Challenges and issues of green banking in Islamic and traditional banks of Pakistan
Keywords:Green Banking, Pakistan, Islamic Banks, Traditional Banks
This study investigates the current challenges and issues in adopting green banking activities in Pakistan’s banking sector, especially in Islamic banks, due to their close link with green and ethical banking. A total of 26 interviews have been conducted (19 green banking officers and seven heads of the Shariah department) via a semi-structured questionnaire. The study reveals eight factors in priority order, causing hindrance in implementing green banking in Pakistan. These are lack of awareness, knowledge and skills, the culture of adoption to change, lack of pressure, lack of incentives, lack of legal power, culture, and infrastructure. Among the four green banking areas, interviewees have identified environmental risk management as the most challenging area. Most banks have demanded revision in green banking guidelines with legal power and incentives. The study is the first literature that identifies the problems in priority orders with reasons and after-effects. This study supports Jeucken’s and Chapra’s green and Islamic banking models, respectively. The study will help formulate the policy for revising green banking guidelines and environmental laws in Pakistan. The study will further help in achieving Maqasid-e-Shariah in Islamic banks.
Ahmad, K. (2000). Islamic Finance and Banking: The Challenge and Prospects. Review of Islamic Economics, 9, 57-82.
Aizawa, M. (2011). China’s Green Credit Policy: Building Sustainability in the Financial Sector. International Finance Corporation World Bank Group.
Aizawa, M., & Yang, C. (2010). Green Credit, Green Stimulus, Green Revolution? China’s Mobilization of Banks for Environmental Cleanup. The Journal of Environment & Development, 19(2), 119-144. https://doi.org/https://doi.org/10.1177/1070496510371192
Alam, K. T., Julker, N. M., Rashedul, I., & Khadiza, B. (2017). Green Banking: Bangladesh Perspective and International Experiences. Russian Journal of Agricultural and Socio-Economic Sciences, 1(61), 10-16. https://doi.org/https://doi.org/10.18551/rjoas.2017-01.02
Alexander, K. (2016). Greening Banking Policy. In Support of the G20 Green Finance Study Group.
AlKalbani, A., Deng, H., & Kam, B. (2019). The Influence of Organizational Enforcement on the Attitudes of Employees Towards Information Security Compliance 10th International Conference on Information and Communication Systems (ICICS), Irbid, Jordan. https://ieeexplore.ieee.org/document/8809166
Arab News. (2020, October 16). Pakistan Second Most Polluted Country in South Asia After India. Arab News. https://www.arabnews.pk/node/1749686/pakistan
Aragonés-Beltrán, P., García-Melón, M., & Montesinos-Valera, J. (2017). How to Assess Stakeholders' Influence in Project Management? A Proposal Based on the Analytic Network Process. International Journal of Project Management, 35(3), 451-462.
Bal, Y., Faure, M., & Liu, J. (2014). The Role of China's Banking Sector in Providing Green Finance. Duke Environmental Law & Policy Forum, 24, 89-140.
Bangladesh Bank. (2011). Policy Guidelines for Green Banking. Banking Regulation & Policy Department. https://www.bb.org.bd/mediaroom/circulars/brpd/feb272011brpd02e.pdf
Beck, T., Demirgüç-Kunt, A., & Merrouche, O. (2010). Islamic vs. Conventional Banking: Business Model, Efficiency and Stability. The World Bank. https://openknowledge.worldbank.org/bitstream/handle/10986/3929/WPS5446.pdf
Bhardwaj, B. R., & Malhotra, A. (2013). Green Banking Strategies: Sustainability Through Corporate Entrepreneurship. Greener Journal of Business and Management Studies, 3(4), 180-193.
Bihari, S. C. (2010). Green Banking-Towards Socially Resonsible Banking in India. International Journal of Business Insights & Transformation, 4(1), 82-87.
Biswas, N. (2011). Sustainable Green Banking Approach: The Need of the Hour. Business Spectrum, 1(1), 32-38.
Bolderston, A. (2012). Conducting a Research Interview. Journal of Medical Imaging Radiation Sciences, 43(1), 66-76.
Boyatzis, R. E. (1998). Transforming Qualitative Information: Thematic Analysis and Code Development. Sage Publication.
Burns, E. (2010). Developing Email Interview Practices in Qualitative Research. Sociological Research Online, 15(4), 24-35.
