Ensuring sustainable development through corporate social responsibility: A study on financial Institution in Bangladesh
1) Introduction:
This report has represented the contributions of Financial Institutions to sustainable development through the medium of corporate social responsibilities (CSR) . The impetus for a financial institution to adopt a CSR approach can essentially come from one of two sources: the company adhering to sustainability values due to the convictions of a CEO or founder; or pressures exerted by its stakeholders. Stakeholders, responding to adverse economic, social, or environmental conditions, have the greatest influence on companies with respect to their corporate social responsibility. A company’s stakeholders typically include governments, regulators, creditors, suppliers, customers, employees and their bargaining units, communities, NGOs, and investors. Each group has its own unique relationship with, and expectations of, an institution and the manner in which they conducts themselves. With regard to sustainability, each group has its own impact and influence on an institution approach to corporate social responsibility. In Bangladesh, the economic sustainable development is continuously doing essentially with their own capital and efforts. Through achieving MDG (Millennium development Goals), in MDG some of the items such as Decent work, Economic growth, Industrial innovation and sustainable community is consider as main important for sustainable economic development in Bangladesh.
2) Review of previous empirical literature:
While making the report we read some journals and articles to get information’s where different authors analyze the historical evolution of the above concept in respect to globally as well as in Bangladesh prospective. According to Carroll (1979) and Chirieleison (2004) they agreed that the first considerable contribute about the topic, it is to be attributed to Howard Bowen (1953), who gave a definition of CSR related to the “businessman” rather than to the whole company (here CSR was referred to as social responsibility rather than corporate social responsibility. In response to a public opinion survey organized by Opinion Research Corporation in 1970 where two thirds of the respondents believed business had an obligation to help other major institutions to achieve social progress, even at the expense of the benefit of CED articulated a three concentric circles denotation of corporate social responsibilities. According to Machiavellian Sustainability change Agents are, on average, less well informed about such matters that are needed. He also added that relatively idealistic and ethics-based approach to change the work and assuming that most people working on sustainability are not sitting on a cache of raw powder. In case of Chang, jia Wang (2010), he examine that bank found in reallocations and regional growth .the credit each taken based on the 1991-2005 provincial –level data of four state owned commercial bank of china. They found no correlation at the regional level between fund relocation and bank of china. They fund no correlation growth on the economic because there was lack of corporate social responsibilities. Bangladesh has been a leader as a part of sustainable drives to built-in a socially responsible intuitions’ atmosphere in the financial sector where it has developed a suite of green banking regulations and policies including concessional green refinancing , credit quotas for green finance and guidelines for requirement on environment due diligence. According to Dhiraj Kumer Nath, he describes the sustainable development in Bangladesh, that it follows the 17 precise in sustainable development there are end poverty all its forms everywhere goal achieve food security and improve nutrition, green economy etc. The effective delivery of justice in any given system requires the smooth –function of curt and the competent management cases by all there are equal right for everyone. In Bangladesh women face the discrimination, color and also face the exclusion, injustice, ineligibles influence in decision making process. Bangladesh has been a stick out performer not just in economic growth but in poverty alleviation too. Therefore from the authors observation it is clear that, Sustainable development and corporate social responsibility measure a rate of growth which can be fulfilled outside of the establishing other useful of economic problems, particularly for future generation. An effective financial section is important for the total well act economy. It will be allocating the capital as well as manage the risk in a very good way. Social equity: the society people must equitable and right for the entire member. The community also provides the opportunity among the member.
3) Financial Institutions in Bangladesh:
Financial Institutions are the main source of collecting the long term funds for the economic development of a country. For banking financial instructions their liabilities are deposited money while for non-banking financial intuitions their liabilities are not depository money. There are 48 commercial banks also include 4 government commercial bank, 9 foreign banks, and 5 speculated banks and the 28 non finical intuitions’ .in Bangladesh financial market is dynamic in the economic it contribute the surplus unit like as household, individual, business firms, public sectors units, central government, state government. Financial institutions invest in a crucial role distribute the fund and necessary to collected. It also contributes the national growth and entrepreneurship growth and helps to develop the industry.
