Journal of Islamic Marketing

Exploring green banking performance of Islamic banks vs conventional banks in

Bangladesh based on Maqasid Shariah framework
Taslima Julia, Salina Kassim,
Article information:
To cite this document:
Taslima Julia, Salina Kassim, (2019) "Exploring green banking performance of Islamic banks vs
conventional banks in Bangladesh based on Maqasid Shariah framework", Journal of Islamic
Marketing, https://doi.org/10.1108/JIMA-10-2017-0105
Permanent link to this document:
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

https://doi.org/10.1108/JIMA-10-2017-0105
Downloaded on: 01 July 2019, At: 03:57 (PT)
References: this document contains references to 48 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 3 times since 2019*

Access to this document was granted through an Emerald subscription provided by emerald-
srm:226873 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald
for Authors service information about how to choose which publication to write for and submission
guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as
well as providing an extensive range of online products and additional customer resources and
services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the
Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for
digital archive preservation.

*Related content and download information correct at time of download.

 The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1759-0833.htm

Islamic banks
Exploring green banking vs
performance of Islamic banks vs conventional
banks
conventional banks in Bangladesh
based on Maqasid Shariah
framework Received 5 October 2017
Revised 24 September 2018
17 February 2019
Taslima Julia 1 April 2019
Accepted 2 April 2019
International Islamic University Malaysia, Kuala Lumpur, Malaysia, and
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

Salina Kassim
Department of Economics, International Islamic University Malaysia,
Kuala Lumpur, Malaysia

Abstract
Purpose – Environmental degradation has been identified as one of the major impediments for development
in Bangladesh. The World Health Organization has ranked Bangladesh fourth among the most polluted
countries in the world. Faced with this challenge, the Government of Bangladesh introduced the Green
Financing Policy and encouraged banks to participate in offering green financing as part of the efforts to
promote environment-friendly economic activities for sustainable economic development. This study aims to
examine the financial performance of selected commercial banks that offered green financing in Bangladesh
in the period from 2012 to 2014.
Design/methodology/approach – In achieving this objective, the paper has divided the various sections
of green banking policy under Maqasid Shariah framework of Imam Al-Ghazali, which is preserving faith,
life, intellect, posterity and wealth. After that, green performance is compared between five conventional
banks and five Islamic banks, according to the secondary data gathered from the annual reports and
sustainability reports, as well as verified based on interviews. Finally, based on quantitative and qualitative
thematic analysis approach, it is identified which banks meet most of the Shariah objectives along with
performing sustainably.
Findings – The study finds that none of the banks fully meet the green/sustainable policy requirements;
however, the Islamic banks are ahead in preserving faith, intellect and wealth circulation.
Research limitations/implications – This research is mostly based on secondary data; banks’ non-
disclosure of green data was an impediment to run in-depth and fair comparisons. However, to check the
reliability and validity of secondary data, two heads of sustainable banking department from conventional
bank and two from Islamic bank have been interviewed.
Practical implications – Based on the findings, several recommendations are made on ways to expedite
green financing, which can ultimately enhance contribution of Islamic banks toward the sustainable economic
growth of the country while fulfilling Maqasid Shariah.
Social implications – Because the green banking policy aim is very much in line with Maqasid Shariah
which is the aim of Islamic banks, Islamic banks can presumably contribute more to the sustainable economic
growth of the country by aligning their entire operations with green policies.
Originality/value – To the best of the authors’ knowledge, this study is perhaps the earliest initiative to
compare Islamic and conventional banks’ green performances in Bangladesh.
Keywords Islamic banks, Conventional banks, Green performance,
Journal of Islamic Marketing
Green policy of Bangladesh © Emerald Publishing Limited
1759-0833
Paper type Research paper DOI 10.1108/JIMA-10-2017-0105
 JIMA 1. Introduction
Growing world population has immense pressure on the natural resources as well as
ecosystem of this earth, which has resulted in world leaders making a collective effort to
adopt sustainable rules in their developmental activities since the past three decades
(Brundtland Commission, 1987). Nonetheless, environmental sustainability remained a
major issue in many countries, which requires best strategies to reduce the environmental
impacts caused by the products and services offered. The importance of sustainable
development is central to Bangladesh because it is ranked fourth among the most polluted
countries in the world by World Health Organization (WHO) (2014) and is vulnerable in
terms of natural calamities and disasters (Daily Star, 2013). The Government of Bangladesh
has shown seriousness in handling the issue by amending laws and creating regulations and
guidelines of green financing and by making it mandatory for all financial institutions to
adopt green financing policy. The aim of the new inclusion in the banking sector is to
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

enhance sustainable development of the country and to lessen the impact of environmental
pollution.
Additionally, because the majority of the population in Bangladesh are Muslims, there is
a huge need for Islamic financial services to be offered by the Islamic financial institutions.
Indeed, the rapid development of the Islamic finance industry in Bangladesh seemed to be
reflective of all these efforts. According to the Central Bank of Bangladesh, the Islamic
banking industry accounted for more than one-fifth of the entire banking industry in terms
of deposits and investment (Research Department Bangladesh Bank, 2014); however, the
latest statistics indicate that it is one-fourth (Islamic Banking Cell, 2018), which means
Islamic banking is doing well compared to conventional banks. Islamic banks are basically
providing ethical services to their clients, following the Shariah guidelines. Green financing
is ethical financing as the intrinsic value of green banking policy is Shariah relevant (Julia
et al., 2016). Even the main concern of green finance is sustainability, which is also an
important feature of Islamic finance.
This paper attempts to review the performances of the Islamic banks offering green
financing and subsequently compare Islamic banks’ performances with their conventional
counterpart’s, particularly on green services and products. Based on an exploratory study,
findings of this paper could serve as a reference to various stakeholders on the benefits of
green finance under the responsible banking banner.

