5 years ago

Joint efforts key to sustainable banking

Experts focus on green financing

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A collaborative approach of industry-led initiatives and policy leadership is required to ensure sustainable financing in banking system, experts said on Thursday.

The banks, in most cases, look less interested in green financing unless any circular is issued by the regulator, they observed.

But in developed countries, the analysts added, the initiative comes from banking associations before being reinforced through regulatory actions.

To make an effective contribution to meeting six key sustainable development goals, they laid emphasis on changing mindset of the top policymakers of a bank.

The experts suggested regular monitoring of banks' green financing activities by the central bank.

They made the observations at a review workshop styled 'Sustainable Banking Activities of Bangladesh' organised by the Bangladesh Institute of Bank Management (BIBM) in its auditorium.

Dr Muzaffer Ahmed Chair Professor Dr Barkat-e-Khuda moderated the event attended by leading bank officials.

BIBM director (training) Prof Dr Shah Md Ahsan Habib presented a study paper on the topic.

He said sustainable banking cannot be disaggregated from the key concerns of corporate governance, leadership and CSR (corporate social responsibility) activities by banks.

Banks are mostly focusing on economic factors but financing on environmental and social areas like agriculture financing, SME funding, green financing, CSR and financial inclusions remain untapped.

To protect farmers, Dr Habib said, banks should introduce warehouse receipt financing, which has been benefiting growers globally.

"Farmers could use the system through depositing commodities to a warehouse after harvest and selling them at a later time at relatively more profitable prices," he added.

Prime Bank deputy managing director (DGM) Touhidul Alam Khan said sustainable financing cannot alone help banking become sustainable.

It needs to be adopted in terms of all banking activities like leadership, corporate governance and CSR, he argued.

"We shouldn't do anything so that our next generation can point a finger at us in terms of getting formal finances," he said, indicating the bulging volume of bad loans.

At the programme, Bank Asia DGM Ziaul Hasan Molla said there are some banks making a good profit but they cannot do the same after a certain period.

"This is our (bankers) failure because we often race for meeting the high profit target rather than focusing on sustainability," he added.

Helal Ahmed Chowdhury, supernumerary professor at BIBM, said sustainable development is not possible without ensuring good governance at each level.

"Active coordination among the departments and stakeholders is vital to this effect," he continued.

Bangladesh Bank general manager Khondkar Morshed Millat said improper reporting over green financing activities by banks was one of the major reasons behind their failure to reach the goal.

"The central bank's green financing target (5.0 per cent of the total loan) for banks is not aggressive. Banks should concentrate more on reporting," he stated.

BIBM former supernumerary professor Yasin Ali said banks should not do anything that would lead to a colossal waste of resources.

Citing an example of agent banking in covering the unbanked population, he said bank managements need to think products like that. "Product diversification is very essential to this effect."

Moderating the function, Dr Barkat-e-Khuda said emphasis on quality of profitability which would eventually enhance image and reputation of a bank in the long run.

"By doing so, you (banks) will be able to attract more deposits, able to give more credit to investors and thereby contribute much more meaningfully to the economy," he added.

The noted economist also highlighted ethical banking practice at all levels for sustainability.

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