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Macro and micro prudential incentives in ESG lending in dual banking system: do Islamic banks have better ESG lending?

Hasan Al Banna & Amila Zamzabila Putri

Journal of Islamic Accounting and Business Research2026https://doi.org/10.1108/jiabr-12-2024-0491article
AJG 1ABDC C
Weight
0.50

What the paper says

Purpose Environmental, social and governance (ESG) lending has become the main objective of policymakers worldwide. However, the banking industry is in a dilemma when supporting the ESG through their investment, due to its high-risk asset. Therefore, the policy mix is critical to support ESG lending in the banking industry. Thus, this paper aims to evaluate the role of macro and micro prudential policy on ESG lending in the dual banking system. Design/methodology/approach Panel data is used, including 8 Islamic banks and 32 conventional banks involved in the samples from 2018 to 2022. Static panel regression and the Generalized Method of Moments (GMM) are implemented, including the robustness check. Findings The findings showed that the Macroprudential Intermediation Ratio, loan loss provision and total assets influence ESG lending in dual banking systems at the macro and micro levels. Furthermore, discussion and analysis are available in this paper. Originality/value To the best of the author’s knowledge, this is the first paper discussing the macro and micro prudential incentives in promoting ESG lending in a dual banking system in an emerging country. Research limitations/implications The study focuses only on the Indonesian context, which is very limited in gaining a multi-perspective from other dual banking systems. Thus, the findings justified the similar macro and micro prudential incentives in the country with similar characteristics to Indonesia. Practical implications The results imply that regulators’ incentives in supporting ESG lending are critical due to its risk. The policies must be adjusted to the specific bank (Islamic or conventional) due to their different characteristics in operations and their market share. Social implications The paper suggests that a policy mix is needed to support the ESG lending in the dual banking systems. Promoting the ESG values in the body of the banking industry, especially Islamic banks, which have to work harder in pursuing the nonprofit activities by giving more to the social orientation through activating Islamic social finance (zakat and qordul hasan contract).

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https://doi.org/https://doi.org/10.1108/jiabr-12-2024-0491

Or copy a formatted citation

@article{hasan2026,
  title        = {{Macro and micro prudential incentives in ESG lending in dual banking system: do Islamic banks have better ESG lending?}},
  author       = {Hasan Al Banna & Amila Zamzabila Putri},
  journal      = {Journal of Islamic Accounting and Business Research},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1108/jiabr-12-2024-0491},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.