Nexus of Artificial Intelligence, Green Finance and The Banking Industry of Pakistan
DOI:
https://doi.org/10.22399/ijcesen.3398Keywords:
Nexus of Artificial Intelligence, Green Finance, Banking, Industry of PakistanAbstract
Artificial Intelligence (AI) is a magnificent stride in the digitalization and transformation of businesses all over the globe. AI can be interpreted as the computer/machine’s capability to function without human interaction to provide optimized results. AI technologies imitate human cognitive skills and can yield decisions made on data inputs. AI typically performs the human mind's capable activities. It also refers to developing machines capable of mimicking human behavior AI has revolutionized the banking sector globally. However, according to research conducted by Noreen et al. (2023), the adoption of AI in the banking sector of Pakistan has not reached its full potential. The banking sector in Pakistan has embraced AI acquisition at a growth rate of 12.2 percent. The AI adoption in Pakistani banks is somehow restricted to optimizing risk management, improving customer services, digital identity management, biometric verification and detection of fraud. However, the role of AI goes far beyond the ordinary procedures of automation. AI inclusion has the power to transform the structure of financial services. It can help lay the basis for data analysis to forecast new market trends and constitute the advanced course of action for decision-making. AI, therefore, increases the efficiency of the financial sector leading towards economic sustainability and achieving sustainable goals associated with green finance.
References
[1] Acuite Ratings & Research. (2015, June 6). Bank Size Has a Significant Influence on Its Financial Performance. https://www.acuite.in/sector-alert-bank-asset size.htm#:~:text=In%20terms%20of%20Net%20Interest,of%2040%20bps%20in%20ROA.
[2] Agarwal, S. (2020). Literature review on the relationship between board structure and Firm Performance. International Journal of Business Ethics in Developing Economies, 9(2).
[3] Almustafa, H., Nguyen, Q. K., Liu, J., & Dang, V. C. (2023). The impact of COVID-19 on firm risk and performance in MENA countries: Does national governance quality matter? PloS one, 18(2), e0281148.
[4] Alnajjar, A., & Othman, A. H. A. (2021). The impact of capital adequacy ratio (CAR) on Islamic banks’ performance in selected MENA Countries. International Journal of Business Ethics and Governance, 116-133.
[5] Ambec, S., & Lanoie, P. (2008). Does it pay to be green? A systematic overview. The Academy of Management Perspectives, 45-62.
[6] Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of international financial Markets, Institutions and Money, 18(2), 121-136.
[7] Bartel, J. (2022, April 29). Seven Unique Risks of Investing in Fintech Startups. https://www.forbes.com/sites/forbesfinancecouncil/2022/04/29/seven-unique-risks-of-investing-in-fintech-startups/?sh=167bfbed7527/
[8] Barry, Z. Y. (2022). Global Green Finance Saw Record Growth in 2021, Exceeding US $720 Billion. Forrester (blog), October, 18.
[9] Ben Naceur, S., Candelon, B., Elekdag, S. A., & Emrullahu, D. (2023). Is FinTech Eating the Bank's Lunch?
[10] Berger, A. N., & DeYoung, R. (1997). Problem loans and cost efficiency in commercial banks. Journal of banking & finance, 21(6), 849-870.
[11] Boden, M. A. (2018). AI: A very short introduction. Oxford,
[12] Brogi, M., & Lagasio, V. (2019). Environmental, social, and governance and company profitability: Are financial intermediaries different? Corporate Social Responsibility and Environmental Management, 26(3), 576-587.
[13] Brown, S., & Hillegeist, S. A. (2007). How disclosure quality affects the level of information asymmetry. Review of accounting studies, 12, 443-477.
[14] Bughin, J., Hazan, E., Sree Ramaswamy, P., DC, W., & Chu, M. (2017). AI the next digital frontier.
[15] Burgess, A. (2017). The Executive Guide to AI: How to identify and implement applications for AI in your organization. Springer.
[16] Clarkson, P. M., Li, Y., & Richardson, G. D. (2004). The market valuation of environmental capital expenditures by pulp and paper companies. The accounting review, 79(2), 329-353.