2. Literature review
Ex-Governor of Bangladesh Dr Atiur Rahman, also known as Green Governor (UNCCC,
2012), has officially inaugurated green initiatives in Bangladesh (BD) through banking
practices (Rahman, 2010), and the green banking initiatives adopted by various banks are
digitalizing through computerization, networking and online banking. (Islam, 2010).
After introduction of the green banking policy, a new trend is observed in literature,
where researchers are trying to portray various banks’ green performances and comparing
green performances across various sector of banks such as state-owned commercial banks
(SCBs), state-owned specialized development banks (SDBs), public commercial banks
(PCBs) and foreign commercial banks (FCBs). One study stated that until 2013, only PCBs
and FCBs had adopted green banking guidelines and financed some of the green banking-
based projects, and in this regard, the initiatives of SCBs and SDBs are not remarkable
(Marufullah, 2013). Another study conducted on five of the top ten banks of BD showed that
none of the sample banks was found active in all areas of green banking (Islam, 2012). Green
banking practices being new in BD, banks performance in green is not at all satisfactory
according to Shafiqul and Prahallad (2013). Moreover, according to global green banking
 initiatives, BD is far behind compared to its counterparts from the developed countries; Islamic banks
however, the general picture presents a transition to green banking in a consistent manner vs
for most banks (Masukujjaman and Serina, 2013).
Until 2015, the green banking performance of various banks in Bangladesh was like as
conventional
year 2013 and state-owned banks performance in green sector was unexpected. A literature banks
revealed that PCBs and FCBs are advanced in adopting green policies, green guide and
green units as compared to SCBs and SDBs. Even online banking and ATM facilities of
SCBs and SDBs are abysmal (Lalon, 2015). Recently two articles published on green banking
of Bangladesh tried to depict different scenarios: in one paper, the authors tried to prove the
Shariah relevance of green banking policy with an intention to motivate Islamic banks and
financial institutions to be more serious about green financing marketing (Julia et al., 2016);
in another article the authors tried to demonstrate a positive relation between banks’
profitability and green financing (Julia and Kassim, 2016). The finding of the second
research is motivational to all banks in a sense that by maintaining profitability, they can
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

serve the environment and pave the way to fulfill the 2030 agenda of sustainable
development (UNDP and GRI, 2016). A recent paper that is extensively based on literature
review, tried to identify issues related to governance of green growth based on three
aspects – policies, institutions and political economy (Khan, 2017). All the previous papers
on green banking and financing are based on descriptive statistics, and comparisons has
been made among four categories of banks operating in Bangladesh, namely, state-owned
banks, private commercial banks, specialized banks and foreign banks, but no study has so
far been done by comparing the green performances of Islamic and conventional banks.
This paper aims to fill this void.

2.1 Definition of green financing

The green financing or banking definition varies remarkably, and until today, there is no
widely accepted definition of it. Green banking is commonly known as environmental
banking, ethical banking or sustainable banking, in a broad perspective; it is the ecofriendly
banking practices that promote its clients to reduce carbon footprints in their banking
operations (Tara et al., 2015). Dr Nannette Lindenberg of German Development Institute
proposed a definition of green financing in April 2014 – “Green finance comprise financing
of green investments, financing of public green policies and green financial system.” This
definition clarifies the areas of green investments-climate change adaptation, renewable
energies, energy efficiency and other climate change mitigation, e.g. reforestation. Financial
system components are been clarified that deal specifically with green investments, such as
the Green Climate Fund or financial instruments for green investments e.g. green bonds and
structured green funds (Linderberg, 2014).

2.2 Definition of sustainable development

United Nations Conference on Environment and Development (UNCED), in 1992, also
known as the “Earth Summit,” is a significant moment for sustainable development (SD).
Agenda 21, the Rio Declaration on Environment and Development, is the product of the
Conference. However, 20 years before that, in 1987, sustainable development was defined by
the World Commission on Environment and Development (WCED), commonly, known as
the “Brundtland Commission”: “development that meets the need of the present without
compromising the ability of future generations to meet their own needs” (United Nations,
1987). Until today this is the widely quoted and accepted definition of SD.
On the contrary, in Islamic viewpoint, the definition of sustainability varies. According to
Sadeq, Islam’s basic concern is human well-being, and from Islamic perspective, economic
 JIMA development can be defined as a balanced and sustained improvement in material and non-
material welfare of man for both here and hereafter, following multidimensional process
through advancement, reorganization and reorientation of the whole economic and social
system in harmony with the standard principles of Islam. According to him, index of
economic development seems to work through three principle determinants – growth, equity
and Islamic values (Sadeq, 1987). According to Hasan (2006), from the Islamic viewpoint, SD
eventually ends up with environment concern and is surrounded by various complex issues
such as moral, ethical, social and political, which economics and economists alone cannot
resolve (Hasan, 2006).

2.3 Green investment/financing areas

Bangladesh central bank, Bangladesh Bank, has introduced a notice classifying 11 types of
business as green business. The categories are renewable energy, energy efficiency, solid
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

waste management, liquid waste management, alternative energy, fire burnt brick, non-fire
block brick, recycling and recyclable product, green industry, safety and security of
factories and miscellaneous. Among the 11 categories there are 47 product lines or types of
business mentioned by green banking guidelines and policy. The product lines include
projects financed having effluent treatment plants (ETP), biogas plant, solar home system
and solar panel trades, bio-fertilizer plant, projects financed having tunnel kiln, installation
of zigzag kiln, waste and hazard disposal plants, waste paper recycling plant, waste battery
recycling plants, financing of light emitting diode (LED) bulb production, polyethylene
terephthalate (PET) bottle recycling plant, safe/clean water supply projects, improve
cooking stove (Bondhu Chula), green finance at zero rate of interest, electricity generation
from rice husk and rice bran oil production. (Circular 2, 2014). Both conventional and Islamic
banks are bound to finance these projects and plants, as these are classified as green projects
and green financing mode can be direct or indirect in nature.

