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Green Banking in Bangladesh

Green Banking means promoting environmental friendly practices and reducing your carbon footprint from your banking activities. It may in many forms. Using online banking instead of branch banking, Paying bills online instead of mailing them, Opening up CDs and money market accounts at online banks, instead of large multi-branch banks or finding the local bank in your area that is taking the biggest steps to support local green initiatives.

Green BankingAny combination of the above personal banking practices can help the environment. So this leads to the question that which banks are green. In general, online banks and smaller community banks have better track record than larger banks. And today I will discuss about the Green Banking in Bangladesh.

In the Recent Reform Initiatives of Bangladesh Bank, it has been written that green banking products are those that help to create a favorable impact on environment. From green banking operations four key stakeholders namely customers, management, employees and shareholders can be benefited.

The banking sector can play a significant role in protecting the environment providing financial support to high impact environmentally sensitive sectors. As part of the Rio+20 Summit, Bangladesh and Vietnam jointly organized a side event on June 19, 2012, in Rio de Janeiro, Brazil to discuss how to ensure green development in the backdrop of rapidly changing climate. In this summit, the Governor of Bangladesh Bank Dr. Atiur Rahman drew a presentation on green banking informing his audience on the development of green banking in Bangladesh. He pointed out that banks have entered the 2nd phase of green banking policy guideline.

According to their reports, as of May 2012, 40 banks have formed Green Banking Units, 29 banks have introduced Green Office Guides, Environmental Risk Rating has been done for 4,394 projects; 4,315 rated projects have been financed, Tk.271.0 billion has been disbursed for rated projects, 171 branches have been powered by solar energy and 2,567 branches have been facilitated with online coverage.

On February 27, 2011, Banking Regulation and Policy Department of the Bangladesh Bank issued a circular to all scheduled banks to take necessary steps towards initiating and implementation of green banking in each bank. The entire implementation process is divided into three years sessions as Phase 1 contains policy formulation, incorporation of environment, initiating in-house environmental management, introducing green finance, creation of climate risk fund, introducing green marketing, on-line banking, supporting employees training, consumer awareness and green event, and reporting green banking practice.

Green Banking Initiative
Green banking initiative Solar Plant Project powered by CITI BANK in Bangladesh

Phase 2 involves sector-specific environmental policies, green strategic planning, setting up green branches; improve in-house environment management, formulation of bank specific environmental risk management plan and guidelines, rigorous programs to educate clients and disclosure and reporting of green banking activities.

Green Banking Workshop
Dutch-Bangla Bank Limitid held workshop on Green Banking

All these must be implemented within the end of December.
In Phase 3, whose deadline is on December 31, 2013, banks will accomplish Designing and Introducing Innovative Products and Reporting in Standard Format with External Verification.

Banks that comply with green banking practice will have the several preferential treatments like points will be awarded by the Bangladesh Bank to banks on management component while computing CAMELS rating, where there will ultimately be a positive impact on overall rating of a bank.

Top ten names of banks will be declared by the Bangladesh Bank for their overall performance in green banking activities in the BB websites and the Bangladesh Bank will enthusiastically consider green banking activities of a bank while granting permission for opening new branch of bank. In such banking, green financial products and services are categorized as Retail Banking, Corporate and Investment Banking and Asset Management.

Retail banking will include green mortgage, home equity loans, green commercial building loans, green car loans and green cards. Under corporate and investment banking banks can offer green project finance, green securitization, green venture capital and private equity, Green Indices and Carbon Commodities and finally banks can deal with green fiscal funds, green investment fund and carbon fund under asset management.

To minimize the environmental degradation, green banking can contribute significantly with other environment-concerned organizations since it can protect the environment and conserve the resources.

This idea is in the nascent-stage through the world. In Bangladesh, this concept starts its journey through circulation of policy guidelines by the Bangladesh Bank. At present, green banking, practice exists in the second phase after ending of the first phase keeping in mind that the third phase of policy guidelines will be implemented within December 2013.

Banks should set environmental standards for lending and disburse loans to environmental project at a lower interest rate compared to traditional banks.

To implement green banking in Bangladesh, scheduled banks must follow the policy guideline issued by the Bangladesh Bank. Specific deadline should be followed mentioned in the policy guidelines for effective implementation of green banking. Deadline of Phase I has been executed.

As a vital part of Green Banking many banks in Bangladesh have started online bill payment system for gas, electricity, phone  and other bills. Nowadays anyone can shop by using their bank’s debit or credit cards. Mobile Banking is a very popular trend in Bangladesh and initially a few banks in Bangladesh have started complete Online Banking system as branch banking. 

Green Banking is now a very well-known and friendly banking system in Bangladesh that really helps our country to keep green environment safely.

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