BENEFITS THAT ISLAMIC AND CONVENTIONAL BANKS CAN ATTAIN IN - - PowerPoint PPT Presentation

BENEFITS THAT ISLAMIC AND CONVENTIONAL BANKS CAN ATTAIN IN IMPLEMENTING GREEN BANKING

The 5th International Islamic Monetary Economics and Finance Conference (IIMEFC 2019) Jakarta; 12-14 November, 2019

Presented by

KASHFIA SHARMEEN

Assistant Professor

Bangladesh Institute of Capital Market (BICM)

Co-Author

AHSAN MAHBUB YEAMAN

Managing Director

K&Y Ventures

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)

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RESEARCH QUESTIONS METHODOLOGY

 The prime methodology concern

• f this research is to code these

initiatives undertaken by banks (Source: Green Banking Guideline by Bangladesh Bank 2012) and all 13 variables of Green Compliance Index (GCI) have been collected by a primary survey for all 40 schedule banks.  Semi-structured interview of related personal  Collection of Secondary data

• What is the current state of green

banking practices by banks in Bangladesh?

• What are the determinants that

motive banks to become green?

• What are the underpinning

causes that determine and reinforce banks for being green ?

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MODEL

SPECIFICATION

Figure 1: Underpinning and Benefits of Green Banking Compliance

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DATA DESCRIPTION

• 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 the governing authority.

Results of Structural Model Analysis

Figure 2: Structural Equation Modeling Results

Green Compliance Index & Reliability Analysis

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PATH COEFFICIENT AND HYPOTHESIS TESTING

All Banks Conventional Islamic Hypothesis Relationship Coefficient t-Value Supported Coefficient Coefficient H1 Governance  Green Compliance .062 0.269 No

• .076
• .457

H2 Firm Specific  Green Compliance .394 2.206* Yes .132 1.154 H3 Green Compliance  Benefit .607 2.721* Yes .703* .744*

REGRESSION RESULTS

All Banks Conventional Islamic Coefficient t-value Coefficient t-value Coefficient t-value Size .053 2.089* .051 2.098* NA NA Leverage NA NA NA NA .011 4.317* Adjusted R2 .172 .132 .727 F-Value 7.889** 4.403** 18.639**

MULTIVARIATE TESTS

All Banks Conventional Islamic Independent Variable Dependent Variables Coefficient Coefficient Coefficient Green Compliance Profitability 2.384* 1.285 .0005* Reputation 1.407 .955 10.33 Accountability 4.619* 2.996** .0027* Moral ground 9.591** 4.776** 35.193* F-value 1.836** 2.734* 4.057* Adjusted R2 .781 .774 .969

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TEST FOR MODIATION

• The difference in results between

conventional and Islamic banking in various tests generated the possibility

• f a moderating effect.
• 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

• utcome 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.

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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.

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