Implementation of Green Banking and Financial Performance on Commercial Banks in Indonesia

Tria Ratnasari, Arni Surwanti and Firman Pribadi

A chapter in Recent Developments in Asian Economics International Symposia in Economic Theory and Econometrics, 2021, vol. 28, pp 323-336 from Emerald Group Publishing Limited

Abstract: There is a global concern over climate change issues. The banking sector is expected to join the initiatives in solving environmental issues, even though banking sectors have no direct contribution to environmental damage. Banking commitment to environmental issues is required. The banking sector should have a responsibility for monitoring and managing the impacts of the ecological effects as the result of their business activities. The advantages of green banking implementation are that bank can avoid the use of paper by utilizing online transaction for their daily operation such as internet banking, SMS banking, and ATM. This will bring in the paperless operation into the banks, which in turn will reduce the logging of the forest. Banks also can develop an environmentally friendly lending policy for their business activities. This research aims to determine the impact of green banking daily operation, green banking policy (GBP), capital adequacy, non-performing loan (NPL), bank efficiency, and bank liquidity on bank profitability. The sample of this research is the Indonesian banking sector during the period 2012–2016. The results showed that green banking daily operation, capital adequacy, and bank liquidity have a positive effect on bank profitability. GBP and bank efficiency negatively affect bank profitability, while the NPL did not have a significant impact on banks’ profitability.

Keywords: Green banking daily operation; green banking policy; capital adequacy; non-performing loan; bank efficiency; bank liquidity; bank profitability (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:isetez:s1571-038620210000028018

DOI: 10.1108/S1571-038620210000028018

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