Professional Documents
Culture Documents
ON
GREEN BANKING
AND
ITS PRACTICES IN
BANGLADESH
[GREEN BANKING]
ID:07303125.
TERM PAPER
ON
GREEN BANKING AND ITS PRACTICES IN
BANGLADESH
Prepared For:
Mr. Mohammed Jamal Uddin
Associate Professor
Department of Finance & Banking
University of Chittagong.
Prepared By:
Md. Maidul Hayder
4th Year, BBA
ID: 07303125
Session: 2006-2007
Department of Finance and Banking
University of Chittagong.
LETTER OF SUBMISSION
Date: April 28, 2012
To
Mr. Mohammed Jamal Uddin
Associate Professor
Department of Finance & Banking
University of Chittagong.
Subject: Prayer for accepting the term paper report.
Sir,
With due respect and humble submission, I like to state that I have completed my Term
paper report on Green Banking and its practices in Bangladesh. Though it is a new
experience, I have tried my level best to gather information about this topic. Without
sincere cooperation and proper guidance of you it was not possible for me to prepare this
report. For this act of kindness, I am grateful to you.
I would like to express my gratitude for your kind guidance in completion of the report
assigned to me. I sincerely hope that this report will meet your expectation and will serve
its purposes.
Yours sincerely
_______________
Md. Maidul Hayder
B.B.A (4th year)
ID: 07303125
Session: 2006-2007
Department of Finance and Banking
University of Chittagong.
Green Banking
LETTER OF CERTIFICATION
---------------------------------
Green Banking
PREFACE
Preparation of term paper report is one of the important assignments of 4 th year BBA
(Hons.). Mainly our study is limited in theories. This term paper program has been
designed for the students of 4th year to acquire some practical and special knowledge.
Because it is an important thing that students have some piratical knowledge about the
current business world. In developed countries business schools give more preference to
practical knowledge. Keeping this view in mind our curriculum includes preparation of
term paper in which I had to make this report. My report actually concern about
environmentally friendly banking (Green banking).
During my preparation of report I tried to acquire the information related to concept and
current practices of Green Banking in Bangladesh. The paper also includes experts view,
evolution, policy guidelines, roles, different products and services as well as related
problems of green banking. This paper may work as guidance for different public and
private
commercial banks for adopting green banking practices in their day to day
activities.
I owe a profound sense of gratitude to my honorable teacher, Mohammed Jamal Uddin,
Associate Professor, Department of Finance and Banking, University of Chittagong,
whose continuous guidance enable me to complete this report successfully.
Green Banking
ACKNOWLEDGEMENT
It was very kind desire of the Almighty that I, Md. Maidul Hayder, have completed the
assigned task within the specified time period. For the fear of soundings like a vote
of thanks speech, I could not possibly thank all of those marvelous people who
have contributed something of themselves directly in preparing this report. First of all,
my hearty thanks go to Mr. Mohammed Jamal Uddin, Associate Professor, Department
of Finance and Banking, University of Chittagong, for his perseverance and direct
supervision. Without his guidelines and valuable advices and suggestions from time to
time, I would be failed to complete the whole thing in a right manner.
I like to express my tributes and gratitude to all of my friends who directly or indirectly
give their in this regard. I am also thankful to our classmates, employees of department
and seminar librarian who helped me in various ways, without their cooperation my report
cant be prepared in time.
Green Banking
EXECUTIVE SUMMARY
Sustainable development can best be achieved by allowing markets to work within an
appropriate framework of cost efficient regulations and economic instruments. One of the
major economic agents influencing overall industrial activity and economic growth is the
financial institutions such as banking sector. In a globalised economy, the industries and
firms are vulnerable to stringent environmental policies, severe law suits or consumer
boycotts. Since banking sector is one of the major stake holders in the Industrial sector, it
can find itself faced with credit risk and liability risks. Further, environmental impact
might affect the quality of assets and also rate of return of banks in the long-run. Thus the
banks should go green and play a pro-active role to take environmental and ecological
aspects as part of their lending principle, which would force industries to go for mandated
investment for environmental management,use of appropriate technologies and
management systems. This paper explores the importance of Green Banking, sites
international experiences and highlights important lessons for sustainable banking and
development in Bangladesh. However, we find that there has not been much initiative in
this regard by the banks and other financial institutions in Bangladesh though they play an
active role in Bangladesh emerging economy. Therefore, I suggest possible policy
measures and initiative to promote green banking in Bangladesh.
