Corporate Social Responsibility of Banking Institutions

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Corporate Social Responsibility of Banking Institutions

1.1. Background of the Report:

Corporate Social Responsibility stands for business contribution to sustainable development and covers companies’ active participation in different fields: human rights, human resources, relations with clients, suppliers, and other stakeholders, corporate governance, environment and contribution to community and society. The purpose of this report is to see what are the banks in Bangladesh doing in respect of CSR practice and how much are they spending on it.

1.2. Origin of the Report:

Today practical experience is as much essential as academic education that enables someone to be successful business executive especially in the glove, competitive business environment. In order to gather knowledge and experience regarding the organization culture and behavior. This thesis report  title “Corporate Social Responsibility of Banking Institutions in Bangladesh” is a process of gathering knowledge regarding the CSR related activities by banks.

1.3. Objective of the Study:

There are some specific objectives of this report these are:

1. To become familiar with CSR

2. To observe existing practice of CSR by banks

3. To know about other activities related to social welfare carried out by banks

4. To find the possible information sources.

1.4. Methodology

In the ensuring proper management of the business processes to produce an overall positive impact on society, CSR is very important issue. In order to study this issue, collections of data were made from the secondary sources as published materials from like Dhaka Stock Exchange (DSE). Internet and few books related to the CSR were also very much used for collecting information on CSR. Annual reports of 2010 following banks are taken in this report:

1. AB Bank Ltd
2. Bank Asia Ltd.
3. .BRAC Bank Ltd
4. Janata Bank
5. .Dutch- Bangla Bank Ltd.
6. Eastern Bank Limited
7. .Exim Bank Ltd.
8. .Islami Bank Bangladesh Ltd
9. National Bank Ltd
10. One Bank Ltd.
11. Southeast Bank Ltd
12. United Commercial Bank Ltd.
13. Social Investment Bank Ltd.
14. Agrani Bank Ltd.
15. Standard Charted Bank Ltd.

Chapter: 2

History of Bnaking Industry in Bangladesh

2.1. Definition of Bank:

A bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and it lends money to those who need it.

2.2. Characteristics / Features of a Bank:

1. Dealing in Money:

Bank is a financial institution which deals with other people’s money i.e. money given by depositors.

2. Individual / Firm / Company:

A bank may be a person, firm or a company. A banking company means a company which is in the business of banking.

3. Acceptance of Deposit:

A bank accepts money from the people in the form of deposits which are usually repayable on demand or after the expiry of a fixed period. It gives safety to the deposits of its customers. It also acts as a custodian of funds of its customers.

4. Giving Advances:

A bank lends out money in the form of loans to those who require it for different purposes.

5. Payment and Withdrawal:

A bank provides easy payment and withdrawal facility to its customers in the form of cheques and drafts; it also brings bank money in circulation. This money is in the form of cheques, drafts, etc

6. Agency and Utility Services:

A bank provides various banking facilities to its customers. They include general utility services and agency services

7. Profit and Service Orientation

A bank is a profit seeking institution having service oriented approach.

8. Ever increasing Functions:

Banking is an evolutionary concept. There is continuous expansion and diversification as regards the functions, services and activities of a bank.

9. Connecting Link:

A bank acts as a connecting link between borrowers and lenders of money. Banks collect money from those who have surplus money and give the same to those who are in need of money.

10. Banking Business:

A bank’s main activity should be to do business of banking which should not be subsidiary to any other business.

11. Name Identity:

A bank should always add the word “bank” to its name to enable people to know that it is a bank and that it is dealing in money.

2.3. Objective of banking sector:

The main objective of banks is to maintain higher profitability by maintaining circular and efficient flow of amount of money deposited by the customers and the lenders. Banks contribute to the economic cycle by keeping the money circulation among households, government and corporate businesses. The commercial banks lend money to the economic agents through their various products and services by earning interest income on the borrowed money. Commercial banks design their short term and long term loans and other products to cater to the need of customers while enhancing their own returns. Their objective is to attract more customers and build profitable relationships with the new and existing customers.

Another objective of a bank is to lower transaction costs, lower information costs, create liquidity, and to diversify people’s money in a way they could not do on their own.