[17] Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2011). Does it really pay to be green? Determinants and consequences of proactive environmental strategies. Journal of accounting and public policy, 30(2), 122-144.
[18] Coad, A. (2018). Firm age: a survey. Journal of Evolutionary Economics, 28, 13-43.
[19] Cornett, M. M., Erhemjamts, O., & Tehranian, H. (2016). Greed or good deeds: An examination of the relation between corporate social responsibility and the financial performance of US commercial banks around the financial crisis. Journal of Banking & Finance, 70, 137-159.
[20] Del Gaudio, B. L., Previtali, D., Sampagnaro, G., Verdoliva, V., & Vigne, S. (2022). Syndicated green lending and lead bank performance. Journal of International Financial Management & Accounting, 33(3), 412-427.
[21] Dietrich, A., & Wanzenried, G. (2011). Determinants of bank profitability before and during the crisis: Evidence from Switzerland. Journal of international financial markets, institutions and money, 21(3), 307-327.
[22] Diouf, D., & Boiral, O. (2017). The quality of sustainability reports and impression management: A stakeholder perspective. Accounting, Auditing & Accountability Journal, 30(3), 643-667.
[23] Dobrescu, E. M., & Dobrescu, E. M. (2018). AI (Ai)-the technology that shapes the world. Global economic observer, 6(2), 71-81.
[24] Dor, Z., & Iania, L. " Exploring the impact of ESG and greenwashing scores on stock valuation ratios.
[25] Eisenbach, S., Schiereck, D., Trillig, J., & von Flotow, P. (2014). Sustainable project finance, the adoption of the equator principles and shareholder value effects. Business Strategy and the Environment, 23(6), 375-394.
[26] Elmarzouky, M., Albitar, K., Karim, A. E., & Moussa, A. S. (2021). COVID-19 disclosure: a novel measurement and annual report uncertainty. Journal of Risk and Financial Management, 14(12), 616.
[27] Eren, B. A. (2021). Determinants of customer satisfaction in chatbot use: evidence from a banking application in Turkey. International Journal of Bank Marketing, 39(2), 294-311.
[28] Finger, M., Gavious, I., & Manos, R. (2018). Environmental risk management and financial performance in the banking industry: A cross-country comparison. Journal of International Financial Markets, Institutions and Money, 52, 240-261.
[29]
[30] Finkenwirth, K. S. (2021). The impact of AI on financial performance in the German financial service industry-a content analysis (Doctoral dissertation).
[31] FSB. 2017. AI and Machine Learning in Financial Services: Market Developments and Financial Stability Implications.
[32] Gander, J. P. (2012). Firm debt structure, firm size and risk volatility in US industrial firms. Applied Financial Economics, 22(5), 387-393.
[33] Garcia, M. T. M., & Guerreiro, J. P. S. M. (2016). Internal and external determinants of banks’ profitability: The Portuguese case. Journal of Economic Studies, 43(1), 90-107.
[34] Gill, S. (2003). Price-earnings ratio revisited. Finance India, 17(3), 937.
[35] Green, L. W., Ottoson, J. M., Garcia, C., & Hiatt, R. A. (2009). Diffusion theory and knowledge dissemination, utilization, and integration in public health. Annual review of public health, 30, 151-174.
[36] Griffin, P. A., & Sun, Y. (2013). Going green: Market reaction to CSRwire news releases. Journal of Accounting and Public Policy, 32(2), 93-113.
[37] Hagel, J., & Seely Brown, J. (2013). Success or struggle: ROA as a true measure of business performance. Deloitte Insights.
[38] Heikal, M., Khaddafi, M., & Ummah, A. (2014). Influence analysis of return on assets (ROA), return on equity (ROE), net profit margin (NPM), debt to equity ratio (DER), and current ratio (CR), against corporate profit growth in automotive in Indonesia Stock Exchange. International Journal of Academic Research in Business and Social Sciences, 4(12), 101.