Bussmann, K. D., & Niemeczek, A. (2019). Compliance Through Company Culture and Values: An International Study Based on the Example of Corruption Prevention. Journal of Business Ethics, 157(3), 797-811.
Chapra, M. U. (2016). The Future of Economics: An Islamic Perspective (Vol. 21). Kube Publishing Ltd.
Chen, Z., Hossen, M. M., Muzafary, S. S., & Begum, M. (2018). Green Banking for Environmental Sustainability-Present Status and Future Agenda: Experience from Bangladesh. Asian Economic and Financial Review, 8(5), 571-585.
Chowdhury, A., & Dey, M. (2016). Green Banking Practices in Bangladesh. The Cost and Management, 44(2), 34-39.
Chua, S. C., & Oh, T. H. (2011). Green Progress and Prospect in Malaysia. Renewable and Sustainable Energy Reviews, 15(6), 2850-2861. https://doi.org/https://doi.org/10.1016/j.rser.2011.03.008
Creswell, J. (2009). Research Design: Qualitative, Quantitative, and Mixed Methods Approach (3 ed.). Sage Publication.
Cui, Y., Geobey, S., Weber, O., & Lin, H. (2018). The Impact of Green Lending on Credit Risk in China. Sustainability, 10(6), 1-16. https://doi.org/https://doi.org/10.3390/su10062008
da Costa Filho, J. R., Penha, R., & da Silva, L. F. (2021). Stakeholders and the Impact that Exercise on Digital Transformation Projects. RISUS-Journal on Innovation and Sustainability, 12(03), 98-108.
DeJonckheere, M., & Vaughn, L. (2019). Semi-structured Interviewing in Primary Care Research: A Balance of Relationship and Rigour. Family Medicine Community Health, 7(2), 1-8. https://doi.org/10.1136/fmch-2018-000057
Deka, G. (2015). Green Banking Practices: A Study on Environmental Strategies of Banks with Special Reference to State Bank of India. Indian Journal of Commerce and Management Studies, 6(3), 11-19.
Dufays, L. (2012). Responsible Banking, the 10 Principles. Aestimatio: The IEB International Journal of Finance(5), 238-269.
Environmental Performance Index. (2020). 2020 EPI Results. https://epi.yale.edu/epi-results/2020/component/epi
European Commission. (2015). Climate Negotiations. Retrieved from https://ec.europa.eu/clima/policies/international/negotiations/
Fayez, A., Mohammad, Z. N., & Md, H. (2013). Factors Behind the Adoption of Green Banking by Bangladeshi Commercial Banks. ASA University Review, 7(2), 242-255.
Ferdous, C. S. (2013). Compliance with Codes of Corporate Governance in Developing Economies: The Case of Bangladesh University of Birmingham. https://etheses.bham.ac.uk/id/eprint/3993/1/Ferdous13PhD_Redacted.pdf
Ghosh, S. K., Ghosh, P. K., & Chowdhury, S. (2018). Essential of Central Bank’s Regulatory Policy to Strengthen Green Banking Practice and Reporting in a Country. Asian Journal of Finance & Accounting, 10(2), 133-150.
Global Footprint Network. (2017). Ecological Footprint per Person. https://data.footprintnetwork.org/?_ga=2.104893441.388409914.1603175145-749734591.1603175145#/
Grassa, R., Moumen, N., & Hussainey, K. (2020). Is Bank Creditworthiness Associated with Risk Disclosure Behavior? Evidence from Islamic and Conventional Banks in Emerging Countries. Pacific-Basin Finance Journal, 61. https://doi.org/https://doi.org/10.1016/j.pacfin.2020.101327
Haron, S., & Hisham, B. (2003). Wealth Mobilization by Islamic Banks: The Malaysian Case. In Islamic Perspectives on Wealth Creation. https://doi.org/10.3366/edinburgh/9780748621002.003.0004
Hoshen, M. S., Hasan, M. N., Hossain, S., Al Mamun, M. A., & Mannan, A. (2017). Green Financing: An Emerging Form of Sustainable Development in Bangladesh. IOSR Journal of Business and Management, 19(12), 24-30.
Hossain, D. M., Bir, A., Tarique, K. M., & Momen, A. (2016). Disclosure of Green Banking Issues in the Annual Reports: A Study on Bangladeshi Banks. Middle East Journal of Business, 11(1), 19-30.
