Re-Thinking About The Green Banking Model In The Context Of Bangladesh

Abstract

Green financing and sustainable development have become a crucial aspect of today's financial sector. Green banking entails two aspects: greening the internal operations of Banks & Financial Institutions (FIs) and attaching greening condition to financing schemes (Green financing). This paper will shed a light on the impact of climate change on Bangladeshand the role of green banking to combat climate change. It has been found that banks' are much more proactive regarding green internal operations rather than environment-friendly financing. Moreover, the majority of the customers of banks & FIs are unaware of green banking and its' importance. The primary focus of this paper is to show the existing policies, regulations and models of green banking and to develop an inclusive green banking model. The model proposed active participation of three groups: stakeholders of the economy, banks and clients to implement the green banking practices in the economy. The model emphasizes on environmentally friendly operating procedures of the banks and their clientele and financing the eco-friendly projects. This paper also presents the existing green banking policies of the country and the implementation status up to December, 2015. It has been found that unaware customer base, too much profit-orientation by Banks and FIs, high non-performing loan, immense competition and lack of regulatory framework are the major challenges faced by banks, FIs and regulators regarding implementation of green banking. Inclusion of green banking clause into the banking companies act, corporate governance charter and industrial policies is recommended by this paper. Moreover, banks and FIs should extend credit facility by considering each business's nature and its impact on environment. Stringent terms and conditions can be stipulated into the loan agreement to avoid financing of eco-unfriendly businesses. The paper concludes that green banking practices leads to greening economics activities thus able to tackle climate change problems in the country.