Developing and Validating the Green Banking Practices Index (GBPI): A Bilingual Framework for Pakistan's Dual-Banking System

https://doi.org/10.5281/zenodo.18018591

Abstract

This study creates and tests the Green Banking Practices Index (GBPI) for Pakistan's dual-banking system. It combines Maqasid al-Shariah ethical principles with standard sustainability benchmarks so that Islamic and conventional banks can be compared fairly. Using a sequential explanatory mixed-methods design, Phase 1 combined 28 indicators from a thematic analysis of 200 corporate documents (2019–2023) from 30 banks (15 Islamic and 15 conventional) and NVivo-coded semi-structured interviews with 21 experts (8 senior managers, 5 Shariah scholars, 4 SBP regulators, and 4 consultants). In Phase 2, the index was checked for content validity (S-CVI/Ave=0.94), inter-coder reliability (Cohen's κ=0.89), internal consistency (Cronbach's α=0.91), and exploratory factor analysis (EFA: 76.8% variance explained, KMO=0.87, Bartlett's p<0.001). In policy-ethical integration, Islamic banks do better (M=73.8, SD=7.5 vs. M=52.4, SD=13.6; t=5.22, p=0.001) and slightly better in risk-financing (M=68.4 vs. 61.7; p=0.096). In disclosure, conventional banks do better (M=62.3 vs. 48.6; t=-3.45, p=0.002). Total scores are close (M=61.5 vs. 58.6; p=0.312). Qualitative insights identify fundamental drivers: Shariah-compliant ethics for Islamic banks and regulatory adherence for conventional banks. The GBPI gives regulators a standardized tool to use in Pakistan, which is very vulnerable to climate change (ranked in the top 10 in the world). It also fits into the SBP's 2023-2028 framework, which has effects on mandatory disclosures, tiered incentives, and capacity-building. Limitations include reliance on disclosure; future research suggests tracking over time.