2.4. The role of Banks in economy:

Banks play an important and active role in the economic development of a country. If the banking system in a country is effective, efficient and disciplined it brings about a rapid growth in the various sectors of the economy. The following is the significance of commercial banks in the economic development of a country:

1. Banks promote capital formation:

• Commercial banks accept deposits from individuals and businesses, these deposits are then made available to the businesses which make use of them for productive purposes in the country.
• The banks are, therefore, not only the store houses of the country’s wealth, but also provide financial resources necessary for economic development.

2. Investment in new enterprises:

• Businessmen normally hesitate to invest their money in risky enterprises. The commercial banks generally provide short and medium term loans to entrepreneurs to invest in new enterprises and adopt new methods of production.
• The provision of timely credit increases the productive capacity of the economy.

3. Promotion of trade and industry:

• With the growth of commercial banking, there is vast expansion in trade and industry.
• The use of bank draft, check, bill of exchange, credit cards and letters of credit etc has revolutionized both national and international trade.

4. Development of agriculture:

· The commercial banks particularly in developing countries are now providing credit for development of agriculture and small scale industries in rural areas.

· The provision of credit to agriculture sector has greatly helped in raising agriculture productivity and income of the farmers.

5. Balanced development of different regions:

• The commercial banks play an important role in achieving balanced development in different regions of the country.
• They help in transferring surplus capital from developed regions to the less developed regions.
• The traders, industrialists etc of less developed regions are able to get adequate capital for meeting their business needs.

6. Influencing economic activity:

• The banks can also influence the economic activity of the country through its influence on

o Availability of credit.

o The rate of interest.

• If the commercial banks are able to increase the amount of money in circulation through credit creation or by lowering the rate of interest, it directly affects economic development.
• A low rate of interest can encourage investment.
• The credit creation activity can raise aggregate demand which leads to more production in the economy.

7. Implementation of Monetary policy:

• The central bank of the country controls and regulates volume of credit through the active cooperation of the banking system in the country.
• It helps in bringing price stability and promotes economic growth with in the shortest possible period of time.

8. Monetization of the economy:

• The commercial banks by opening branches in the rural and backward areas are reducing the exchange of goods through barter.
• The use of money has greatly increased the volume of production of goods.
• The non monetized sector (barter economy) is now being converted into monetized sector with the help of commercial banks.

9. Export promotion cells:

· In order to increase the exports of the country, the commercial banks have established export promotion cells.

· They provide information about general trade and economic conditions both inside and outside the country to its customers.

· The banks are therefore, making positive contribution in the process of economic development.

2.5. Evolution of bank:

The banking system at independence consisted of two branch offices of the former State Bank of Pakistan and seventeen large commercial banks, two of which were controlled by Bangladeshi interests and three by foreigners other than West Pakistanis. There were fourteen smaller commercial banks. Virtually all banking services were concentrated in urban areas. The newly independent government immediately designated the Dhaka branch of the State Bank of Pakistan as the central bank and renamed it the Bangladesh Bank. The bank was responsible for regulating currency, controlling credit and monetary policy, and administering exchange control and the official foreign exchange reserves. The Bangladesh government initially nationalized the entire domestic banking system and proceeded to reorganize and rename the various banks. Foreign-owned banks were permitted to continue doing business in Bangladesh. The insurance business was also nationalized and became a source of potential investment funds. Cooperative credit systems and postal savings offices handled service to small individual and rural accounts. The new banking system succeeded in establishing reasonably efficient procedures for managing credit and foreign exchange. The primary function of the credit system throughout the 1970s was to finance trade and the public sector, which together absorbed 75 percent of total advances.

The government’s encouragement during the late 1970s and early 1980s of agricultural development and private industry brought changes in lending strategies. Managed by the Bangladesh Krishi Bank, a specialized agricultural banking institution, lending to farmers and fishermen dramatically expanded. The number of rural bank branches doubled between 1977 and 1985, to more than 3,330. Denationalization and private industrial growth led the Bangladesh Bank and the World Bank to focus their lending on the emerging private manufacturing sector. Scheduled bank advances to private agriculture, as a percentage of sectoral GDP, rose from 2 percent in FY 1979 to 11 percent in FY 1987, while advances to private manufacturing rose from 13 percent to 53 percent.

