ABSTRACT

This research work seeks to examine the impact of corporate social responsibility on bank performance on the commercial banks in Sierra Leone. Time series data from 2004 to 2013 were computed from the financial statements of the samples studied. The period was assumed long enough to account for corporate social responsibility on five commercial banks in Sierra Leone. Annual reports from the secondary source of data collection where the CSR expenditure and return on assets (ROA) for the period of 2004-2013was used for the computational experiment. The data collected for this study were analyzed using correlation and regression analysis. The hypothesis formulated was tested. The study concluded that there is positive relationship between banks CSR activities and bank performance. The study reveals that corporate social responsibility has a great impact on the society by adding to the infrastructures and development of the society and concludes that a company has to give back to the society in which it operates and also provide infrastructural facilities to the society as a way of giving back and developing the society. It was recommended that corporate social responsibilities should be seen by the firm as social obligations business concerns owe their shareholders, the local (host) community, general public, customers, employees and the government in the course of operating their legitimate businesses, such that CSR should be included in the law and enforced on the firms accordingly and that Government should fix a minimum percentage of profit corporate firm should expend on corporate social responsibility activities.

 

CHAPTER ONE

INTRODUCTION

1.0 Background of the Study

Corporate Social Responsibility (CSR) as a concept entails the practice whereby corporate entities voluntarily integrate both social and environment upliftment in their business philosophy and operations. A business enterprise is primarily established to create value by producing goods and services which society demands. The notion of Corporate Society Responsibility (CSR) is one of ethical and moral issues surrounding corporate decision making and behaviour, thus weather a company should undertake cer¬tain activities or refrain from doing so because they are beneficial or harmful to society is a central question. Social issues deserve moral consideration of their own and should lead managers to consider the social impacts of corporate activities in decision making regardless of any stake¬holders’ pressures. However, some argument that the contri¬bution of concepts such as Corporate Society Responsibility (CSR) is just a reminder that the search for profit should be constrained by social considerations (Manuel and Lúcia, 2007) and increasingly Corporate Society Responsibility (CSR) is analysed as a source of competitive ad¬vantage and not as an end in itself (Bran¬co and Rodrigues, 2006).

Today, managers of Sierra Leone banks have found a need that the environment in which they operate should be provided for because their intermediate and macro environments have a direct impact on the attainment of the corporate goals, objectives and mission statement. The purpose of all profit-making organizations, and even the non-profit making organizations, is to maximize profit and in turn minimize cost, through optimal utilization of available resources to achieve the best results they are capable of. Profitability is an important factor to all banks, because it is one of the major purpose for which the banks are established.

Corporate Society Responsibility (CSR) involves a business identifying its stakeholder groups and incorporating their needs and values within the strategic and day-to-day decision-making process, thus a means of analyzing the inter-dependent relationships that exist between businesses the economic systems and the communities within which they are operating. Corporate Society Responsibility (CSR) is a means of discussing the extent of obligations a business has to its immediate society; a way of proposing policy ideas on how those obligations can be met; as well as a tool by which the benefits to a business for meeting those obligations can be identified (Corporate Society Responsibility Guide). Corporate Society Responsibility (CSR) is also referred to as ‘corporate’ or ‘business responsibility’, ‘corporate’ or ‘business citizenship’, ‘community relations’, ‘social responsibility’.

The Sierra Leone banks seek to conduct Corporate Society Responsibility (CSR) so that they meet there financial, social and environmental responsibilities in an aligned way, their financial, social and environment responsibilities in an aligned way. At its core, it is simply about having a set of values and behaviours that underpin its everyday activities, its transparency, its desire for fair dealings, its treatment of people, its attitudes towards and treatment of its customers and its links into the Community. As a result, the environmental aspect of Corporate Society Responsibility (CSR) is seen as the duty to cover the environmental implications of the company’s operations, products and facilities, eliminate waste and emissions, maximize the efficiency and productivity of its resources, reward for externalities and minimize unethical practices that might adversely affect the enjoyment of the country’s resources by future generations. In the emerging global economy, where the Internet, the news media and the information revolution shed light on business practices around the world, companies are more frequently judged on the basis of their environmental stewardship (CIBN). Partners in business and consumers want to know what is inside a company. This transparency of business practices means that for Sierra Leone banks, Corporate Society Responsibility (CSR) is no longer a luxury but a requirement.

