DOES COMMERCIAL BANK PRACTICE GREEN FINANCE? A STUDY ON THE RELATIONSHIP BETWEEN GREEN FINANCING AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN BANGLADESH

Amena Khatun, Fahmida Ferdous Mouri, Mst. Fariya Akter

Text | Abstract | PDF

DOES COMMERCIAL BANK PRACTICE GREEN FINANCE? A STUDY ON THE RELATIONSHIP BETWEEN GREEN FINANCING AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN BANGLADESH

 

Amena Khatun1, Fahmida Ferdous Mouri2, Mst. Fariya Akter3

1Lecturer, Department of Marketing, EXIM Bank Agricultural University Bangladesh.

2Lecturer, Department of Marketing, EXIM Bank Agricultural University Bangladesh.

3Faculty of Business Administration, EXIM Bank Agricultural University Bangladesh.

 

A R T I C L E  I N F O

Article Type: Research

Received: 24, July. 2024.

Accepted: 15, Aug. 2024.

Published: 10, Sep. 2024.

 

 

 A B S T R A C T

Literature Review: Green finance (GF) has drawn a lot of attention in recent literature as a result of increased worldwide efforts to mitigate climate change. The Bangladeshi central bank mandates that all commercial banks embrace green banking policy guidelines and make green investments.

Purposes: In order to determine if the adoption of green finance has an effect on financial performance, this study examines the relationship between green financing and the financial performance of commercial banks in Bangladesh.

Methodology: To accomplish the goals, information has been gathered from ten commercial banks’ websites, Bangladeshi banks, and annual reports of certain institutions for the years 2016 to 2022. To achieve the goals, the collected data is categorized and organized.

Analysis: Regression, correlation, and profitability ratios are used in data analysis. Ratio analysis is often used to assess and contrast different banks’ long-term results. Return on equity and return on total assets are the metrics used to quantify profitability. Total debt divided by total assets is known as the debt ratio. The green financing has been utilized as an independent variable in regression analysis. The writers have employed debt ratio, return on equity, and return on asset as the dependent variable of financial success.

Findings: According to this study, green financing has a negative effect on the debt ratio but a favorable influence on the return on equity and return on total assets. Regression research reveals that there is no statistically significant correlation between Bangladeshi commercial banks’ financial performance and green financing. Nonetheless, there is still a high positive link between ROE and ROA, a strong negative correlation between ROA and debt ratio, and a mild negative correlation between ROE and debt ratio. Furthermore, there is little relationship between green finance and debt ratio, ROE, and ROA. It suggests that Bangladeshi commercial banks’ returns will rise in tandem with an increase in green finance.

Implications: The highly lucrative listed banks will be encouraged by the study’s findings to increase their investments in environmentally friendly operations, which will eventually result in sustainable development in this industry.

Originality: This research article has not been submitted to any other papers or other institutions. It is the writers’ original work.
Keywords: Sustainable Development Goals (SDGs), Bangladesh Bank, Green Finance, Private Commercial Banks, Debt Ratio, Return on Equity (ROE), Return on Asset (ROA), Financial Performance.

 

 

 