In Bangladesh the financial institutions are divided into two ways:
Depository financial intuition
1.commercial bank
2.saving loans and association
3.credit loans
Non depository financial intuition
1.mutual funds
2.pension fund
3.insurance company
4) An overview of sustainable development:
The idea of sustainable development was taken by the World Commission on Environment and Development, and there is an agreement that sustainable development involves a comprehensive and integrated approach towards economic, social, and environmental processes.
The development that meets the needs of the present without compromising the capacity of future generations to meet their own needs is known as Sustainable Development.
According to Pearce, Makandia & Barbier in 1989” Sustainable development involves formulating a social and economic system, which ensures that these goals are sustainable by which real incomes rise, that educational standards increase, that the health of the nation improves, that the general quality of life is advanced.
There are some principles that describe sustainable development in the following way:
❖ A nation should develop its international laws to provide compensation for damage that activities below their control cause to areas beyond their borders.
❖ Increase the transparency of the processes and materials by the companies through self regulation or by GRI compliant sustainability reporting.
❖ Government must collaborate to assure that development is sustained from an environment andsocial and economic standpoint. The external actions in a given territory must be taken into consideration.
❖ To achieve sustainable development, environmental protection must compose of an integral part of the development process.
❖ Nations should reduce and eliminate the unsustainable pattern of production and consumption to promote appropriate demographic policies.
❖ Maximizing the degree of freedom and potential by recognizing the smooth dynamic sequence.
The above principles are integrated into the practices of a increasing number of government agencies, non-profit and private organizations and those who are working in fields to draw inspiration from these principles to improve their techniques with regard to access to knowledge, production and consumption, citizen contribution and involvement, ecological responsibility, and the ideas to develop new areas of instrument.
5) Theoretical framework between CSR and Sustainable development:
The term Sustainable Development is used – also for describing the social dimension which is often replaced by the term Corporate Social Responsibility or others. The term Sustainable Development seems to be used especially for articles in where the environmental pillar is focused on. In general, Corporate Social Responsibility is seen as ethical concept but is not describe as the main framework for Sustainable Development on corporate level. Incorporate the sustainability appearance into business management should be grounded in the ethical belief of give and take to maintain a successful company in the long-term.
By using the Corporate Social Responsibility as social strand of the Sustainable Development the idea which is mainly built on a sound stakeholder approach. Corporate Social Responsibility focus especially on the corporate engagement realizing its responsibilities as a member of society and meeting the expectations of all stakeholders
Some authors observed that Sustainable Development is a wide basis for CSR, due to its three pillar (social, economic and ecological) dimension, and SD at corporate level is seen as corporate social responsibility. Therefore, Sustainable Development is the responsibility of governments, international institutions and individuals, while CSR is focused on a corporate level, so that corporations can able to meet the needs of their stakeholders while protecting the environment.
In other way it can be said that corporate sustainability is based on collaborative, performance driven, integrated, global and diversified.
6) The drivers pushing Financial Institutions towards CSR:
Globally, the perception or belief of Corporate Social Responsibility (CSR) is fast gaining acceptance as the contribution that financial institutions can and should make voluntarily towards environmentally sustainable and socially equitable development.
Corporate social responsibility (CSR) means social welfare, the responsibility towards the society. Only profit maximization shouldn’t be the main concern of these institutions but also upgrading the society and economic condition.
A financial institution has 2 drivers or factors toward CSR these are:
1. Internal driver or factor
2. External driver or factor
1. Internal drivers: Internal drives or factor means internal ethics, value, behavior and responsibility of the institution or management towards the stakeholders, speculators, employees, and customers.