[39] Haipeng, N., Xiayi, Z., & Pingdan, Z. (2020). Institutional change and effect evaluation of green finance policy in China: Evidence from green credit policy. Management Review, 32(8), 3.
[40] Han, J., Huang, Y., Liu, S., & Towey, K. (2020). AI for anti-money laundering: a review and extension. Digital Finance, 2(3-4), 211-239.
[41] Hasan, F., Bellenstedt, M. F. R., & Islam, M. R. (2023). Demand and supply disruptions during the Covid-19 crisis on firm productivity. Global Journal of Flexible Systems Management, 24(1), 87-105.
[42] Hassanein, A., Zalata, A., & Hussainey, K. (2019). Do forward-looking narratives affect investors’ valuation of UK FTSE all-shares firms? Review of Quantitative Finance and Accounting, 52, 493-519.
[43] Höhne, N., Khosla, S., Fekete, H., & Gilbert, A. (2012). Mapping of green finance delivered by IDFC members in 2011. Cologne: Ecofys.
[44] Hueske, A. K., Endrikat, J., & Guenther, E. (2015). External environment, the innovating organization, and its individuals: A multilevel model for identifying innovation barriers accounting for social uncertainties. Journal of Engineering and Technology Management, 35, 45-70.
[45] Hughes, J. S., Liu, J., & Liu, J. (2007). Information asymmetry, diversification, and cost of capital. The accounting review, 82(3), 705-729.
[46] Hwang, S., & Kim, J. (2021). Toward a chatbot for financial sustainability. Sustainability, 13(6), 3173.
[47] IOSCO. 2020. The Use of AI and Machine Learning by Market Intermediaries and Asset Managers: Consultation Report. The International Organization of Securities Commissions.
[48] Iqbal, S. (2024, February 19). Can AI help banks reduce non-performing loans?https://www.tbsnews.net/thoughts/can-artificial-intelligence-help banks-reduce-non-performing-loans-604214/
[49] Jones, T. M. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. Academy of management review, 20(2), 404-437.
[50] Júnior, J. F. A., Oliveira, M. C., Ponte, V. M. R., & de Sousa Ribeiro, M. (2014). Social disclosure of Brazilian and UK firms in light of stakeholder theory, legitimacy theory and voluntary disclosure theory. Advances in Scientific and Applied Accounting, 175-200.
[51] Karim, S., Sandu, R., & Kayastha, M. (2021). The challenges and opportunities of adopting AI (AI) in Jordan’s healthcare transformation. Global Journal of Information Technology: Emerging Technologies, 11(2), 35-46.
[52] Kaya, O. (2019). AI in banking. A lever for profitability with limited implementation to date. Deutsche Bank Research.
[53] Kikan, D., Singh, S., & Singh, Y. (2019). Predictive analytics adoption by banking and financial services: The future perspective. International Journal of Recent Technology and Engineering, 8, 832-837.
[54] Kirsch, A. (2018). The gender composition of corporate boards: A review and research agenda. The Leadership Quarterly, 29(2), 346-364.
[55] Kok, J. N., Boers, E. J., Kosters, W. A., Van der Putten, P., & Poel, M. (2009). AI: definition, trends, techniques, and cases. AI, 1, 270-299.
[56] Kumar, L., Nadeem, F., Sloan, M., Restle-Steinert, J., Deitch, M. J., Ali Naqvi, S., ... & Sassanelli, C. (2022). Fostering green finance for sustainable development: A focus on textile and leather small medium enterprises in Pakistan. Sustainability, 14(19), 11908.
[57] Leiponen, A. (2002). Why do firms not collaborate? The role of competencies and technological regimes. In Innovation and firm performance: Econometric explorations of survey data (pp. 253-277). London: Palgrave Macmillan UK.
[58] Luo, S., Yu, S., & Zhou, G. (2021). Does green credit improve the core competence of commercial banks? Based on quasi-natural experiments in China. Energy Economics, 100, 105335.