Green Banking
TABLE OF CONTENTS
SL. NO.
1.1
1.2
1.3
1.4
2.1
2.2
2.3
PARTICULARS
CHAPTER 1: INTRODUCTION
PAGE NO.
1
INTRODUCTION
2
OBJECTIVE OF THE STUDY
4
METHODOLOGY OF THE STUDY
5
LIMITATION OF THE STUDY
6
7
CHAPTER 2: GREEN BANKING
COMMENTS OF EXPERTS ABOUT GREEN BANKING
8
OBJECTIVES OF GREEN BANKING
10
IMPORTANCE OF GREEN BANKING
11
CHAPTER 3: GREEN BANKING PRACTICES 12
IN BANGLADESH
3.1
3.2
3.3
3.4
3.5
3.6
3.7
BANGLADESH
GREEN BANKING IN BANGLADESH
ROLES OF GREEN BANKING
GREEN BANKING PRACTICES
AREAS OF GREEN BANKING
GREEN BANKING PRODUCTS AND SERVICES
PROSPECTS OF GREEN BANKING
13
15
16
19
21
22
23
24
CONCLUSION
4.1
4.2
RECOMMENDATION
CONCLUSION
REFERENCES
Green Banking
25
26
27
CHAPTER 1
INTRODUCTION
Green Banking
1.1 INTRODUCTION
The term Green Banking is now popular worldwide now-a-days. It is for stopping the
environmental degradation and making this planet habitable. The concept of Green
Banking was developed in the western countries. Green banking is a general term, which
can cover a multitude of areas from a bank being environmentally friendly to how and also
where their money is invested.
Defining green banking is relatively easy. It means promoting environmental-friendly
practices and reducing carbon footprint from banking activities. A green bank is a bank
that promotes environmental and social responsibility but operates as a traditional
community bank and provides excellent services to investors and clients. Its progressive
approach to the community and the earth makes it different from the crowd. A green bank
is also called ethical bank, environmentally responsible bank, socially responsible bank, or
a sustainable bank, and is expected to consider all the social and environmental factors.
Green banking involves pursuing of financial and business policies that are not hazardous
to environment rather help conserve environment. The broad objective of green banking is
to use resources with responsibility and giving priority to environment and society. It is
more about focusing on 'mother planet and its sustainability', shifting from a traditional
approach on 'profit' or even 'people'. Gree banking is not just another corporate social
responsibility (CSR) activity; it is all about going beyond to keep this world livable
without much damage.
Green banking, which considers all the social and environmental factors, is also called
'ethical banking'. Ethical banks started with the aim of protecting the environment. These
banks are like normal banks that aim to protect the environment and are controlled by the
same authorities.
Green Banking
Basically, green banking avoids as much as paper work as possible - from go-green credit
cards and go-green mortgages to all transactions done online. It creates awareness around
business people about environmental and social responsibility, enabling them to adopt
environment friendly business practices, and follows environmental standards for lending.
When a person is awarded a loan, the interest is less than normal banks because ethical
banks give more importance to environment-friendly factors - they do not operate with
high interest rates only.
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To have knowledge about policy standard set by the Bangladesh Bank for the
application of Green Banking.
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Journal.
Books.
Newspapers.
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Time frame for the research was very limited. The actual survey was done within a
short period.
Some supportive materials were not available during the completion of my term
paper i.e. PC, Internet facility etc.
Last but not the least, in many cases, up to date information is not published.
It seems to me that during completion of this report necessary and up to date information
was not possible to gathered, I think if it was possible then a fully fledged and
comprehensive report could have been made possible.
