State Bank of Pakistan Introduces Green Banking Guidelines For Commercial Banks & DFIs

Commercial Banks & Development Finance Institutions To Go Green: SBP 

Under the green banking initiative, commercial banks and DFIs are being encouraged by the State Bank of Pakistan to set up green branches and offices. The idea is to have more than 50% of energy needs to be met by renewable energy sources. This would be done through the installation of photovoltaic solar panels. This includes the use energy efficient lights and equipment along with utilization of technologies for efficient use of water and other resources.

SBP has given specific green banking guidelines (GBG) to the banks and DFIs with a year to implement those. From the looks of it, the guidelines cover all major aspects of banking. Basically, all banks and DFIs are expected to set their own house in order first. The GBGs also require all banks and DFIs to make their infrastructure and operations environment-friendly.

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Summing up, a senior NBP official spoke to a newspaper and said:

“The central bank wants banks and DFIs to tap all opportunities of financing environment-friendly activities of agriculture and SMEs, and corporate and services sectors.”

The implementation of the GBG is mandatory for banks and DFIs. However, the State Bank also encourages microfinance banks to also act up on these. Development of green banking portfolios and their continued monitoring, can give banks and DFIs a unique chance to assess their existing borrowers on additional standards. Following up, they may design new financing products and new advisory services.

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The response for the GBGs provided by SBP have been positive so far. Bankers say GBG is introduced when flow of credit towards the private sector credit demand is high. This will help in the implementation, without running of the risk of a squeeze in credit distribution as a result. Some bankers are concerned that the evaluation of credit proposals of, and credit disbursement to, public sector projects and enterprises might prove difficult because many get environmental certification from federal and provincial agencies without fulfilling all the requirements.