Think Green Be Green

‘Green Banking and its impacts on

Bangladeshi Banking System’

Term Paper

"Green is a process, not a status. We need to think of 'green' as a verb, not an adjective."
~ Daniel Goleman
 Term Paper
BUS 2311: FOB

‘Green Banking and its impacts on Bangladesh

Topics Covered:
Banking System’

Submitted to
Ms. Farhanaz Luna
Assistant Professor
Faculty of Business Administration
Fareast International University

Submitted by
Md. Tamim Hossain (18201006)
Faculty of Business Administration
Fareast International University

Latest Date of Submission: April 16, 2019

April 15, 2019

To,
Ms. Farhanaz Luna
Assistant Professor,
Department of Business Administration,
Fareast International University

Subject: Submission of term paper on

‘Green Banking and its impacts on Bangladesh Banking System’

Dear Madam,

Here is the term paper, ‘Green Banking and its impacts on Bangladesh Banking System’,
which I am assigned and has been completed on the underpinned knowledge gained from
various research papers, articles and your guidelines.

Throughout the completion of the term paper, I came to know about many things
regarding the GB practices of Bangladeshi Banks towards the Green Economy and
banking.

I do believe that my tiresome efforts will help you to get ahead with this sort of venture.
In this case it will be meaningful to me. However, I would genuinely appreciate and keen
enough to make further corrections where you think it is necessary. Your kind advice will
encourage me to do further research in future.

Thanking you.

Yours obediently,

Md. Tamim Hossain

ID # 18201006
Department: FBA
Program: BBA
 Acknowledgement

Indeed all praises and salutations due to ALLAH Subhanahu Wa Ta’ala, The most glorified,
The most high.

My gratitude and thanks goes to my respected supervisor Ms. Farhanaz Luna, Assistant
Professor, Faculty of Business Administration, Fareast International University for her
inspiration and guidance to prepare this term paper on ‘Green Banking and its impacts
on Bangladesh Banking System’ which has obviously widen my know-how to a great
extent.

Last but not the least I admit the perseverance of folks who enable me and my humble
exertion towards finalization of this Term Paper.

I sincerely believe... that banking establishments are more

dangerous than standing armies. ~ Thomas Jefferson
 Table of Contents

Abstract 1
Introduction 1
1.0 Objectives of the study 2
1.1 Methodology & limitations of the study 2
1.2 Rationale of the Study 2
1.3 Literate Reviews 2
2.0 Background of the study 4
2.2 Factors behind adoption of GB 4
2.3 Reasons for Green Banking practices 4
3.0 Analysis and Findings of the study 5
3.1 Fund allocation of Green Banking 5
3.2 Green Finance 5
3.3 Green Energy 6
3.4 Mobile Banking 6
3.5 Online Banking 7
3.6 Industry Imprint 7
3.7 Banks’ in house Green activities 8
3.8 Specific Findings 8
3.9 GB Slogans of Bangladeshi Banks 9
3.10 Spacial Events 9
4.0 Recommendations & Suggestions 9
4.1 Introducing Smart E-loan 10
5.0 Conclusion 10
TERMS AND ACRONYMS 10
REFERENCES 11
 Green Banking and its impacts on Bangladeshi Banking system 1

___________________________________________________________________________
Abstract: This paper interprets the existed and future practices extent of Green Banking (GB)
and how effective it is for economy and banking sector of Bangladesh, a newly introduced
developing country. This Study is mainly based on secondary data highlighting the mobile
banking, online banking, green economy, green financing, green energy, green banking unit
along with feasible projects and guidelines. GB is a new way of conducting the banking
business through prioritization the social, ecological and environmental issues which relate
corporate social responsibility (CSR) in one bond. Although the concept of GB is relatively
new in Bangladesh and yet to get momentum, it got financed by Bangladesh Bank. On an
average, Bangladesh Bank allocated Tk. 657.67 million for green banking in 2012. Since
October 2012, Taka 838.4 million has been allocated to the following green projects. For 2012,
banks have allocated Tk.20, 034.59 million for green finance of which Tk. 3273.69 million has
been utilized during January September 2012. The study concludes that practices of GB in
Bangladesh is not adequate enough but it is inevitable to drill because of environment,
economy, banking, globalization, competition, sustainability and Greenhouse gas (GHG).