Mazurkiewicz (2004) recognizes that concept has been developing since the early 1970s. There is no single, commonly accepted definition of “Corporate Social Responsibility” (CSR); there are different perceptions of the concept among the private sector, governments and civil society organizations. Depending on the perspective, Corporate Society Responsibility (CSR) may cover:
a) A company running its business responsibly in relation to internal stakeholders
(shareholders, employees, customers and suppliers);
b) The role of business in relationship to the state, the nationa, as well as to global
institutions or standards; and
c) Business performance as a responsible member of the society in which it operates and the
global community.
The first perspective includes ensuring good corporate governance, product responsibility, employment conditions, workers rights, training and education. The second includes corporate compliance with relevant legislation, and the company’s responsibility as a taxpayer, ensuring that the state can function effectively. The third perspective is multi-layered and may involve the company’s relations with the people and environment in the communities in which it operates, and those to which it transacts business. Too often, attaining Corporate Society Responsibility (CSR) is understood from the perspective of business generosity to community projects and charitable donations, but this fails to capture the most valuable contributions that a company has to make (Reyes 2002).
Simply, many companies have found that Corporate Society Responsibility (CSR) has often had a positive impact on corporate profits. Of all the topics related to corporate social responsibility, it is environmental initiatives that have produced, so far, the greatest amount of quantifiable data linking proactive companies with positive financial results. Business for Social Responsibility (BSR), for example, emphasizes that investment in Corporate Society Responsibility (CSR) has promoted product differentiation at the product and firm levels. Some firms now produce goods and services with attributes or characteristics that signal to the consumer that this particular company is concerned about certain social and environmental issues.

Corporate Social Responsibility in Sierra Leone Banking Sector would be aimed at addressing the peculiarity of the socio-economic development challenges of the country (e.g. poverty alleviation, health care provision, infrastructural development, education, etc) and would be informed by socio-cultural influences (e.g. communalism and charity). They might not necessarily reflect the popular western standard or expectations of Corporate Society Responsibility (CSR) (e.g. consumer protection, fair practice, green marketing, climate change concerns, socially responsible investments, etc). As a result of the effect of the global economic meltdown the Central Bank of Sierra Leone (BSL) regulatory policies on the banking activities which led to the recent replacement of some Sierra Leone banks’ Chief Executive Officers even after the 89 banks that had hitherto existed in Sierra Leone were reduced to 25 in 2006. While 76 of them merged into the 25 mega banks, 13 banks were liquidated as an outcome of the implementation of the N25 billion minimum capital base for banks, the first phase of the most extensive and intensive banking reforms in post-independence Sierra Leone. There is no doubt that Corporate Society Responsibility (CSR) is becoming indispensable, though involuntary, in the contemporary business world as societal needs are making it imperative for the corporate organisations to be sensitive to happenings in their environments, which ensure more understanding and good relationship between the organisation and the society where they exist, since Corporate Society Responsibility (CSR) contributes to the wellbeing of the citizenry (Osho 2008).

1.1 Background of the Case Study

Skye Bank (SL) Limited is a leading financial institution in Sierra Leone and ranked among the top 10 banks in the country. We offer excellent banking services, anchored by our team of seasoned and dedicated staff. Skye Bank (SL) Limited was incorporated in Sierra Leone on 10th August 2007 as a Private Limited Liability Company, a subsidiary of Polaris Bank Limited. In accordance with the then Banking Act 2000, it was licensed by the Bank of Sierra Leone (‘BSL’) on 19th August 2009 to carry on banking business in Sierra Leone. Polaris Bank was a large financial services provider in West Africa and Central Africa. With headquarters in Nigeria, the bank maintains subsidiaries in Sierra Leone, the Gambia, the Republic of Guinea, Liberia, Angola, and Equatorial Guinea. In August 2019, Polaris Bank decided to sell off their subsidiaries in Sierra Leone to SIFAX Nigeria Limited.

