Corporate Social Responsibility (CSR) spending by Islamic banks in Bangladesh has witnessed a significant decline in recent months, raising concern about the banks' capacity to sustain their social impact initiatives.
A latest Bangladesh Bank (BB) report revealed that during the July-September 2024 quarter, CSR spending stood at Tk0.58 billion, a sharp drop from Tk0.80 billion in the preceding April-June 2024 quarter and the same period in 2023.
CSR spending during the period under review declined by 27.5 per cent compared to the April-June 2024 quarter, BB data said.
Expenditure on CSR activities in January-March 2024 reached Tk0.85 billion, the central bank data showed.
Islamic banks in Bangladesh have long played a crucial role in addressing social challenges through their CSR programmes.
These activities are funded by sources aligned with Shariah principles, such as Zakat, compensation charges (penalties imposed on defaulting clients), and other permissible earnings.
The funds are channeled toward education, training, healthcare, and charitable activities, often reaching underserved and impoverished segments of the population excluded from the conventional banking system.
By prioritising human necessities and productivity-focused projects, Islamic banks aim to alleviate poverty and foster sustainable development.
However, the recent decline in CSR expenditure might hinder their ability to maintain these impactful initiatives.
The reduction comes at a time when the needs of disadvantaged communities remain acute.
At present, Islamic banking system represents more than 25 per cent share of deposit and 28 per cent share of investment of the whole banking sector, the BB report said.
Stakeholders have called for increased focus on strengthening CSR frameworks and ensuring adequate allocation of resources to support vulnerable populations.
The commitment of Islamic banks to align their financial activities with ethical and social objectives will be critical in navigating these challenges and continuing their efforts to reduce poverty and enhance social welfare in Bangladesh, they added.
The total deposits in Bangladesh's Islamic banking system witnessed a decline of Tk86.42 billion or 1.94 per cent, reaching over Tk4.36 trillion at the end of September 2024, compared to the end of June, the BB report revealed.
Out of the total deposits, the 10 full-fledged Islamic banks dominated, holding Tk 3.90 trillion, or 89.48 per cent.
Meanwhile, Islamic banking windows of conventional banks contributed Tk253.25 billion (5.80 per cent), and Islamic banking branches of conventional banks accounted for Tk205.82 billion (4.71 per cent).
At the end of September 2024, there were 10 full-fledged Islamic banks in Bangladesh operating with 1,686 branches amongst total 11,300 branches in the whole banking system.
In addition to this, 33 Islamic banking branches of 16 conventional commercial banks and 750 Islamic banking windows of 19 conventional commercial banks are also providing Islamic financial services in Bangladesh.
Total investment (loans & advances) of Islamic banking system stood at Tk 4.68 trillion at the end of June 2024.
Out of the total investment of Islamic banking system, 93.26 per cent was materialided by 10 full-fledged Islamic banks, 3.52 per cent by the Islamic banking windows of conventional banks and the rest 3.22 per cent by the Islamic banking branches of conventional banks.
The central bank directed the Islamic banks to enhance their CSR activities for socio-economic development aiming to serve humanity through different philanthropic activities giving emphasis on health, education, disaster management, rehabilitation, poverty eradication and so on.
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