Key words: GB, CSR, GHG, Green economy, Green energy, Sustainability etc.
___________________________________________________________________________

Introduction
The word “Green Banking” is very common concept in the world. Global warming is a great
issue in protection of hygienic society. There is high possibility of playing significant role of
Green Banking in the global warming issue. The green banking concept is evolved in western
countries and now is practiced in most of the countries in the world. It indicates endorsing
environment-friendly practices and reducing carbon footprint from banking activities. Green
banking is not just another corporate social responsibility activity; it is all about going beyond
to keep the world livable without any significant damage. Green banking that considers
all the social and environmental factors is also called ethical banking. The main objective of
green Banking is to ensure the use of organizational resources in favor of the environment and
society. Green banking as a concept is proactive and smart way of thinking with a vision for
future sustainability of our only Spaceship earth.

It evaluates all the factors before giving the loan whether the project is environment-friendly
and has any implication on the future people and planet. Green finance as a branch of green
banking makes significant contribution to the transition to resource efficient and low carbon
industries, i.e. Green industry and green economy in general. Green banking is a component of
the global initiative by a group of stakeholders to put aside environment. Green banking or
ethically responsible banks do not only advance their own initiatives but also affect socially
responsible behavior of other business.
 Green Banking and its impacts on Bangladeshi Banking system 2

1.0 Objectives of the study

 To analyze the green banking practices in Bangladesh;
 To justify the prospects of green banking practices in Bangladesh;
 To analyze effect on Bangladesh Banking system;
 To provide some suggestions in this regards

1.1 Methodology & limitations of the study

Based on secondary data collected from annual report and published materials of Dutch-Bangla
Bank ltd. (DBBL), Prime Bank Limited, Islami Bank Bangladesh ltd (IBBL), Shajalal Islami
Bank ltd, Pubali Bank ltd., Trust Bank ltd., Eastern Bank Ltd, United Commercial bank ltd
(UCBL), National Bank ltd., Bank Asia ltd., Janata Bank ltd. And Rupali Bank ltd. In addition
to this, company’s corporate profile, daily newspaper, different journals & articles, bank’s
websites and Bangladesh bank’s websites patronize a lot.
The data are analyzed in aspect of effects, practices and problems of green banking. No
interview of company executives involved. The findings of the study are reliable as the
authentic sources of data. The major limitation of the study is that no primary data is involved.

1.2 Rationale of the Study

Green initiatives can be implemented by facilitating the support and cooperation of its clients,
human capital and stakeholders. It can also increase the goodwill of the organization and
promote a 'green and social consciousness image' in the community as CSR towards buying
customers’ loyalty and shrinking of global warming.

1.3 Literate Reviews

Atiur Rahman (2010) in his paper focused on the present monetary and credit policy of
Bangladesh Bank towards attaining broader financial enclosure. Bangladesh Bank is carry
forwarding with technology driven, innovative, environment and low cost banking approach;
conveying a qualitative change in banking, preparation of monetary policy, application of
advanced banking technology, and use of Information and Communication Technology (ICT)
to extend financial services to the door step of common people. To ensure access to financial
services for all, various initiatives have been taken like trade finance; digitalization of the
financial sector; channeling liquidity into productive and supply augmenting investments
including agriculture, SMEs, Green Banking and CSR activities; expected to lead to more
broad -based inclusive growth and therefore lessen poverty; required for pushing the country
on course to the targeted vision of digital Bangladesh by 2021; the year of Golden Jubilee of
their independence.

Suresh Chandra Bihari (2011) elucidated that Green Banking includes promoting corporate
social responsibility (CSR). It starts with the aim of protecting the environment where banks
consider before financing a project whether it is environment friendly and has any implications
for the future. A company will be given a loan only when all the environmental safety standards
 Green Banking and its impacts on Bangladeshi Banking system 3

are followed. Green Banking can be efficiently implemented through the use of technology and
policy, he emphasized.

Alice Mani (2011) indicated that as Socially Responsible Corporate Citizens (SRCC), banks
have a major role and responsibility in enhancement of governmental efforts towards
substantial reduction in carbon emission. Banks can practices and initiatives of Green Banking
for sustainable development. The author examined and compared the green lending policies by
banks in India in the light of their compliance and commitment to environment protection and
environment friendly projects.

