A Review of the Recent Developments of Green Banking in Bangladesh

Abstract

This paper aims to explore the emergence of ‘Green Banking’ in Bangladesh, with a focus on the role of financial regulation and regulators in greening the financial sector. It also examines the contribution and involvement of banks and non-bank financial institutions in promoting green economic transition. The study is based on the review of secondary data collected from various sources, such as quarterly reports, annual reports, websites of the central bank of Bangladesh, and other commercial banks and non-bank financial institutions as well as various articles, and newspapers reports on green banking in Bangladesh. The collected data is reviewed using descriptive statistics. The research results reveal that the central bank of Bangladesh played a major role in greening the financial system of the country by implementing various green policies and regulatory measures. Although Bangladesh is still far behind the developed countries in terms of environmental performance, the country has made a remarkable progress in initiating and expanding green banking practices, infrastructure development, and accelerating green growth in recent years.

The Impact of COVID-19 on the Green Banking of Financial Institutions in an Emerging Economy: Implications for the Green Economic Recovery

“…Consequently, the empirical findings revealed that the banks' total green financing rose by 7.26% during the pandemic compared to the previous year, contrasting the 18.53% decrease experienced by NBFIs during the same period. This result is consistent with the recent study of Khairunnessa et al, (2021) that, contrary to the NBFIs, banking institutions in Bangladesh had improved during the past year in terms of green financing. Moreover, the overall banks' green financing of various projects such as green establishment, green brick manufacturing, renewable energy, energy efficiency, recycling & recyclable product and others were estimated to be BDT 105920.18 Million in 2020, which exceeded the amount (BDT 98753.04 million) invested in 2019.…”

“…Thus, the empirical findings revealed that the total number of branches with an online coverage increased by 4.55%, 0.6% and 1.54% for PCBs, SOCBs and FCBs respectively during the pandemic. On the other hand, the number (percentage) of online branches slightly decreased for the PCBs and SOCBs during this pandemic, while that of FCBs remained unchanged, which is consistent with the past studies (Akter et al, 2018;Hoque et al, 2019;Khairunnessa et al, 2021;Zheng et al, 2021). These studies highlighted that the green banking in Bangladesh had improved in recent years, especially in terms of green funding and in-house risk management, which is largely promoted by the BB in a bid to green the Bangladeshi banking system.…”

“…On the other hand, the leading NBFIs, which include Infrastructure Development Co. Ltd., Lankan Alliance Finance Ltd., and Hajj Finance Company Limited, disbursed more than 5% of their total loan disbursement to green finance. Thus, our findings are consistent with the earlier studies (Khairunnessa et al, 2021;Zheng et al, 2021). Furthermore, the empirical findings indicate that the BB refinancing scheme for various green products such as biogas, effluent treatment plant, solar home system, vermicompost, HHK technology in brick kiln, green industry, safe working environment, and energy efficient technology had risen by 76.97% during this pandemic compared to the past year.…”

“…Similarly, category-wise green financing by PCBs declined by roughly 11% during the pandemic, in contrast to 56.54% increase witnessed in the SOCBs' sector-wise green financing. More interestingly, the results showed that the FCBs' green financing increased by 78.69% during the outbreak, which is similar to the findings of recent studies (Khairunnessa et al, 2021;Zheng et al, 2021). Therefore, we can conclude that SOCBs and FCBs play crucial role in the development of green economy during the pandemic through their green financing of various ecofriendly projects.…”

“…As such, it is high time financial institutions introduce green banking systems including online banking, online payments, and technological innovations to meet customer's need and also minimize the effect of crisis such as the COVID-19 pandemic. Green banking (GB) is a type of bank operation aimed at protecting the environment (natural resources), society and economy (Khairunnessa et al, 2021;Zheng et al, 2021). In 2011, Bangladesh Bank (BB), the central bank of Bangladesh, released the green banking and environmental risk management guidelines for banks in a struggle to ensure sustainable growth of the country.…”