The transformation of finance priorities has brought with it problems in administration. No sound project-appraisal system was in place to identify viable borrowers and projects. Lending institutions did not have adequate autonomy to choose borrowers and projects and were often instructed by the political authorities. In addition, the incentive system for the banks stressed disbursements rather than recoveries, and the accounting and debt collection systems were inadequate to deal with the problems of loan recovery. It became more common for borrowers to default on loans than to repay them; the lending system was simply disbursing grant assistance to private individuals who qualified for loans more for political than for economic reasons. The rate of recovery on agricultural loans was only 27 percent in FY 1986, and the rate on industrial loans was even worse. As a result of this poor showing, major donors applied pressure to induce the government and banks to take firmer action to strengthen internal bank management and credit discipline. As a consequence, recovery rates began to improve in 1987. The National Commission on Money, Credit, and Banking recommended broad structural changes in Bangladesh’s system of financial intermediation early in 1987, many of which were built into a three-year compensatory financing facility signed by Bangladesh with the IMF in February 1987.

Beginning in late 1985, the government pursued a tight monetary policy aimed at limiting the growth of domestic private credit and government borrowing from the banking system. The policy was largely successful in reducing the growth of the money supply and total domestic credit. Net credit to the government actually declined in FY 1986. The problem of credit recovery remained a threat to monetary stability, responsible for serious resource misallocation and harsh inequities. Although the government had begun effective measures to improve financial discipline, the draconian contraction of credit availability contained the risk of inadvertently discouraging new economic activity.

Foreign exchange reserves at the end of FY 1986 were US$476 million, equivalent to slightly more than 2 months worth of imports. This represented a 20-percent increase of reserves over the previous year, largely the result of higher remittances by Bangladeshi workers abroad. The country also reduced imports by about 10 percent to US$2.4 billion. Because of Bangladesh’s status as a least developed country receiving confessional loans, private creditors accounted for only about 6 percent of outstanding public debt. The external public debt was US$6.4 billion, and annual debt service payments were US$467 million at the end of FY 1986.

2.6. Money and Banking-Currency Fluctuation

At independence the value of the taka, Bangladesh’s unit of currency, was set between 7.5 and 8.0 to US$1. With the exception of FY 1978, the taka’s value relative to the dollar declined every year from 1971 through the end of 1987. To help offset this phenomenon, Bangladesh first used the compensatory financing facility of the International Monetary Fund (IMF–see Glossary) in FY 1974. Despite the increasing need for assistance, the Mujib government was initially unwilling to meet the IMF’s conditions on monetary and fiscal policy. By FY1975, however, the government revised its stance; declaring a devaluation of the taka by 56 percent and agreeing to the establishment by the World Bank of the Bangladesh Aid Group (see Foreign Assistance, this ch.). Between 1980 and 1983, the taka sustained a decline of some 50 percent because of deterioration in Bangladesh’s balance of payments. Between 1985 and 1987, the taka was adjusted in frequent incremental steps, stabilizing again around 12 percent lower in real terms against the United States dollar, but at the same time narrowing the difference between the official rate and the preferential secondary rate from 15 percent to 7.5 percent. Accompanying this structural adjustment was an expansion in the amount of trade conducted at the secondary rate, to 53 percent of total exports and 28 percent of total imports. In mid- 1987, the official rate was relatively stable, approaching Tk31 to US$1.

2.7. The Functions of Banking:

The most important functions of banking may be classified as follows:

(1) To assemble capital and make it effective.

(2) To receive deposits and make collections.

(3) To check out and transfer funds.

(4) To discount or lend.

(5) To exercise fiduciary or trust powers.

(6) To issue circulating notes.

(7) To be succeeded bank must first of all prove its value to the community.

(8) The services which a bank performs are so generally taken for granted that the public is unaware of the real extent of the facilities offered.

(9)Banks are equipped to utilize funds, for either a short or long period of time, safely, and with some profit.

(10)By receiving deposits and making collections the bank saves the depositor much personal effort.

(11) To convert check in a relatively short time into cash available for the depositor’s use, and all this with no direct assistance from the customer and at a very slight expense to him or none at all, is indeed service.

(12) It is the willingness of the bank to collect promissory notes, drafts and other negotiable paper in a similar way.