2.4 Green banking inclination with Islamic values

There is ample literature that describe the difference between the operation and the purpose
of conventional banking system and the Islamic one. However, it is also important to
identify the purpose of green banking and to find out if there are any similarities between
Islamic banking and green banking. The main purpose of green banking is to preserve the
environment and surroundings by being economical in every deed and transaction so that
the future generation can enjoy a better living environment. Therefore, green banking
concentrates on resource conservation, ensures best use of resources, minimizes wastage
and maximizes the use of renewable energy. All these concern areas of green banking are in
line with Shariah and meet the Maqasid Shariah based on various verses of the Holy Quran
and Hadith of Prophet Muhammad (pbuh) has been successfully ascertained by the writers
(Julia et al., 2016).

3. Research methodologies
Being inspired by Haniffa and Hudaib (2007), this paper is going to follow a unique method
to analyze the secondary data collected from the annual reports of financial institutions.
This paper is going to segregate the green banking policy (GBP) according to Imam Al-
Ghazali’s framework of Maqasid Shariah. Table I represents the division based on theme
preserving faith, preserving human self, preserving intellect, preserving future generation
and preserving wealth. After that, following the quantitative (green data) and qualitative
(interview responses) thematic analysis approach, this paper is going to analysis the green
 performance of banks. The green data is going to collect from individual banks’ green Islamic banks
report, Bangladesh Banks’ quarterly published green report etc. vs
For this study, five conventional private commercial banks and five Shariah-based
private commercial banks have been selected. The list is given in Table II.
conventional
The period of study is from 2012 to 2014, as 2011 was the starting year of green banking banks
inclusion in BD. The banks are being selected because of their top performances in 2012 in
green financing, as well as data availability to confirm comparability and apprehend the
performance of both types of banks. The study is extensively based on secondary data;
however, to check the reliability and the validity of secondary data, four heads of green
banking department are interviewed; of these, two are from CCB and two from ICB. Table III
presents the details of the interviewed bankers.
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

Serial Maqasid shariah-based preset theme Sections of green banking policy

1 Preserving faith Policy formulation and governance

Nature of Green financing (interest-based or interest-free)
2 Preserving human self Environmental risk management
In-house environment management
3 Preserving intellect Online banking
Employee training, consumer awareness and green events
Innovative products
4 Preserving posterity Climate risk fund
Standard reporting format Table I.
5 Preserving wealth Green finance Classifying GBP
Green marketing under Maqasid
Risk – return analysis of CCB and ICB Shariah theme

Serial Full names of the banks Abbreviation

Conventional commercial banks CCBs

1 Dutch Bangla Bank Ltd DBBL
2 Prime Bank Ltd PBL
3 Eastern Bank Ltd EBL
4 Bank Asia Ltd BA
5 BRAC bank Ltd BRAC
Islamic commercial banks ICBs
Table II.
6 Islamic Bank Bangladesh Ltd IBBL
7 Al-Arafah Islami Bank Ltd AIBL List of banks used
8 Social Islami Bank Ltd SIBL for green
9 Export Import Bank Ltd EXIM performance
10 Shahajalal Islami Bank Ltd SJIBL comparison

Serial Name and designation of interviewee Bank

1 Shawket Ul Amin, Senior Vice President, Head of SME SIBL (ICB) Table III.
2 Husna Ara Begum, Assistant General Manager, Head of Green Banking Division IBBL (ICB) Details of
3 B.M. Tohiduzzaman, Assistant Vice President, Head of Branch PBL (CCB) interviewees and
4 Mavrina Palli, Junior Officer, Sustainable Finance Division BA (CCB) their banks
 JIMA 4. Comparisons of performance
Green banking policy set by BB has three phases; in the first phase, emphasis has been laid
on individual bank-wise green policy creation, green banking unit setup, establishment of
green guide, economical use of paper, electricity, water and other utilities, incorporating
environmental risk in credit risk management, introducing green finance, online banking,
SMS banking to reduce dependency on paper and as tools of in-house green performance,
moreover, creating awareness among employees and consumers by training and green
marketing is also essential part of this phase. The focus of the second phase is to set
strategic green planning, use renewable energy such as solar panel in branches and ATM
booths, create sector-wise environmental policies and appropriate reporting and disclosure
of green activities. The third phase focal point is to design and introduce innovative
products and ensure a standard format in green reporting. Indeed, this section compares the
sample conventional and Islamic banks’ green performances based on the preset theme of
Maqasid Shariah.
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

4.1 Preserving the faith

According to GBP, all financial institutes in BD are supposed to create a green policy of their
own, green guide and declare branches as green branches. The obedience of law of land falls
under protection of faith, and violation of law is considered as breach of trust or faith of the
law creator. However, in the case of policy formulation and governance, all the sample banks
have implemented the guideline and created their own green policy, green guide and green
branches. This action of bank has been confirmed by the Shawket Ul Amin (SIBL), Husna
Ara Begum (IBBL), B.M. Tohiduzzaman (PBL) and Mavrina Palli (BA).
The fundamental aim of Islamic banking is to run the banking activities according to
Islamic values and principles and keep all the financing activities free from interest (riba),
uncertainty (gharar) and gambling (mysir). Thus, Islamic banks are serving their clients by
preserving their faith. Our sample five Islamic banks are helping customers in preserving
faith as banks provide them interest-free green financing; thus, Islamic banks are in an
advantageous position to preserve the faith of their clients. In conclusion, it can be said that
Shariah-based banks are contributing more in protecting the faith of their clients than their
conventional counterpart.