Independent News Pakistan. (2018, January 24). Pakistan Among 12 Worst Countries in Environmental Pollution: EPI Report. Pakistan Today. https://archive.pakistantoday.com.pk/2018/01/24/pakistan-among-12-worst-countries-in-environmental-pollution-epi-report/
Islam, M. S., & Das, P. C. (2013). Green Banking Practices in Bangladesh. IOSR Journal of Business and Management, 8(3), 39-44.
Jahamani, Y. F. (2003). Green Accounting in Developing Countries: The Case of UAE and Jordan. Managerial Finance, 29(8), 37-45.
James, N. (2016). Using Email Interviews in Qualitative Educational Research: Creating Space to Think and Time to Talk. International Journal of Qualitative Studies in Education, 29(2), 150-163.
James, N., & Busher, H. (2006). Credibility, Authenticity, and Voice: Dilemmas in Online Interviewing. Qualitative Research, 6(3), 403-420.
Jeucken, M. (2004). Sustainability in Finance: Banking on the Planet. Eburon Academic Publisher.
Julia, T., & Kassim, S. (2019). Exploring Green Banking Performance of Islamic Banks VS Conventional Banks in Bangladesh Based on Maqasid Shariah Framework. Journal of Islamic Marketing, 11(3), 729-744. https://doi.org/https://doi.org/10.1108/JIMA-10-2017-0105
Julia, T., Rahman, M. P., & Kassim, S. (2016). Shariah Compliance of Green Banking Policy in Bangladesh. Humanomics, 32(4), 390-404.
Junaidi, I. (2019, December 31). 128,000 Deaths Occur in Pakistan Due to Climate Change Every Year, Senate Body Told. Dawn News. https://www.dawn.com/news/1525374/128000-deaths-occur-in-pakistan-due-to-climate-change-every-year-senate-body-told
Kaeufer, K. (2010). Banking as a Vehicle for Socio-Economic Development and Change: Case Studies of Socially Responsible and Green Banks. Presencing Institute, Cambridge, 2-6. https://www.gabv.org/wp-content/uploads/SocialBanking.pdf
Lalon, R. M. (2015). Green Banking: Going green. International Journal of Economics, Finance and Management Sciences, 3(1), 34-42.
Lavuri, R., & Susandy, G. (2020). Green Products: Factors Exploring the Green Purchasing Behavior of Southern Indian Shoppers. Indonesian Journal of Sustainability Accounting and Management, 4(2). https://doi.org/https://doi.org/10.28992/ijsam.v4i2.229
Masukujjaman, M., & Aktar, S. (2013). Green Banking in Bangladesh: A Commitment Towards the Global Initiatives. Journal of Business and Technology (Dhaka), 8(1-2), 17-40.
Masukujjaman, M., Siwar, C., Mahmud, M. R., & Alam, S. S. (2015). Banker's Perception on Green Banking-An Empirical Study On Islamic Banks In Bangladesh. Management & Marketing Journal, 13(2), 296-310.
Mazzi, F., Slack, R., & Tsalavoutas, I. (2018). The Effect of Corruption and Culture on Mandatory Disclosure Compliance Levels: Goodwill Reporting in Europe. Journal of International Accounting, Auditing, and Taxation, 31, 52-73.
Miah, D. M., & Rahman, S. M. (2017). Green Banking: The Case of Commercial Banking Sector in Oman The Islamic Economic System Conference (iECONS 2017), Muscat, Oman. https://www.researchgate.net/publication/322506242_Green_Banking_The_Case_of_Commercial_Banking_Sector_in_Oman
Miah, M. D., Rahman, S. M., & Mamoon, M. (2020). Green Banking: The Case of Commercial Banking Sector in Oman. Environment, Development, and Sustainability, 23(2), 2681–2697.
Millat, K. M., Chowdhury, R., & Singha, E. A. (2013). Green Banking in Bangladesh: Fostering Environmentally Sustainable Inclusive Growth Process. Department of Communications and Publications, Bangladesh Bank.
Nath, V., Nayak, N., & Goel, A. (2014). Green Banking Practices–A Review. IMPACT: International Journal of Research in Business Management (IMPACT: IJRBM), 2(4), 45-62.
