This study aims to determine the relationship between corporate social responsibility (CSR) activities and financial performance of Islamic banks in Bangladesh. The researcher analyzed CSR data from annual reports of 7 Islamic banks over a 5-year period. Regression models showed a negative relationship between CSR disclosure index and return on assets/return on equity, indicating higher CSR spending is associated with lower financial performance. The study recommends increasing CSR spending in more beneficial sectors and establishing governance over banks' CSR activities. Limitations include a small sample size and focus on accounting measures of performance.

1. Determination of Relationship between CSR
and Financial performance of Islamic Banking
sector of Bangladesh
D.M. Mostafa Farhad Uddin
ID# 12 12 00 152
Eastern University
Major: Finance

2. Objective
Broad Objective
• To determine the functional relationship between CSR activities and
financial performance of Islamic banking sector of Bangladesh.
Specific objectives
• To determine the CSR activities performed by the Islamic Bank.
• To analyze the Islamic Bank’s CSR performance based on last five
years data.
• To evaluate the sector wise contribution for the CSR activities.
• To ascertain the impact of CSR activities on the financial
performance.

3. Methodology
• Sample selection and data collection
• Mode of analysis
• Regression Model

4. Sample selection and data
collection
• Content analysis to
extract information from
annual reports of seven
Islamic banks.
• Data collected from
annual reports 2009 to
2013.
Mode of analysis
• Dimension: Disaster Relief ,
• Dimension: Education,
• Dimension: Health,
• Dimension: Sports,
• Dimension: Art & Culture,
• Dimension: Environment,
• Dimension: Mission & Vision,
• Dimension: Board of Directors,
• Dimension: Top Management,
• Dimension: Product,
• Dimension: Zakah & Charity,
• Dimension: Employee Information,
• Dimension: Sariah Supervisory
Board (SSB).

5. Regression Model
• Model 1:
• Model 2:
• Model 3:
• Model 4:
• Model 5:
• Model 6:

6. Islamic Banks of Bangladesh
1.Social Islami Bank Limited.
2.Islami Bank Bangladesh Limited
3.First Security Islami Bank Limited
4.Al-Arafah Islami Bank Limited
5.Export Import Bank Limited
6.ICB Islamic Bank Limited
7.Shahjalal Islami Bank Limited
8.Union Bank Limited ( Excluded in analysis)

7. Contribution of Islamic Banks in CSR expenditure
Bank 2013 2012 2011 2010 2009
All Listed
Banks 4422387450 3046685877 2188329743 2329778000 553782342
Islamic Banks 1180576900 999387586 729097990 629726380 134537000
percentage 26.70% 32.80% 33.32% 27.03% 24.29%
0
500000000
1E+09
1.5E+09
2E+09
2.5E+09
3E+09
3.5E+09
4E+09
4.5E+09
5E+09
2013 2012 2011 2010 2009
All
Listed
Banks
Islamic
Banks
2013
18%
2012
23%
2011
23%
2010
19%
2009
17%

8. CSR expenditure by Islamic Banks in Bangladesh
Bank 2013 2012 2011 2010 2009
SIBL 53180700 52918600 24484990 24689080 0
GR 0.50% 116.13% -0.83% - -
IBBL 476400000 309100000 410700000 232631000 116270000
GR 54.12% -24.74% 76.55% 100.08% -
FSIBL 126857200 90409070 80850500 43630000 0
GR 40.31% 11.82% 85.31% - -
AIBL 84090000 31300000 20900000 70400000 8030000
GR 168.6581% 49.7608% -70.3125% 776.7123% -
EXIMBL 392620000 399000000 180900000 231825000 0
GR -1.60% 120.56% -21.97% - -
ICBIBL 460000 1054600 562500 2518000 0
GR -56.38% 87.48% -77.66% - -
SJIBL 46969000 79157186 10700000 24033300 10237000
GR -40.66% 639.79% -55.48% 134.77% 0.0000%
Total 1180576900 962939456 729097990 629726380 134537000

9. CSR expenditure by Islamic Banks in Bangladesh
1180576900
962939456
729097990
629726380
134537000
CSR expendeture
2013 2012 2011 2010 2009

10. Sector wise contribution in CSR
Year Education Health
Disaster
relief Sports
Art and
Culture
Environmen
t
Zakah &
Charity
2013 260329837 101199624 370390632 129263840 32049666 25582500 671828912
2012 16462500 42343247 91973247 3053247 9683247 13923247 536784354
2011 61420000 28612000 39980000 272250000 7150000 480000 444141569
2010 0 24000000 420000 500000 1000000 0 387296168
2009 13600000 19700000 0 0 0 0 310093824
total 338212337 196154871 502763879 405067087 49882913 39985747 2040051003

11. 2013 CSR contribution 2012 CSR contribution
Education,
260329837
Health,
101199624
Disaster
relief,
370390632
Sports,
129263840
Art and
Culture,
32049666
Environme
nt,
25582500
Zakah &
Charity,
671828912
Education,
16462500
Health,
42343247 Disaster
relief,
91973247
Sports,
3053247
Art and
Culture,
9683247
Environme
nt,
13923247
Zakah &
Charity,
536784354

