The Role of Green Finance in Enhancing Customer Loyalty in Nepalese Banks: The Mediating Effect of Environmental Awareness

Green finance, customer loyalty, environmental awareness, Nepalese banks, sustainable banking, renewable energy, customer perception

The article entitled The Role of Green Finance in Enhancing Customer Loyalty in Nepalese Banks: The Mediating Effect of Environmental Awareness explores the role of green finance programs in improving customer loyalty towards their banks with environmental awareness acting as the mediating variable. Green finance, where capital is directed to environmentally friendly initiatives has become prominent in the world and Nepal where banks are now promoting products like electric vehicle (EV) loans, green home loans and financing hydropower initiatives. This paper is a quantitative research design, where the main target group will be banks within the major urban center of Nepal, Kathmandu, where the most apparent use of green finance is seen. The 5 Point Likert scale was used as the data instrumentation measure, and the analysis performed with the help of SEM with SmartPLS. The results indicate that the positive direct impact of green finance (or green banking) practices on the customer loyalty is quite substantial: the banks which provide and promote the environmentally friendly products and services are more likely to intensify the repurchase intentions and long-term commitment. Besides, the environmental awareness can be considered a partial mediator: more environmentally conscious customers tend to perceive the green finance efforts in a positive way, which enhances the loyalty effect, yet some share of the effect still can be regarded as direct. The existing banking and financial services studies show the effect size estimates to indicate a moderate to high range (around 0.30-0.60) of the standardized path coefficients of the green finance to loyalty link; the mediated (indirect) effect is often approximately 20-40% of the full effect. The conclusion can be made that the more environmentally conscious customers are, the more they would feel that banks offering green finance products are socially responsible, and would be more inclined to stay loyal to them. Especially EV loans have helped banks to gain a more positive reputation as the advocates of sustainable transportation, whereas green home loans promote the use of energy-saving construction methods. Hydropower projects are being funded even with regulatory and environmental challenges, which reinforces the idea of banks as providers of renewable energy objectives in Nepal.