[59] Marietza, F., & Hatta, M. (2022). Technology, R & D, and Green Finance on Intrinsic Value and the Opportunity of Share Growth in Indonesia. In 1st Virtual Workshop on Writing Scientific Article for International Publication Proxyed SCOPUS (1st WoW-SAIPIS 2021) (p. 148).
[60] Moşteanu, N. R. (2023). Thriving in the entrepreneurial landscape of sustainability and intelligent automation era. Green and Low-Carbon Economy.
[61] Muganyi, T., Yan, L., & Sun, H. P. (2021). Green finance, fintech and environmental protection: Evidence from China. Environmental Science and Ecotechnology, 7, 100107.
[62] Nazareno, L., & Schiff, D. S. (2021). The impact of automation and artificial intelligence on worker well-being. Technology in Society, 67, 101679.
[63] Nguyen, D. M., Chiu, Y. T. H., & Le, H. D. (2021). Determinants of continuance intention towards banks’ chatbot services in Vietnam: A necessity for sustainable development. Sustainability, 13(14), 7625.
[64] Nguyen, H. V., Dang, H. N., & Dau, H. H. (2021). Influence of corporate governance on dividend policy in Vietnam. The Journal of Asian Finance, Economics and Business, 8(2), 893-902.
[65] Nguyen, T. N. Q., Nguyen, D. T., Le, H. A., & Le, D. L. (2022). Corporate governance and Financial Stability: The case of commercial banks in Vietnam. Journal of Risk and Financial Management, 15(11), 514.
[66] Noreen, U., Shafique, A., Ahmed, Z., & Ashfaq, M. (2023). Banking 4.0: Artificial intelligence (AI) in banking industry & consumer’s perspective. Sustainability, 15(4), 3682.
[67] OECD. 2021. AI, Machine Learning, and Big Data in Finance
[68] Ojeyinka, T. A., & Akinlo, A. E. (2021). Does bank size affect efficiency? Evidence from commercial banks in Nigeria. Ilorin Journal of Economic Policy, 8(1), 79-100.
[69] Orsato, R. J. (2006). Competitive environmental strategies: when does it pay to be green? California management review, 48(2), 127-143.
[70] Ottoson, F., & Westling, M. (2020). AI and its Breakthrough in the Nordics: A Study of the Relationship Between AI Usage and Financial Performance in the Nordic Market.
[71] Oztemel, E., & Gursev, S. (2020). Literature review of Industry 4.0 and related technologies. Journal of intelligent manufacturing, 31(1), 127-182.
[72] Piper, T. R., & Weinhold, W. A. (1982). How much debt is right for your company. Harvard Business Review, 60(4), 106-114.
[73] Plastino, E., & Purdy, M. (2018). Game changing value from AI: eight strategies. Strategy & Leadership, 46(1), 16-22.
[74] Popeanga, V., & Holt, A. G. (2013). The Current State of Structural Funds Absorption in Romania Through Operational Programme Environment. Annals-Economy Series, 4, 154-159.
[75] Porter, M. E. (1991). Towards a dynamic theory of strategy. Strategic management journal, 12(S2), 95-117.
[76] Porter, M., & Van der Linde, C. (1995). Green and competitive: ending the stalemate. The Dynamics of the eco-efficient economy: environmental regulation and competitive advantage, 33, 120-134.
[77] Prior, D., Surroca, J., & Tribó, J. A. (2008). Are socially responsible managers really ethical? Exploring the relationship between earnings management and corporate social responsibility. Corporate governance: An international review, 16(3), 160-177.
[78] Purdy, M., & Daugherty, P. (2016). Why AI is the future of growth. Remarks at AI now: the social and economic implications of AI technologies in the near term, 1-72.
[79] PwC. 2020. How Mature Is AI Adoption in Financial Services? A PwC Study across the DACH Region
[80] Raj, S. B. E., & Portia, A. A. (2011, March). Analysis on credit card fraud detection methods. In 2011 International Conference on Computer, Communication and Electrical Technology (ICCCET) (pp. 152-156). IEEE.
[81] Rao, A. S., & Verweij, G. (2017). Sizing the prize: What’s the real value of AI for your business and how can you capitalise?