Financial institutions are encouraging in savings. They provide some benefits and percentage on it. They also provide both long term and short-term loan. They offer pension fund, insurance fund (including medical facilities), against deposits. Company gives dividend to the stakeholders and investors, bonus to employees, different interest rate savings and loan to the customer to motivate them.
2. External drivers: External driver’s means external pressure that force financial institution in CSR activities. It is the expectation of the community from the institutions. Government, polities, law, citizen, environment, economic condition force to do CRS activities.
Every year when government implements the budget there is one sector of corporate social responsibility (CSR). Government allocates a certain percentage from budget for CSR activates of the budget. This is a fixed regulation every organization has to do this.
Financial Institutions collect money from the different sources. It is their duty to work for those people who support to run the business. They should contribute in the economy and the better life of the people.
As Bangladesh is a developing country a major number of people are living under poverty and they are not capable to get education or hygienic life. Because of poverty number of child labor is increasing. It is a threat for the future generation. Maintaining Labor law, proper working environment, health and safety issue, gender discrimination, tree plantation includes in CSR. Sometimes government can’t overcome the economic crisis or natural disaster hence financial institutions support the government.
7) The positive outcomes that can arise when Financial Institutions adopt a policy of corporate social responsibility:
Adopting CSR policy there is benefit for the society. If investors are happy with the return they will invest more in financial market. If banks offer old age security scheme or pension fund, it will secure their future. Insurance deposits secure depositor or their family’s future. Bonus and extra benefits makes employee and customer satisfaction.
Financial institutions provide different rate of return based different maturity and different deposits.
Bangladesh is already overcoming those obstacles. Financial institutions build up their capital to reduce the poverty. They are helping rural poor people by giving micro financing. Credit unions, saving associations give credit loans to the local communities. They encourage people in cultivating, sole proprietorship. They are trying to create job opportunities. They are providing hygienic sanitation. Their main target is to remove poverty from the society. Along that are trying to remove hunger, gender discrimination.
Some financial institutions are giving scholarship to the student to continue their further education for instance: Dutch Bangla Bank has awarded scholarship to 200 meritorious and needy students also the donates books for Bangabandhu Sheikh Mujib Medical University; Grameenphone, in a partnership with Jaago Foundation, launched Online Classroom where Video Conference technology is used and both teacher and students interact in real time at the respective classes; on the other hand BRAC Bank-Prothom Alo Trust Adamya Medhabi Scholarship’ was introduced in 2010 to assist meritorious student of insolvent families meet their pursuit of higher education.
Not only in education sector but also in other sectors like Southeast Bank Ltd providing free medical services to the AIDS patient, then HSBC Bangladesh contributed to support some disability centers.
Bangladesh government declared digital Bangladesh within 2021. To make a digital country more infrastructures, hospitals, education system, facilities, living standard are needed to increase. But sometimes government can’t do this alone. Financial institutions are cooperating with the government to accomplish this goal.
Law and regulations force financial institution to make green environment and more conscious about the environment, natural resources and the pollutions. Green financing discourage to use paper documents.
Sometimes financial institutions organize events, awareness program , and social welfare program for the citizens. Cleaning city, beautification, charity and some other initiatives are takes by the local banks, unions and associations.
8) Data and method of analysis:
Data and method is a systematic method of finding solutions to problems. It is essentially an investigation, a recording and an analysis of evidence for the purpose of gaining knowledge. Research comprises of defining and redefining problem, formulating hypothesis or suggested solutions, collecting, organizing and evaluating data, reaching conclusions, testing conclusions to determine whether they fit the formulated hypothesis
In order to make the report more meaningful and presentable we use two types of methods in case of data collection, one is the Qualitative method which indicate the primary source and the other one is the quantitative method which indicate the secondary source.
In case of primary source we analyze what different authors have tried to describe about ensuring sustainable development through corporate social responsibility in financial institutions. Not only author’s observation but we also take help from different journal, articles and mostly our course instructor has assisted us to gather information regarding the topic.
