Journal of Academic Research for Humanities (JARH) is a double-blind peer-review, Open Free Access, online Multidisciplinary Research Journal
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Vol. 3 No. 3 (2023)
The International "Journal of Academic Research for Humanities"

Research Articles

Analysis of Credit Structure of Financial Institutions in Islamic Countries for Green Financing : and its Impact on Renewable Energy Expansion

Published 20-09-2023

  • Rashid Ahmad
    • ,
  • Fakhre Alam

Rashid Ahmad
Institute of Business Administration, Karachi

Fakhre Alam
Bahria University, Islamabad

Abstract

Green financing has emerged as a crucial approach to address various challenges associated with global warming, water scarcity, waste, pollution, smog, and floods. This research paper aims to assess the phenomenon of green finance and domestic credit granted for renewable energy projects in Islamic countries (sample chosen). The primary objective is to determine the significance of lending in these countries and its impact on the environment. To evaluate green financing, Domestic Credit Provided by the Financial Sector (DCPFS) is used as a proxy, as there is a lack of exclusive data on green financing in the World Bank databases. Commercial banks in these countries are encouraged by central banks to provide green financing to local investors. The purposive sampling technique is employed, focusing on green financing within the Islamic banking system. The independent variables include renewable energy consumption (% of total electricity output), renewable electricity output (% of total electricity output), and alternative and nuclear energy (% of total energy use). These variables are chosen based on the hypothesis that an increase in green financing would positively impact renewable energy consumption. The overall findings indicate a weak linkage between credit investment (a proxy for green financing) and the production and use of alternative and renewable energy. The findings serve as an alarming call for policymakers in the central banks of the sampled countries, highlighting the need for extensive efforts towards developing policy guidelines, implementing effective measures, and monitoring green financing by commercial banks.

Keywords

Islamic Credit Lending Structure, Islamic Green Financing, Impact of Green Financing on, Renewable Green, Energy Expansion

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Author Biography

Rashid Ahmad

Rashid Ahmad is a scholar of IBA, Karachi who has completed his master degree in Islamic Banking & Finance 

Fakhre Alam

Fakhre Alam is a graduate of Bahria University having extensive experience of working in Islamic Banking. 

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