References

  1. Abuatwan, N. 2. (2023). The Impact of Green Finance on the Sustainability Performance of the Banking Sector in Palestine: The Moderating Role of Female Presence.
  2. Ahmed, R. Y. (2024 ). Green bonds as a bridge to the UN sustainable development goals on environment: A climate change empirical investigation. International Journal of Finance & Economics, 29(2), 2428-2451.
  3. Akhter, I. Y. (2021). Green banking practices and its implication on financial performance of the commercial banks in Bangladesh. Journal of Business Administration, 42(1), 1-23.
  4. Al Mamun, M. A. (2020). Green Banking Practices and Profitability of Commercial Banks in Bangladesh.
  5. Alam, K. T. (2017). Green banking: Bangladesh perspective and international experiences. Russian Journal of Agricultural and Socio-Economic Sciences, 61(1), 10-16.
  6. Ayesha Afzal, E. R. (2022). Green finance and sustainable development in Europe. Economic Research-Ekonomska Istraživanja, 35:1,, 5150-5163,.
  7. Azad, M., Islam, M., Sobhani, F., Hassan, M., & Masukujjaman, M. D. (2022). Revisiting the Current Status of Green Finance and Sustainable Finance Disbursement: A Policy Insights.
  8. Choudhury, T. T. (2013). Influence of stakeholders in developing green banking products in Bangladesh. Research Journal of Finance and Accounting, 67-77.
  9. Chowdhury, M. M. (2023). Green Finance and Bank Performance: Evidence from Bangladesh. International Journal of Multidisciplinary Research and Analysis,6(6), 2354-2362.
  10. Chowdhury, M. M.-2. (2023). Green Finance and Bank Performance: Evidence from Bangladesh. Chowdhury, MM (2023). Green Finance and Bank Performance: Evidence from Bangladesh. .
  11. Chowdhury, T. D. (2013). Green finance is essential for economic development and sustainability.
  12. Dai, Y. A.-S. ((2022)). Sustainability performance efficiency in the banking sector.
  13. Farzana Rashid, A. U. (2023). Practices of Green Financing and Sustainable Development: Scope and Complexity. International Journal of Sustainable and Green Energy, 12, 6-12. nternational Journal of Sustainable and Green Energy, 12, 6-12.
  14. Goel, P. (2016). Green finance: A step towards sustainable financial system. . Abhinav International Monthly Refereed Journal of Research in Management & Technology, 5(3),, 22-31.
  15. Hao, X. L. (2023). The role of digitalization on green economic growth: Does industrial structure optimization and green innovation matter?
  16. Hoshen, M. S. (2017). Green financing: an emerging form of sustainable development in Bangladesh. IOSR Journal of Business and Management, 19(12), , 24-30.
  17. Hossain. (2018). Green finance in Bangladesh: policies, institutions, and challenges (No. 892). ADBI Working Paper.
  18. Hossain, M. 2.-f.-b.-p.-i.-c. (2018). GREEN FINANCE IN BANGLADESH: POLICIES, INSTITUTIONS, AND CHALLENGES.
  19. Hossain, M. (2018). Green finance in Bangladesh: Policies, institutions, and challenges.
  20. Ji, X. Z. (2021). The impact of carbon neutrality on the investment performance.
  21. Julia, T. &. (2016). Green financing and bank profitability: Empirical evidence from the banking sector in Bangladesh. Al-Shajarah: Journal of the International Institute of Islamic Thought and Civilization (ISTAC), 21(3).
  22. Khan, I. H. (2024). Green banking practices, bank reputation, and environmental awareness: evidence from Islamic banks in a developing economy. Environment, Development and Sustainability, 16073–16093.
  23. Khan, S. S. (2016). Green banking: With reference to sustainable development. Asian Journal of Islamic Finance, 1(1), 14-35.
  24. Lalon, R. M. (2015). Green banking: Going green. International Journal of Economics,finance and management sciences, 3(1), , 34-42.
  25. Lusy, L. H. (2018). Effects of current ratio and debt-to-equity ratio on return on asset and return on equity. International Journal of Business and Management Invention (IJBMI), 7(12), 31-39.
  26. Md. Kazimul Hoque, M. H. (2022). Impact of Financial Performance on Green Banking Disclosure: Evidence from the Listed Banking Companies Bangladesh,” , DOI: 10.13189/ujaf.2022.100209. Universal Journal of Accounting and Finance, Vol. 10, No. 2, pp. 450 – 456,.
  27. Nundy, S. G. (2021). Impact of COVID-19 pandemic on socio-economic, energy-environment and transport sector globally and sustainable development goal (SDG). Journal of Cleaner Production, 312, 127705.
  28. Okumu, B. A. (2014). The relationship between green banking and financial performance of commercial banks in Kenya.
  29. Önder, A. N. (2021). Environmental problems. In Different perspectives on environmental (pp. 306-338).
  30. Rahman, F. &. (2016). Green Banking Activities in Bangladesh: An Analysis and Summary of Initiatives of Bangladesh Bank. Research Journal of Finance and Accounting, 7(10), 6-7.
  31. Rahman, M. H. (2023). Green banking initiatives and sustainability: A comparative analysis between Bangladesh and India. Research in Globalization.
  32. Rahman, S. M. (2022). A systematic review of green finance in the banking industry: perspectives from a developing country. Green Finance, 4(3), 347-363.
  33. Rashid, M. a. (2018). Green financing for sustainability: analysing the trends with challenges and prospects in the context of bangladesh.
  34. Sahoo, B. P. (2016). Green banking in India: problems and prospects. International Journal of Research-Granthaalayah, 4(8), 92-99. Research-Granthaalayah, 4(8), 92-99.
  35. Slaper, T. F. ( 2011). The Triple Bottom Line: What Is It and How Does It Work? The Triple Bottom Line Defined.
  36. Soundarrajan, P. &. (2016). Green finance for sustainable green economic growth in India. Agricultural Economics, 62(1), 35-44.
  37. Sufian, F. (2011). “Profitability of the Korean Banking Sector: Panel Evidence on Bank-Specific and Macroeconomic Determinants”. Journal of Economics and Management, 7(1) , 43-72.
  38. Suwarno, A. E. (2004). Manfaat Informasi Rasio Keuangan Dalam Memprediksi Perubahan Laba (Studi Empiris terhadap Perusahaan Manufaktur Go Publik di Bursa Efek Jakarta). Jurnal Akuntansi dan Keuangan , volume 3 , issue 2.
  39. Ullah, M. S. (2014). Green banking in Bangladesh: Progress, problems and prospects. . NIBM, Prajnan, 43(1).
  40. Umar, M. J. (2021). Carbon neutrality, bank lending, and credit risk: Evidence from the Eurozone. Journal of Environmental Management, 296, 113156.
  41. Wang, Y. &. (2016). The role of green finance in environmental protection: Two aspects of market mechanism and policies. Energy Procedia, 104, 311-316.
  42. Weber, O. (2016). The Impact of Green Banking Guidelines on the Sustainability Performance of Banks: The Chinese Case.
  43. Zakari, A. &. (2022). The Introduction of Green Finance: A Curse or a Benefit to Environmental Sustainability? Energy RESEARCH LETTERS, 3(3).
  44. Zhang, D. M.-H. (2021). Public spending and green economic growth in BRI region: mediating role of green finance.
  45. Zhang, X. W. ( 2022). Do green banking activities improve the banks’ environmental performance? The mediating effect of green financing., . Sustainability, 14(2), 989.
  46. Zheng, G. W. (2021). Green Finance Development in Bangladesh: The Role of Private.
  47. Zheng, G.-W., Siddik, A., Masukujjaman, M., Fatema, N., & Alam. (2021). S.S. Green Finance Development in Bangladesh: The Role of Private Commercial Banks (PCBs).
  48. Zhixia, C. H. (2018). Green banking for environmental sustainability-present status and future agenda: Experience from Bangladesh. Asian Economic and Financial Review, 8(5), 571-585.