From Credit to Clean Cooking: What Finance Can Do for SDG 7 in Southeast Asia

Southeast Asia has made impressive progress in bringing electricity to homes, farms and businesses, but a quieter energy crisis persists inside kitchens. Millions of households still rely on biomass, charcoal or kerosene for cooking, despite the region's economic rise, digital transformation and expanding power grids.

A new study published in Economies argues that solving this problem may depend less on building deeper stock markets and more on strengthening the financial institutions that ordinary households actually use: banks, microfinance providers, insurance systems and digital finance platforms.

The research, covering eleven Southeast Asian economies from 2004 to 2020, finds a clear divide within the financial sector. Financial institutions are strongly associated with improved access to clean cooking fuels and technologies. Financial markets, on the other hand, show weaker and sometimes negative associations in within-country models.

Energy poverty is often treated as an infrastructure problem, but the study suggests it is also a finance problem.

The Grid Expanded, but the Kitchen Was Left Behind

In many countries, grid access has expanded rapidly, and average electricity access in the study sample reached 83.3%. However, clean cooking access averaged only 52%, revealing a major gap between being connected to electricity and being able to use modern, healthy energy at home.

Traditional cooking fuels expose households to indoor air pollution, increase health risks, consume time, and reinforce gendered burdens, especially for women and children who often manage cooking and fuel collection. The persistence of polluting cooking fuels also complicates progress toward Sustainable Development Goal 7, which calls for affordable, reliable, sustainable and modern energy for all.

The study highlights the problem of "energy stacking," where households do not fully abandon traditional fuels even when modern alternatives are available. Families may use electricity for lighting and mobile charging but continue cooking with wood, charcoal or kerosene because cleaner appliances and fuels require upfront spending they cannot easily afford. A clean stove, LPG connection, biogas system or induction cooker may be relatively inexpensive in macroeconomic terms, but it can still be unaffordable for low-income households without credit, savings or flexible payment options.

The Type of Finance Matters More Than the Size of Finance

The study separates financial development into two parts: financial institutions and financial markets.

Financial institutions

They include the channels most likely to interact with households and small businesses: banks, microfinance providers, insurers and related intermediaries. Financial markets include equity and bond markets, which usually serve governments, large firms and investors.

The findings show that this distinction is not technical hair-splitting. It changes the policy message.

Across several statistical models, the Financial Institutions Index is consistently and positively associated with access to clean cooking. The relationship holds in pooled models, fixed-effects models, random-effects models, long-run estimates and quantile regressions. The association is especially strong among countries with lower levels of clean cooking access.

Financial markets

They do not show the same pattern. In some models, market development is positively associated with energy access at the broad cross-country level, but in within-country estimates, it does not translate into better clean cooking outcomes. In some cases, the association is negative.

Bond and equity markets can finance renewable energy projects, utilities and large infrastructure, but they may not be the right tool for helping poor households afford cleaner cooking technologies. A more sophisticated stock exchange does not automatically mean a rural family can buy an LPG stove or pay for an electric cooker.

Frontier Economies Stand to Gain the Most

The study finds that the finance-clean cooking relationship is strongest in the frontier group of Cambodia, Lao PDR, Myanmar, Vietnam and Timor-Leste. These countries show a much larger association between financial institutions and clean cooking access than the ASEAN-6 group of Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand.

The authors rightly caution against reading the large coefficients as precise policy elasticities. The frontier sub-sample is small, and individual country trajectories, especially rapid change in Vietnam, may influence the results. Still, the broad pattern is highly relevant: institutional finance appears to matter most where clean cooking deficits are deepest.

In Global South countries where clean energy transitions remain constrained by household income, informality and limited rural access, financial inclusion may be as important as energy planning. Expanding bank branches, strengthening microfinance, enabling responsible consumer credit and integrating mobile money with clean energy providers could help reduce the upfront cost barrier.

Southeast Asia has seen rapid growth in mobile wallets and platform-based payments. If linked with clean energy companies, these systems could support pay-as-you-go models for solar systems, clean cookstoves and efficient appliances. But the study does not directly test digital finance or household-level payment behaviour, so this remains a promising policy pathway rather than a proven conclusion.

The finding also speaks to investors. Clean cooking is often overlooked compared with solar, wind, electric mobility and grid infrastructure. Yet it sits at the intersection of health, gender, climate, poverty reduction and household productivity. If financial institutions can package affordable products for clean cooking adoption, the sector could offer both development impact and scalable business opportunities.

A Powerful Signal, but Not a Causal Verdict

The authors describe the results as robust conditional associations, not definitive causal evidence. Countries with stronger financial institutions may also have higher incomes, better governance, stronger public infrastructure, more effective social programmes or more active energy policies. The study controls for several factors, but it cannot fully rule out reverse causality or omitted variables. Improved energy access can also stimulate economic activity, which may itself deepen the financial sector.

There are other constraints. The IMF Financial Development Index ends in 2020, so the analysis does not fully capture the post-pandemic surge in digital finance or recent energy price shocks. Country-level access data also hide large inequalities within countries, including rural-urban divides, income gaps and differences among ethnic or remote communities. The study cannot observe whether households actually used microloans, mobile wallets or savings products to buy clean cooking technologies.

Still, the research offers a valuable policy signal. It warns against assuming that all financial development is equally inclusive. A country can build sophisticated capital markets while leaving low-income households financially excluded. Conversely, modest improvements in institutional finance may have real development value if they help families overcome affordability barriers.

Governments should integrate clean energy access into financial inclusion strategies. For development agencies, it is to work through local banks, microfinance institutions and digital platforms, not only through large infrastructure finance. For ASEAN and its partners, it is to ensure that green finance taxonomies include measurable social outcomes, including clean cooking access and energy affordability.

Southeast Asia's next energy access challenge will require payment systems, credit products, targeted subsidies, consumer protection and institutions capable of serving households at the margin of the modern energy economy. If the region wants an energy transition that reaches the poor, the study suggests policymakers should look beyond capital markets and ask a more grounded question: who can actually finance the household decisions that make modern energy usable?