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Chapter 2
Green Banking
Green Banking
banks
should prioritise
loaning the
sectors
that
promote
environmental
practices, The banks can also launch green initiatives with their own business
operations through pursuing cost cutting, recycling of materials and equipment and
waste minimisation
strategies, the financial institutions should initiate 'green office guide' to help protect the
eco-system. Use of online communication in stead of printed documents, installation of
energy
efficient
equipment,
use of filtered
encouraging usage of energy efficient cars are some of the examples of practicing green
business said Shah Md Ahsan Habib, director (training) of BIBM.
We are facing a negative impact of climate change though we contribute little to global
warming, so, we have to focus on adaptation and mitigation process to cope up the
adverse impacts of global warming, and green banking initiative can facilitate this
process." said Qazi Kholiquzzaman Ahmad, chairman of Palli Karma-Sahayak
Foundation.
Green Banking
branches in North America, reducing energy costs by 15 percent a year, while improving
the speed with which it services customers.
The Financial Times of London announced the Sustainable Banking Awards last year.
UK's Cooperative Bank won the 'Sustainable Bank of the Year' award and only HSBC,
among large global banks, was a runner-up in any category.
The good news is, BRAC Bank Ltd from Bangladesh became the regional winner for
'Asian Emerging Markets Sustainable Bank of the Year', which they are also portraying in
all their bill boards and promotion campaigns. Good news for all of us.
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The broad objective of the Green banks are avoiding waste and giving priority to
environment and society.
Focusing on environment-friendly initiatives by providing innovative financial and
ensure sustainable development.
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Green Banking
Chapter 3
Green Banking Practices in
Bangladesh
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risk premium.
Promoting eco-friendly products, supporting training and events for raising awareness for
environmental risk management are also suggested to include in the regular activities of
the bank in the next six months.
In the second phase, the draft suggests banks to take specific policies by June 2012 for
different environmental sensitive sectors such as agriculture, poultry, dairy, farming,
tannery, fisheries, textile and apparels, renewable energy, pulp and paper, sugar and
distilleries, construction and housing, engineering and basic metal, chemicals, rubber and
plastic industry, hospital/clinic, chemical trading, brick manufacturing and ship breaking.
During this period, all banks will also set up green branches to use maximum
natural light, renewable energy, energy saving light bulbs and other equipments.During
the same period, they will have to determine a set of achievable targets and strategies, and
disclose these in their annual reports and websites. They will have to set up green
branches. The banks should increasingly rely on virtual meeting through video
conferencing.
According to the draft guideline, banks in the next one year will adopt a green strategic
plan, determining their target for green banking. The draft says a system of environment
management should be in place in all banks before they step into the third phase of green
banking, to be completed by June 2013.
Green Banking
In this final stage, banks will focus on fine tuning of their green activities and will look for
more innovative products and services to expand eco-friendly business and industries.
Commercial banks will have to adopt a comprehensive green banking policy by
December 2013 as part of the central bank's efforts to make banking practices more
responsible to social and environmental causes. The central bank will name top ten banks
for their overall performances in green banking, and will take into account to give
it permission to open new branches. In its policy guideline for green banking, the BB said
co-friendly business activities and energy efficient industries should get preference in
financing by the banks. The banks will have to inform the BB of their initiatives
on a quarterly basis within 15 days after the end of a quarter. The first quarterly report
has to be submitted by July 15, 2011.Besides avoiding negative impacts on environment
through banking activities, the banks are expected to introduce environment friendly
green products to address the core environmental challenges of the country.
The commercial banks will now require taking measures to protect environmental
pollution while financing a new project or providing working capital to the existing
enterprises. The guidelines advised the banks to facilitate their clients with utmost care in
opening letter of credit for installation of effluent treatment plant (ETP) in the industrial
units. They were also asked to finance in solar energy, biogas, ETP and Hybrid Hoffman
Kiln (HHK) in brickfield under BB efinance scheme.