(13)In addition to taking care of funds without charge and making collections, the bank provides the means of withdrawing and transferring funds readily by giving its customer a book of blank checks.

(14)By lending money the bank benefits the community to the extent that it supplies funds to assist worthy business. Temporary working capital to assist in the commercial, agricultural or industrial life of a community is very important.

2.8. Numbers and Types of Banks in Bangladesh:

The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are Nationalized Commercial Banks (NCBs), 30 local private commercial banks, 09 foreign banks and the rest five are Development Financial Institutions (DFIs). Sonali Bank is the largest among the NCBs while Pubali is leading in the private ones. Among the 12 foreign banks, Standard Chartered has become the largest in the country. Besides the scheduled banks, Samabai (Cooperative) Bank, Ansar-VDP Bank, Karmasansthan (Employment) Bank and Grameen bank are functioning in the financial sector. The number of total branches of all scheduled banks is 6,038 as of June 2000. Of the branches, 39.95 per cent (2,412) are located in the urban areas and 60.05 per cent (3,626) in the rural areas. Of the branches NCBs hold 3,616, private commercial banks 1,214, foreign banks 31 and specialized banks 1,177. Bangladesh Bank (BB) regulates and supervises the activities of all banks. The BB is now carrying out a reform program to ensure quality services by the banks.

Bangladesh Bank:

Bangladesh Bank (BB) has been working as the central bank since the country’s independence. Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing transaction facilities of all public monetary matters. BB is also responsible for planning the government’s monetary policy and implementing it thereby.

The BB has a governing body comprising of nine members with the Governor as its chief. Apart from the head office in Dhaka, it has nine more branches, of which two in Dhaka and one each in Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and Barisal.

List of Bank:

Central Bank: Bangladesh Bank.

Pursuant to Bangladesh Bank Order, 1972 the Government of Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of the country, and named it Bangladesh Bank with retrospective effect from 16 December 1971.

Commercial Bank (State owned):

The banking system of Bangladesh is dominated by the 4 Nationalized Commercial Banks, which together controlled more than 54% of deposits and operated 3388 branches (54% of the total) as of December 31, 2004. The nationalized commercial banks are:

1. Sonali Bank.

2. Agrani Bank.

3. Rupali Bank.

4. Janata Bank.

Commercial Bank (Private): Private Bank are the highest growth sector due to the dismal performances of government banks (above). They tend to offer better service and products.

1. Mutual Trust Bank Limited .

2. BRAC Bank Limited.

3. Eastern Bank Limited.

4. Dutch Bangla Bank Limited.

5. Dhaka Bank Limited.

6. Islami Bank Bangladesh Ltd.

7. Pubali Bank Limited.

8. Uttara Bank Limited

9. IFIC Bank Limited

10. National Bank Limited

11. The City Bank Limited

12. United Commercial Bank Limited

13. NCC Bank Limited

14. Prime Bank Limited

15. South East Bank Ltd.

16. Al-Arafah Islami Bank Limited

17. Social Islami Bank Limited

18. Standard Bank Limited

19. One Bank Limited

20. Exim Bank Limited

21. Mercantile Bank Limited

22. Bangladesh Commerce Bank Limited

23. First Security Islami Bank Limited

24. The Premier Bank Limited

25. Bank Asia Limited

26. Trust Bank Limited

27. Shahjalal Islami Bank Limited

28. Jamuna Bank Limited

29. ICB Islami Bank

30. AB Bank Limited

Commercial Bank (Foreign):

1. Citibank
2. HSBC
3. Standard Chartered Bank
4. Commercial Bank of Ceylon
5. State Bank of India
6. Habib Bank.
7. National Bank of Pakistan
8. Woori Bank
9. Bank Alfalah.