12. CSR Disclosure Index result
Dimension Disclosure
Disaster Relief In recent years, we saw banks are eagerly committed to build this fund. Whereas some banks are not fulfill this
criterion.
Education Most valuable dimension of CSR activities of banks. Most of the banks directly related with this disclosure. Some
other banks did not fulfill this.
Health Most of the banks fulfill this criterion. But as Islamic banks, they should figure out some instruction regarding this.
Sports Most of the banks disclose this dimension in their annual report and a fixed amount of expense incurred by the
banks.
Art & Culture Only few banks fulfill this dimension. Most of the banks did not give any instruction regarding this. ICB Islami
Bank & Shajalal Islami bank did not disclose any cost of this sector.
Environment Most of the Bank discloses this part in annual report. But they did not meet the requirement. There were no valid
project and lack of fund in banks operating recent years.
Mission & Vision Most of Islamic banks in the sample don't disclose any clear commitments to engage only in permissible
investments or financing activities.
Board of Directors Most of banks disclose information about Board of Directors (Names, Positions, Pictures, and Profiles).
Top Management Only some of banks give information about their Team Management. Other Information is not given
(Shareholdings of board members).
Product For the dimension of product, there is a very lack of information. No bank gives information about non permissible
activities or details about new products and approve of SSB.
Zakah & Charity Most of banks mention Zakat and amount to be paid for it. But there is a lack regarding other information (Source
of Zakat, Uses or beneficiaries of Zakat
Employee
Information
Almost all banks published the number of their employees. But there were no specific information regarding
employee information. ICB Islami Bank Ltd. Lack this information most.
Sariah Supervisory
Board (SSB)
All banks give names of Sharia Supervisory Board member’s name. No bank gives remuneration of SSB members
or meeting held by them.

13. CSRD Index Values
• A disclosure index has been created
• Put a score 1 if the item disclosed in the annual report
• Put a score 0 if the item did not disclosed in the annual
report
• Put 1 & 0 in this formula below to find CSRD index
values

14. CSRD Index Values
Bank 2013 2012 2011 2010 2009
SIBL 1 1 0.9231 0.7692 0.5385
IBBL 1 0.9231 1 0.8462 0.9231
FSIBL 0.8462 0.9231 0.9231 0.6923 0.7692
AIBL 0.5385 0.6923 0.7692 0.5385 0.4615
EXIMBL 1 0.9231 0.5385 0.6154 0.4615
ICBIBL 0.3846 0.3846 0.3846 0.3846 0.3846
SJIBL 0.6923 0.4615 0.4615 0.4615 0.4615

15. Significant Result
Model 3
Model
Un
standar
dized
Coeffici
ents
Standar
dized
Coeffici
ents
B Std.
Error
Beta t Sig.
Constant 051 .009 5.807 .000
CSR
dis.index
-.046 .012 -.552 -3.804 .001
Adjusted
R Sq.
.284
F- value 14.470
Probabil
ity
.001
Model 4
Model
Un
standa
rdized
Coeffi
cients
Stand
ardize
d
Coeffi
cients
B Std.
Error Beta t
Sig.
Constant .262 .030 8.657 .000
CSR
dis.index
-.145 .042 -.515 -3.454 .002
Adjusted R
Sq.
.243
F- value 11.928
Probability . 002

16. Findings
• Now most of the Islamic banks of Bangladesh are fulfilling their
corporate social responsibility.
• Focus their CSR activities in zakah & charity, disaster relief,
education sector.
• Increasing trend in CSR contribution
• Increased from tk. 343393824 in 2009 to tk. 1590645011 in 2013.

17. • In 2013
Highest contribution made by zakah & charity sector for tk. 671828912,
Second highest made by disaster relief sector for tk. 370390632.
• Highest CSR fund has been made to zakah & charity sector for tk.
2040051003 in years 2009 to 2013.
• The regression model shows that there is a negative and significant
relationship between financial performance (ROA, ROE) and CSR
activities represented by CSR disclosure index.
• Most of the banks used CSR expenditure before tax portion of
income.

18. Recommendations
• CSR sector should be increased not in number but also
for useful for society.
• Specific amount of fund should be made mandatory for
all Islamic banks and as well as conventional banks.
• CSR fund should be tax exempted.

19. • Specific format of CSR disclosure should
formulate and made mandatory to display in
annual report.
• Establish governing team for monitoring CSR
activities of banks of Bangladesh.

20. Conclusion
• This research has attempted to empirically assess the relationship
between CSRD and Islamic banks performance as measured by
ROA and ROE.
• The results revealed there are many lack in information disclosed
regarding corporate social responsibility.
• SJIBL has the lowest value of CSRDI whereas SIBL, IBBL has
highest value of CSRDI in 2013.
• The results of regression models refute a statistically significant
relation between ROA and ROA with CRSDI.

21. There are some limitations in this study.
• This study focuses only on accounting based performance
measurements.
• The study is conducted on seven banks for five years 2009 and
2013.
• Future research may also consider market based performance
measurement with largest sample.
• This study focuses on CSR disclosures in banks’ annual reports.
• Other forms of communication channels such as the bank’s web
site, standalone sustainability-type reports, newspapers and in-
house magazines can be used to communicate corporate social
responsibility activities.
• Future research may consider such disclosures