BENEFITS THAT ISLAMIC AND CONVENTIONAL BANKS CAN ATTAIN IN IMPLEMENTING GREEN BANKING Presented by Co-Author KASHFIA SHARMEEN AHSAN MAHBUB YEAMAN Assistant Professor Managing Director Bangladesh Institute of Capital Market (BICM) K&Y Ventures The 5th International Islamic Monetary Economics and Finance Conference (IIMEFC 2019) Jakarta; 12-14 November, 2019
URGE FOR GREEN Worse worming effects of global climate crisis Financial institutions, specially banks can create and maintain green revolution by implementing ‘go - green’ policy as it has a considerable role in financing commercial projects for organizations. For our research, all 31 conventional banks and 9 Islamic banks have been considered. Banking based on Islamic principles accounts for 20% of all deposits and 23% of all credit in Bangladesh (International Environment House, 2015) 1 2 3 4 5 6 7 8
RESEARCH QUESTIONS METHODOLOGY What is the current state of green The prime methodology concern banking practices by banks in of this research is to code these Bangladesh? initiatives undertaken by banks (Source: Green Banking What are the determinants that Guideline by Bangladesh Bank motive banks to become green? 2012) and all 13 variables of What are the underpinning Green Compliance Index (GCI) causes that determine and have been collected by a reinforce banks for being green ? primary survey for all 40 schedule banks. Semi-structured interview of related personal Collection of Secondary data 1 2 3 4 5 6 7 8
MODEL SPECIFICATION Figure 1: Underpinning and Benefits of Green Banking Compliance 1 2 3 4 5 6 7 8
DATA DESCRIPTION Green Compliance Index & Results of Reliability Analysis Structural Model Analysis Data relating to governance, firm-specific • and benefit indicators were collected directly from the annual report of 2018. Green Compliance Index (GCI) works as a • mediator. The extent of green compliance is • measured through content analysis by using a self-developed index by Bangladesh Bank guidelines. A score of 1 is given to a bank that • complied with an item of the developed index and 0 otherwise. The green compliance index was sent to • the head office of all forty banks to get firsthand information on the extent of compliance based on the standards set by Figure 2: Structural Equation Modeling Results the governing authority. 1 2 3 4 5 6 7 8
PATH COEFFICIENT AND HYPOTHESIS TESTING All Banks Conventional Islamic Hypothesis Relationship Coefficient t-Value Supported Coefficient Coefficient Governance Green Compliance H1 .062 0.269 No -.076 -.457 Firm Specific Green Compliance H2 .394 2.206* Yes .132 1.154 Green Compliance Benefit H3 .607 2.721* Yes .703* .744* MULTIVARIATE TESTS REGRESSION RESULTS All Banks Conventional Islamic All Banks Conventional Islamic Coefficient t-value Coefficient t-value Coefficient t-value Independent Dependent Coefficient Coefficient Coefficient Variable Variables Size .053 2.089* .051 2.098* NA NA Green Profitability 2.384* 1.285 .0005* Leverage NA NA NA NA .011 4.317* Compliance Reputation 1.407 .955 10.33 Adjusted .172 .132 .727 Accountability 4.619* 2.996** .0027* R 2 Moral ground 4.776** 35.193* 9.591** F-Value 7.889** 4.403** 18.639** F-value 1.836** 2.734* 4.057* Adjusted R 2 .781 .774 .969 1 2 3 4 5 6 7 8
The difference in results between conventional and Islamic banking in various tests generated the possibility TEST FOR of a moderating effect. MODIATION Difference in slope test has been carried out for all the paths in the structural model, but only the path from green compliance to the outcome is found significant. As a result, we can conclude that the level of benefits attained by banks through green compliance is higher for Islamic Banks than conventional banks. 1 2 3 4 5 6 7 8
DISCUSSION AND CONCLUSION In our research model, governance and firm-specific have been incorporated with green banking compliance • index and benefits, i. and moral ground are examined. e. accountability, profitability, reputation In the first phase of examination, it has been seen that firm-specific have a positive association with green • compliance index whereas governance is not significantly associated. Although not significantly associated, the indicators used to measure the level of governance provided some • basic relationships. Furthermore, green compliance is also positively associate with the underlying results which means if banks • comply with green they will gain more benefits which increase their accountability, profitability and the most in the moral ground. Only reputation receives a little lower attention. Moral ground as expected is high is Islamic banks which go accordance with the Islamic view. In the second • phase of examination we found that among three hypothesis, only execution of green banking provide more benefits to Islamic banks over conventional banks. It is expected that consumers of Islamic banking would have a greater sensitivity toward Shariah principles and • support Islamic banks initiatives toward going green. A combination of Islamic and green ideas in Bangladesh, along with conventional banks, would certainly add • more value to the final consumers as well as create a sustainable future for the country itself. 1 2 3 4 5 6 7 8
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