Corporate social responsibility (CSR) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a self-regulatory mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards and national or international norms.
Corporate governance broadly refers to the mechanisms, processes and relations by which corporations are controlled and directed. Governance structures and principles identify the distribution of rights and responsibilities among different participants in the corporation and include the rules and procedures for making decisions in corporate affairs.
At present 'Corporate Social Responsibility' together with 'Corporate Governance' has been branded as one of the most important factors in the banking sector in our country. It is fast spreading in the sector under the leadership of the Bangladesh Bank. The combination of these two aspects, corporate social responsibility and corporate governance offers long-term benefits for any organisation. The benefits in the banking sectors are:
n Reducing risk in the banking sector.
n Attracting new investors in banking loan.
n Sustainable performance.
The banking sector can play an intermediary role between economic development and environment protection by promoting environmentally sustainable and socially responsible investment. Attaining high quality of corporate governance is important for creating and maintaining investor confidence in the corporate businesses and more so for banks as they are highly leveraged and engaged in risk bearing investments with depositors' funds in a fiduciary role.
Bangladesh Bank ensures the responsible, value-driven management and control through the system of corporate governance, which has four key elements: good relations with shareholders, effective cooperation between the Management Board and the Supervisory Board, a system of performance-related compensation for managers and employees, as well as transparent and early reporting.
The 2008-2009 Global Financial Crisis (GFC) is still vivid in our memory as an example of failure in corporate governance in banks precipitating global-scale systemic collapses in chains of contagion across institutions and markets with linked exposures. The corporate governance regulations and guidelines in Bangladesh are evolving in line with the Basel global best practice standards, adapted appropriately to the specifics of our local environment. Our banking sector is growing in tandem and needs to consolidate and strengthen its capacity of mobilising massive new volumes of domestic and external financing to meet the economy's expanding financing needs.
Commitment and proactive engagement of the Bangladesh Association of Banks (BAB) and the Association of Bankers (ABB), the forums of bank owners and senior managements towards forging and deeply ingraining the culture of corporate governance excellence in terms of clarity in roles, responsibilities and accountabilities, risk management capabilities, transparency, and fair treatment of all stakeholders including depositors, minority equity holders and other creditors are important for it. The uncomplicated, fairly straightforward corporate structure of banks in Bangladesh is an advantage for their boards and senior managements in fostering high quality corporate governance, positioning them well for major expansion breakthroughs in local and external markets. Bangladesh Bank has been involved with a helping hand and supporting infrastructure like the IT platform already in place for online reporting and data base access. Setting up a world-class Centre for Leadership Excellence in the Financial Sector (CLEFS) is in progress in Chittagong which will primarily focus on issues related to better corporate governance in the financial sector.
Rising up to this challenge will require the banking community to aspire for urgently elevating its corporate governance practices to standards that are nothing short of excellence. Governance-related clauses of Companies Act, the Bank Companies Act and the attendant regulations and guidelines from the Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank are being revised and updated continually in line with evolving needs. But these are merely the minimum in required standards and should be exceeded rather than barely met. Bank directors and senior managements must bear in mind that good corporate governance is more a culture to be fostered spontaneously by the corporate business community rather than a discipline to be enforced coercively by the regulators.
Bangladesh Bank has therefore gone about setting the motivations oriented in the right direction alongside overseeing compliance with corporate governance related laws, regulations and guidelines. Bangladesh Bank's financial sector corporate social responsibility (CSR) mainstreaming initiative taken up in 2008 at the onset of the global financial crisis (GFC) is now a full-blown initiative of ingraining socially and environmentally responsible financing in the corporate ethos of the financial sector. The campaign has enthused all banks and financial institutions into a broad range of direct and indirect CSR engagements including humanitarian relief and disaster response, widening of advancement of opportunities for disadvantaged population segments with support in the areas of healthcare, education, and training, 'greening' initiatives arresting environmental degradation and so forth.
