“Corporate social responsibility evaluation by different levels of management of Islamic banks and traditional banks: evidence from banking sector of Bangladesh”

The research aims to evaluate different levels of management understanding and performance on Corporate Social Responsibility (CSR) of traditional banks and Islamic banks in Bangladesh. Moreover, the paper points out the philosophy of both banks’ policy makers. The study is exclusively analytical in nature where 14 banks were selected on the basis of availability of branches in the research area. The research was based on primary data sources through a structured questionnaire. The research findings revealed that there is a gap between policy makers’ assurance of CSR contribution and its real implementation. The analysis found that Islamic banks are better than traditional banks with regard to the implementation of CSR policies. The result also showed that there are still some controversies on CSR performance of Islamic and traditional banks in general. The study also observed that Islamic, as well as traditional banks’ different levels of management conceive that CSR activities are performed by banks for their own interest rather than for social welfare. Therefore, it must be emphasized that good CSR policy is inevitable for all types of banks in Bangladesh. For the betterment of the society, as well as the banks, all levels of management should harmonize their CSR philosophy.


Introduction 
In the 21 st century, Corporate Social Responsibility (CSR) is not only a word, but also a tool for measuring the accountability of business sectors, as well as describing a company's obligations to be accountable to all of its stakeholders in all its operations and activities (Fasanya and Onakoya, 2013). CSR maintains a framework for the role of business in society, setting standards of behavior to which a company must subscribe to impact society in a positive and a productive manner.
CSR activities are playing an important role in the changing socio-economic conditions of Bangladesh (Hossain et al., 2015). The bank industry is an influential financial institution for money circulation in the economy. As a responsible and disciplined organization, banks play a vital role in the economy of Bangladesh. In Bangladesh, CSR is a popular word used in the banking sector and day by day CSR contribution from banking sector is growing (Bangladesh Bank, 2015). Traditional, as well as Islamic banks, are trying to make a positive contribution in the society from the CSR point of view. The concern over CSR is also relevant to Islamic banks. Moreover, within the ambit of Islamic Law (Shariah), Islamic banks are expected to be guided by an Islamic economic worldview, which is based on the principle of social justice and well-being (Dusuki, 2006). There is a general perception that Islam is based on the principles of equal rights of individual ensuring maximum benefits to society. It becomes an important duty for the banks that follow the Islamic principles to be involved in social activities.
All banks are operated by a management team which is responsible and accountable for the performance of the organization. A bank's CSR policy or philosophy is determined by the management of the bank. As a result, CSR activities are also implemented by different levels of management. Management of a large organization can be divided into three levels. The top level management manages the overall organization, middle managers are responsible for carrying out and implementing the plans and policies of top level management, and first line or junior managers supervise and coordinate the activities of regular workers (Grifin, 2009).
Many past studies have begun to examine the link between CSR disclosures and economic benefits (Azim et al., 2009), CSR performance of different banks (Belal, 2007), CSR performance of Islamic banks (Samina, 2012) Khan, 2010;Quazsi, 2000), but, at present, no research has been documented that evaluated the performance of different levels of management of traditional and Islamic banks in Bangladesh in respect of CSR. This study is designed to explore the thinking, concept and understanding of CSR of different levels of management of traditional and Islamic banks operating in Bangladesh. The study will help us to understand the performance of different levels of management of two different operational concepts of the banking sector. Also, asking the question to the different levels of management of traditional and Islamic banks would help to justify the CSR gap among the three levels of management. Indeed, a study that investigates various managements' opinion of CSR from an emerging economy like Bangladesh will add a new dimension to the banking literature.

Research objectives
The main objective of the study is to understand the concept of CSR of different levels of management of traditional banks and Islamic banks. Along with the main objective, the study also aims to evaluate top level management's CSR performance of traditional banks and Islamic banks.
The remainder of the paper proceeds as follows: the following section discusses the literature review. An overview of traditional banks and Islamic banks in Bangladesh are discussed in section three. Research methodology adopted in this study is discussed in sections four and five, respectively. While the findings and results are offered in section six, the conclusion is presented in the final section.

