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Green Banking Prospects in Bangladesh

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Asian Business Review, Volume 2, Numebr 2/2013 (Issue 4)
ISSN 2304-2613 (Print); ISSN 2305-8730 (Online)
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Green Banking Prospects in Bangladesh

Md. Mustafizur Rahman1, Md. Ali Ahsan2, Md. Motahar Hossain3, Meem Rafiul Hoq4
1
M.Phil (Fellow), University of Rajshahi, Rajshahi, Bangladesh
2
Lecturer, School of Liberal Arts & Science, University of Information Technology & Sciences (UITS), Rajshahi, Bangladesh
3
Senior Lecturer, School of Business, University of Information Technology & Sciences (UITS), Rajshahi, Bangladesh
4
Lecturer, School of Business, University of Information Technology & Sciences (UITS), Rajshahi, Bangladesh

ABSTRACT
Green banking is the operation of the banking activities giving especial attention upon the social, ecological and environmental fac-
tors aiming at the conservation of nature and natural resources. Banks can be green through bringing changes in six main spheres
of banking activities. Those are Change in Investment Management, Change in Deposit Management, Change in House Keeping,
Change in the Process of Recruitment and Development of Human Capital, Corporate Social Responsibility (CSR), and Making
Consciousness Among Clients and General Mass. Such an initiation can ensure a safe residence for upcoming generation. Bangla-
desh Bank has already issued circulars regarding this. Banks have already been asked to make their own green banking policy. Now
we only need raising voice, keeping hand over hands, thinking in positive way and working in collective manner to make this a true.

Key Words: Green Banking, Green Policy, Green Products.

1 INTRODUCTION

A mong crores of skies of the Universe ours is the only

planet capable of providing residence for animals.
The reason behind this is the green environment of
gan “Be Green, Go Green” before them, it has been started
here in developing countries like ours in recent years.
Several researchers have written about Green Banking.
the planet enriched by green plants. This represents a Among those most remarkable are Rashid (2010), Schultz
close relationship between the animals and plants. But (2010), Fenn(2012), Haque (2012), Hayder (2012), Hossan
due to destructive activities of man as well as their strong (2012), Khan (2012) and Millat (2012). This research is
tendency to grasp the nature, the color of our environ- aimed at finding prospects of Green Banking in Bangla-
ment is becoming faded and the bio-diversity, residing desh perspective.
there, is becoming eliminated. Because of the emission of
Carbon in density and due to green house affect, the tem-
perature of the whole world is increasing day by day. As a
2 OBJECTIVES OF THE STUDY
result, every year we are facing cyclones, floods, long The major objective of the study is to analyze the pros-
drought, and many other natural disasters. To come out pects of green banking in Bangladesh. But the specific
from this hazardous situation, the Green Banking activi- objectives of the study are to promote green banking
ties taken by millions of banks of the world may play a among beneficiaries and in the banking sector. In particu-
vital role. Banking sectors are the main source of money lar, it is aimed to -
for different commercial projects and those are working in • To study management of environmental risk and
bringing the economic development of a country. Green identify opportunities for innovative environment
banking is nothing but the operation of the banking activi- friendly financial products.
ties giving especial attention upon the social, ecological • To study environmental and control regulations re-
and environmental factors aiming at the conservation of garding green banking in Bangladesh.
nature and natural resources. Green bank promotes envi- • To design proper environmental management system
ronmental and social responsibility but operates as a tra- in the investment projects.
ditional community bank providing excellent services to • To create financial products and services that sup-
investors and clients.1 A bank can grow itself as Green ports commercial development with environmental
Bank through the application of environment friendly benefits.
policies in every sector of its activities and through the
elimination of Carbon foot prints 2 from its premises 3 METHODOLOGY OF THE STUDY
without changing main banking functions. Such bank acts
as Ethical Bank, Moral Bank, Responsible Bank, and Sus- This article is mainly based on secondary data collected
tainable Bank in a society.3 Green banking can facilitate from several reliable sources. The sources of secondary
both the clients, human capital and stake holders. This data are annual reports of Bangladesh Bank and various
also increases the goodwill of the bank as a part of its im- Commercial Banks, and related articles etc. A thorough
age building activities. Although this theme has been im- research was carried out for a period of three months
plemented in several developed countries keeping a slo- when we talked with several bank bodies and finally this