Green Banking
Bangladesh Bank, the central bank, has a greater role in shaping up a concrete guideline
for green banking practices in Bangladesh. According to central bank, each bank and
financial institution can formulate a strategy and guideline for Green Banking and Green
Financing.
The commercial banks are to develop green banking policies and show general
commitment on environment through in-house performances by December 31 this year.
A
high-powered committee
will
be
responsible
for
reviewing the
banks'
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depletion of Ozone layer. As such, every person and especially the professionals
must have greater role to check the environmental degradation.
Bankers are the important professional group who has interaction with the other groups
of people and also with general masses. They can adopt different green activities within
their in-house environment and also can initiate the protection of the air pollution, water
pollution by their clients. Bankers can finance the green projects, which are
environmental friendly and discourage the projects that damage the environment. It will
be obligatory for each person to show respect to the environmental issues. Otherwise, the
environments where the concerned person lives will be inhabitable and as whole the
country and the globe will no longer be safe place. We have to use resources
carefully and keep in the mind that the reserve of the resources is not unlimited and its
excessive use may endanger the future generation. We have to think that each of our
activity has a specific impact on the environment.
Green Banking
and creating additional jobs through the provision of healthier energy generation
facilities.Green finance may cover all the financial services related to the promotion and
development of green industry and green economy where the environmental benefits in
terms of reduced carbon dependency or reduced ecological scarcity are the most
significant. Green banking practices of banks are connected with both internal operation
and product ecology. Some banks are engaged in carbon offsetting, which refers to
the
effort of canceling out the climate-changing effects of its own greenhouse gas
Green Banking
emissions. Banks, by using their commercial lending and securities underwriting, may
catalyze the necessary transition to an economy that minimizes greenhouse gas pollution
and relies on energy efficiency.
There is no doubt that the combined threats associated with climate change and
biodiversity loss call for a deeper commitment of resources and investment from all
stakeholders. In the endeavor of emission reduction and conservation, stakeholders have
been contributing in different ways in different countries and regions. Green banking is
just one of the initiatives by stakeholder - banks and financial institutions. The
environmentally responsible banks do not only improve their own standards but also
affect socially responsible behavior of other businesses. The banks will have to go
for online banking by eliminating paper waste, saving gas and carbon emission,
reducing printing costs and postage expenses.
Green Banking
For
example, if we draft our letters on a computer rather than in paper, it will save millions of
paper as well as thousands of trees that provide raw materials for paper production.
Similarly, if we select a location of the branch of a bank with sufficient access to light and
air, it will save huge electricity and create a healthy environment. Wastages must be
grouped like organic and inorganic wastage. Organic materials like food, vegetables,
animals etc. can be recycled for manure, gas and electricity etc. The inorganic material
like paper, bottles, pots etc. can be recycled. Wet and degradable materials can be
processed directly keeping under the soil. The recycling materials should be disposed off
at the respective disposal site and the rotten items should be buried under the soil and as
such, pollution can be protected.
Clean and hygienic environment:
A green banker will not throw any waste, bottles or packing materials here and
there. Each group of waste should be kept in a separate place, which does not pollute
the environment and all the wastes must be disposed off separately. A green banker will
not spit or cough on the floor, walls or on the road.
On line statements, emailing documents:
We must send account statements and balance confirmation etc. to the clients through
online
and through
email, which will save paper, time, cost and above all the
environment. We may use these technologies for our clients as well as inter bank
correspondence.
Green Banking
Sound Pollution:
We should keep our voice low when we converse and also convince our clients maintain
this for the sake of healthy working environment in the branches.
Installation of solar panel in the rural branches and using high mileage vehicles or
using shared vehicles instead of personal vehicle:
Since Bangladesh is an energy deficit country we can install solar panels in all Branches as
an alternative energy source. We can also use the vehicles which consume less fuel
which will save huge fuel import of the country. We can also use big vehicles to carry the
employees of the Banks instead of personal vehicle to reduce fuel as well traffic jam
inthe roads.
that
pollutes
the
environment.
