Spending on corporate social responsibility (CSR) by scheduled banks and other financial institutions fell by 18 per cent in 2023 compared to the previous year due mainly to liquidity tightness within the industry, according to central bank data.
The aggregated spending on CSR activities by banks and financial institutions in 2023 amounted to over Tk 9.33 billion, down by 18 per cent from Tk 11.37 billion spent in 2022, according to the CSR-spending report released by the Bangladesh Bank on Wednesday.
The report shows over 35 per cent of the total CSR expenditure in 2023 came from just 10 Islamic banks. In contrast, five banks made zero contributions to CSR initiatives in the 2023 calendar year.
The report also shows banks contributed over Tk 9.24 billion to CSR funds in 2023, while other financial institutions contributed only Tk 88 million. The highest allocation of Tk 2.89 billion went towards the health sector last year. This is Tk 1.75 billion lower than the previous year's Tk 4.64 billion.
Education followed with Tk 1.63 billion and the environment and climate sectors received Tk 640 million. The top contributors to CSR spending were IBBL Tk 991 million, Dutch-Bangla Bank Tk 931 million, Jamuna Bank Tk 561 million, Mercantile Bank Tk 551 million and EXIM Bank Tk 431 million.
Earlier this year, the central bank issued a directive mandating all financial institutions to spend a minimum of 60 per cent of their CSR funds equally to the education and health sectors. A further 20 per cent should be directed towards environmental and climate change initiatives. Seeking anonymity, a central bank official cited liquidity tightness in the financial sector as the primary reason for the decline in CSR spending.
For the tightness, the official credited the Bangladesh Bank's contractionary monetary policy launched in July last year to combat inflation.
"That's why, the CSR spending in the second half of the last calendar year declined significantly which impacts the overall annual spending," the central banker said.
Contacted, Emranul Huq, managing director and chief executive officer of Dhaka Bank, said banks faced a liquidity crunch, especially in the second half of the last financial year. This, he said, was a consequence of the central bank's contractionary monetary policy, which impacted banks' net income.
"If the income of the banks falls, their spending on social causes will certainly decline too. This could be a reason for the drop in releasing CSR funds," he said.
The experienced banker added that CSR expenditure by banks usually increases in response to natural disasters like floods or cyclones. But, the country did not experience any such major events in the latter months of 2023. "This likely also contributed to the lower CSR spending," said the Dhaka Bank CEO, whose institution allocated Tk 151 million for CSR purposes last year.
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