Literature review
Fasanya and Onakoya (2013) examined Cadbury Nigeria Plc. on the relationship between CSR and financial performance and found that CSR could be a key instrument to the financial development of any organizations and that profit making is at the heart of the current growing trends in CSR practice and not morality. Their study recommends that an effective CSR performance can go a long way in improving the firms' financial performance in Nigeria. Arshad et al. (2012) examined the effect of Islamic CSR disclosure on corporate reputation, as well as firm performance and found significant positive relationships between the extent of ICSR disclosure and corporate reputation and ICSR disclosure and firm performance. Moreover, the results also highlighted that management are proactively implementing and disclosing ICSR activities that meet the needs of multiple stakeholders. Their findings also provided new evidence that CSR activities and disclosure from Islamic perspectives are equally important business strategies in creating continuous superior performance for organizations. Samina (2012) found that almost all Islamic banks in Bangladesh do follow the mandatory forms of CSR, but the extent of participation in the recommended forms of CSR activities varies among the banks. Moreover, the study also found a strong positive correlation between the amount of CSR expenditure and the Islamic banks' deposit and investment amount and the profit. Alam et al. (2010) pointed out that CSR is still an evolving concept that enables corporate executives to create and apply self-determined policies to best meet the needs and demands of its stakeholders. Here, it has been remarked that the peculiar nature of CSR practices makes their cross-border management difficult. Achieving consistent CSR practices across global operations involves not only the transfer of the CSR practice, but also the transfer of its underlying value and meaning. Azim et al. (2011) mentioned that CSR is not the only ethical dilemma that financial institutions face in an atmosphere of corrupt corporate practice; these institutions are also concerned with commitment for sustainable development. A well-functioning financial sector in any country can contribute directly to a healthy economy. The result also cited that CSR reporting of the financial sector in Bangladesh is increasing and organizations are concerned about the matter and it is significantly maintained in the annual report. Dusuki (2006) concluded that Islamic banks should adopt CSR policies in their operation and decision making in order to reap comparative advantage in competing with conventional banks. The study also marked that effectively and efficiently involved in CSR activities, Islamic banks may inevitably generate valuable resources in terms of reputation, long-term standing, and loyalty from various stakeholders. Moreover, CSR reputation may prove beneficial in the long-run for Islamic banks to reap the benefits of brand enhancement, differentiation, goodwill, quality workforce retention and, ultimately, profitability and sustainability in the sector.
A study conducted by Belal (2001) on different listed companies of Dhaka Stock Exchange (DSE) found out that most of the companies disclose mandatory and non-mandatory information. He also noted that 51% companies did not disclose mandatory information. His findings also indicated that a number of companies are making social disclosure, but the quantity of information disclosed is very low.

An overview of traditional banks and Islamic banks in Bangladesh
In Bangladesh, there are two types of banks, namely, scheduled banks and non-scheduled banks. The banks which get license to operate under Bank Company Act, 1991 (amended in 2003) are termed as scheduled banks. There are 56 scheduled banks in Bangladesh which operate under full control and supervision of Bangladesh Bank which is empowered to do so through Bangladesh Bank Order, 1972. In the scheduled banks, there are different types of banks like state owned commercial banks, private commercial banks, Islamic commercial banks, foreign commercial banks. On the other hand, the banks which are established for special and definite objective and operate under the acts that are enacted for meeting up those objectives are termed as nonscheduled banks. These banks cannot perform all functions of scheduled banks. There are now 4 nonscheduled banks in Bangladesh. All types of commercial banks in the study can be divided into two types, namely, traditional commercial banks and Islamic commercial banks.

An overview of CSR regulation in Bangladesh
At the moment, there is no mandatory legal requirement for CSR and government of Bangladesh has not imposed or proposed requirements for disclosure of CSR performance. The Bangladesh Companies Act of 1994 and Banking Companies Act of 1991 set the general framework for corporate financial reporting, but no provisions regarding CSR exist. Moreover, no separate Bangladesh Accounting Standard (BAS) has been found regarding social and environmental reporting (International Accounting Standards Committee Foundation (IASCF), 2003). International Financial Reporting Standards (IFRS) in Bangladesh were adopted on 5 July 2006; Presentation of Financial Statements (BAS 1) encourages companies listed on the Stock Exchange of Bangladesh to publish additional statements on their non-financial activities if management believes they will assist users in making economic decisions (Azim et al., 2011). However, CSR is not mandatory in Bangladesh with the exception of disclosure of expenditures on energy usage required under the Companies Act of 1994 and the Securities and Exchange Rules of 1987, which require the total amount spent on energy to be shown as a separate expenditure in the notes to the financial statements (Belal, 2001

