Banks' CSR spending drops 38% in Jul-Dec, health and climate initiatives hit hard

Infographics: TBS

Corporate social responsibility (CSR) spending by banks on health and measures to counter climate change and environmental conservation decreased significantly in the last six months of 2023, a development that indicates either a shift in priorities or financial constraints within the banking sector.

According to Bangladesh Bank data released Wednesday (27 March), spending on health-related CSR initiatives decreased by nearly 67%, dropping to Tk72 crore from over Tk216 crore in the last six months compared to the first half of the previous year. 

Similarly, CSR spending on efforts to address climate change and environmental concerns declined to Tk14.32 crore from nearly Tk50 crore in the first half of the previous year.

Overall, CSR spending by banks decreased by 38% in the last six months of 2023. During the period, CSR spending was Tk353.08 crore, a significant drop from Tk571.25 crore in the first half of the year.

"The CSR expenditure of the banking sector may have dropped due to the decrease in the net profit"

Md Mezbaul Haque, executive director and spokesperson, Bangladesh Bank

Bankers say CSR spending has dropped as the profit rate of banks has decreased due to the economic crisis. Moreover, there is a directive from the central bank to reduce bank expenses, they say.

Bangladesh Bank Executive Director and spokesperson Md Mezbaul Haque told TBS that the central bank has been maintaining a contractionary monetary policy since last year. "As a result, liquidity has tightened. In this situation, all are trying to reduce their expenses."

Moreover, the spokesperson said, the CSR expenditure of the banking sector may have dropped due to the decrease in the net profit of the banks compared to the previous year.

As per directives of the Bangladesh Bank, banks and financial institutions are required to allocate 30% of their total CSR expenditure to education, 30% to healthcare, and 20% to environmental and climate change mitigation and adaptation. The remaining 20% should be spent on income-generating activities, disaster management, infrastructure development, sports and culture, and other areas as per guidelines.

According to central bank data, banks spent Tk924.32 crore on CSR accounts in the January-December period of 2023. The amount is 18% or Tk204.67 crore less compared to the previous year's spending of Tk1,129 crore.

In 2023, 61 scheduled banks spent Tk924.32 crore. Among them, the highest expenditure was made in the healthcare sector, accounting for 31.26% or Tk289 crore of the total expenditure. 

Expenditure on education accounted for Tk163.10 crore or 17.65%, while expenditure on environment and climate change accounted for Tk68.17 crore, representing 7.38% of the total expenditure. Expenditure on other sectors amounted to Tk404 crore, constituting 43.72% of the total expenditure.

Among the scheduled banks, five — BASIC Bank, Bengal Commercial Bank, Citizens Bank, ICB Islamic Bank, and National Bank — did not spend any amount on CSR in 2023.

On the other hand, in 2022, nine banks — BASIC Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank, Bengal Commercial Bank, Citizens Bank, ICB Islamic Bank, Padma Bank, and National Bank of Pakistan — were unable to make any net profit.

However, despite five of these nine banks not making any net profit, they incurred CSR expenditure in 2023. These banks are Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bangladesh Commerce Bank, Padma Bank, and National Bank.

Thirteen banks that obtained licences after 2013 are subject to the condition of spending at least 10% of their net profit from the previous year on CSR accounts in the subsequent year. If any bank fails to make a net profit, it will not be able to spend on CSR. Whether other banks outside the new banks will incur CSR expenses is their own prerogative.

Six fourth-generation banks — South Bangla Agriculture and Commerce Bank, Midland Bank, Modhumoti Bank, Shimanto Bank, NRB Commercial Bank, and Global Islamic Bank — failed to comply with the conditions set by the central bank during the specified period.

Among the banks, Islami Bank Bangladesh, as it did earlier, has spent the most on CSR, amounting to nearly Tk100 crore in 2023. Dutch-Bangla Bank spent the second-highest amount, Tk94 crore. Jamuna Bank spent Tk56.73 crore and holds the third position. 

Following in sequence, Mercantile spent Tk55.92 crore, Shahjalal Islami Bank Tk53.62 crore, Al-Arafah Tk51.32 crore, Exim Bank Tk43.93 crore, Southeast Bank Tk39.69 crore, UCBL Tk38.40 crore, and Bank Asia Tk32.63 crore.

Non-bank financial institutions spent Tk5.36 crore on CSR accounts in the last six months of 2023. Of the amount, 38% was spent on healthcare, 30% on education, and 21% on environmental and climate-related expenditures.