Voluntary activities of Banks:
Banks should take initiative to make their clients aware by organizing seminar and
symposium. They can organize awareness campaign in schools and colleges. They
can participate in the tree plantation and cleanliness programmes in city areas.
Working on specific green project:
Our country has lot of problems of proper waste management, drainage and sanitation,
and affected by river pollution, water pollution by pesticides etc. Every bank can
undertake a specific green project for removal of existing polluting substances from the
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ecosystem.
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and new
Many home improvements also qualify for the energy tax credit. Anyone
undertaking an energy-saving house project should shop around for a bank that offers a
special rate for a green mortgage or loan.
Green Credit Cards: A green credit card allows cardholders to earn rewards or points
which can be redeemed for contributions to eco-friendly charitable organizations. These
cards offer an excellent incentive for consumers to use their green card for their
expensive purchases. Imagine the millions of dollars that could be raised for worthwhile
environmental groups if green credit cards really took off.
Green Reward Checking Accounts: A product called reward checking accounts pays a
bonus rate to customers who go green. Customers can earn higher checking account rates
if they meet monthly requirements like receiving electronic statements, paying bills
online or using a debit or check card. With this banking product higher rates and ecofriendly livings go hand-in-hand.
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Green Banking
Chapter 4
RECOMMENDATION &
CONCLUSION
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4.1 Recommendation
Bank should keep following aspects in mind while financing any projects:
1. Analyzing the project in terms of scale, nature and the magnitude of
environmental impact. The project should be evaluated on the basis of potential
negative and positive environmental effects and then compared with the without
project situation. There should be an Environmental Impact Assessment (EIA)
of each project recommending the measures needed to prevent, minimize and
mitigate the environmental negative impact before financing the projects.
2. While investing or funding the projects, the financial institutions should assess
the sensitive issues like vulnerable groups; involuntary displacement etc and
projects should be evaluated in terms of environmentally important areas
including wetlands, forests, grasslands and other natural habitats.
3. Banking institutions need to evaluate the value of real property and the potential
environmental liability associated with the real property. Therefore, the banks
should have right to inspect the property or to have an environmental audit
performed through the life of the loan.
4. Banks also need to monitor post transaction for the ideal environmental risk
management program (Rutherford, 1994) during the project implementation and
operation. There should be physical inspections of production, resources, training
and support, environmental liability, audit programs etc.
5. The next round of evaluation includes loan structuring, credit approval, credit
review and loan management. Further banks have annual audits, quarterly
environmental compliance certificate from the independent third party and also
from the government
Further the banks can introduce green bank loans and products like:
i.
ii.
iii.
Green Banking
4.2 Conclusion
There is a growing awareness among banks and financial institutions to protect the
environment and thereby save 'mother planet'. Big banks are committing large funds on a
sustainabl basis in responsible banking, creating more values for our next generation.
They are shifting forward from 'profit' to 'people' and now more importantly, to create a
better future for all. The sooner this philosophy of 'green banking' is embraced, the better
it is for all.
A good online banking system is the linchpin of reduced costs, improved performance and
competitiveness. We provide the service at no cost to our retail and business customers.
The logical progression of online banking - converting existing customers to online bill
payment - is a harder step and can require a lot of legwork. Once customers get here,
there is the chance of moving to completely electronic banking.
Environmental conservation and protection of ecological balance should be maintained
through combined efforts of multi stakeholders. The main stakeholders are businessmen,
consumers and professionals, NGOs and government organizations.
As green initiatives sweep across the globe, more and more banks have been adopting
green banking practices. Today, many banks are assessing environmental risk while
selecting a project for financing. Even as the market slows in the face of economic
upheaval, many banks are keeping a focus on green.
The positive outcomes of these green initiatives are evident in many instances. However,
these are the results of collective efforts. There is no doubt that the progress so far has
been made possible because of the substantial efforts of all stakeholders, covering banks,
policy makers, civil society organizations, international development and financial
institutions, business entities and the common people (consumers).
Green Banking
References
1.
Green Banking