CSR from Islamic and traditional banks' perspective.
Interest is strictly prohibited in Islamic law, and for that Islamic banks conduct their business on profit-loss sharing principles. On the other hand, traditional banks apply interest based principles for their business. As a result, there are many differences in the two principles, but no evidence found that Islamic banks'approach to CSR is different than that of traditional banks. Both banks are involved in CSR activities from the part of their profit. According to Bangladesh Bank guidelines, there are no separate approaches on CSR. All types of banks follow the same rules/guidelines for CSR activities. As a result, there is no distinction of CSR performance of Islamic and traditional banks regarding interest.

The research method.
The research method of the study involves examination, verification and analysis of a set of ten questions that is asked to the different levels of management of the selected banks to observe the understanding of CSR activities and performance in line with the above research objectives. The study was conducted in 2015. In the study, the analysis and findings section are divided into three types: (a) CSR activities and performance are evaluated by questionnaire, (b) CSR disclosure and top level management performance are evaluated by annual report, (c) comparative analysis of traditional banks and Islamic banks management satisfaction on CSR.
The study is based on CSR performance evaluation of different levels of management who are responsible for promoting and conducting CSR activities in society. As such, in the survey, different questions are formulated for different levels of management in order to evaluate the performance on CSR issues. In respect of interest, there is a major difference in traditional banking and Islamic banking fundamentlly and operationally. Further, Islamic law strictly prohibits interest in all dealings, but allows the maintenance of the system of profitloss sharing. Thus, interest on loan or profit earning ability is not considered in the study. Consequently, no question is provided to the respondents of both banks (Islamic and traditional) regarding interest on loan and whether they view any prohibition of interest on loans as a type of CSR.

Data collection and sample size.
The study is exclusively an analytical research on CSR thinking and evaluation of different levels of management of Islamic and traditional banks of Bangladesh. The data collected for the purpose of the study involve the examination of bank management performance and activities of CSR. In this study, Bangladeshi banking sector is divided into two categories like traditional commercial banks and Islamic commercial banks. From the categories, 14 banks were selected on the basis of availability of branches in a district town and research area and all differences between types of banks are descriptive only. Refer to appendix for the list of 14 banks surveyed. The study is purely based on the information from primary data sources, as well as secondary. Primary data were collected through a structured questionnaire. The structured questionnaire consists of ten questions and they were mainly close-ended types of questions. The questionnaire was completed by 41 officials of samples banks. The questionnaire was provided to the officials on the basis of availability in the branch during the study period. Officials of different banks were chosen randomly on the basis of level of management. In this regards, management was divided into three types; top level, mid-level and junior level. On the other hand, secondary data were collected mainly from annual reports of selected banks from 2010 to 2013. Besides the annual report, data were also collected from different websites of sample banks, Bangladesh Bank, stock exchanges, Securities and Exchange Commission.

Findings and results
Part A: graphical evaluation of CSR activities and performance.

Fig. 2. CSR concept and understanding of different level of management
From Figure 2, it is clear that Islamic banks' different levels of management with regard to CSR concept and understanding are better than traditional banks. Figure 2 shows that, on average, Islamic banks' different levels of management response are more positive (response rate 95 %) than traditional banks' response (i.e., 78%). It also indicates that, regarding CSR concept and understanding, all levels of management of Islamic banks are clearly ahead than that of traditional banks. Moreover, top level managers of Islamic banks (100%) understanding is more satisfactory than traditional banks (85%).

