial efficiency. The research increases literature on the link between environmental protection expenses and its influence on financial efficiency. Financial institutions should be incentivized to reduce carbon-intensive investments. Additionally, strict enforcement of environmental regulations, the introduction of carbon pricing mechanisms, and institutional governance reforms to ensure the effective execution of green finance. These measures will foster a sustainable financial ecosystem, promoting long-term economic stability and sustainability in Sub-Saharan African financial markets.
- green finance,
- financial efficiency,
- Sub-Saharan Africa
Citation: Chi Aloysius Ngong, Charles O. Manasseh. The nexus of green finance and financial efficiency in Sub-Saharan Africa[J]. Innovation Economics, 2026, 1(1): 86-104. doi: 10.3934/InnoEcon.2026005

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Abstract

This paper explores the nexus of green finance and financial efficiency in Sub-Saharan African nations from 2011 to 2024. The autoregressive distributed lag technique is applied for the results estimation. The variables include environmental protection expenses, carbon footmark of bank credits, and green bonds as exogenous variables. Financial efficiency was the endogenous variable. The research shows that environmental protection expenses positively influences financial efficiency via enhancing market stability and investor confidence. The carbon footmark of bank credits negatively impacts financial efficiency. Green bonds insignificantly affect financial efficiency because of the weak green finance market. The governments should strengthen green funding projects by expanding the green bonds' market via tax incentives for sustainable investments and enforce environmental sustainability goals regulations to enhance financial efficiency. The research increases literature on the link between environmental protection expenses and its influence on financial efficiency. Financial institutions should be incentivized to reduce carbon-intensive investments. Additionally, strict enforcement of environmental regulations, the introduction of carbon pricing mechanisms, and institutional governance reforms to ensure the effective execution of green finance. These measures will foster a sustainable financial ecosystem, promoting long-term economic stability and sustainability in Sub-Saharan African financial markets.

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