4.2 Preserving human self

Two sections of GBP, that is, environmental risk management (EnvRM) and in-house green
management, fall under protection of the human self. The inner motive of EnvRM is to
protect investors from involving those investments that could harm the precious
environment, and one should take care of the surrounding not only for the betterment of
oneself but also for the benefit of the future generation. Moreover, in-house green practice
within bank premises teaches employees self-discipline and creates consciousness among
themselves about the reuse and recycle tactic of resources that they can implement
elsewhere.
Banks are required to assess environmental risk rating of all the projects according to the
environmental due diligence checklist mentioned in EnvRM guidelines, and they are doing
so currently. In overall credit risk methodology, environment risk has a greater impact, so
environment risk is obligatory to be merged in core risk management (CRM). Incorporation
of environment risk in CRM is also important for computation of adequate capital under
risk-based capital adequacy. Among the ten sample banks, only five banks’ environmental
risk rating data are available: in 2014, IBBL rated 2,031 projects; AIBL, 964; DBBL, 334;
EBL, 142; and BRAC, 1,800, according to each bank’s published financial statements.
 In terms of in-house green management, banks are now involving in virtual meetings Islamic banks
with the help of video conferencing instead of physical travel, which helps save cost and vs
energy. They are also maintaining inventory record for consumption of water, paper,
electricity, energy, etc., at each office and branch located in various places. Besides
conventional
maintaining an inventory, they are also caring to save electricity, water and paper while banks
keeping records of that the same. As the entire sample banks’ 100 per cent branches are
online, in lieu of relying on printed documents, they are now doing online communication,
which is paperless. Even few banks concentrating to create new branches in a way so that
they can make sure maximum day light is used. Moreover, to reduce the use of ink, they are
now applying eco-font, and to be ecofriendly, they are now using scrap paper as notepads
and avoiding disposable cups/glasses. Energy-efficient electronic equipment are being used
and actions are being taken to save electricity through automatic shutdown of computers,
fans, lights and air coolers. Most branches are now using energy-saving bulbs instead of the
usual bulbs.
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

Furthermore, banks are concentrating on installing solar power system in new and
existing branches; they are also installing solar panels in ATM booths to reduce electricity
consumption. All the ten sample banks are engaged in improving in-house green practices
by reducing paper uses, best using day light, and installing solar panels in branches and
ATM booth. Unfortunately, all banks did not disclose data or statistics properly in their
financial statements or green reports.
According to Mavrina Palli of Bank Asia Ltd:
We have commemorated this year’s (2014) World Environment Day by arranging Workshop at
our Corporate Office in Dhaka, which was simultaneously linked by Video Conferencing with
Chittagong Zone. we saved around 32 per cent electricity (used for lighting purpose) by using the
day light in our Corporate Office. We have installed Solar panels in our 7 branches. Bank Asia is
the 10th private commercial bank to launch Express cash system which is easier and faster
domestic remittance service.
B.M. Tohiduzzaman of Prime Bank Ltd. expressed his views as follows, “Our Credit Review
Committee is arranging paperless meeting (both SME and Corporate) by soft copy
presentation.” In year 2014, software named “Agenda and Compliance Management
Software” was introduced, which eliminated the process of presenting paper-based memo
during the meeting of the executive committee of the board. Currently, nine branches are
well equipped to arrange video conference, which ultimately reduces official travel, and
establishment of video-conference facilities between major distant offices are under process.
Moreover, up to 2014, the Bank had already installed solar panels at 21 branches, as well as
at 12 ATM booths and SME unit offices, as part of its commitment to the usage of renewable
energy resources.
According to Shawket Ul Amin of SIBL, their bank rates every green project
environmental risk before granting any financing to the client. Husna Ara Begum of IBBL
also assured the seriousness of IBBL in terms of in-house greening; she ascertained that at
every meeting of the head office, they have fixed slots to discuss the progress and
implementation plan of green banking activities.

4.3 Preserving intellect

Three sections of GBP are:
(1) online banking;
(2) employee training, consumer awareness; and
(3) green events and innovative product.
 JIMA It is considered that these sections of GBP are protecting and nurturing the intellectual
ability of clients and employees.
Online banking is the practice of banking without physical interaction and using Web-
based network. Currently, every bank has their own secure website, which allows clients to
undertake all transactions such as making deposits, withdrawals and paying bills through
the internet. Online services of banks are basically eliminating paper waste, saving gas and
carbon emission, reducing printing costs and postage expenses, thereby protecting the
environment. All the branches of sample banks are under online banking network, which is
a huge achievement for banks and their clients. Banks are undertaking paperless
transactions through efficient online services, whereas customers are benefitting by
enjoying prompt and quality services from the bank sitting in their homes. Online banking
not only saves paper but also reduces the hassle and cost of traveling from one place to
another. From the green report of each bank, it is noted that IBBL has the highest number of
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

branches (286) among all the sample banks, and EXIM bank has the lowest (87) until the
2014 financial year; both banks are Islamic. All the conventional and Islamic sample banks’
branches are providing online services to their clients. In Table IV below, the number of
bank branches within the online network basically means 100 per cent in each bank case.
One of the major responsibilities of human resource departments at each bank is to create
green awareness among the employees, clients and management by organizing training
programs on environmental and social risks and the relevant issues. It should be a
continuous job of public relation department of banks to organize green events and
programs at short intervals. Although all the banks are much aware of their responsibilities
to train their employees and inform clients about green financing and likewise they are
arranging green events and program,
There is ample scope for banks to introduce new products in green financing to motivate
and ensure participation of clients alongside regular activities of banks. Banks being
important stakeholders are expected to introduce innovative ecofriendly green products to
discourse the essential environmental challenges of the country. SJIBL and SIBL is a bit
ahead in innovating green and Islamic products. SJIBL has introduced several green
products that are unique, such as “Krishan” – finance to farmer, “Shobujayon” – finance to
farmer for tree plantation, “Kutir” – finance to facilitate the handicraft products from jutes,
“Rupayon” – finance for recycle industry, “Shobuj Shokti” – finance for solar panels and
“Shobuj shilpo” and “Shobuj poribesh” – both to finance the green industry and ETP
projects. SIBL also has been awarded for its creative product in cash waqf scheme. From the
conventional side, EBL has two innovative products named “EBL Utpadon,” which is to
increase the scope of financial inclusion, and “EBL Projukt,” to acquire agricultural
machinery/equipment for the farmers.
According to Husna Ara, “currently IBBL is concentrating more on environmental
financing and arranging appropriate training programs to educate both employees and
clients about the advantage of green financing.” Shawket Ul Amin also expressed similar
thoughts. Tohiduzzaman detailed that in 2014, Human Resource Training and Development
Center of the PBL arranged 12 green banking training programs for 403 employees. I In