[82] Rogers, M. (1998). The Definition and Measurement of Innovation.
[83] Ryll, L., Barton, M. E., Zhang, B. Z., McWaters, R. J., Schizas, E., Hao, R., ... & Yerolemou, N. (2020). Transforming paradigms: A global AI in financial services survey.
[84] Sætra, H. S. (2021). AI in context and the sustainable development goals: Factoring in the unsustainability of the sociotechnical system. Sustainability, 13(4), 1738.
[85] Sanny, L., Susastra, A., Roberts, C., & Yusramdaleni, R. (2020). The analysis of customer satisfaction factors which influence chatbot acceptance in Indonesia. Management Science Letters, 10(6), 1225-1232.
[86] Scholtens, B., & Dam, L. (2007). Banking on the equator. Are banks that adopted the equator principles different from non-adopters? World Development, 35(8), 1307-1328.
[87] Shook, E. I., Knickrehm, M. A., Mcintyre, A., Woolf, A., Browne, H., & Lavelle, K. (2018). Future Workforce Survey–Banking Realizing the Full Value of AI. Dublin: Accenture. Retrieved November, 17, 2020.
[88] Sirgy, M. J. (2002). Measuring corporate performance by building on the stakeholders model of business ethics. Journal of business ethics, 35, 143-162.
[89] Song, X., Deng, X., & Wu, R. (2019). Comparing the influence of green credit on commercial bank profitability in China and abroad: empirical test based on a dynamic panel system using GMM. International Journal of Financial Studies, 7(4), 64.
[90] Soni, V. D. (2019). Role of AI in combating cyber threats in banking. International Engineering Journal For Research & Development, 4(1), 7-7.
[91] Takács, Á., Rudas, I., Bösl, D., & Haidegger, T. (2018). Highly automated vehicles and self-driving cars [industry tutorial]. IEEE Robotics & Automation Magazine, 25(4), 106-112.
[92] Talavera, O., Yin, S., & Zhang, M. (2018). Age diversity, directors' personal values, and bank performance. International Review of Financial Analysis, 55, 60-79.
[93] Tan, Y., Floros, C., & Anchor, J. (2017). The profitability of Chinese banks: impacts of risk, competition and efficiency. Review of Accounting and Finance, 16(1), 86-105.
[94] Tan, G. (2019). Beyond the zero lower bound: negative policy rates and bank lending.
[95] Tekic, Z., & Koroteev, D. (2019). From disruptively digital to proudly analog: A holistic typology of digital transformation strategies. Business Horizons, 62(6), 683-693.
[96] Topal, Y., & Dogan, M. (2014). Impact of board size on financial performance: The case of BIST manufacturing industry. International Journal of Business Management and Economic Research, 5(4), 74-79.UK: Oxford University Press.
[97] Shiyyab, F., Girardone, C., & Zakaria, I. (2013). Pay for no performance? Executive pay and performance in EU banks. Unpublished working paper, Essex business school, 1-48.
[98] Shiyyab, F. S., Alzoubi, A. B., Obidat, Q. M., & Alshurafat, H. (2023). The impact of artificial intelligence disclosure on financial performance. International Journal of Financial Studies, 11(3), 115.
[99] Wheeler, D. W. (2020). Co-opting AI as an Opportunity for Financial Service Professionals. Journal of Financial Service Professionals, 74(1).
[100] Zheng, G. W., Siddik, A. B., Masukujjaman, M., & Fatema, N. (2021). Factors affecting the sustainability performance of financial institutions in Bangladesh: the role of green finance. Sustainability, 13(18), 10165.
[101] Zhou, S., Simnett, R., & Green, W. (2017). Does integrated reporting matter to the capital market?. Abacus, 53(1), 94-132.
[102] Zhou, G., Sun, Y., Luo, S., & Liao, J. (2021). Corporate social responsibility and bank financial performance in China: The moderating role of green credit. Energy Economics, 97, 105190.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 International Journal of Computational and Experimental Science and Engineering
This work is licensed under a Creative Commons Attribution 4.0 International License.