Green Banking Policy of BASIC Bank Limited, Bangladesh (2011) was go forwarded in
response to increasing consciousness over climate change, environmental degradation, need
for urgent measures for sustainable development to be addressed by some of the stakeholders
in the world. Banking system holds a unique position in an economy that can affect production,
business and other economic activities through their procedure for financing activities which
would in turn contribute to protect environment/climate from pollution. Moreover, efficiency
in energy use, water consumption and waste reduction may significantly contribute for
operating cost for many of the large banks of the country.

Mohmed Aminul Islam (2010), ‘Green Banking is also significant issue in recent times. While
the banking industry is undergoing computerization, networking and offering of on-line
banking is naturally gaining momentum.’

British Institute of Management (BIM) (1992) urged in favor of greening and launched a
major report which produced basic tips on greening the workplace.

Rutherford Michael (1994) stated that Banks need to monitor post transaction for the ideal
environmental risk management program during the project implementation and operation.

Schmidhciny S, Federico J, L Zorraquin (1996) described that commercial banking has been
emphasized on investment banking rather environmental risks but it would play a larger role
in their investment decision in the near future.

Jeucken M and Bouma JJ (1999) mentioned that investment which take into account of
environmental side-effects usually have lower rate of return.

PravakarSahoo, Bibhu Prasad Nayak (2008) explored the importance of green banking and
highlighted important lessons for sustainable banking and development in India.

Ginvosky, John (2009) focused on the efforts of community banks in the U.S. to leverage
sustainability, or green banking.
 Green Banking and its impacts on Bangladeshi Banking system 4

Rahman A (2010), governor of the central bank of Bangladesh, focused on green banking.

Ullah, M. M. (2010) marked green banking as a component of global initiatives to save the
environment and climate. He concluded the study pointing out that state owned commercial
banks and social development banks are less concerned with this issue.

Khan, M.T.A. (2012) stated that green banking initiatives by all banks are a moral obligation
to save the people. He also urged that lenders should consider 'Go green' and 'Think green'
themes.

Millat, K. M. et. al; (2012) reported that Banks in Bangladesh have enthusiastically responded
to Bangladesh Bank's guidance about green banking, with steps in environmentally responsible
financing that are beginning to make profound impact on environmental practices in the real
economy

2.0 Background of the study

Environmental-friendly practices involves GB into two pronged approach. Firstly, green
banking focuses on the green transformation of internal operations of all banks. It means all
the banks should adopt appropriate ways of utilizing renewable energy, automation and other
measures to minimize carbon footprint from banking activities. Secondly, all banks should
adopt environmentally responsible financing; weighting up environmental risks of project,
before making financing decisions; and in particular supporting and fostering growth of
upcoming ‘green’ initiatives and projects. More precisely, Green banking coverage includes:
Sustainable banking, Ethical banking, Green mortgages, Green loans, Green credit cards,
Green savings accounts, Green checking accounts, Green money market accounts, Mobile
banking, online banking, Remote deposit, Waste Management, Roof Gardening, and Green
Financing.

2.2 Factors behind adoption of GB

1. Pressure from Stakeholder 2. Potential for the profitability
3. Concern for the environment 4. Risk Minimization
5. Image Improvement

2.3 Reasons for Green Banking practices

 To avoid waste and giving priority to environment and society.
 To focus on environment-friendly initiatives.
 To hold economic sustainability.
 To use organizational resources with responsibility.
 To keep the world livable for a long period of time.
 To minimize paper works as much as possible inside and outside the bank.
 To achieve cost and time efficiency.
 Green Banking and its impacts on Bangladeshi Banking system 5

3.0 Analysis and Findings of the study

On the basis of CAMEL’S rating and Risk Based Capital Adequacy (RBCA) measurement
Bangladesh Bank selected ten commercial banks in Bangladesh those are executing green
banking practices such as Bank Asia ltd, DutchBangla Bank limited (DBBL), Eastern Bank
ltd (EBL), Islami Bank Bangladesh ltd, Mutual trust bank ltd, Prime bank ltd, Pubali Bank
ltd, Standard Chartered bank, Shahajalal Islami bank ltd and Trust Bank ltd. Major activities
under the green banking as under:

 Green banking policy  Green Banking unit  Mobile banking

 Online banking  Internet banking  Green banking budget
 ETP related project  Environmental risk rating
 Funds for green financing  Allotment of fund in green banking
 Effluent Treatment Plant (ETP)

The above mentioned banks allotted Tk. 525 crore for green banking and Tk. 505 crore was
provided for green financing among that fund. The 40 out of 47 nationalized and non-
nationalized commercial banks was established green banking unit. The 41 commercial banks
was formulated green banking policies. (Source: Dainik Kaler kantho_21th June, 2012)

3.1 Fund allocation of Green Banking

Banks are required to allocate a considerable amount for green banking in their annual budgets,
which will include (a) Budget for green Finance (b) Budget for Climate Risk Fund and (c)
Budget for marketing & capacity building for green banking. 35 Banks have allocated Tk.
23,018.36 million in their annual budget for 2012. On an average, a bank allocated Tk. 657.67
million for green banking in 2012.

Table-1 Allocation of fund for GB

Area of Allocation Amount (In Million Taka)
Green Finance 20034.59
Climate Risk Fund 2141.74
Marketing and capacity building for GB 842.73

3.2 Green Finance

For 2012 banks have allocated Tk.20, 034.59 million for green finance of which Tk. 3273.69
million has been utilized during January- September 2012. From the table it can be realized
that private commercial banks allocated the funds for green finance rather than the state- owned
commercial banks and utilization of allocation funds in private commercial banks is more than
other state-owned commercial banks.
 Green Banking and its impacts on Bangladeshi Banking system 6

Table-2: Allocation of Green Finance on the basis of Bank category

Allocation for Utilization(January-
Bank Percentage of
year September
Category utilization
2012 2012)
SCBs 6,160.00 25.53 0.41%
PCBs 11,506.79 2,828.73 24.58%
FCBs 1,017.80 76.80 7.55%
SDBs 1,350.00 342.63 25.38%
Total 20,034.59 3,273.69 16.34%

Status of Green Finance under Bangladesh Bank’s Refinance Scheme:

Since October 2012, 838.4 million out of taka 2.0 billion revolving fund has been allocated to
the following green projects:

Table-3: Bangladesh Bank refinance scheme for promotion of green projects:

Category Amount (in million Taka)
Solar irrigation pump 23.9
Solar home system 87.8
Biogas plant) 262.7
Effluent Treatment Plant (ETP) 90.4
Hybrid Hoffman Kiln (HHK) 124.8
Solar PV module assembling plant 248.8

3.3 Green Energy

Taka 838.4 million (approximately USD 10.27 million) has been disbursed from Bangladesh
Bank's fund, of which 56.3% was for Solar energy, 30.8% for biogas, 9.1% for Hybrid Hoffman
kiln and 4.8% for effluent treatment plants.

3.4 Mobile Banking

With fast expanding mobile telephone and great enthusiasm of the banks in offering financial
services through mobile phones, Bangladesh Bank issued guidelines on mobile financial
services in 2011. 23 Banks have been given license to provide mobile financial services (MFS)
of which 14 banks have already started their operations. These banks are presently providing
MFS to around 1.5 million customers; average transaction volume is around Taka 330 million
per day. The average rate of growth of customer base in mobile banking is currently 15% per
month. ATM services of Banks: Most of the banks have been offering 24 hours banking
services through their countrywide ATM booths. Now 4,332 ATM booths are operating in
Bangladesh. Dutch - Bangla Bank is taking the leading position with installation of 2,170 ATM
booths.
 Green Banking and its impacts on Bangladeshi Banking system 7

3.5 Online Banking The better performances happened due to

The Online Banking scenario looks quick decision making by management and
promising, wherein 3,226 out of 8,199 capacity for investment in environment saving
branches (39.35%) are equipped with projects with global demands. It is absent in
online banking services. 90.73% of the SCBs and SDBs.
total branches of private commercial
banks (PCBs) have been brought under online banking coverage. 4.84% of the total branches
of state commercial banks (SCBs) have been brought under online banking coverage. The
SCBs need to go a long way in the arena of green banking.

