Banks move towards a more meaningful CSR mandate

There has been a noticeable shift in how banks and financial institutions in Bangladesh are approaching corporate social responsibility (CSR). After relatively high spending in 2023 and 2024, overall CSR expenditure has declined in 2025. But those familiar with the sector say this is not simply a case of cost-cutting—it reflects a deeper structural change in how banks report profits, manage risk, and prioritise social investment.

Under current regulations, banks are not allowed to spend on CSR if they incur net losses. In earlier years, however, many banks were able to report profits by restructuring or delaying the recognition of defaulted loans. Even with shortfalls in provisions, some institutions managed to present positive balance sheets by extending deferral periods. That flexibility has now largely disappeared. Banks that relied on such facilities are no longer able to show profits on paper, and with non-performing loans rising sharply, a significant number have slipped into losses. This has had a direct impact on CSR allocations, as spending in 2025 is based on profits recorded in 2024.

Higher CSR spending seen in 2023 and 2024 was influenced by extraordinary circumstances. Banks had to respond to floods, cyclones, and post-pandemic recovery efforts, leading to a temporary surge in expenditure

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The numbers reflect this shift clearly. Banks spent Tk345 crore on CSR last year, down from Tk617 crore in 2024 and Tk1,129 crore in 2022. In just a few years, spending has fallen sharply. However, this decline is closely tied to more transparent and realistic financial reporting rather than a withdrawal from social responsibility.

A managing director of a state-owned bank, speaking on condition of anonymity, described the trend as a "necessary correction." According to him, earlier CSR figures were often supported by profits that did not fully reflect the true financial condition of banks. Now, CSR spending is more closely aligned with actual earnings, which strengthens long-term accountability and financial discipline. He also pointed out that global economic pressures—such as inflation, supply chain disruptions, and geopolitical uncertainty—have further strained the banking sector. Despite these challenges, banks continue to contribute to key sectors like education, healthcare, and humanitarian assistance, albeit within tighter financial limits.

Another important shift is in the nature of CSR itself. Banks are gradually moving away from one-off donations and small grants towards more structured, impact-driven programmes. A senior official from Bangladesh Bank's Sustainable Finance Department noted that liquidity pressures, rising defaults, and broader economic uncertainty have forced banks to rethink their spending priorities. Instead of spreading resources thinly across many initiatives, there is now a greater emphasis on fewer, well-designed projects that can deliver measurable outcomes—particularly in education, healthcare, climate resilience, and financial inclusion.

Obaidul Haque, managing director of Bangladesh Commerce Bank, echoed this sentiment, describing CSR as a form of "social investment" rather than charity. The focus, he said, is increasingly on results—programmes where impact can be tracked and sustained over time.

It is also important to note that the higher CSR spending seen in 2023 and 2024 was influenced by extraordinary circumstances. Banks had to respond to floods, cyclones, and post-pandemic recovery efforts, leading to a temporary surge in expenditure. As these pressures eased in 2025, spending naturally declined, reinforcing the idea that recent reductions are partly cyclical.

At the same time, regulatory oversight has become more structured. Bangladesh Bank allows banks to allocate a portion of their after-tax profits to CSR and has set indicative guidelines on how these funds should be distributed—typically prioritising education, healthcare, environmental protection, disaster management, and poverty alleviation. While CSR itself is not mandatory, the framework provides clear direction, including suggested allocation ratios across sectors. This has helped standardise CSR practices across the banking industry, even if not all institutions follow the guidelines strictly.

In contrast, mobile financial services (MFS) providers operate under a different framework. There is currently no specific regulatory requirement for MFS operators to allocate a defined portion of their profits to CSR, unlike banks. As a result, CSR activities in the MFS sector tend to be more discretionary and often aligned with branding, partnerships, or specific corporate initiatives rather than a structured, guideline-driven approach. While some leading MFS providers do engage in social initiatives—particularly around financial inclusion and digital literacy—there is no uniform benchmark or obligation comparable to that imposed on banks.

The financial stress within the banking sector is becoming increasingly evident. According to Bangladesh Bank, 15 banks failed to make a net profit in 2024, including several state-owned and private institutions. These banks are effectively excluded from CSR spending in the following year due to regulatory restrictions.

Among the banks that did spend, foreign-owned Standard Chartered Bank topped the list, followed by Exim Bank and several private commercial banks such as Jamuna Bank, BRAC Bank, and Mercantile Bank. Meanwhile, Islami Bank—once the largest CSR spender—has seen a dramatic decline. After spending Tk3.27 billion in 2022, its CSR outlay has dropped sharply, and mounting losses mean it is unlikely to contribute to CSR in the coming year. This reflects a broader trend where the true financial health of banks is now becoming more visible after years of irregularities and weak loan governance.

Sector-wise, the composition of CSR spending is also evolving. Education accounted for 28.53% of total CSR expenditure last year, a notable increase from the previous year, indicating a shift towards long-term human capital development. Healthcare spending remained relatively stable at around 25%. However, allocations for environment and climate-related initiatives declined significantly, while spending in other miscellaneous sectors also fell as banks moved away from scattered, one-off activities.

Bangladesh Bank had been publishing bank-wise profit and loss data alongside CSR expenditure reports in recent years, adding another layer of transparency. This time, however, such details were omitted—reportedly due to the weak financial performance of many banks.

Taken together, these developments point to a clear transformation. CSR in Bangladesh's banking sector may be shrinking in size, but it is becoming more disciplined, transparent, and impact-focused. Rather than being driven by headline figures, it is increasingly shaped by financial reality and long-term sustainability—suggesting that while the scale of spending may fluctuate, the underlying approach is becoming more mature.