Copyright © 2012, Asian Business Consortium | ABR 59 | P a g e

Asian Business Review, Volume 2, Numebr 2/2013 (Issue 4)
ISSN 2304-2613 (Print); ISSN 2305-8730 (Online)
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article is chalked. The investigation will be helpful for the threat, the financial sector of Bangladesh is playing a key
readers and researchers. role as one of the important stake-holders of the economy
enforcing the businessmen/ industrialists of the country
to design their various strategy/action plans keeping in
4 JUSTIFICATION OF THE STUDY mind the crucial environmental issues. Green banking
Climate change is the most complicated issue the world is (GB) is a component of the global initiative by a group of
facing. Across the globe there have been continuous en- stakeholders to save the climate/environment. In this
deavors to measure and mitigate the risk of climate study it is tried to find out the present status of green
changes caused by human activities. Many countries over banking practices. In doing so a comparative analysis has
the world have made commitments necessary to mitigate been initiated among different types of banks [State-
climate change. As socially responsible corporate citizen, owned Commercial Banks (SCBs), State-owned Specia-
Bangladeshi banks have a major role and responsibility to lized Development Banks (SDBs), Public Commercial
support and supplement the government effort towards Banks (PCBs) and Foreign Commercial Banks (FCBs)] in
substantial reduction in carbon emission. operation in Bangladesh to see whether they adopted
green banking policy guided by Bangladesh Bank (BB).
Normally we can consider the banks as environment The study concluded that only PCBs, FCBs have adopted
friendly institution with their operational activities but it green banking guideline and financed some of green
is important that the environment can be affected greatly banking based projects on the other hand SCBs and SDBs
by the activities of their customers. The banking sector is initiatives are not remarkable.5
one of the major sources of financing for commercial
projects 4 such as Brick field, Steel, Paper, Cement, Chem- Md. Touhidul Alam Khan wrote an article on Green Bank-
icals Fertilizer, Power, Textiles etc. Which cause maximum ing: Go green, Think green. In his article he said that “in a
carbon emission. Therefore, the banking sector can play word, we can say that green banking refers to the attempt
intermediary role between economic development and of the banking sector to consider social, ecological and envi-
environment protection, for promoting environmentally ronmental factors with an aim to protect the environment
sustainable and social responsible investment. and conserve natural resources”. The banking sector plays
a major role in financing investment for commercial
Green Banking refers to the banking business conducted projects, which is one of the most important economic ac-
in such areas and in such a manner that helps the overall tivities for economic growth. Hence, by taking various
reduction of external carbon emission and internal carbon measures to save the environment, the banking sector can
footprint. To aid the reduction of external carbon emis- play a crucial role in promoting environmentally sustaina-
sion, bank should finance green technology and pollution ble and socially responsible investment. As such, Green
reducing projects. Internally the banking operations have Banking is also known as Ethical Banking and Sustainable
considerably increased the carbon footprint of banks due Banking. The purpose of Green Banking initiatives taken by
to their massive use of energy e.g. lighting, air condition- central bank is to ascertain required measures to save the
ing, electronic/electrical equipments, IT, high paper was- environment and reduce pollution while serving or financ-
tage, lack of green buildings etc. ing customers and improve in-house environment man-
agement through efficient and effective use of resources in
Therefore, to adopting green banking, bank should adopt all the branch and head offices of banks. Bangladesh Bank
technology, process, and products which result in sub- is well aware of the environmental degradation situation
stantial reduction of their carbon footprint as well as de- and has already given time-to-time directions to all sche-
velop sustainable business. duled banks. Commercial Banks are now required to en-
sure necessary measures to protect environmental pollution
Now-a-days global worming is a key issue of the world
while financing a new project or providing working capital
and green banking might be the answer of this burning
to the existing enterprises. Banks have been advised to faci-
