The Mediating role of Fintech on the Shadow Economy and Green Finance

The idea of "Green Growth" emphasize on protecting the environment by reducing pollution and preventing the depletion of natural resources (Nkalu et al., 2020). This emboldened the attention of the United Nations and World leading economies to develop policies and promote environment-friendly investments. However, the existence of shadow (informal) economic activities, which are not under the tax net and regulations, affects environmental quality directly on the one hand and on the other hand results in low government tax revenue, low economic growth, and weak financial development which ultimately affect Green finance (Dada et al., 2021; Hajilee and Niroomand, 2021). In this regard, the use of financial technology (Fintech) boost financial sector development by providing various digital services which could attract informal businesses into the formal sector of the economy (Rahman et al., 2023). However, the provision of technology infrastructure and poor regulation of Fintech (Such as cryptocurrency) may generate issues for formalising the economy.
Therefore, this research study investigates the influence of the shadow or informal economic activities on green finance in the sample of developed and developing countries over the period from 2000 to 2020. Moreover, this study also examines the moderating role of Fintech in the shadow economy and green finance nexus. The findings of this research will highlight the shadow economy's role in promoting green finance and the role of Fintech services in their relationship. Based on the empirical results, this study will suggest policy recommendations regarding the importance of formalising the economy to expand government tax base and its use in promoting the Green finance. Second, the study will inform policymakers about the role of fintech in advancing Green finance. Third, this will help the policy makers in achieving UN 20230 sustainable development goals by advancing financial inclusion through fintech and increasing the size of finance for green projects.

The study is unique in that it measures, empirically, the transition from shadow to documented economy. Secondly, it analyses the role of Fintech to promote transparency and enhance tax revenues. Thridly, we examine and analyse the impact of Fintech and how it substantially moderates the relationship between shadow economy and green finance.
The proposed research is the first of such a study that auguments theory with practice; provides theoretical as well as empirical evidence for the policymakers and financial institutions to consider improving the availability of green firnance for sustainable future. Moreover, the study will contribute to the existing literature by linking the shadow economy and green finance.