Ningsih, P. K. (2020). Contribution of Sharia Supervisory Board (S.B.) and Sharia Compliance Levels to Performance Indonesian Sharia Banking. Jurnal Manajemen, 11(1), 114-125. https://doi.org/http://dx.doi.org/10.32832/jm-uika.v11i1.3039
Onyancha, G. K. (2013). The Impact of Bank Brand Image on Customer Satisfaction and Loyalty: A Case of Kenya Commercial Bank. European Journal of Business Management, 5(21), 35-39.
Padda, I. U. H., & Asim, M. (2019). What Determines Compliance with Cleaner Production? An Appraisal of the Tanning Industry in Sialkot, Pakistan. Environmental Science and Pollution Research, 26(2), 1733-1750. https://doi.org/https://doi.org/10.1007/s11356-018-3717-0
Park, H., & Kim, J. D. (2020). Transition Towards Green Banking: Role of Financial Regulators and Financial Institutions. Asian Journal of Sustainability and Social Responsibility, 5(1), 1-25.
Pereira, V. M. M., & Filipe, J. A. C. B. (2021). APPLICATION OF A GREEN BANKING PERFORMANCE INDEX TO PORTUGAL. RISUS-JOURNAL ON INNOVATION AND SUSTAINABILITY, 12(03), 12-23.
Permatasari, P., Gunawan, J., & El-Bannany, M. (2020). A Comprehensive Measurement for Sustainability Reporting Quality: Principles-Based Approach. Indonesian Journal of Sustainability Accounting and Management, 4(2). https://doi.org/https://doi.org/10.28992/ijsam.v4i2.282
Qureshi, M. H., & Hussain, T. (2020). Green Banking Products: Challenges and Issues in Islamic and Traditional Banks of Pakistan. Journal of Accounting Finance in Emerging Economies, 6(3), 703-712. https://doi.org/https://doi.org/10.26710/jafee.v6i3.1177
Rahman, M., Rasid, S. Z. A., & Basiruddin, R. (2020). Moderating Effect of Earnings Management in the Relationship between Sustainability Reporting Initiatives and Value Relevance. Indonesian Journal of Sustainability Accounting and Management, 4(2). https://doi.org/https://doi.org/10.28992/ijsam.v4i2.309
Rahman, S. M., & Ahmad, M. M. (2016). Perception of Local Experts About Accessibility to International Climate Funds: Case of Bangladesh. The Journal of Developing Areas, 50(3), 53-67.
Rahman, S. M., & Miah, M. D. (2016). Intended Nationally Determined Contributions from the Middle East and North Africa. Geography, Environment, Sustainability, 9(4), 92-100. https://doi.org/https://doi.org/10.24057/2071-9388-2016-9-4-28-32
Rosly, S. A., & Bakar, M. A. A. (2003). Performance of Islamic and Mainstream Banks in Malaysia. International Journal of Social Economics, 30(12), 1249-1265.
Ryszawska, B. (2016). Sustainability Transition Needs Sustainable Finance. Copernican Journal of Finance & Accounting, 5(1), 185-194. https://doi.org/https://doi.org/10.12775/cjfa.2016.011
Sachs, J., Woo, W. T., Yoshino, N., & Taghizadeh-Hesary, F. (2019). Handbook of Green Finance: Energy Security and Sustainable Development (1st ed.). Springer https://books.google.com.pk/books?id=qjHPtAEACAAJ
Sadr, S. M. B. (1982). An Introduction to Principles of Islamic Banking (1st ed.). BonyadBe’that.
Sahoo, P., & Nayak, B. P. (2007). Green Banking in India. The Indian Economic Journal, 55(3), 82-98.
Salman, A., & Nawaz, H. (2018). Islamic Financial System and Conventional Banking: A Comparison. Arab Economic and Business Journal, 13(2), 155-167.
Samad, G., Gulzar, W., & Ahmed, V. (2015). Environmental Regulations and Compliance in the Textile Processing Sector in Pakistan: Empirical Evidence. South Asian Network for Development and Environmental Economics (SANDEE). https://ideas.repec.org/p/ess/wpaper/id7531.html
SBP. (2020). Credit / Loans Classified by Borrowers [Economic Data]. https://www.sbp.org.pk/ecodata/index2.asp
SBP. (2021). Islamic Banking Bulletin. Islamic Banking Department. https://www.sbp.org.pk/ibd/Bulletin/2021/Jun.pdf
Scholes, K., Johnson, G., & Whittington, R. (2002). Exploring Corporate Strategy. Financial Times Prentice Hall.
