SECTION-C

FIM

Contributions of financial institutions and markets towards sustainable economic development: A study

on Bangladesh

Submitted ToMd. Joynal Abedin Course instructorDepartment of FinanceAIUB

Submitted By:

1) Ahsan, A F M Mahmudul 13-24651-22) Kanchan, Eleus 13-24002-23) Islam, Jahidul 12-22422-34) Saha, Sudipta 13-24730-25) Israt, Fatema 13-23406-1

Introduction. Financial system in Bangladesh. Sustainable development. Theoretical frame work between financial

system and sustainable development. The role of financial institution and markets

in sustainable development. Data analysis. Empirical result and discussion . Recommendation. Conclusion.

Table of content

Introduction

Sustainable development and private sector: A financial institution perspective- Garcia (1997)

The role of financial institutions in achieving sustainable development- E.C (1997)

New direction line of sustainable development and marketing in green banking- Pinter (2014)

Financial sector and sustainable economic development- Setakova (2012)

Literature Review

“A development which meets the needs of current generations without compromising the ability of future generations to meet their own needs".(Brundtland Commission)

“Economic development that is conducted without depletion of natural resource”(oxford dictionary)

Sustainable Development

Financial Institution

Regulators of the financial system: Bangladesh Central Bank

Structure of Financial System

The main constituents of financial system are :

i) Financial Institutionsii) Financial Instruments, andiii) Financial Markets.

Financial system in Bangladesh

Financial Institutions: Depository Financial Institution includes Non Depository Financial Institution includes Financial Instruments: Cash, Cheque, Commercial Paper, Negotiable

Certificate of deposits, Banker Acceptances, Bonds, Stocks, Govt. Securities,

Financial Markets: Primary Market Secondary Market Money Market Capital market

Financial system in Bangladesh

Theoretical framework between financial system and sustainable development

Flow chart to adopt sustainable development and the result

COST

COST

TECHNOLOGICAL ADVANCEMENT

USING ECO FRIENDLY MACHINE

CSR ACTIVITIES

SUSTAINABLE DEVELOPMENT (ULTIMATE

GOAL)

PROFIT MARGIN

TOTAL EFFICIENCY EFFICIENCY

ENVIRONMENTAL WELL BEING

REVENUE

GREEN BANKING

USING DAY LIGHT

CSR VS REVENUE

BDT 0.00BDT 0.50BDT 1.00BDT 1.50BDT 2.00BDT 2.50BDT 3.00BDT 3.50

0 1 2 3 4 5 6 7CSR

COST

IN M

ILLI

ON

(TK)

REVENUE IN BILLION (TK)

0

100000

200000

300000

400000

500000

600000

0 1 2 3 4 5 6

GREEN BANKING VS COST

GREEN BANKING VS COST

0

1

2

3

4

5

6

7

8

9

10

0 1 2 3 4 5 6

Fixed Cost Per Unit

FCPU

Year 1Year 2Year 3

Variable cost per Unit (Taka)

Profit in 2014 after adopting green financing, and 2015 use day light, technology etc. (assumption)

2014

2015

A financial institution is an establishment that conducts financial transactions such as investments, loans and deposits.

Financial markets facilitate the flow of funds and thereby allow financing and investing by households, firms, and government agencies.

The role of financial institution and market in sustainable development

Depository institution:1. commercial banking sector is in its relationship

with Small and Medium sized Enterprises.2. Play very influential through their lending

practices and by providing information.3. commercial banks have focused on two areas Firstly they have progress in developing internal

environmental management systems to reduce their own environmental impact.

Secondly, most banks include some environmental analysis into their credit assessment process.

The role of financial institution and market in sustainable development(cont..)

Non-depository institutions: Like insurance company play very important

role in reducing environmental risk by pay for environmental damage.

Using sustainable development as a risk management tool.

Insurance to reduce uncertainty in environmental policy development,, e.g. policies which would provide a maximum cost for the affected industry. 

The role of financial institution and market in sustainable development(cont..)

Data and method of analysis

o Fixed Cost(Initial Cost)

o Government Rules and Regulation.

o Monetary Instability.

o Global Financial Crisis.

o Technological Risk.