SIFAX NIGERIA LIMITED began operations as SIFAX Nigeria Limited in 1988, started as a freight forwarding agency in Lagos, Nigeria. Services rendered at its inception included freight forwarding, haulage, and warehousing operations, as well as adjunct import and export support services. Skye Bank (SL) Limited operates as one of the leading financial services companies in Sierra Leone and provides facets of financial products and services powered by a purpose-built technological framework that supports the service delivery process to customers. Skye Bank (SL) Limited operates through Retail Banking, Commercial Banking, and Treasury, Corporate and Investment Banking segments. The Retail Banking segment provides private banking services, individual customer current accounts, deposits, investment savings products, custody, credit and debit cards, consumer loans, and mortgages. The Commercial Banking segment provides current accounts, deposits, overdrafts, loans, and other credit facilities, foreign currency, and derivative products. The Treasury, Corporate, and Investment Banking segment provides financial instruments trading, structured financing, and corporate leasing. Skye Bank (SL) Limited is a significant player in the corporate banking platform in Sierra Leone with strong competencies in Project Financing and Foreign Exchange transactions amongst others. We are ever ready to support our customers in exploring business opportunities in the Public and Private sectors in the emerging Sierra Leonean economy.

The Bank continues to drive customer acquisition by offering superior customer services and providing excellent customer experiences across all touch points. Our belief is that happy customers breed happier customers and this has yielded a consistently higher customer acquisition and retention volume. Skye Bank has asserted itself as the choice bank for a lot of customers. This has helped the bank remain highly profitable as demonstrated in the impressive figures from its audited financials.
Mission Statement
To consistently provide innovative and convenient financial services, through a highly motivated team of enterprising professionals to the benefit of all stakeholders.
Vision
To continuously challenge ourselves to be the most preferred financial institution in Sierra Leone

1.2 Statement of the Problem

With the new “competent and competitive players,” the Sierra Leone banking system is now driven by advanced competition brought about by globalization, deregulation of financial services, recent replacement of some banks’ Chief Executives, astronomical development in Information and Communication Technology (ICT), among others, to render services according to cost-benefit criteria. Banks in Sierra Leone perceive and practice Corporate Social Responsibility as a corporate philanthropy aimed at addressing socio-economic development challenges. What impact does this have on the profitability of the bank?

1.3 Research Question and /or Hypothesis

The following questions would be examined during the course of this study:

i) Does Skye Bank (SL) Limited embark on Corporate Social Responsibility?

ii) What impact doeds Corporate Social Responsibility have on the bank’s profitability?

iii) What challenges if any does Corporate Social Responsibility impose on the bank?

iv) Does Corporate Social Responsibility guarantee the customers’ confidence level and security of depositor’s fund?

v) Are there other benefits Skye Bank stands to gain aside profitability from the execution of Corporate Social Responsibility?

1.4 The Purpose of the Study

The main aim of this study to examine the impact Corporate Social Responsibility of Skye Bank (SL) Limited vis-à-vis its profitability. The study is essentially geared towards achieving the following objectives:

i) To examine Corporate Social Responsibility in relation to banks in Sierra Leone with Skye Bank in focus.

ii) To evaluate the impact of Corporate Social Responsibility on the profitability of the Sierra Leone banking sector.

iii) To examine the challenges of Corporate Social Responsibility in the Sierra Leone banking sector.

iv) To investigate whether Corporate Social Responsibility guarantee customers’ confidence and security of depositor’s fund.

1.5 Scope of the Study

The study is focused on the headquarters of Skye Bank (SL) Limited. It critically examines what impact Corporate Social Responsibility has on the profitability of Skye Bank (SL) Limited.

1.6 Limitation of the Study

The major limiting factor of this research work is time constant, the staff who is to give the necessary information as to the impact of Corporate Social Responsibility in Sierra Leone Banking Industry is not always available.

1.7 The Significance of the Study

The study is expected to make contribution to knowledge in the following areas:
i) Provision of information about Corporate Social Responsibility to corporate institution especially the Sierra Leone banking sector.
ii) Provision of a fundamental material for scholarly discourse in management science relating to Corporate Social Responsibility.
iii) Assisting in providing information on the impact of Corporate Social Responsibility on the profitability of Sierra Leone banking sector.
iv) Provision of information on the challenges of Corporate Social Responsibility in the Sierra Leone banking sectors and recommendations.
v) Provision of reference points for future research on the topic under study.

1.8 Definition of Terms

In this study it will be significant to clarify conceptually the keyword used in the study, for better understanding of the research work.

Corporate Social Responsibility:

It entails the practice whereby corporate entities voluntarily integrate both social and environment upliftment in their business philosophy and operations.

Stakeholders:

They are group of individuals who are affected or indirectly by organization pursuit of goals. There are two categories of stakeholders, internal stakeholders which owners, employees and stockholders and external stakeholders such as suppliers, competitors, public interest association, protest group and government agencies.

Profit – making organization:

Is an organization setup with a view of transitory businesses with the government or non-government organization mainly to make profit.