Impact of mobile money on climate smart agricultural practices and GHG emission reduction in Kenya's agricultural sector

Abstract

This study investigates how mobile money facilitates the adoption of climate-smart agricultural (CSA) practices and reduces greenhouse gas (GHG) emissions through waste-to-energy transitions in Kenya's agricultural sector. Despite agriculture being a major contributor to Kenya’s GDP, farmers face severe financing constraints, receiving only 3.5% of total bank lending in 2023, which limits their ability to invest in sustainable technologies. This financial exclusion presents a significant barrier to climate mitigation and adaptation, particularly among smallholder farmers vulnerable to weather volatility and rising GHG emissions. Using monthly time-series data from 2008 to 2024, this study applies the Autoregressive Distributed Lag (ARDL) model to analyze the impact of mobile money and financial inclusion on CSA adoption and GHG emissions. A scenario and sensitivity analysis were also conducted to evaluate farmers’ potential earnings from carbon credit sales through briquette compaction and organic fertilizer production. The results indicate that a 1% increase in mobile money use reduces GHG emissions by 0.384%, while a similar rise in financial inclusion leads to a 0.217% decline. Moreover, the scenario and sensitivity analysis reveal a compounding pattern: carbon revenue increases with both carbon price and adoption scale. At just 5% adoption and $20/tCO₂e, briquette compaction can yield $31.36 (KES 4,547) per farmer per month, enough to lift some above Kenya’s rural poverty line of KES 3,252/month. Even at base-case levels ($10, 1% adoption), farmers can earn KES 1,134/month, which can cover school fees or repay input loans. The study concludes that mobile money is a scalable tool to close the agricultural finance gap, enhance CSA adoption, and operationalize Kenya’s climate ambitions.