Specialized Development Banks:

1. Bangladesh Krishi Bank
2. Rajshahi Krishi Unnayan Bank
3. Progoti Co-operative Landmortgage Bank Limited (Progoti BanK) www.progotibank.com.bd
4. Grameen Bank
5. The Dhaka Mercantile Co-operative Bank Limited (DMCBL)
6. Bangladesh Development Bank Ltd
7. Bangladesh Somobay Bank Limited(Cooperative Bank)
8. Ansar VDP Unnyan Bank
9. BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited

2.9. Name of listed bank under SEC:

1. ABBANK( AB Bank Limited )
2. ALARABANK( Al-Arafah Islami Bank )
3. BANKASIA (Bank Asia Ltd.)
4. BRACBANK (BRAC Bank Ltd.)
5. CITYBANK( City Bank )
6. DHAKABANK( Dhaka Bank )
7. DUTCHBANGL( Dutch-Bangla Bank )
8. EBL( Eastern Bank )
9. EXIMBANK( Export Import (Exim) Bank of Bangladesh )
10. FIRSTSBANK( First Security Islami Bank Limited )
11. ICBIBANK( ICB Islamic Bank Limited )
12. IFIC( IFIC Bank )
13. ISLAMIBANK( Islami Bank )
14. JAMUNABANK (Jamuna Bank Ltd.)
15. MERCANBANK (Mercantile Bank Ltd.)
16. MTBL (Mutual Trust Bank Ltd.)
17. NBL( NBL )
18. NCCBANK( NCCBL )
19. ONEBANKLTD( One Bank Limited )
20. PREMIERBAN (The Premier Bank Ltd.)
21. PRIMEBANK( Prime Bank )
22. PUBALIBANK( Pubali Bank )
23. RUPALIBANK( Rupali Bank )
24. SHAHJABANK (Shahjalal Islami Bank Ltd.)
25. SIBL( Social Islami Bank Limited )
26. SOUTHEASTB( Southeast Bank )
27. STANDBANKL( Standard Bank Limited )
28. TRUSTBANK( Trust Bank Limited )
29. UCBL (United Commercial Bank Ltd.)
30. UTTARABANK( Uttara Bank )

2.10. Name of listed registered bank under Bangladesh Bank:

Organization	Web Link
AB Bank Limited	http://www.abbank.com.bd
Agrani Bank Limited	http://www.agranibank.org
Al-Arafah Islami Bank Limited	http://www.al-arafahbank.com/
Bangladesh Commerce Bank Limited	http://www.bcbl-bd.com
Bangladesh Development Bank Limited	http://www.bdbl.com.bd
Bangladesh Krishi Bank	http://www.krishibank.org.bd
Bank Al-Falah Limited	http://www.bankalfalah.com
Bank Asia Limited	http://www.bankasia-bd.com
BASIC Bank Limited	http://www.basicbanklimited.com
BRAC Bank Limited	http://www.bracbank.com
Citibank N.A	http://www.citi.com/domain/index.htm
Commercial Bank of Ceylon Limited	http://www.combankbd.com
Dhaka Bank Limited	http://www.dhakabank.com.bd
Dutch-Bangla Bank Limited	http://www.dutchbanglabank.com
Eastern Bank Limited	http://www.ebl-bd.com
EXIM Bank Limited	http://www.eximbankbd.com
First Security Islami Bank Limited	http://www.fsblbd.com
Habib Bank Ltd.	http://www.habibbankltd.com
ICB Islamic Bank Ltd.	http://www.icbislamic-bd.com/
IFIC Bank Limited	http://www.ificbankbd.com
Islami Bank Bangladesh Ltd	http://www.islamibankbd.com
Jamuna Bank Ltd	http://www.jamunabankbd.com
Janata Bank Limited	http://www.janatabank-bd.com
Mercantile Bank Limited	http://www.mblbd.com
Mutual Trust Bank Limited	http://www.mutualtrustbank.com
National Bank Limited	http://www.nblbd.com
National Bank of Pakistan	http://www.nbp.com.pk
National Credit & Commerce Bank Ltd	http://www.nccbank.com.bd
One Bank Limited	http://www.onebankbd.com
Premier Bank Limited	http://www.premierbankltd.com
Prime Bank Ltd	http://www.prime-bank.com
Pubali Bank Limited	http://www.pubalibangla.com
Rajshahi Krishi Unnayan Bank	http://www.rakub.org.bd
Rupali Bank Limited	http://www.rupali-bank.com
Shahjalal Bank Limited	http://www.shahjalalbank.com.bd

2.11. Services of Bank in Bangladesh:

· Accounts, Current, FDR, PDS, Deposit Scheme:

Current Account: Generally this sort of account opens for business purpose. Customers can withdraw money once or more against their deposit. No interest can be paid to the customers in this account. If the amount of deposit is below taka 1,000 on an average the bank has authority to cut taka 50 from each account as incidental charge after every six months. Against this account loan facility can be ensured. Usually one can open this account with taka 500. One can open this sort of account through cash or check/bill. All the banks follow almost the same rules for opening current account.