Sekreter, A. (2017). Green Finance and Islamic Finance. International Journal of Social Sciences & Educational Studies, 4(3), 115-121.
Shetty, S., & Unnikrishnan, G. (2017). A Comparative Study of Green Banking Practices in India & USA. International Journal of Research in Finance and Marketing (IJRFM), 7(1), 10-19. http://euroasiapub.org/current.php?title=IJRFM
Siddiqi, M. N. (1983). Banking Without Interest (Vol. 5). Islamic Foundation
State Bank of Pakistan. (2017). Green Banking Guidelines. Retrieved from http://www.sbp.org.pk/smefd/circulars/2017/C8-Annex.pdf
Sue, V. M., & Ritter, L. A. (2012). Conducting Online Surveys (2 ed.). Sage Publication.
Thombre, K. A. (2011). The New Face of Banking: Green Banking. Research Paper–Commerce, 1(2), 1-4.
U.S Department of State. (2019). 2019 Investment Climate Statements: Pakistan. Bureau of Economic and Business Affairs. https://www.state.gov/reports/2019-investment-climate-statements/pakistan/
Ullah, M. M. (2013). Green Banking in Bangladesh-A Comparative Analysis. World Review of Business Research, 3(4), 74-83.
United Nations. (1987). Our Common Future: Report of the World Commission on Environment and Development. United Nations. https://digitallibrary.un.org/record/139811?ln=en
United Nations. (2016). List of Parties that Signed the Paris Agreement on 22 April. Retrieved from https://www.un.org/sustainabledevelopment/blog/2016/04/parisagreementsingatures/
Véras, E. Z., & Véras, D. B. J. J. o. I. (2011). Cultural Differences between Countries: the Brazilian and the Chinese Ways of Doing Business. RISUS-JOURNAL ON INNOVATION AND SUSTAINABILITY, 2(2), 77-83.
Verma, M. K. (2012). Green Banking: A Unique Corporate Social Responsibility of India Banks. International Journal of Research in Commerce & Management, 3(1), 110-114.
Vitolla, F., Raimo, N., Rubino, M., & Garzoni, A. (2019). The Impact of National Culture on Integrated Reporting Quality. A Stakeholder Theory Approach. Business Strategy and the Environment, 28(8), 1558-1571. https://doi.org/https://doi.org/10.1002/bse.2332
WHO. (n.d). Climate Change. https://www.who.int/health-topics/climate-change#tab=tab_1
World Bank. (n.d). Total Greenhouse Gas Emissions (kt of CO2 Equivalent). World Bank,. Retrieved December 15, 2020 from https://data.worldbank.org/indicator/en.atm.ghgt.kt.ce
World Health Organization. (n.d). Climate Change. https://www.who.int/heli/risks/climate/climatechange/en/
World Population Review. (2021). Most Polluted Countries 2021. https://worldpopulationreview.com/country-rankings/most-polluted-countries
Yadav, A., Pal, N., Patra, J., & Yadav, M. (2020). Strategic Planning and Challenges to the Deployment of Renewable Energy Technologies in the World Scenario: Its Impact on Global Sustainable Development. Environment, Development, and Sustainability, 22(1), 297-315. https://doi.org/https://doi.org/10.1007/s10668-018-0202-3
Yip, A. W., & Bocken, N. M. (2018). Sustainable Business Model Archetypes for the Banking Industry. Journal of Cleaner Production, 174, 150-169. https://doi.org/https://doi.org/10.1016/j.jclepro.2017.10.190
Yunanda, R. A., Tareq, M. A., Mahdzir, A. B., & Rahman, F. K. (2019). National Culture and Transparency: Evidence from Islamic Banks. RISUS-JOURNAL ON INNOVATION AND SUSTAINABILITY, 10(1), 101-109.
Zhang, B., Yang, Y., & Bi, J. (2011). Tracking the Implementation of Green Credit Policy in China: Top-Down Perspective and Bottom-Up Reform. Journal Of
This Journal is licensed under a Creative Commons Attribution-Non Commercial-No Derivers 4.0 International license.
1.The author (s) authorize the publication of the article in the journal;
2.The author (s) warrant that the contribution is original and unpublished and is not in the process of being evaluated in other journal (s);
3. The journal is not responsible for the opinions, ideas and concepts emitted in the texts, as they are the sole responsibility of its author (s);
4. The editors are entitled to make textual adjustments and to adapt the articles to the standards of publication.