FINANCIAL INCLUSION, DIGITAL TRANSFORMATION AND ENERGY CONSUMPTION DYNAMICS: EVIDENCE FROM OIC ECONOMIES

Abstract

This study examines the impact of digitalization and financial inclusion on energy consumption across 40 OIC member countries from 2001 to 2022. The research used several advanced panel econometric techniques, including cross-sectional dependence and slope heterogeneity tests, CIPS, IPS, and LLC unit root tests, Pedroni, Kao, and Westerlund cointegration tests, FMOLS and DOLS long-run estimators and the Method of Moments Quantile Regression (MMQR) approach. The findings indicate that digitalization and financial inclusion significantly reduce energy consumption in overall OIC countries and particularly in higher-income OIC countries by improving energy efficiency, facilitating technological innovation, and promoting the adoption of energy-efficient technologies. However, in lower-income OIC countries, digitalization and financial inclusion increase energy consumption due to increasing industrial activity, growing access to energy-dependent technologies, and rising economic participation. Furthermore, industrialization and population are found to increase energy consumption across all country groups. The interaction effect between Digitalization and financial inclusion indicates that their combined role contributes to energy sustainability, especially in higher-income OIC countries. The study highlights important policy implications for sustainable energy management in OIC economies. Policymakers should promote digital infrastructure, expand inclusive financial systems, and encourage green financing mechanisms to accelerate the adoption of energy-efficient technologies while ensuring sustainable energy transition pathways, particularly in lower-income OIC countries.