Fig. 3. CSR activities are voluntary or mandatory
The study intended to know whether CSR activities were mandatory or voluntary. The average answer of most of the respondents of both banks is voluntary (refer to Figure 3). The average response of different levels of management of traditional banks is 52%, and, in case of Islamic banks, it is 60%. On the other hand, 48% respondents of traditional banks and 40% of Islamic banks said that CSR activity is mandatory. Generally, CSR activities are voluntary in nature in Bangladesh (Belal, 2001;Belal and Momin, 2009) and in this regard Islamic bank's different levels of management responses are satisfactory compared to traditional banks. Figure 4 indicates the involvement of government in CSR. The study also wanted to ascertain if the government plays any role on the bank's management's involvement on CSR activities. Only 25% of the respondents of top level management in traditional banks indicated that there is a little initiative taken by the government to encourage CSR in the banking sector; 75% of the respondents said that there is no initiative from the government. On the other hand, all respondents (100%) of top and junior level managers of Islamic banks' responses are negative regarding government's role in encouraging CSR initiatives. The result pointed that different levels of management of both banks believe government initiative is very poor (average 18%) to encourage CSR in the banking sector. However, previous research (Sayaduzzaman and Masud, 2012) showed that Bangladesh government along with Bangladesh Bank has taken different initiatives to encourage CSR.

Fig. 5. Different level of management perception on CSR
There is a general perception that business organization is providing CSR activities for enjoying tax benefit, advertisement, etc. (Sayaduzzaman and Masud, 2012). According to Figure 5, different levels of management respond that banks are participating in CSR as their social responsibility. Most of the Islamic banks' different levels of management (on average, 83%) answer is positive and they believe their banks' CSR activities are contributing to the society. Besides, on average, 72% of traditional bank managements ensure that they are working for CSR as a matter of social welfare. But there is confusion on top level management of traditional banks where 58% managers confirm that CSR is provided for enjoying different types of benefits of the banks instead of social responsibility (42%). On the other hand, 20% top level managements of Islamic banks also ensure that CSR activities are adapted for enjoying different benefits from the government and the remaining 80% believe that their banks CSR is for social welfare and benefits.
Part B: CSR disclosure and top level management performance. Table 3.

CSR disclosures of traditional banks and Islamic banks
Year of disclosing information    EXIM Bank, 2013).
Part C: a comparative analysis of traditional banks and Islamic banks management satisfaction on CSR.

Conclusion
The paper provides different levels of management's understanding and performance on CSR in Islamic banks versus traditional banks in Bangladesh.
The results of the study indicate that overall CSR performance of Islamic banks is increasing year on year compared to traditional banks. Based on the analysis and investigation of part A, B and C, the study can conclude that the concept, understanding, thinking, satisfaction and overall commitment of CSR of Islamic banks are higher than those of traditional banks. The findings of the study also found that there is a gap between top level commitment of CSR and its implementation in the real world. Some of the top level managers make the same commitments from year to year, but are reluctant to fulfil the commitments.
Different studies showed that Islamic banks have higher level of social responsibility as compared to conventional banks (Dusuki, 2006) and this study has documented the same. It is worthy of note that, as interest is strictly prohibited in Islamic law, there is no scope for Islamic banks to doing business by using interest principle. Therefore, Islamic banks do not view the prohibition of interest on loans as a type of CSR itself, because it is totally forbidden in Islamic law. Also, the Central Bank of Bangladesh has provided guidelines on certain areas and functions that will be treated as CSR and the guidelines are applicable across all types of banks in Bangladesh. As a result, CSR and the prohibition of interest both are viewed in totally different ways and treated separately.
The study observed that some respondents of Islamic and traditional banks across the different levels of management believe that CSR activities are performed by banks for their own interest rather than for social welfare. Further, banks are doing these CSR activities for enjoying different benefits like tax rebate, advertising, marketing, etc. and, most importantly, there is a link to the recent steps of Bangladesh Bank against some banks regarding corruption and nepotism in CSR activities. Moreover, the study found that most of the top level managers of both banks criticized the poor initiatives of government in encouraging CSR in the banking sector. Therefore, government should implement different steps to increase popularity of CSR activities among different levels of management in the banking sector of Bangladesh. Also, it must be emphasized that good CSR policy is inevitable for all types of banks in Bangladesh. For that, all levels of management must have proper concept and understanding of CSR. Traditional banks' top level managers should concentrate more on CSR issues, because they are the highest level of policy makers in the organization. For the betterment of the society, as well as of both types of banks, all levels of management should synchronize their CSR philosophy.
However, it should be noted that the study is limited by a small number of sample banks. Thus, further research could be conducted with a large number of banks, preferably the entire banking sector in Bangladesh. Furthermore, a very small survey instrument is used in this study. As such, future studies could focus on a larger survey instrument due to the fact that a larger survey instrument can vary the results significantly.