Journal of Forest Economics > Vol 40 > Issue 4

Deforestation and Financial Inclusion in Sub-Saharan Africa: Evidence from the Conditional and Unconditional Quantile Regression Approach

Hassan Swedy Lunku, Xi'an Jiaotong University, School of Economics and Finance, China AND Local Government Training Institute, Tanzania, mtakwimu88@gmail.com , Zaiyang Li, Xi'an Jiaotong University, School of Economics and Finance, China, Muhsin Danga, Local Government Training Institute, Tanzania
 
Suggested Citation
Hassan Swedy Lunku, Zaiyang Li and Muhsin Danga (2025), "Deforestation and Financial Inclusion in Sub-Saharan Africa: Evidence from the Conditional and Unconditional Quantile Regression Approach", Journal of Forest Economics: Vol. 40: No. 4, pp 297-326. http://dx.doi.org/10.1561/112.00000595

Publication Date: 05 Nov 2025
© 2025 H. S. Lunku et al.
 
Subjects
Econometric models,  Econometric theory,  Estimation frameworks,  Financial econometrics,  Environmental economics,  Economic theory,  Forestry,  Financial markets
 
Keywords
JEL Codes: Q23Q56G21O55E44
DeforestationFinancial inclusion: Inclusive growthQuantile regression
 

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In this article:
1 Introduction 
2 Literature Review 
3 Data and Methodology 
4 Empirical Results and Discussion 
5 Conclusion 
References 

Abstract

Deforestation via forest conversion remains a persistent threat that leads to land degradation, biodiversity loss, and climate change in sub-Saharan Africa (SSA). Financial inclusion significantly boosts the deforestation dilemma and many communities in SSA lack access to formal financial services, limiting their ability to invest in sustainable land-usage practices, agricultural activities or alternative livelihoods that could mitigate forest loss. This study employs conditional and unconditional quantile regression (QR) to investigate the heterogeneity and impact of demand- and supply-side indicators of financial inclusion on forest conversion across different quantiles in the SSA economies between 2004 and 2020. Results indicate that significant negative financial inclusion and access to financial institutions reduces, while financial usage and markets increases, forest conversion rates across different distributions of deforestation. The positive impact of financial markets on forest conversion suggests the need for regulatory policies to ensure investments influenced by financial markets do not lead to forest and environmental degradation. To promote sustainable development and reduce deforestation in the region, policymakers should focus on enhancing financial inclusion while regulating financial markets to ensure that investments support environmentally sustainable activities. SSA can achieve both economic prosperity and environmental protection by aligning financial systems with sustainability goals.

DOI:10.1561/112.00000595