CSR funds for research and development

In Bangladesh, the banking sector is growing steadily. At present, over 50 commercial banks are in operation. Most of them are in the private sector. A few are state-owned and some are multinational banks. The Bangladesh Bank is the prime regulatory body monitoring and supervising activities of all the scheduled banks operating in the country.
The Bangladesh Bank is very active in maintaining discipline in the financial sector of the country. The financial sector is considered the backbone of the economy. Credit-related irregularities are very efficiently tackled by the central bank. Banks are now better guided when it comes to classified loans. Not only that, the central bank has taken a number of praiseworthy steps in developing neglected areas that need attention, such as motivating and allocating funds to develop the SME (small and medium enterprise) sector, green banking-related issues, allowing farmers to open accounts with a deposit of Tk 10 each to promote rural banking, and the very recently-introduced agent banking.  
Commercial banks are less interested in operating in remote areas and less commercially-important rural areas. It is not wise to blame the commercial banks, because so far as these are business enterprises, they have to satisfy their stakeholders at the end of the day. That is why they are more focused on and motivated to divert their portfolio investment to the areas where the prospects for profit generation are brighter and greater instead of risky areas like rural banking. The costs of operation for banks in the less-important areas are almost equal to that in prospective urban or commercial districts. So banks are naturally less motivated to expand their banking activities to the rural areas.
Besides, no one generally likes to be a pioneer in any risky venture. For example, the introduction of mobile money transfer system branded as bKASH has gained popularity. So, all other banks have started following the suit as usual. Agent banking will allow banks to operate commercial banking more profitably than setting up a full-fledged branch or even a booth. Through introducing agent banking, the central bank has expanded the banking facilities to the rural population.
As a result of steady economic growth, banks are expanding their network and activities in many areas and as part of that, banks are more focused on corporate social responsibility (CSR). In most cases, banks are donating blankets and other winter clothes to the ultra-poor and some of the banks are offering scholarships to the students.
The banks as part of their CSR have also started establishing English-medium schools. English-medium schools are operated on a commercial basis. Some of the established English-medium schools are earning a lot and a large number of new such schools are entering the market with inadequate facilities triggering a stiff competition among them. The unplanned growth in the number of English-medium schools is creating problems. Establishing English-medium schools as a part of CSR is not justified under any consideration.
First of all, the activity could not be accepted as part of the CSR, because it is more or less a business venture, and secondly, already a large number of English-medium schools exist. If these institutions are run as vocational institutions for creating skilled human resources by training poor children, as is done by the Underprivileged Children's Educational Programmes (UCEP), that could be acceptable. Some NGOs (non-governmental organisations) are supporting and organising rural schools for children in the rural areas. These types of activities, if done by banks, are acceptable as part of CSR. But commercially-run English-medium schools are not acceptable. Moreover, students of English-medium schools are normally from the higher income group of society. Definitely they do not need any financial assistance.
But on the other hand, it is difficult to blame the commercial banks because there is no guidelines on CSR. So, whatever they think and do as a CSR activity is legally correct.
Once, the Grameen Bank was blamed for its high rate of interest. A question was raised from the Grameen Bank's side: What is the exact rate of interest on microcredit? At that time, there was no right answer to the question. Later on, the central bank realised the fact and set the rate of interest on microcredit. Nowadays, it is difficult for the microcredit lenders to charge any rate of interest higher than that fixed by the central bank.
So, a well-planned guideline is needed on CSR activities of banks and other corporate bodies. Banks are diverting a significant amount of money for CSR activities and there are more than 50 commercial banks at present. If the fund is accumulated, it will be a significant amount to be used for any purpose bearing long-term benefits for society as well as for the institutions which are spending the fund.
In developed countries, a large amount of fund is invested in research and development activities. Though the governments in those countries are the main sponsors, the private corporate bodies are also a source of funds for research and development. As our economy is growing, the necessity of more research and development is felt. Research and development create new opportunities, allow best utilisation of resources, help explore new markets and products. So, if a country wants to maintain sustainability in development, it has no other choice but to invest in research and development. As there is a constraint of public funds in Bangladesh, one possible source could be the CSR fund of the banks.
In Bangladesh, the public universities carry on research on different activities and every year a large number of PhD and MPhil students are enrolled. But instead of getting research fund, they need to spend on research work from their personal source. The supervisors get negligible honorarium for the purpose. So, in most cases students and their supervisors take the research work as a tool to earn a mere degree or certificate. The research work does not produce any outcome that can be used in the practical field. The main reason is the shortage of research fund. If an adequate research fund is allocated, then researchers will produce quality research work which ultimately can be utilised in different areas of development to set economic growth on a more solid base.
If the central bank and the University Grants Commission (UGC) jointly take an initiative to design a well-thought-out guideline and set aside the CSR funds for carrying out research work in universities, then it will be a significant step towards development of the country. The Bangladesh Bank and the UGC can be the custodians of the fund. Banks will deposit their respective amounts of money with the fund and mention the preferred areas of utilisation of the money under a policy guideline. To motivate banks to contribute fully or even a portion of their CSR money for research and development could be subject to tax relief or other benefits. Banks could be asked to submit a list of their preferred areas of research and the money could be allocated for research work in those areas. Through the process the researchers, the fund providers and the country as a whole will be benefited.
The central bank, which has already gained respect for different development initiatives, should look into the matter seriously. Because, research work is being neglected while a significant amount of fund for development is being misused in the absence of any CSR guideline.
Syed Ejaz Ahsan is MBA MPhil and Ali Yusuf Hossain is MBA.                     [email protected]                [email protected]