question. Assessing the available literature it has been
litate their clients with utmost care financing for installation
found that no profound work has been done on this topic
of Effluent Treatment Plant (ETP) in the industrial units
till now. As it is a very novice topic for country like Ban-
and to finance in Solar Energy, Bio-gas, ETP and Hybrid
gladesh. That’s why working on this contemporary topic
Hoffman Kiln (HHK) in brick field under refinance pro-
is important for the greater interest of people. In fact, the
gram of Bangladesh Bank.
work has enormous justification from theoretical and
practical view point. Green Economy is one whose growth in income and em-
ployment is driven by public and private investments that
5 REVIEW OF RELATED LITERATURE reduce carbon emissions and pollution, enhance energy
and resource efficiency, and prevent the loss of biodiversi-
Md. Maruf Ullah found that as one of the least developed
ty and ecosystem services. These investments need to be
countries Bangladesh is the worst sufferer of world envi-
catalyzed and supported by targeted public expenditure,
ronmental pollution through industrialization of the
policy reforms and regulation changes. This is why Green
western countries. Under such extreme environmental
Banking initiatives by all banks are a moral obligation to
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Asian Business Review, Volume 2, Numebr 2/2013 (Issue 4)
ISSN 2304-2613 (Print); ISSN 2305-8730 (Online)
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save the people. And the time has come for all lenders to give especial concentration upon their financing so
“go green” and “think green” by setting their mindset that the project or any of its parts they have taken or
taking remarkable footsteps through successful green are going to take in hand will not be threat for the en-
banking initiatives.6 vironment. Investment should be increased for
projects installing solar energy plant, bio-gas, and/or
Khondokar Morshed Millat et. al had a study on Green other renewable energy plants, bio-fertilizer plants,
Banking in Bangladesh Fostering Environmentally Sus- Effluent Treatment Plant (ETP), Hybrid Hoffman Kiln
tainable Inclusive Growth Process. They said that Bangla- projects for the production of brick etc. At lower in-
desh is perusing low-carbon green development without terest and utmost care.9 They should take proper
compromising the imperative of faster economic growth steps in shielding the production of hazardous Car-
and social development. Development strategies of the bon from their projects. Encouraging farmers to grow
Government of Bangladesh laid down in the perspective
salinity or flood tolerable species while providing
plan (2010-2021) and the Sixth Five Year Plan (FY 2011-15)
them agro-investment and providing this at lump-
declare clear commitment of pursuing sustainable growth.
sum interest is also the part of Green Investment.
The country’s vulnerability to floods, cyclones and to the
o Investment in Waste Management Projects: Banks
threat of inundation of large coastal areas from global
should invest in projects to manage waste materials
worming driven sea level rise makes sustainability a
harmful for environment especially produced by
prime development concern.
those mills and factories draining such components to
Financial practices can crucially influence the speed of rivers, rivulets, canals, beels and/or other water bo-
adaptation of environmentally sustainable output practic- dies and continuously doing harm to the environ-
es in the real economy. Aware of its responsibility practic- ment. They should ensure proper management of
es in the financial sector, Bangladesh Bank, the central wastes bringing necessary chemical changes in com-
bank of Bangladesh, has spearheaded adaptation and ponents to make it environment friendly through
promotion of green ban banking practices throughout the their projects.
financial sector, towards safeguarding environmental sus- o Environmental Risk Rating before Investment: Banks
tainability. As a regular financial sector, the central bank should invest in a project after assessing its environ-
already proceeded a long way in implementation green mental or climatic risk. They should rate the presence
banking. Banks in Bangladesh have enthusiastically re- of factors harmful for environment and its degree. In-
sponded to Bangladesh Bank’s guidance towards green vestment should only be given after being insured
banking, with steps in environmentally responsible fi- about the proper management of those harmful com-
nancing that are beginning to make profound impact on ponents. Banks can bring Green Home Loan, Green
environmental practices in the real economy. Car Loan and other newer products in this regard.