· Savings Bank Account:

Usually customers open this sort of account at a low interest for only security. This is also an initiative to create people’s savings tendency. Generally, this account is to be opened at taka 100. Interest is to be paid in June and December after every six months. If money is withdrawn twice a week or more than taka 10,000 is withdrawn (if 25% more compared to total deposit) then interest is not paid. This account guarantees loan. Almost all the banks follow the same rules in the field of savings account, except foreign banks for varying deposit. On an average, all the banks give around six percent interest.

· Special Services

Some Banks render special services to the customers attracting other banks.

o Internet Banking

Customers need an Internet access service. As an Internet Banking customer, he will be given a specific user ID and a confident password. The customer can then view his account balances online. It is the industry-standard method that used to protect communications over the Internet. To ensure that customers’ personal data cannot be accessed by anyone but them, all reporting information has been secured using Version and Secure Sockets Layer (SSL).

o Home Banking

Home banking frees customers of visiting branches and most transactions will be automated to enable them to check their account activities transfer fund and to open L/C sitting in their own desk with the help of a PC and a telephone.

o Electronic Banking Services for Windows (EBSW)

Electronic Banking Service for Windows (EBSW) provides a full range of reporting capabilities, and a comprehensive range of transaction initiation options. The customers will be able to process all payments as well as initiate L/Cs and amendments, through EBSW. They will be able to view the balances of all accounts, whether with Standard Chartered or with any other banks using SWIFT. Additionally, transactions may be approved by remote authorization even if the approver is out of station.

o Automated Teller Machine (ATM)

Automated Teller Machine (ATM), a new concept in modern banking, has already been introduced to facilitate subscribers 24 hour cash access through a plastic card. The network of ATM installations will be adequately extended to enable customers to non-branch banking beyond banking.

o Tele Banking

Tele Banking allows customers to get access into their respective banking information 24 hours a day. Subscribers can update themselves by making a phone call. They can transfer any amount of deposit to other accounts irrespective of location either from home or office.

o SWIFT (Society for Worldwide Interbank Financial Telecommunication)

SWIFT is a bank owned non-profit co-operative based in Belgium servicing the financial community worldwide. It ensures secure messaging having a global reach of 6,495 Banks and Financial Institutions in 178 countries, 24 hours a day. SWIFT global network carries an average 4 million message daily and estimated average value of payment messages is USD 2 trillion. SWIFT is a highly secured messaging network enables Banks to send and receive Fund Transfer, L/C related and other free format messages to and from any banks active in the network. Having SWIFT facility, Bank will be able to serve its customers more profitable by providing L/C, Payment and other messages efficiently and with utmost security. Especially it will be of great help for our clients dealing with Imports, Exports and Remittances etc.

Chapter: 3

Corporate Social Responsibilities

3.1. Corporate Social Responsibility:

Definition of CSR:

One of the most frequently asked questions at this era – and probably for all those individuals and organizations dealing with CSR issues is the obvious – just what does “Corporate Social Responsibility” mean anyway? Is it a stalking horse for an anti-corporate agenda? Something which, like original sin, you can never escape or what? Different organizations have framed different definitions – although there is considerable common ground between them. My own definition is that CSR is about how companies manage the business processes to produce an overall positive impact on society.

Take the following illustration:

Conceptualization of CSR:

The World Business Council for Sustainable Development in its publication “Making Good Business Sense” by Lord Holme and Richard Watts used the following definition. “Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”

The same report gave some evidence of the different perceptions of what this should mean from a number of different societies across the world.

Definitions,”CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government” from Ghana, through to “CSR is about business giving back to society” from the Philippines.

Traditionally in the United States, CSR has been defined much more in terms of a philanthropic model. Companies make profits, unhindered except by fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes. It is seen as tainting the act for the company to receive any benefit from the giving.