In secondary source we access internet and gone through different financial institutions web sites to collect information about how they are doing their CSR activities. We have also read the literature reviews and review articles to have more knowledge.
All the above sources helped us in such a way that we have able to complete the report in a significant method.
9) Empirical results and discussion:
In this report we discuss about the two things sustainable development and CSR (corporate social responsibility). If financial institutions are willingly do CSR activities than a country like Bangladesh will be more benefited. Bangladesh is a developing country and people can find many barriers in the society which can easily solve by everyone contribution. Financial institution can also be a part of it and an example is given bellow.
BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) registered under the Companies Act 1913 on the 2nd of August, 1988, started is operations from 21st of January, 1989. It is governed by the Banking Companies Act 1991. The Bank was established as the policy makers of the country felt the urgency for a bank in the private sector for financing small scale Industries. At the outset, the Bank started as a joint venture enterprise of the BCC foundation with 70 percent shares and the Government of Bangladesh (GOB) with the remaining 30 percent shares. BASIC Bank limited is unique in its objectives. As a stakeholder of the society, the Bank is keen to augment CSR activities gradually in the days to come.
Company Profile:
At BASIC Bank Limited passionately believe that a better society is fundamental precondition for a better business environment. As such, CSR is viewed as one of the core corporate values of the Bank. As all know, Bangladesh is one of the signatories to achieve those goals by 2015. We have aligned our CSR activities partially with those goals. Some of our CSR activities are:
Poverty Alleviation: It is globally accepted that the Non-Government Organization (NGOs) have been performing a laudable role in poverty alleviation across the globe, especially in Bangladesh. With a view to widen the access to finance by the poor and ultra-poor community, BASIC Bank Limited has been financing NGOs for quite since at privileged rates of interest (between 7.00% and 13.00%).
Women Empowerment: As half of our population is women, a sustainable national progress can’t be attained, if women are left aside. Therefore, they should progressively be brought to the mainstream of our development activities.
Sports and Cultural Activities: During the year 2011, the Bank extended financial support Tk. 1.00 crore each to Sheikh Russel Krira Chakra and Sheikh Jamal Dhanmondi Club towards development of games and sports. The Bank also contributed Tk. 5.00 lac for making documentary on Bangladesh Sheikh Mujibur Rahman, the father of the nation, viewing tribute and homage to him. In the year 2011, an amount of Tk.8.00 lac was contributed for making documentary exhibition and archive of scarce footage of our great independence war. The Bank also contributed Tk. 10.00 lacto Bangladesh Table Tennis Federation in the year 2011.
Disaster Relief In the year 2011, the Bank donated 25,000 pieces of blankets to Prime Ministers Relief and Welfare Fund. In the previous year the Bank donated an amount Tk.1.00 crore to the same Fund for the rehabilitation of the victims of the Nimtoli Fire Tregedy.
Education During 2011, the Bank distributed Tk.5.00 lac amongthemeritoriousstudents of Gopalganj Zilla Samity. In 2010, BASIC Bank Limited donated a fund of Tk. 20.00 lac to the Government of Bangladesh for maintaining the educational expenditure of their children. Besides, the Bank also contributed a fund of Tk.5.00 lac to the daughters of late Chapa Rani Bhowmik for their education purpose.
Health Care Program Access to healthcare facilities is one of the fundamental rights of every human being.. However, most of our people, especially the underprivileged group has little or no access to health care facilities. As such, BASIC Bank Limited is committed to assist those poor people, who have no way to secure basic treatment, In the year 2011, the Bank distributed about Tk.3.00 lac amongst different disadvantaged individuals.
Awareness Building Generation of awareness is a very useful tools to combat social evils, like drug addiction, smoking, pollution terrorism, population etc. For this purpose, the Bank has continue to display banner, festoon sticker, display board and use such other communication channels for discouraging drag, smoking , pollution, population growth etc. The Bank kept continued such awareness building activities for the year 2011.
