Sustainable banking and trust in the global South
| Published date | 01 March 2024 |
| Author | Fernando Ubeda,Alvaro Mendez,Francisco Javier Forcadell |
| Date | 01 March 2024 |
| DOI | http://doi.org/10.1111/1758-5899.13314 |
34
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Global Policy. 2024;15(Suppl. 1):34– 44.wileyonlinelibrary.com/journal/gpol
RESEARCH ARTICLE
Sustainable banking and trust in the global South
FernandoUbeda1 | AlvaroMendez2,3,4 | Francisco JavierForcadell5,6
Received: 1 Novem ber 2023
|
Accepted: 6 Novem ber 2023
DO I: 10 .1111/17 58- 589 9.13 314
This is an open ac cess article under t he terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which perm its use and distributi on in
any medium, provi ded the original work is p roperly cited, the use i s non-commercial a nd no modifications o r adaptations are made.
© 2024 The Authors. G lobal Policy published by Du rham University and Jo hn Wiley & Sons Ltd.
1Universdidad Aut ónoma de Madrid,
Madrid, Spain
2UBI Business School, Brussels, Belgium
3Fudan University, Shanghai, China
4London School of Economics and
Political Science, London, UK
5ESIC University, Madrid, Spain
6Rey Juan Carlos Uni versity, Madrid,
Spain
Correspondence
Fernando Ubed a, Facultad de CC.
Económicas y Empresariales, Universidad
Autónoma de Madr id, C. Francisco Tomás
y Valiente, 5, 28049 Mad rid, Spain.
Email: fernando.ubeda@uam.es
Funding information
Government of Mad rid, Grant/Award
Number: Línea3 and Excelenciaparael
Profesorado Universitario Comunidad
de Madrid(VPRICIT); Spanish Ministry of
Economy and Competitiveness, Grant/
Award Number: PID20 20- 118064GB- I 00,
RTI2018- 097 and 447- B - I00
Abstract
Trust in banking plays a significant role in promoting financial inclusion.
Multinational banks (MNBs) have the potential to enhance trust by adopting sus-
tainable banking practices. We investigate the impact of MNB s' adoption of ESG
(Environmental, Social and Governance) practices on trust in banking in 3 8 de-
veloping countries. Using an instrumental variable a pproach and control function
estimation, our findings indicate that sustainable practices by commercial MNBs
are positively and significantly assoc iated with increased trust in banking. The
results remain consistent across dif ferent samples, lending robustness to our
findings. By demonstrating the importance of sustainable banking in fostering
trust, this study contributes to the limited literature on trust in b anking in the
global South.
1 | INTRODUCTION
Financial services, often c haracterised by their in-
tangible nature, present unique challenges for con-
sumers disadvantaged by widespread information
asymmetries (Akerlof, 1970). Many financial prod-
ucts heavily rely on the quality of creden ce that they
merit, underscoring the pivotal role of ad vice from
financial professionals. Consequently, the perceived
risk in purchasing numerous financial products tends
to be significantly high. In such a context, tru st is
paramount as a cornerstone of undert aking risk.
Trust represents a generalised expectation regard-
ing the future conduct of financial institutions. Trust
in banks is widely acknowledged as a cr itical fac-
tor in the smooth operation of any financial system
(Carbó- Valverde etal.,2 013; Fungáčová etal.,2019;
Jansen et al.,2015 ; Knell & Stix,2 015; Sapienza &
Zingales, 2012). It encompasses individuals' confi-
dence not only in the stability of financial institutions
but also in the integrity of bankers. Additionally, the
World Bank advocates implementing international
standards to enhance the institutiona l capacity of the
public sector in developing countries, aiming to foster
social trust (Ward,2004).
Social capital emerges as a pivotal factor in nur-
turing trust in the financial system (Guiso etal.,2004;
Lins etal.,2 017). The civic eng agement facet of so-
cial capital encompasses ac tivities through which in-
dividuals actively contribute to their commu nities and
social life, which fosters trust. Organisation s, includ-
ing banks, play a crucial role in building and storing
social capital, particularly with sustainability initia-
tives (Lins etal., 2017 ). These efforts bolster social
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