Corporate Social Responsibility Practices in Banking Sector Of
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Corporate Social Responsibility Practices in Banking Sector of Bangladesh: Its Impact on the Socio-economic Development of Bangladesh Thesis submitted as a partial requirement of M.Phil. Degree Prepared under the supervision of: Professor Dr. Swapan Kumar Bala, FCMA Department of Accounting & Information Systems Faculty of Business Studies University of Dhaka Prepared By: Md. Emadul Karim M.Phil. Registration # 166, Session: 2013-14 Department of Accounting & Information Systems Faculty of Business Studies University of Dhaka February, 2016 Certificate by the Supervisor This is to certify that the thesis entitled “Corporate Social Responsibility Practices in Banking Sector of Bangladesh: Its Impact on the Socio-economic Development of Bangladesh” has been completed satisfactorily by Md. Emadul Karim (Registration No. 166, Session: 2013-2014) under my supervision for the partial fulfilment of the degree of Master of Philosophy (M.Phil.) in Accounting & Information Systems and can be submitted to the examination committee for evaluation. Professor Dr. Swapan Kumar Bala, FCMA Department of Accounting & Information Systems Faculty of Business Studies University of Dhaka I | P a g e Declaration by the Candidate This is Md. Emadul Karim (M.Phil. Registration # 166), declaring that this thesis and all of its contents are based on my own research endeavour. Any exception to that is mentioned with proper citation and reference. The secondary information used in the research is also documented with source reference. This is also a declaration that this research work has not been submitted for any other degree or professional qualification except as specified. Md. Emadul Karim M.Phil. Registration No. 166, Session: 2013-2014 Department of Accounting & Information Systems University of Dhaka II | P a g e Preface No research work can be of an individual effort. This statement is also applicable for me too. The preparation of this research paper has helped me learn a lot of things in the context of academic and professional culture. The preparation of this dissertation was not possible without cordial help and assistance from some persons. The most important contribution to this dissertation is from my honourable supervisor, Professor Dr. Swapan Kumar Bala, FCMA, to whom my cordial gratitude is applicable. This research work would not be successful without the guidelines and direction from him. Beside the directions and guidelines he did his responsibility to motivate and inspire the students in their study. Contribution from my classmates, friends and other participants in my study is also notable. The assistance from all of them is recognizable. I am expressing my gratitude towards all of them who helped me to conduct this research. III | P a g e Abstract Banking Sector is a strong industrial sector in Bangladesh compared to other sectors. The rate of growth and expansion of the banking industry is faster than other industries in the country. In line with the growth and expansion in economic and financial activities, corporate social responsibility is getting more and more attention due to environmental and other reasons. This is a study about the CSR practice of selected five banks in Bangladesh along with a highlight on the social and economic impacts of those CSR activities in the country. For the purpose of the study, financial and nonfinancial information about the banks have been collected from several sources and presented here with different comparisons including bank to bank, year to year information etc. The analyses based on the information about the CSR activities of sample banks have revealed that most of the banks are reluctant in conducting CSR activities unless they can exploit any benefit therefrom. Any direct or indirect benefit may encourage the banks in conducting CSR activities. As one of the strongest industries in Bangladesh, CSR activities are expected to be performed at a large scale by the banks. As a part of corporate citizenship initiatives, banks and financial sectors should also emphasise different responsibilities to the society. Due to these CSR activities, corporate entities are getting some fiscal and promotional benefits in their business. IV | P a g e The study encompasses five sample banks, viz., Dutch Bangla Bank Ltd (DBBL), Mercantile Bank Ltd (MBL), Bank Asia Ltd (BAL), Prime Bank Ltd (PBL) and Southeast Bank Ltd (SEBL). As per the findings on the current CSR practice of the sample banks, Dutch Bangla Bank Ltd. has achieved remarkable CSR performance. At the same time, a very poor CSR performance has been achieved by Southeast Bank Ltd. and it can be said that SEBL has rarely any interest in conducting CSR by its own initiative. Different motivation by Bangladesh Bank in conducting CSR has been found influential for the banks for their CSR activities. The periodic trend of the current GDP growth of Bangladesh and the growth of the banks’ CSR activities are positive. Moreover, the CSR beneficiaries, who require small funding and are usually not in a position to access to formal banking sector, are being directly benefitted from the CSR activities of the banks in their day- to-day livelihood and basic support for health, education, and some other areas. V | P a g e Table of Contents Chapter 1: Introduction ................................................................................ 1 1.1 Background of the study ........................................................................ 2 1.2 Statement of the problem ....................................................................... 6 1.3 Objective of the study ............................................................................ 8 1.4 Benefits of the study ............................................................................... 9 1.5 Significance of the study ...................................................................... 11 1.6 Limitations of the study .......................................................................12 Chapter 2: Literature Review .....................................................................14 2.1 Corporate Social Responsibility ...........................................................15 2.2 Focus on social reporting .....................................................................17 2.3 Social Performance ..............................................................................19 2.4. Relevant literatures critically reviewed ...............................................24 2.5 Relevant theoretical discussion and rationales for Corporate Social Responsibility .............................................................................................24 2.6 Managerial process ...............................................................................27 2.7 Contemporary standing of issues clarified ...........................................31 2.8 Focus on Practice .................................................................................32 2.9 Summary of the literature review .........................................................33 Chapter 3: Research Design .......................................................................34 3.1 Methodological Approach ....................................................................35 3.2 Data Collection Methods & Instruments .............................................36 VI | P a g e 3.3 Research Sampling ...............................................................................38 3.4 Reliability & Validity of Research .......................................................39 Chapter 4: Findings of the Study ...............................................................41 4.1 Introduction ..........................................................................................42 4.2 Major areas of banks’ CSR activities in Bangladesh ...........................43 4.3 Comparative analysis of sector-wise CSR initiatives by Sample Banks ....................................................................................................................54 4.4 Motivational Factors behind CSR activities ........................................69 4.5 Performance of CSR in comparison to Net Profit ...............................71 4.6 Performance of the competitors ...........................................................75 4.7 Comparison of CSR percentage in line with the GDP growth of Bangladesh .................................................................................................86 4.8 A survey on the beneficiaries of the CSR initiatives by Banks ...........88 Chapter 5: Conclusions and Policy Implications ......................................93 5.1 Summary of the findings ......................................................................93 5.2 Conclusions ..........................................................................................97 5.3 Policy Implications ...............................................................................98 References ....................................................................................................100 Appendices ..................................................................................................105 Appendix I: CSR conducted by different banks in Bangladesh ..............105 Appendix II: Questionnaire for the beneficiaries .....................................109 VII | P a g e Chapter 1: Introduction 1 | P a g e 1.1 Background of the study This study focuses on the corporate social responsibility (CSR) practiced in the