Other Activities The bank donates for publishing a souvenir marking the 90 years of anniversary of Bangla Department of Dhaka University in the year 2011. The Bank does not impose any fee to the job applicants for position of Assistant Manager, Officer and Assistant Officer whereas the Bank is required to make expense for this purpose.
After knowing the BASIC Bank activities a person can say that beside government financial institutions also play role for sustainable development of a country.
10) Recommendations:
From the overall discussion it can be recommend that to ensure the sustainability by the corporate social responsibility the Financial Institutions must do the following activities:
● They should allocate the financial resources in a responsible manner, which means investing in or lending to socially responsible activities only.
● Lowering their intermediation margins, so that the financial capital is effectively used. It is very important for small economic agents to be able to finance their businesses at low, non-offensive costs
● Concerning about society`s needs by allocation of money in order to satisfy them
● Operating transparently and educating their clients by explaining all the details about the complex financial products they sell
● Contributing to the environment protection by refusing lending to or investing in polluting industries
● Promoting social cohesion
Through all these functions that they perform, financial institutions may predict economic growth and create employment, improve the standard of living; contribute to the environment protection, so that financial institutions may have a great contribution to sustainable development while acting properly and effectively. Financial corporations should also merge in their policies social responsibilities above their economic and legal responsibilities. As financial intermediation is an activity with big impact on society, it should be strictly regulated and supervised in such a way so that authorities also have a great role in promoting corporate social responsibility within the financial system.
11) Conclusion:
In contrast of the above discussion it can be said that Financial companies and the financial system as a whole, should contribute to the welfare of the society by improving its capacity of saving and investing, and should not jeopardize the development of the economy, as recently happened during the financial crisis. The development of the financial system has been artificial, and it has not fulfilled effectively the role of financing, but rather having a move away from the objectives of sustainable development. Hence, authorities and financial corporations should work together so that such disturbances will be avoided in the future and moreover, they should direct their activities towards the sustainable development of the financial system, economy and society.
Giving a fact that financial institutions are called upon to promote sustainable development, as they can encourage economic growth, social welfare and also the protection of the environment. This report consists of three factors. The first one analyzes the frame work between corporate social responsibility and sustainable development, the second section highlights the role of financial institutions within the economy, and the third one points out the social responsibilities of financial corporations.
As financial institutions are expected to play an important role in the decrease of poverty and the reduction of social and economic exclusion. Moreover, they are expected that, by their actions, to contribute indirectly to the reduction of pollution and the protection of the environment. In other words, the financial institutions should act in the direction of sustainable development by ensuring the corporate social responsibilities.
Finally to remove all the barriers that keep the general public from identifying with sustainable development, Bangladesh bank has allocated forty seven green products which consider as a green financing. It shift towards the environment friendly financial systems that increasing the economic growth. Investment from fossil-fuel to green energy is one of the main ways for sustainable economic growth.
13) References:
1. International Institute for Sustainable Development (IISD), Bangladesh Bank (BB), & United Nations Environment Programmed (UNEP). (2015). Designing a Sustainable Financial System in Bangladesh. Inquiry: Design of a Sustainable Financial System. Retrieved December 6, 2015, from https://www.bb.org.bd/pub/special/sfs_october2015.pdf
2. Hopkins, M (1998); a Planetary Bargain: Corporate Social Responsibility Comes of Age, Macmillan, UK.
3. Drivers and Barriers for Corporate Social Responsibility in Multinational Corporations Victoria Hallbäck
4. World Bank Group. (2012). Inclusive Green Growth - FAQ. RIO 20: A Framework for Action for Sustainable Development. Retrieved December 6, 2015, from http://siteresources.worldbank.org/EXTSDNET/Resources/Green-Growth-RIO-FAQ.pdf
5. BASIC Bank Limited. Serving people for progress
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