Parameter EXIM IBBL SIBL AIBL SJIBL DBBL BA EBL PBL BRAC
Table IV. Number of online branches 87 286 100 119 93 145 97 76 140 155
Status of online
banking up to 2014 Source: Green reports of bank
 addition to that, officials of the Bank attended various training programs/workshops/ Islamic banks
seminars on Green Banking issues arranged by Bangladesh Bank Training Academy. The vs
Bank arranged a customer-awareness program in Jessore on March 19, 2014, to create
awareness among the 120 participants to protect the environment from different pollution
conventional
and hazards: banks
Bank Asia is very proactive in rolling out Online Learning Tool (OLT), Human Resources
Department (HRD) implemented OLT by which the trainees can learn from their own work
station without attending any formal class. Bank sent employees of Finance and Accounts to
attend training program on “Global Reporting Initiatives (GRI)” held at Kuala Lumpur, Malaysia
in 2012- by the opinion of Ms Mavrina Palli (BA).
This section can be concluded by saying that all CCBs and ICBs are serious about employee
training, customer awareness building and organizing programs accordingly. In terms of
online banking service, their position is similar; however, in creating innovative green
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

products, ICBs are ahead.

4.4 Preserving future generation

Intrinsically, the overall motive of green banking policy is to preserve the natural resources
as well as ecological balance for the future generation by controlling financing activities.
However, from various sections of GBP this paper classified climate risk fund and standard
reporting format as tools to protect future generation rights.
Bangladesh is prone to natural calamities because of its geographic location; therefore, to
keep a certain amount of funds aside to meet the contingent liabilities owing to climate risk
is the responsibility of all financial institutions operating in BD. Socially responsible
financial institutions banks are maintaining climate risk funds in two ways: first, as
corporate social responsibility events and, second, as corporate social responsibility
projects. Most of the sample banks published their green financing data combined with
climate risk fund and fund for employee training, consumer awareness and green events.
Thus, getting separate data in climate risk fund is difficult, although few banks, such as
IBBL, DBBL and EBL, disclosed that separately.
Banks are now responsible to disclose all their past performances, current activities and
future green initiatives through independent green banking and sustainability reporting
according to the central bank sustainable policy guidelines. Although there is a requirement
to disclose the recent and thorough information about banks’ green activities and acts of
main clienteles and to announce independent green annual report following universally
recognized layout such as Global Reporting Initiatives (GRI) aiming their stakeholders, very
few banks are following that. Among all the sample banks, only IBBL follows the
instructions to a T, whereas all the other banks publish their green initiatives but do not
follow the standard format and structure.
Husna Ara from IBBL and Shawket Ul Amin from SIBL assured that their banks report
green activities following the standard reporting format. Tohiduzzaman added a bit more in
this regard – “Prime Bank Ltd has prepared ‘Sustainability Report’ and successfully
achieved the Materiality Disclosure Service under GRI G4 guideline for the year 2014, also
as per BB’s guideline. It is mentionable here that, PBL’s sustainability report in 2013 has
fulfilled the requirement of ‘Application Level B’ as declared by GRI.”

4.5 Preserving wealth

The fundamental activity of banks is to circulate money from surplus unit to deficit unit and
create new financial products, marketing it for the welfare of the society. Banks through
 JIMA their green financing can green the economy and by in-house conservational strategy can
preserve the wealth, this section is going to investigate how green financing and green
marketing is contributing to protect wealth and which type of bank is contributing more.
At present banks are giving preference to sustainable business activities and power-
efficient industries in financing. They are also inspiring investment in conservative
infrastructure and encouraging business customers to invest more in renewable energy
projects, clean water supply projects, waste water treatment plants, solid and hazardous
waste disposal plants, biogas plants, bio-fertilizer plants, etc. Table V presents the sharp
increase of green financing by the all private commercial banks from 2012 to 2014 from
about two million to slightly above four million. Moreover, the investment of Islamic banks
in green financing shows a comparatively high figure than that of conventional banks in
recent years. Green financing basically includes financing in green projects, saving in
climate risk fund and expenses in green training and awareness program to educate clients
about green.
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

The financing statistics in Table V indicates that Islamic banks’ seriousness about green
financing increased remarkably from 2012 to 2014 (TK. 54290 m, 65080 m to 96594 m);
however, the conventional banks’ green financing figure shows that their enthusiasm is
comparatively low. Moreover, at the beginning although five sample CBCs’ performance in
green was better than ICBs’, in recent years ICBs are investing more in green than CBCs
(total GF figure by five ICBs are TK. 96594.97 m and total GF of ICBs are TK. 70362.91 m,
reflect that). IBBL, which is the first and largest Islamic bank of Bangladesh, invests the
highest in millions in green financing and is the only bank that discloses all its green
initiatives. The green investments of both EXIM and IBBL show a similar pattern in 2012
and 2014 same amount of green financing and in year 2013 slightly drop from previous year,
it’s simply because political turmoil situation which exist in year 2013. SJIBL shows
surprising green financing performance, which indicates sharp decrease in investment
pattern for the past three years. On the contrary, AIBL financing increased drastically from
year 12 to 14 and SIBL shows slight increase in the same.
However, among the conventional banks, Bank Asia topped in green financing in 2012,
placing it among the top ten green financing banks of the year; but for the following two
years, its green investment decreased dramatically, while EBL showed a steady growth