Barriers to have sustainability

o Green banking. o Using day light.o Advance technology.o Efficient employee.o Using energy saving interior tools.o Using eco friendly machine.o Corporate social Responsibility.

Driver of sustainability

Incentives to have sustainable development.

o Government investment.

o Tax exemption in financial

sector to introduce

sustainable development.

o TDS(tax deduction at

source) decrease in bank

who adapted green banking.

o Deduction rate for the central bank.

o Tax deduction on solar plant.

o Tax deduction on ecology friendly machine, energy and light.

o Tax reduction on tempered glass.

o Aware about the problem of climate change.o Aware about the need of sustainable

development.o Introduce business ethics.

Encouraging instrument to have sustainable development.

Since sustainable development is needed for the whole world to survive and present the resource for the future and future generation so the all types of organization and institution and markets should adopt the sustainable development.

These types of step are very much necessary for those countries who are already in danger.

Empirical results and discussion

Climate risk : 6th Position

Bangladesh is in the sixth position of global climate risk index 2015.

these report it can be said that Bangladesh is in the climate risk for the global warming.

The western counties are basically responsible for that .

Empirical results and discussion(cont…)

Introduce some ideas : Such as green banking, using day light,

advance technology using efficient employee, using energy saving interior tools, using eco friendly machine and some CSR activities

Promote sustainable development : Bangladesh is not too much aware about the

technological crime. So it will be major barrier to promote

sustainable development by the technology.

Empirical results and discussion(cont…)

Incentive plan: To remove the barriers there are some incentive which can

be promoted by the government Bangladesh bank and the financial institutions and markets,

government can invest in some green project for the sustainable development

Tax reduction:- Reduce the tax in solar plant, energy saving machine eco

friendly machine, tempered glass etc. Government can also exempted some portion of tax those

who adopt the sustainable development. Bangladesh bank can reduce the reserve rate those who

adopt the sustainable development.

Empirical results and discussion(cont…)

For financial institution and markets All the financial institution (Bank) should introduce the green

banking. Financial institution should adopt the technology with a

proper backup (security) All financial institution should use the day light instead of

using electricity (glass structure) Financial institution should let government

aware/understandable about the sustainable development and should attract to invest on it.

Financial institution should use eco friendly equipment.

For Government Government should aware the people or industry or financial

institution about the sustainable development. Government should insist financial institution to adopt

sustainability

Recommendation

Government can impose more tax those institution do not adopt sustainable development

Government can reduce tax rate on those financial institution which implement sustainable development

Government should deduct tax on solar plant

For Bangladesh bank

Bangladesh bank should new rules and regulation to adopt the sustainable development in institution.

Bangladesh bank should reduce the reserve rate or deposit who adopt sustainable development

Recommendation (cont…)

Conclusion

Pinter, E., Deutsch, N., Ottmar, Z., (2014). New direction line of sustainable development and marketing in green banking,Social science research network, 1-10.

Lele, S.M. (1991), Sustainable development: a critical review , World development. Vol 19(6), 607-621.

Attah, N.V.(2010), Environmental sustainability and sustainable growth: a global outlook, University of pennsylviniascholary commons, 1-65.

Pisano, U., Martinuzzi, A,. Bruckner, B. (2012). Financial sector and sustainable development: logistics, principles and actors. ESDN quarterly report N27, 6-53.

References

Garcia, L.E (1997), Sustainable development and private sector: A financial institution perspective, Bridges to sustainability, 130-141.

Sestakova, M. (2012). Financial sector and sustainable economic development, 6-17.

European Commission, (1997). The role of financial institutions in achieving sustainable development. 1-137.

Global climate risk index (2015). Brifing paper. Retrieved from German watch. Website: https://germanwatch.org at 6th December 2015.

References

Development of four decade long climate scenario and trend temperature, rainfall, sunshine and humidity, (2014). Ministry of disaster management and relief.

Sustainable development, Retrieved from Oxford dictionary http://www.oxforddictionaries.com/definition/english/sustainable-development , at 9th December.

References