The European model is much more focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons. Personally, I believe this model is more sustainable because:

Social responsibility becomes an integral part of the wealth creation process – which if managed properly should enhance the competitiveness of business and maximize the value of wealth creation to society. When times get hard, there is the incentive to practice CSR more and better – if it is a philanthropic exercise which is peripheral to the main business, it will always be the first thing to go when push comes to shove. But as with any process based on the collective activities of communities of human beings (as companies are) there is no “one size fits all”. In different countries, there will be different priorities, and values that will shape how business act. And even the observations above are changing over time. The US has growing numbers of people looking towards core business issues. For instance, the CSR definition used by Business for Social Responsibility is: “Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business? On the other hand, the European Commission hedges its bets with two definitions wrapped into one: “A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”.

3.2. Highlights of recent engagements of banks in CSR practices:

• Out of forty eight scheduled banks in Bangladesh, forty six had engagement in CSR practices in some form or other in 2009.

• In terms of direct monetary expenditure, engagements of banks in CSR initiatives are increasing, particularly following issuance of BB guidance:

Year	2008	2009	2010
CSR expenditure (Million Taka)	226.4	410.7	553.8

Table 1: Highlights of recent engagements of banks in CSR practices.

Chart 1: Highlights of recent engagements of banks in CSR practices.

• CSR expenditure s of banks has thus far largely been in the form of passive grantsand donations. Banks were particularly responsive to emergency support needs of population group’s affected in natural and manmade disasters.

• Apart from one of grants and giveaways, some banks have engagements in longer term continuing support commitments, in areas of education and healthcare.

• Besides the passive engagements by way of grants/donations (Table 1, Section B, page 2), banks are now getting actively engaged in socially responsible business operations, by way of increased lending to under-served economic sectors like agriculture and SMEs, towards fuller financial inclusion and faster poverty eradication.
• Banks are yet to adopt practices of prior stakeholder consultations (an important element indicated in BB’s guidance circular) in drawing up their CSR programs.

• Some banks have reported embracing commitment for environmental sustainability in own and client businesses. Their actions have not however gone beyond compliance relevant government laws and regulations. Proactive initiatives of helping arrest environmental degradation, like adoption of more energy efficient, and harmful emission/effluence reducing internal practices and processes have been largely absent the CSR initiatives, even of branches of foreign banks with such practices in their home offices.

• Banks are yet to adopt separate reporting of their CSR activities in comprehensive formats such as the GRI.

3.3. CSR practices in banks: an analytical review:

CSR expenditures by banks:

The banking sector of Bangladesh has a long history of involvement in benevolent activities like donations to different charitable organizations, to poor people and religious institutions, city beautification and patronizing art & culture, etc. Recent trends of these engagement indicates that banks are gradually organizing these involvements in more structured CSR initiative format, in line with BB Guidance in DOS circular no. 01 of 2008.

The June 2008 BB Guidance circular suggested that banks could begin reporting their CSR initiatives in a modest way as supplements to usual annual financial reports, eventually to develop into full blown comprehensive reports in GRI format.

Information on CSR expenditure available from annual reports of banks, compiled together, bring up the following picture of sectoral patterns:

Table 2: Sectoral pattern of CSR reported by banks.

In the year 2007, large concentration in the field of disaster relief, both in participation and expenditure wise, was observed mainly because of the cyclone ‘Sidr’. Whereas, in the year 2009, the ‘Education’ and ‘Health’ sectors were getting more attention and appeared to be the most popular area for CSR activities as huge investments are being made by several banks in these segments. These shifts point to the responsiveness of the banking community to the changing need of the society.

Following are some notable features observed from the CSR activities carried out by the banks:

• In a natural calamity-prone area like Bangladesh, there remains an existing and distinctive CSR agenda focused on the business contribution to tackling social crises in the affected area.
• Disaster relief and rehabilitation became the segment where the highest number of banks participated to help ease the sufferings of the affected people. In the current context, a desired move from the traditionally popular fields of education or health.
• In the education segment, more and more banks have taken long-term or renewable scholarship programs for under-privileged but meritorious students for the persuasion of their studies instead of providing one time recognition awards to good performers.
• Some banks choose to provide continued financial support for maintaining operating costs of health care organizations. A bank undertook a continuous program called ‘Smile Brighter Program’ to perform as many operations possible per year on cleft-lipped boys and girls to bring back smile on their face.
• Several banks have taken steps and introduced investment schemes to cater the needs of self employment and poverty alleviation under which micro-finance is channeled to the target groups, such as poor farmers, landless peasants, women entrepreneurs, rootless slum people, handicapped people, etc.