Table-4: Status of online Banking

Specialized
State owned Private Foreign
development
Types of banks commercial commercial commercial Total
banks
banks (SCBs) banks (PCBs) banks (FCBs)
(SDBs)
Total number of
3,469 3224 73 1433 8199
Branches
Number of
branches with 168 2925 73 60 3226
online facility
% of branches with
online banking 4.84 90.73 100.00 4.19 39.35
facility

3.6 Industry Imprint

3.6.1 Shahajalal Islami Bank Ltd: Finance for farmers named as Krishan, Shobujayon,
finance for handicraft and jute products named as Kutir, finance for re-cycle industry named as
Rupantor, finance for solar-panel named as Shobuj-shokti, finance for industries named as
Shobujshilpo, finance for ETP plants named as Shobujporibesh etc.

3.6.2 National Bank Ltd: Those initiatives such as Bio Gas project, ETP financing, Solar
panel, Mobile Banking and Mobile payments, online banking etc. regarded as green products
of National Bank Ltd.

3.6.3 Bank Asia Ltd: As the Lead Arranger is in the process of raising fund under Syndication
arrangement for establishing paper converting bag manufacturing plant for Propac Ltd. and
Packaging World Ltd. These will be the first of its kind of industry in Bangladesh for producing
and exporting environmental friendly food bags to USA & Canada -the biggest markets for the
products. The entrepreneurs have taken necessary steps to maintain high standards of
manufacturing process to meet stringent quality standards of these markets. These projects
would promote green banking initiatives through low carbon emitting production process, as
 Green Banking and its impacts on Bangladeshi Banking system 8

recycled papers would be used as raw materials for production of finished goods, leading to
conservation of trees. In this two projects Bank Asia has approved financing of Tk. 200 million.

3.6.4 Rupali Bank Ltd: RBL has set up solar system in 5 branches (Powered by solar energy).
RBL has designed two sector specific policies such as Tannery and Jute sector. Advices are
given to all staffs and officials for turning off their PC, Printer, Fan, AC and other office
equipment whenever they are not in use. Strict instructions are provided to maintain office time
schedule so that unnecessary stay in office could be avoided. All staff & officers are advised
to use car pool/ bus pool/ rickshaw pool/taxi pool in order to reduce cost while on the way of
office or in corporate travel. RBL have prepared a green office guide. Steps have taken to
educate clients etc.

3.7 Banks’ in house Green activities

 Use of papers on both sides for internal consumption
 Introduction of e- statement for customers in lieu of paper statement.
 Use of online communications in the best possible manner.
 Using more daylight instead of electric lights and proper ventilations in lieu of using
air conditioning.
 Using energy saving bulbs.
 Video /audio conferencing in lieu of physical travel.
 Conversion of bank’s vehicles into CNG and use of energy efficient electronic
equipment.
 Efficient use of printer cartridges, photocopy toner, office stationary etc.
 Sharing electronic files, voice mail, and e-mail instead of paper memos.
 Common use of table stationeries instead of individual use.

3.8 Specific Findings

 45 banks have formulated policy for green banking.
 46 banks have formed a Green Banking unit.
 41 Banks have introduced a Green Office Guide.
 Environmental risk rating has been done for 13,779 projects.
 13,833 risk rated prefects have been financed.
 13, 07,479.64 million taka has been disbursed.
 212 Branches and 150 SME Units/ATM booths are powered by solar energy.
 37 banks are fully automated.
 3226 branches have been facilitated with online coverage.
 Green Banking and its impacts on Bangladeshi Banking system 9

3.9 GB Slogans of Bangladeshi Banks

 Save paper, save trees
 Be paperless- kick the habit
 Always use a cloth bag
 Digitize yourself
 Conserve energy, conserve natural resources
 Unplug electronic devices while not in use
 Pay your bills online
 Use pools to go to work
 Reduce, reuse and recycle
 Everything has two sides
 Turn off the tap when not needed
 Think before you press the button

3.10 Spacial Events

AB Bank : Switching off all air conditions and unncessary lights
during 3-4 PM of each Sunday
Bank Asia : Workshop on ' GB' to commemorate the World
Environment Day on June 5, 2012.
:All members of HRD worked using Day light and
without Air conditioning on June 30, 2012
Mutual Trust Bank : Introduction of Earth Hour.
Commercial Bank of Ceylon : Acceptance of utility bill through internet.