Bangladesh Bank has taken a number of noteworthy initiatives such as supporting the victims and volunteers of Savar tragedy with the contribution of one day's salary. During the Tazreen Fashions and Rana Plaza incidents, causing well over 1100 fatalities and many times more debilitating injuries, the financial sector and the broader business community came forward with prompt, generous support for the rescue and relief efforts. Together the banking community have donated Taka 1.9 billion to the 'Prime Minister's Relief Fund' for creating employment for the victims. Bangladesh Bank has donated more than half a million Taka to the Burn Unit of Dhaka Medical College Hospital (DMCH) to help the burn survivors' rehabilitation. A permanent annual 'Disaster Relief Fund' of Taka 50 million has also been formed. Bangladesh Bank is supporting Bangladesh Fire Service and Civil Defence, and other relevant government agencies to build their skills and technical capacities.
Some relevant cases in the banking sector corporate social responsibility are described below:
n Prime Bank Eye Hospital, an initiative of Prime Bank Foundation, a concern of Prime Bank Limited has launched a free eye care camp on November 30 at the premises of Qazi Salima Huq Mohila Degree College at Mohammadpur Upazila of Magura.
n Prime Bank Nursing Institute, an initiative of Prime Bank Foundation, a concern of Prime Bank Limited was formally inaugurated on April 13, 2013. Prime Bank nursing institute will produce trained nurses who will be able to sustain the growing demands of the local and international markets.
n The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) recently donated a Formalin Dehydrate Machine at the Banani Kitchen Market financed by Prime Bank Limited to detect the use of formalin in the food products.
n In 2013, Dutch Bangla Bank Limited (DBBL) awarded scholarships to 4,071 students of HSC level who passed SSC in the same year while the existing scholarships were continuing as per rule. Besides this, the bank is continuously working for the development of educational infrastructure of different schools/colleges in different parts of the country.
n DBBL helps to undertake extensive modernisation and refurbishing of the existing Combined Military Hospital at Dhaka Cantonment.
n Dutch-Bangla Bank donated Tk.1,000,000 (Taka one million) to 'Legal Assistance to Helpless Prisoners (LAHP)' to remove the sufferings of the helpless prisoners through legal assistance.
n DBBL has been engaged in creating awareness through electronic and print media since long on different social issues like son or daughter - one good child is enough; hope and love make us lovely; stop acid violence; willpower is enough to do a good job; stop demanding dowry; uphold justice; good behaviour with mentally retarded persons - a moral duty; human for humanity; combat AIDS; drug addiction - a menace to destroy life; plant tree - save environment, etc.
n Islami Bank Bangladesh Limited (IBBL) extended support for the establishment of Committee for Action Research and Extension Services (CARES), a biotechnological research organisation, first of its kind in Bangladesh for action research on biotechnology utilising the expertise of Bangladeshi researchers both at home and abroad.
n IBBL established seven fully owned hospitals and seven community hospitals with a total of 1032 beds creating employment of 353 doctors, 582 nurses and 2932 other employees.
n A number of charitable dispensaries, arsenic mitigation programmes, circumcission camps, mobile eye camps and midwifery training programmes are also operated by IBBL for developing health sector of the country..
At present, it is far more common for corporate governance to assume a greater level of social consciousness than ever before. Bangladesh Bank leads the banking sector of the country. The current economic situation has highlighted deficiencies in corporate governance alongside showing the importance of stakeholder relations. It has also raised the profile of the debates regarding corporate social responsibility and shown its inter-relationship with governance. And the two together are essential for sustainable business. Bangladesh Bank is trying to combine corporate social responsibility and corporate governance. These aspects offer long-term benefits to the banking sector, such as reducing risk and attracting new investors, shareholders and more equity as well as sustainable performance.
The writer is a Central Banker and an M.Phil Fellow, Department of Business Administration,
Bangladesh University of Professionals (BUP), Dhaka.
naim.jnu.bb@gmail.com
CSR brings long-term benefits for the banking sector
Md. Julker Naim | Published: December 30, 2015 00:00:00 | Updated: February 01, 2018 00:00:00
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