DOI: https://doi.org/10.14710/dijb.6.1.2023.50-56

Green credit and bank performance in Indonesia

1Department of Economics Development, Universitas Sriwijaya, Indonesia, Indonesia

2Department of Management, Universitas Sriwijaya, Indonesia, Indonesia

3Department of Accounting, Universitas Sriwijaya, Indonesia, Indonesia

Open Access Copyright 2023 Diponegoro International Journal of Business under http://creativecommons.org/licenses/by-sa/4.0.

Citation Format:
Abstract
A new challenge for the banking sector In Indonesia is integrating social aspects in firm performance reports. Green Credit is expected to substantially drive capital allocation to sustainable development which eventually will impact the pattern of production and consumption in the future. In this study, using commercial bank data in Indonesia, we estimate an empirical model of the effect of green credit on bank performance in Indonesia during the period 2015 to 2021. We employ a panel dynamic model using the Generalized Method of Moments (GMM). We differ bank performance twofold which are return on asset (ROA)). The main finding shows that green credit significantly abates bank performance since some green economy projects focus on the public welfare. Therefore, green credit could not result in high returns. The government should formulate a policy of providing incentives to banks that offer green credit. Thus, it could encourage the willingness of banks to lend more funds to the green economy.
Fulltext View|Download
Keywords: green credit, bank performance, sustainable development, green economy

Article Metrics:

Article Info
Section: Articles
Language : EN
Recent articles
Deaths and diseases: The impact of Covid-19 in Indonesian stock return The effect of ownership structure on social and environmental disclosure in Indonesia Green credit and bank performance in Indonesia More recent articles
  1. Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2005). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money, 18(2), 121–136. Https://doi.org/10.1093/icc/3.3.537-a
  2. Ben Selma Mokni, R., & Rachdi, H. (2014). Assessing the bank profitability in the MENA region: A comparative analysis between conventional and Islamic bank. International Journal of Islamic and Middle Eastern Finance and Management, 7(3), 305–332. Https://doi.org/10.1108/IMEFM-03-2013-0031
  3. Chen, Z., Mirza, N., Huang, L., & Umar, M. (2022). Green Banking — Can Financial Institutions support green recovery ? Economic Analysis and Policy, 75, 389–395. Https://doi.org/10.1016/j.eap.2022.05.017
  4. Dikau, S., & Volz, U. (2021). Central bank mandates, sustainability objectives and the promotion of green finance. Ecological Economics, 184(February), 107022. Https://doi.org/10.1016/j.ecolecon.2021.107022
  5. Djalilov, K., & Piesse, J. (2016). Determinants of bank profitability in transition countries: What matters most? Research in International Business and Finance, 38, 69–82. Https://doi.org/10.1016/j.ribaf.2016.03.015
  6. Gao, X., & Guo, Y. (2022). The Green Credit Policy Impact on the Financial Performance of Commercial Banks: A Quasi-Natural Experiment from China. Mathematical Problems in Engineering, 2022. Https://doi.org/10.1155/2022/9087498
  7. Lian, Y., Gao, J., & Ye, T. (2022). How does green credit affect the financial performance of commercial banks? ——Evidence from China. Journal of Cleaner Production, 344(February), 131069. Https://doi.org/10.1016/j.jclepro.2022.131069
  8. Luo, S., Yu, S., & Zhou, G. (2021). Does green credit improve the core competence of commercial banks? Based on quasi-natural experiments in China. Energy Economics, 100, 105335. Https://doi.org/10.1016/j.eneco.2021.105335
  9. Menicucci, E., & Paolucci, G. (2016). The determinants of bank profitability: empirical evidence from European banking sector. Journal of Financial Reporting and Accounting, 14(1), 86–115. Https://doi.org/10.1108/jfra-05-2015-0060
  10. Mirza, N., Afzal, A., Umar, M., & Skare, M. (2023). The impact of green lending on banking performance: Evidence from SME credit portfolios in the BRIC. Economic Analysis and Policy, 77, 843–850. Https://doi.org/10.1016/j.eap.2022.12.024
  11. Mule, R. K., Mukras, M. S., & Mutunga, N. O. (2015). Corporate size, profitability and market value: an econometric panel analysis of listed firms in Kenya. European Scientific Journal, 11(13), 376–396
  12. Petria, N., Capraru, B., & Ihnatov, I. (2015). Determinants of Banks’ Profitability: Evidence from EU 27 Banking Systems. Procedia Economics and Finance, 20(15), 518–524. Https://doi.org/10.1016/s2212-5671(15)00104-5
  13. Sriyono, S., & Nabellah, A. (2022). Can credit quality as a moderating variable in increasing profitability: study on conventional commercial banks listed on the Indonesia stock exchange. Jurnal Siasat Bisnis, 26(1), 23–35. Https://doi.org/10.20885/jsb.vol26.iss1.art2
  14. Steffen, B. (2021). A comparative analysis of green financial policy output in OECD countries. Environmental Research Letters, 16(7). Https://doi.org/10.1088/1748-9326/ac0c43
  15. Tan, Y. (2016). Journal of International Financial Markets , Institutions & Money The impacts of risk and competition on bank profitability in China. “Journal of International Financial Markets, Institutions & Money,” 40, 85–110. Https://doi.org/10.1016/j.intfin.2015.09.003
  16. Van Nguyen, T., Bui, H. T. T., & Le, C. H. D. (2022). The impacts of corporate social responsibility to corporate financial performance: A case study of Vietnamese commercial banks. Cogent Economics and Finance, 10(1). Https://doi.org/10.1080/23322039.2022.2132642
  17. Weber, O. (2017). Corporate sustainability and financial performance of Chinese banks. Sustainability Accounting, Management and Policy Journal, 8(3), 358–385. Https://doi.org/10.1108/SAMPJ-09-2016-0066
  18. Yao, S., Pan, Y., Sensoy, A., Uddin, G. S., & Cheng, F. (2021). Green credit policy and firm performance: What we learn from China. Energy Economics, 101(June). Https://doi.org/10.1016/j.eneco.2021.105415
  19. Yin, W., Zhu, Z., Kirkulak-Uludag, B., & Zhu, Y. (2021). The determinants of green credit and its impact on the performance of Chinese banks. Journal of Cleaner Production, 286, 124991. Https://doi.org/10.1016/j.jclepro.2020.124991
  20. Yuan, N., & Gao, Y. (2022). Does green credit policy impact corporate cash holdings? Pacific Basin Finance Journal, 75(September), 101850. Https://doi.org/10.1016/j.pacfin.2022.101850
  21. Zhang, Y. (2018). Green Credit Rises the Financial Performance of Commercial Bank--A Case Study on Industrial Bank. Advances in Social Science, Education Adn Humanities Research, 236(May 2006), 295–300. Https://doi.org/10.2991/meess-18.2018.56
  22. Zheng, W., Zhang, L., & Hu, J. (2022). Green credit, carbon emission and high quality development of green economy in China. Energy Reports, 8, 12215–12226. Https://doi.org/10.1016/j.egyr.2022.09.013
  23. Zhou, G., Sun, Y., Luo, S., & Liao, J. (2021). Corporate social responsibility and bank financial performance in China: The moderating role of green credit. Energy Economics, 97, 105190. Https://doi.org/10.1016/j.eneco.2021.105190

Last update:

No citation recorded.

Last update:

No citation recorded.