Environmental consideration in bank’s lending decision: a case study of Bangladesh

Abstract

Corporate Social Responsibility (CSR) is one of the buzz words now-adays. As such environmental awareness has become pivotal in each and every sector of business. In case of banking sector (loan being their primary revenue generating product) environmental issues ought to be addressed in their lending operations. In case of Bangladesh, CSR has even become one of the performance evaluating criteria for banks as far as central bank of Bangladesh is concern. With this regard, this paper aims to examine incorporation of environmental issues in bank’s lending decision. This study is based on questionnaire survey of banks engaged in corporate lending in Bangladesh, supplemented by semi-structured interview. The purpose of the study is to examine the extent to which Bangladeshi banks incorporate environmental consideration into their corporate lending decisions. It explores the sources of information used by banks when making corporate lending decision which involves environmental considerations. This paper also includes some views and comments of the banks regarding environmental disclosure. The study concludes that banks are not satisfied with the current state of information available to them. And they desire for improvement in various ways beyond current practice. The study reveals that in Bangladesh banks rely more on personal visit rather than company’s annual reports for gathering information regarding environmental issues. The little information that is available in the annual reports in this regard is not standardized and comparable. This makes it difficult for banks to use it in pricing their credit.