Chart 2: Segment wise CSR Investment.

• A few banks have taken steps to introduce Interest-free Education Loan to poor and meritorious students to help bear monthly educational expenditure including food, accommodation etc. The loan is distributed to the selected students in monthly installments till their completion of studies up to the Masters Degree level.

• A good number of banks have created separate Foundation/Trusts as non-profitable, nongovernmental organization, solely devoted to the cause of charity, social welfare and other benevolent activities towards the promotion CSR objectives. These banks are providing a certain percentage of the pre-tax profit/net profit each year towards its CSR activities.

· Institutionalizing CSR at corporate level:

The BB guidance circular suggested embracing of CSR with decisions taken at the highest corporate level (board of directors of the bank), and to choose action programs and performance targets a consultative processes involving the internal and external stakeholders concerned. As seen in the following table, 12 PCBs and 3 FCBs reported to have embraced CSR with decision at the highest corporate level, none of the SCBs and DFIs reported to have done anything in this regard. A total of 16 out of 30 PCBs and 1 out of 9 FCBs have formed separate Foundations or Trusts as non-profitable, non-governmental organization, solely devoted to the cause of charity, social welfare and other benevolent activities towards the promotion CSR objectives. These banks have also resolved to provide a certain percentage of the pre-tax profit/net profit each year towards its CSR activities. However, none of the banks reported to have adopted action programs and performance targets through consultative processes involving the internal and external stakeholders concerned as suggested in the guideline of June 1, 2008.

Table 3: Institutionalizing CSR at corporate level.

· Ingraining CSR practices within the organization & client businesses:

Against the suggestion in the BB guidance circular for ingraining environmentally and socially responsible practices within the organization, only four banks (1 DFI and 3 PCBs) reported having taken steps for adoption of socially and environmentally responsible practices in their own internal operations. The DFI mentioned that they have taken actions towards providing a modern, healthy and safe workplace and creating an environment conducive to learning and development. Regarding reducing the environmental impact as a result of their operation and business activity, 1 DFI and 3 PCBs reported to have taken positive actions towards it.

Table 4: Ingraining CSR practices within the organization & client businesses.

As shown in the above table, 1 SCB, 2 DFIs and 8 PCBs have taken steps to foster CSR in their client businesses in various economic sectors, assessing the social and environmental impacts of the enterprises/projects seeking finance. These banks reported that they try to ensure compliance with environmental standards while financing industrial projects, and that they have formulated environment policies in accordance with guidelines issued by the Government, in terms of which the environmental impacts are considered at the time of conducting Credit and Lending Risks Analysis. Projects likely to have adverse impact on environment are strongly discouraged by them. Some banks have also introduced guidelines requiring assessment of environmental and social impacts of the projects to ensure that operations of the projects would be eco-friendly. It is understood that, banks in Bangladesh in general try to ensure that enterprises/projects seeking finance comply with the environmental and social requirements that are compulsorily mandated by laws and regulations. However, most of the banks did not report this in their annual reports.

· Financial Inclusion:

The CSR guidelines issued by Bangladesh Bank put special emphasis on reaching out with financial services to the less well-o. Population segments of the community in order to speed up financial inclusion of the large socially disadvantaged rural and urban population segments; drawing them in with appropriate financial service packages and with financing programs innovatively designed to generate new employment, output and income.

• 4 SCBs, 3 DFIs, 28 PCBs and 3 FCBs were engaged in self-employment credit and Small and Medium Enterprise (SME) lending programs, taken up solo or in association with locally active Micro Finance Institutions (MFIs). These programs were mainly designed to create productive new on-farm/o.-farm employment. The banks also formally recognized their philanthropic obligation towards the promotion and development of small and medium industries sector.

• 1 DFI has financed programs for installation of biomass processing plants and for Effluent Treatment Plants (ETPs) in manufacturing establishments.

Chart 3: Major Financial