Years 2012 2013 2014

All private commercial banks 179,112.58 348,607.91 436,458.2

Islamic Commercial Banks
EXIM 17,616.28 14,197.1 18,282.8
IBBL 54,290.01 44,495.32 54,899.06
SIBL 5,501.98 4,196.66 6,518.03
SJIBL 4,261.42 360.59 704.68
AIBL 1,117.97 1,830.8 16,190.4
Total GF by five ICBs 54,290.01 65,080.47 96,594.97
Conventional commercial banks
DBBL 10,150.05 34,529.89 34,528.89
Table V.
Bank Asia 31,492.38 12,526.6 3,384.385
Usage of green EBL 16,589.94 16,497 22,192
finance (in millions PBL 3,589.4 448.77 6,757.64
TK) for 2012, 2013 BRAC 837 3,364 3,500
and 2014 Total GF by five CCBs 62,658.77 67,366.26 70,362.915
 pattern for the past three years. Although in year 12 DBBL’s green financing was below 10 Islamic banks
thousand million but by next year its investment rises to near 35 thousand million which vs
means more than triple and maintain the same steady situation. EBL’s green financing was
stable for the past two years and increased significantly in recent years. BRAC bank’s green
conventional
performance was slow in the beginning and improved a little each year PBL shows the banks
similar pattern though its investment became double from 12 to 14.
Although both types of banks’ green financing show similar amounts for 2012 and 2013,
Islamic banks’ performance increased radically in recent years, which is clearly visible from
the numbers.
Generally marketing means activities undertaken to sell products and services produced
by companies or banks. Under green marketing banner, banks are producing ecofriendly
products and marketing those safe products to customers through promotions. Green
marketing includes wide-ranging activities such as product modification, introducing green
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

production process, packaging changes and modifying advertising. Moreover, it refers to the
selling of ecofriendly products that have been produced and packed in an environment-
friendly manner.
Banks can also motivate their clients through promotion to use ecofriendly products and
services for the betterment of the present and future generations. Table VI displays the
comparative figure of the ten private commercial banks’ expenditure on green marketing
purposes based on data availability. The IBBL’s marketing expenses was very high in 2013
than 2014 and it was near about double. DBBL and PBL both banks marketing expenses
was approximately same for the two years and Bank Asia shows a falling expense from
year 13 to 14. Although individual bank-wise marketing expenses are showing a falling
pattern, all private commercial bank expenses show a rising pattern from 2012 to 2014.
The ranking of all banks’ green performances based on fund used will be as follows:
IBBL, DBBL, EBL, EXIM, AIBL, so among the top five three are Islamic banks. The top
position of IBBL in terms of using green funds has been confirmed by the Head of
Sustainable Department of that bank, Husna Ara Begum. Thus, to sum up, it can be said
that Islamic banks are contributing more in preserving wealth than the conventional
counterpart and fulfilling Maqasid Shariah.

5. Recommendations
After deep analysis of the green banking initiatives of Bangladeshi commercial banks this
paper aims to provide few suggestions to accelerate the pace of green growth throughout the
economy and it can be done in three ways: first, by the regulatory and supervisory pressure
of the government; second, by financial institutions covering all banks and non-banks
through their financing and educating the people about the greater benefit of this financing;

Islamic commercial banks Conventional commercial banks

Parameter PCBs EXIM IBBL SIBL AIBL SJIBL DBBL BA EBL PBL BRAC

Expenses on MKT, T and D Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
In 2012 81.97 15 16.73 5.67 0.01 0 0 0 0 0.03 0
In 2013 167 N/A 39.19 N/A N/A N/A 5 0.173 N/A 22.5 N/A
Table VI.
In 2014 137.7 N/A 20.91 N/A N/A N/A 5 0.115 N/A 21 N/A
Green marketing,
Notes: Yes = have; No = do not have; N/A = not available training and
Source: Green report of banks development
 JIMA and third, by individuals being conservative in everyday consumption of utilities as
everyone’s small amount of energy saving can have a big impact on the overall society and
economy.

5.1 Role of government

The Government of Bangladesh as the holder of supreme power in case of incorporation and
implementation of new law, rule and regulations also can play pivotal role in successful
implementation of green policy and guidelines. To do so, the Government of Bangladesh
needs to play the following roles. They ought to cautiously monitor and administer the
green banking practices in Bangladesh. Current focus of green policy is to observe social-
environmental benefit of the country but another important element of sustainable
development that economic development should be given due emphasis. Next, the central
bank being part of the government must observe commercial and non-commercial banks’
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

devotion to green banking guidelines. Bangladesh’s central bank published yearly report on
green banking for the first time in 2012 and was awarded the best green guideline followers,
which acts as a motivation for the bank to involve in green financing even more. This paper
has chosen banks based on annual report 2012, top ten performer. However, after that until
2018 no annual report has been published even the change of governor also has impact on
the green performance of banks. So, government as well as central bank should take
initiatives to maintain the consistency of banks green performances. Husna Ara Begum also
showed her concern regarding inconsistence behavior, according to her until 2015 our
solemnity to green banking issues is totally non-existing in current activities. Again, they
should encourage common people about green banking consciousness through the
electronic and print media. Furthermore, they should act as a coordinator among concerned
authorities; they ought to take initiatives to speed up awareness and actual capacity
building. Following that they should encourage banks and other non-bank financial
institutions to concentrate on scrotal lending policies and procedures. They should play an
important role to shift different categories of industry (such as, garments, textiles and
tannery) to an appropriate location so that those projects will not harm the biodiversity and
eco-balance.

5.2 Role of banks

Banks are one of the most important financial institutions and as Bangladesh is operating in
dual financial system so both types of banks should give due effort according to their mode
of financing and operational strategy to realize sustainable growth through green financing
and they should take initiatives to accelerate the pace of green investment and financing and
they can do it in following manner. First, they need to be serious about in house greening
and follow the green banking policy guidelines strictly in financing new or old business
considering it not as moral duty but as moral obligation as they do play a vital role being
financier. Second, BB can take initiatives to increase awareness and to build the required
consciousness in top management such as the Board of Directors/competent authority/
management, about the necessity of green financing. Next, Banks by their environmental
risk rating and green events can encourage borrowers to go green. Again, banks must follow
green banking policy and guideline thoroughly and use EvnRM guideline in effective way
and develop a culture in their own organization to follow the environmental governance.
Furthermore, to improve their green performances they even can imitate global as well as
local best practices and they should take steps to exchange technical know-how and share
knowledge with peer groups and experts in this field. Next to that, banks should practice
inventing innovative products as green banking is such a section of banking where there is
 lots of option to be innovative, so banks should concentrate to create new products to Islamic banks
accelerate the pace of green financing. The Shariah compliance of green banking policy is vs
confirmed by an article (Julia et al., 2016), thus, for Islamic banks it’s very important to take
greening issue very seriously and follow the green policy before granting any financing
conventional
from the bank. Currently, banks are trying to meet 5 per cent minimum green investment banks
requirements following the circular of the central bank (Green Report, 2014). Indeed, Islamic
banks can do beyond that, even hundred per cent of their investment can be green as green
policy has no contradiction with Islamic principles. Current study also showed that in case
of overall green performance measures Islamic banks are in ahead position compare to the
conventional banks. Practically, banks are indeed profit seeker one study showed that there
is positive relation with banks profitability and green financing (Julia and Kassim, 2016) so
all kinds of bank, whether conventional or Shariah-based, should involve in promoting,
marketing and implementing green policy for better future of Bangladeshi as well as world
citizens.
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