The central bank issued policy guidelines for green bank- 7.2 Change in Deposit Management
ing on February, 2011. According to the guidelines, all o Implementation of Alternative Delivery Channel
operating banks and financial institutions need to take and On-line Banking: Now days Alternative Deli-
effective measures to conduct environment friendly bank- very Channels are ensuring modern banking facilities.
ing activities in the country. Bangladesh Bank has also Most common Alternative Delivery Channels are
issued a common reporting format to all the commercial ATM card, credit card, debit card, mobile banking,
banks to report green banking activities including the ex- on-line banking, internet banking etc. BACPS (Ban-
tent of carbon footprint in a structured way. Banks and gladesh Automated Cheque Processing System) and
financial institutions now regularly submit a quarterly BEFTN (Bangladesh Electronic Fund Transfer Net-
report to Bangladesh Bank on their performance of green work) etc. implemented by Bangladesh Bank has en-
banking activities.7 hanced the services provided through Alternative De-
livery Channel. Such products in one hand have sped
6 RESULTS AND DISCUSSION up the services taken by the clients and in other hand
have lessened the use of paper materials ensuring the
The aim of Green Banking can be reflected through taking
a work plan to bring changes in six main spheres of whole freshness of nature.
banking activities. Banks should be promised in bringing o Making every Deposit Products Environment
such changes. Friendly: Deposits of clients are the main sources of
money for every bank. So, banks provide different
deposit services to their clients. All of such deposit
7 MAJOR FINDINGS products should be made environment friendly and
7.1 Change in Investment Management should be brought under on-line management.
o Finance in Environment Friendly Projects: Banks
7.3 Change in House Keeping
should ensure finance in projects those are environ-
Uses of papers encourage flattening of plants and leads
ment friendly or ethical in nature.8 It is necessary to
Copyright © 2012, Asian Business Consortium | ABR 61 | P a g e
Asian Business Review, Volume 2, Numebr 2/2013 (Issue 4)
ISSN 2304-2613 (Print); ISSN 2305-8730 (Online)
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the environment to destruction. Considering this, banks o Policy Formulation and Report Making: Banks
should lessen the use of papers otherwise introduce the should formulate policies and make reports on Green
use of recyclable papers. They should stop unnecessary Banking and analyze those reports to take necessary
printing and in need print on both sides of a paper and steps to ensure green environment through CSR.
use eco-fonts while printing. Storage of all necessary in-
formation should be ensured through establishing electric 7.6 Making Consciousness Among Clients and
data bank like EDW or Enterprise Data Warehouse. E- General Mass
tendering system should be introduced in purchasing ne- Banks should arrange several seminar and symposiums to
cessary stationeries and other items for the institution. make their clients conscious regarding Green Banking as
Office order, notice, account statement, invitation letter, well as to introduce their Green Products and advantages
thanking letter should be taken under electronic system therein. This can ultimately make the clients habituated to
like E-mail and mobile SMS etc. Meeting should be carried the Green Banking activities.
on through Video/Audio Conferencing rather than physi-
cal visit. Necessary steps should be taken while making Every small 'GREEN' step taken today would go a long
the office electricity sustainable. Ensuring the use of day way in building a greener future and that each one of them
light instead of the use of electric bulb and ensuring prop- can work towards to better global environment.10 Consider-
er ventilation instead the use of ACs may save energy. ing this Bangladesh Bank has issued BRPD Circular No. 2
Energy saving bulbs can be used in need. Unnecessary use on 27 February 2011 as an initiation to start Green Banking
of light, fan, AC and computer etc. should be stopped. in our country through providing necessary directions.
Electricity supply to the office premises should be ensured Through this circular all banks are asked to formulate their
through utilization of solar energy and/or other renewa- own Green Banking policies. According to this circular
ble energies. Water and gas should be used sustainably. every bank will implement Green Banking through 3 dis-
Overall environment should be kept neat and clean and tinct phases of three years work plan. The first of which
free from any form of pollutants. All the staff members consists Policy Formulation and Governance, Incorporation
should be made conscious in this regard. of Environmental Risk in CRM, Initiating In-house Envi-
ronment Management, Introducing Green Finance, Crea-
7.4 Change in the Process of Recruitment and De- tion of Climate Risk Fund, Introducing Green Marketing,
velopment of Human Capital On-line Banking, Supporting Employee Training, Consum-
Banks should start E-recruitment system while recruiting er Awareness and Green Event, Disclosure and Reporting
human capital. They can provide salary and bonus etc. of Green Banking Activities. Second step consists Sector
through on-line system and can grow their human capitals Specific Environmental Policies, Green Strategic Planning,
as environment specialists and welfare worker along with Setting up Green Branches, Improved In-house Environ-
making them skilled bankers. Skills and consciousness can ment Management, Formulation of Bank Specific Environ-
also be developed through arranging seminars and sympo- mental Risk Management Plan and Guidelines, Rigorous
siums time to time. Dividing the whole human capital of Programs to educate clients, and Reporting of Green Bank-
the institution into several clusters or groups and involving ing Activities. And in third step banks are asked to Design
them in different environment friendly activities may help and Introduce Innovative Products and Report in standard
the proper implementation of Green Banking. Format with External Verification.11 Already we have
passed the time for first two phases and in 2013 we are
7.5 Corporate Social Responsibility (CSR) stepping to implement the third phase. As per Bangladesh
Now days every bank is playing vital roles in CSR con- Bank, 41 of the 47 commercial banks have formulated poli-
cern. This is the responsibility of an institution upon socie- cy for Green Banking, 45 have formed Green Banking unit.
ty where it is established. CSR can act in the following In the year 2012 the budget allocation of top ten banks for
way in establishing Green Banking - Green Finance was EXIM Bank- BDT 2500 million, BASIC
o Funding to combat against climatic change: Banks Bank- BDT 1200 million, Bank Asia- BDT 1200 million, So-
can make especial funds to combat against climatic cial Islami Bank- BDT 1040 million, Standard Chartered
change and ensure its proper utilization. They can Bank- BDT 1000 million, Shahjalal Islami Bank- BDT 992.5
help environmentalist NGOs or other such organiza- million, One Bank- BDT 729.56 million, Islami Bank- BDT
tions through this fund. Internal human resources of 542.37 million, Agrani Bank- BDT 500 million and Al-
the bank can also play roles in this regard. Arafah Islami Bank- BDT 500 million respectively. Among
o Combat against Natural Disasters and assisting the- 8059 branches of banks 3967 branches (38.03%) have started
reafter: Banks can play direct or indirect roles in com- on-line service. 38 banks have made their structure fully
bating natural disasters. Providing monetary sup- automated and providing on-line service through all their
ports, relief goods and interest free loans etc. after branches. 91.50 percent of private commercial banks are
such diverse situation will assist the victims to sur- providing their clients on-line service, 1.39 percent are pro-
vive in the newer environment. viding iBanking service and 1.37 percent are providing mo-
bile or SMS banking service.

