Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
Environmental Orientation in Lending Practices: Evidence in
Malaysian Banks
Sheirijah Sheikh Kamaruddin* and Azlan Amran**
Rapid economic growth in developing countries has attracted environmental pressure from
various stakeholders. Environmental policies are also changing the regulatory framework of
the financial sector. As financial intermediary in the economy, banks’ responses to the
financing needs of the environmental friendly sectors will be crucial to the sustainable
development of nations. Banks commitment to the environment include considering the
potential environmental impact of corporate borrowers as part of lending decisions. Despite
significant research interest in the field of banks’ role and responsibilities, studies on
environmental management in banking sectors in developing countries are lacking. This
study investigates the level of environmental considerations within bank lending decisions by
Malaysian banks. Interviews with bank professionals provide qualitative data to understand
the strategy and motivation of banks’ responses in environmental management. This
exploratory study documents the conditions under which environmental issues are
incorporated into lending decisions. Although environmental factors are considered as part
of the credit risk management, it is of secondary importance compared to financial criteria
when banks are making lending decisions. Insights on these issues provide a platform for
scholars and policy makers to understand and enhance the environmental governance for
Malaysian banking sector.
Field of Research: Banking
*Sheirijah Sheikh Kamaruddin, Graduate School of Business (GSB), Universiti Sains Malaysia (USM),
Malaysia, Email: sheirijah_sk@yahoo.com
**Professor Dr. Azlan Amran, Graduate School of Business (GSB), Universiti Sains Malaysia (USM),
Malaysia, Email: azlan_amran@usm.my