5.3 Role of individuals

“Yesterday I was clever, so I wanted to change the world. Today I am wise, so I am changing
myself” – Rumi. Thus, we need to act wisely to live green and to present a favorable green
world to our future generation. Our individual effort to tracking and reducing energy and
water consumption can have a greater impact to the overall society and economy.
Conserving energy is vital because of the process involved in producing electricity; the
higher the consumption the more carbon emission we produce. Similarly, unlimited use of
fresh water for over development purpose, pollution and climate change is the cause of
disappearing freshwater habitats at an alarming rate. So, it is crucial that we possess a right
attitude towards conserving these recourses (Matthias Gelber, 2015). If we carefully observe
the green policy, the first phase of the policy that is in house green management is an
inspiration to involve every individual in greening their everyday life. Being a bit of careful
we can conserve lots of energy such as reducing air-cooler use, using energy efficient
appliance, reducing water consumption, minimizing water waste and reusing water,
understanding the power of nature being close to it during holidays, teaching kids and
friends and families about the importance of energy conservation and need of preserving the
environment. We should at individual level motivate each other to encourage reducing
waste and increasing use of recycled products, reuse of papers and concentrate to plant
trees.
Like the above, many more behavioral changes are possible and thus can implement in
house and in workplace greening strategy. These practices will bring a huge change in the
society according to a popular quote by Howard Zinn: “Small acts, when multiplied by
millions of people can transform the world.” Moreover, from Islamic perspectives, individual
should involve themselves more in religious teaching and spend more on that purpose, as,
according to Islam, sustainable economic development depends on three principles – equity,
growth and Islamic values. High level of Islamic values and the strong iman (faith) is the key
to balanced and sustained improvement in both material and non-material wellbeing of
human as well as ensure economic development (Sadeq, 1987).

6. Conclusion
Until now, to the best of the authors’ knowledge, there was a lack of literature in green
finance, though there were numerous works on green economics; however, based on the few
works and articles that have been accessed, it can be perceived that there is scope to work on
the well-discussed topic of green finance, and it can bring financing under Shariah
 JIMA compliance boundary. Even if Islamic finance might not be a big industry globally, it is
growing steadily. Operating as a parallel financial system with the conventional one would
be positive endeavor for all Muslim countries economy and financial system. In addition,
Green finance will strengthen the operation of Islamic finance in contrast to conventional
finance as green is classified as ethical finance and very much Shariah compliance as well as
meet the requirement of Maqasid Shariah (Julia et al., 2016). Policy guidelines for green
banking (PGGB) introduced by Bangladesh central bank in the year 2011 mainly focuses on
the banks contribution towards the sustainable development of the country by providing
green financing as improving environmental condition is a high concern there. Even though
until today there is no generally accepted definition of green banking or financing, it
indicates the effort of banks to reduce environmental degradation condition by financing
decision as they are major financing institutions of any country. Again, the definition of
sustainable development varies from conventional to Islamic viewpoints; in general,
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

sustainable development means economic, social and environmental development in a way

so that current generation can meet the need by fulfilling the need of future generation as
well. From the Islamic view point balanced and sustained improvement in material and non-
material welfare of human by exercising high Islamic values is sustainable development,
this definition also focuses on the economic, social and environmental aspects of
sustainability.
The paper critically evaluates the status of banks in their green offerings and compares
the green performances between five conventional banks and Islamic banks based on preset
theme of Maqasid Shariah. From the analysis, it can be revealed that not a single sample
bank meets all the requirements of each sections of green policy; different banks are doing
well in different sections; however, overall performances of Islamic banks are noticeable
compared to their conventional counterparts in Bangladesh. Islamic banks are better
assisting preservation of faith, intellect and wealth than conventional banks, but in the other
two cases of preserving human self and future generation, both types of bank are
performing equally. Despite their current greater contribution to the economy through green
financing compared to traditional banks, Islamic banks can play a superior role for the
sustainable development of the economy by considering it as the obvious duty and by
considering environmental risk as major assessment criteria before granting each
investment. Furthermore, researchers hope that the study will be an addition to the green
literature with the new inclusion of green Islamic finance, which will rather help to achieve
the noble objectives of equity and justice through sustainability, as envisioned by Islam.

References
Daily Star (2013), Daily Star, Dhaka, 1 November.
Green Report (2014), Bangladesh Bank Green Quarterly Report, Green Banking and CSR Department
Bangladesh Bank, Dhaka.
Haniffa, R. and Hudaib, M. (2007), “Exploring the ethical identity of Islamic banks via communication
in annual reports”, Journal of Business Ethics, Vol. 76 No. 1, pp. 97-116.
Hasan, Z. (2006), “Sustainable development from an Islamic perspective: meaning implications and
policy concerns”, Journal of King Abdulaziz University-Islamic Economics, Vol. 19 No. 1, pp. 3-18,
availabe at: https://mpra. ub.uni-muenchen.de/2784/1/MPRA_paper_2784.pdf
Islam, M.A. (2010), “Green banking: future important issue for banking industry”, Financial Express,
Regd No. DA 1589, Dhaka.
Julia, et al. (2016), “Shariah compliance of green banking policy in Bangladesh”, Humanomics, Vol. 32
No. 4, availabe at: http://dx.doi.org/10.1108/H-02-2016-0015.
 Julia, T. and Kassim, S. (2016), “Green financing and bank profitability: empirical evidence from the Islamic banks
banking sector in Bangladesh”, Al-Shajarah Journal of Islamic Thought and Civilization, Vol. 21
No. 3, pp. 307-330.
vs
Khan, B.F. (2017), Governance for Green Growth in Bangladesh: Policies, Institutions and Political
conventional
Economy, Adam Smith International, London. banks
Linderberg (2014), “Definition of green banking”, Retrieved 20 February 2016, German
Development Institute, available at: file:///C:/Users/User/Desktop/New%20folder/Green%
20folder/Green%20finance%20definition,%20Lindenberg,%20German%20Development%
20Institute,2014.pd (accessed 17 August 2018).
Marufullah, M. (2013), “Green banking in Bangladesh – a comparative analysis”, World Review of
Business Research, Vol. 3, pp. 74-83.
Masukujjaman, M. and Serina, A. (2013), “Green banking in Bangladesh – a commitment towards
the global initiatives”, Journal of Business and Technology (Dhaka), Vol. 8 Nos 1/2,
pp. 17-40.
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