Copyright © 2012, Asian Business Consortium | ABR 62 | P a g e

 Asian Business Review, Volume 2, Numebr 2/2013 (Issue 4)
ISSN 2304-2613 (Print); ISSN 2305-8730 (Online)
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We can step our foot keeping following slogans before us - [2] Schultz, C. 2010. Green Bank Report.
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meaning-of-green-banking/. 08 February 2013.
resources”, “Pay your bills online”, “Turn off the tap when not
[3] 3. Wikipedia. 2013. Ethical Banking.
needed”, “Always use a cloth bag”, “Reduce, reuse and re- http://en.wikipedia.org/wiki/Ethical_banking. 08 February
cycle”, “Digitize yourself”, “Think before you press the but- 2013.
ton”, “Everything has two sides”, “Be paperless-kick the habit”, [4] Anonymous. 2012. Green Banking an avenue to safe environment.
“Use car pools to go to work”, “Unplug electronic devices while http://www.thefinancial express-
bd.com/more.php?news_id=132169&date=2012-06-08. 08 Feb-
not in use” etc.
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[5] Ullah, M.M. 2010. Green Banking in Bangladesh- A Comparative
8 CONCLUSION Analysis. http://www.wbiconpro.com/610-Maruf.pdf. 20 Feb-
ruary 2013.
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regarding modernization of Green Banking practice and its http://www.thedailystar.net/ suppli-
proper implementation. If every bank formulate their work ments/2012/environment/pg1.htm. 08 February 2013.
[7] Millat, K.M. and Others 2012. Green Banking in Bangladesh Foster-
plan following those rules and works collectively only then
ing Environmentally Sustainable Inclusive Growth Process.
it will be possible to complete implementation of Green http://www.bangladesh-bank.org/pub/ spe-
Banking activities in Bangladesh. It will then help earth in cial/greenbankingbd.pdf. 31 December 2012.
regaining Green Environment and ensure safe residence for [8] Fenn, K. 2012. All about Green Banking.
our off-springs. Only the collective approach of both the http://www.preventclimatechange.co.uk/green-banking.html.
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[9] Haque, A.N. 2012. Green Banking Initiatives in Bangladesh. The
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[1] Rashid, M. 2010. Eyes on Green Banking. Term Paper, Department of Finance and Banking, University of
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