4.0 Recommendations & Suggestions

 Government should carefully monitor and supervise the green banking practices in
Bangladesh.
 Bangladesh bank must monitor the adherence of green banking guidelines by the
commercial and noncommercial banks.
 Government encourages the general people about green banking awareness through
the electronic and print media.
 Coordination among concerned authorities.
 Speeding up awareness and effective capacity building.
 Immediate concentration on sectorial lending policies and procedures.
 Shifting of different categories of industry (such as, garments, textiles, and tannery) to
a proper location.
 Awareness of top management.
 Encouraging borrowers to go green.
 Need to apply green banking and use environmental risk management (ERM)
guideline in efficient manner.
 Develop a culture within the organization based on environmental governance.
 Replicate global as well as local best practices.
 Share Knowledge and technical know-how with peer groups.
 Further integration with credit risk management in the overall credit risk methodology.
 Apply quantitative approach for environmental risk rating.
 Develop a database for technical assistance/issues.
 Green Banking and its impacts on Bangladeshi Banking system 10

4.1 Introducing Smart E-loan offers no money down, low-interest financing with flexible
terms to help clients upgrade their home’s energy performance and save money! Through this
home improvement projects that reduce energy use and lower utility bill costs may qualify.
With rates as low as 4.49% applying through a local lender is as easy as child’s play!
(Source: Connecticut Green Bank)

5.0 Conclusion
Presumably Bangladesh Bank will enthusiastically consider green banking activities of a bank
while granting permission for opening new branch of bank as such banking involves green
financial products and services. Whereas, Retail banking will include green mortgage, home
equity loans, green commercial building loans, green car loans and green cards.

Under corporate and investment banking, banks can offer green project finance, green
securitization, green venture capital and private equity, Green Indices and Carbon
Commodities and finally banks can deal with green fiscal funds, green investment fund and
carbon fund under asset management.

To get maximum output from GB

Banks should set environmental standards for
policies, Bangladesh Bank should reform
lending and disburse loans to environmental
the strategy. Interest free financing
project at a lower interest rate compared to
incentives should be declared for pollu-
traditional banks. ~ The Daily Star
tion controlling or pollution preventive
projects of existing industries. Further
research in order to establish company that absorbs the environmental fund allocated by
different types of banks and also to establish the additional financing costs and operational
costs of the projects.

TERMS AND ACRONYMS:

Green Banking – GB ETP - Effluent Treatment Plant
ATM - Automated Teller Machine SCB –State owned commercial bank
PCB –private commercial banks FCB –Foreign commercial banks
SDB –Specialized development banks HHK- Hybrid Hoffman Kiln
RBCA- Risk Based Capital Adequacy CSR- Corporate social responsibility
SME - Small and Medium Enterprise ERM- Environmental risk management
SRCC - Socially Responsible Corporate Citizens HRD – Human Resources Department
ICT- Information and Communication Technology
CAMEL- Capital, asset, management, earnings, liquidity
 Green Banking and its impacts on Bangladeshi Banking system 11

REFERENCES

Factors behind the Adoption of Green Banking by Bangladeshi Commercial Banks _ ASA
University Review, Vol. 7 No. 2, July–December, 2013

Green Banking Practices in Bangladesh_ Md. Ali Arshad Chowdhury and Mouri Dey_ The
Cost and Management (ISSN 1817-5090, Volume-44, Number-2, March-April 2016)

“Green Banking practices in Bangladesh”_ Md. Shafiqul Islam, Prahallad Chandra Das_ IOSR
Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X.Volume 8, Issue 3
(Mar. - Apr. 2013), PP 39-44

Green Banking in Bangladesh_ Fostering Environmentally Sustainable Inclusive Growth

Process_ Published by F.M. Mokammel Huq, GM(Department of Communications and
Publications)_ Bangladesh Bank, Dhaka, Website: www.bb.org.bd

Green Banking in India: A Study of Various Strategies Adopt by Banks for Sustainable
Development_ Dipika,_National Conference on Emerging Trends in Engineering,
Management and Science (NCETEMS – 2015), Sponsored by: International Journal Of
Engineering Research and Technology (IJERT)

https://www.thedailystar.net/news-detail-257872

Connecticut Green Bank (https://ctgreenbank.com/)

http://www.bankasia-bd.com/home/green_banking