Matthias Gelber (2015), The GreenMan’s Guide to Green Living and Working, Matthias Gelber, Kuala
Lumpur.
Rahman, A. (2010), Financial Services at People’s Doorstep, Bangladesh Bank, Dhaka.
Sadeq, D.A.H.M. (1987), “Economic development in Islam”, Journal of Islamic Economics, Vol. 1 No. 1,
available at: http://journals.iium.edu.my/enmjournal/index.php/enmj/article/viewFile/3/3.
Shafiqul, I. and Prahallad, C.D. (2013), “Green banking practices in Bangladesh”, IOSR Journal of
Business and Management, Vol. 8 No. 3, pp. 39-44.
Tara, et al. (2015), “Green banking for environmental management: a paradigm shift”, p. 10,
availabe at: www.cwejournal.org/vol10no3/green-banking-for-environmental-management-
a-paradigm-shift/, pp. 1029-1038.
UNDP and GRI (2016), Measuring Impact: How Business Accelerates the Sustainabale Development
Goals, UNDP and GRI, Istanbul.
United Nations (1987), Our Common Future, New York, NY, United Nations: Report of the World
Commission on Environment and Development.
WHO (2014), Dirtiest Cities of the World, The Daily Star, Dhaka 9 May.

Further reading
AIBL website (2015), Al-Afrafah Iskamic Bank Ltd, available at: www.al-arafahbank.com/Shariah-
Board.php
Annual Report AIBL (2014), Annual Report of Al-Arafah Islami Bank Ltd, Al-Arafah Islamic Bank,
Dhaka.
Annual Report SIBL (2014), Annual Report Social Islamic Bank of Bangladesh, SIBL, Dhaka.
Bangladesh Bank (2012), Annual Report of Green Banking. Bangladesh Bank.
Bangladesh Bank (2014a), “Financial system”, available at: www.bb.org.bd/fnansys/bankfi.php
Bangladesh Bank (2014b), Quarterly Green Report of Bangladesh Bank, Sustainable Development
Department, Dhaka.
Bank Asia Annual Report (2014), Sustainability Report, Bank Asia, Dhaka.
Barbara, Thomas, Wilkinson (2012), CPI Report by Barbara, Thomas, Wilkinson on Effective Green
Financing: What have we learned so far?, s.l.: s.n.
BB Stability Report (2014), Financial Stability Report 2014, Bangladesh Bank, Dhaka.
BRAC Bank (2014), Annual Report, BRAC bank, Dhaka.
BRPD circular no 2 (2011), Policy Guidelines for Green Banking, Banking Regulation and Policy
Department, Dhaka.
 JIMA Circular 2 (2014), Bangladesh Bank Refinance Scheme for Green Financing, Green Banking and CSR
Department: Dhaka.
Circular, B (2011), Policy Guidelines for Green Banking, Bangladesh Bank, Dhaka.
Commission, B (1987), The World Commission on Environment and Development’s, Oxford University
Press, Oxford.
DBBL Annual Report (2011), “Disclosure on green banking”, available at: www.dutchbanglabank.com/
investor-relations/Annual_Report_2011/PDFs/green%20banking.pdf
DBBL Website (2015), about us, available at: www.dutchbanglabank.com/about-us/brief-history.html
EBL Annual Report (2014), Eastern Bank Ltd Annual Report, Eastern Bank, Dhaka.
EBL Website (2015), our profile, available at: www.ebl.com.bd/home/EBL_Profile
EXIM Bank (2103), “Annual Report 2013”. Export Import Bank of Bangladesh.
Financial Stability Report (2014), Financial Stability Report, Issue 5, June 2015, Bangladesh Bank,
Downloaded by Nottingham Trent University At 03:57 01 July 2019 (PT)

Dhaka.
Green Banking and CSR Department BB (2015), Quarterly Report of Green Activities of Banks,
Financial Institutions, (January - March), Bangladesh Bank Green Banking and CSR Department,
Dhaka.
IBBL Disclosure (2014), Green Banking Disclosure IBBL, Islamic Bank Bangladesh: Dhaka.
Islam, M.S. (2019), “Green banking in Bangladesh: how much implemented by the practitioners?”,
Abasyn Journal of Social Science, Vol. 7 No. 2, pp. 189-210.
Mozib Lalon, R. (2015), “Green banking: going green”, International Journal of Economics, Finance and
Management Sciences, Vol. 3 No. 1, pp. 34-42.
PBL website (2015), “Disclosure on green banking”, available at: www.primebank.com.bd/index.php/
home/disclosure_green_banking
PBL Website (2015), “Islamic banking”, available at: www.primebank.com.bd/index.php/home/
islami_deposits
Repetto, R. (1986), World Enough and Time: Successful Strategies for Resource Management, Yale
University Press
SJIBL website (2015), “Green Banking”, available at: www.shahjalalbank.com.bd/Green_Banking.php
Suresh Chandra Bihari (2011), “Green banking – socially responsible banking in India”, The India
Banker, Vol. 6 No. 1.

Corresponding author
Taslima Julia can be contacted at: julialodi.1602@yahoo.com

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com