A number of banking experts stressed the importance of the role that banks play in community service, which should turn from being just donations and grants to a lifestyle, stressing that the concept of social responsibility has become a clear and specific work platform within the framework of institutions’ strategy, and falls within their daily business practice.
Mohamed Abdel-Aal, a well-known banking expert, said that until recently, the leaders of the banking business used to spend days to draw up the bank’s strategic plan, then derive all the strategic maps, which can achieve the highest level of value creation in three important aspects, the first of which is maximizing the rate of wealth accumulation, or increasing the net profits of a bank’s shareholders or owners. The second is to think about ways to increase the value for the bank’s clients by raising their level of satisfaction continuously. The third aspect is related to the structural development process within the bank of technology, policies and work procedures, as well as innovative banking services and products and creating value for bank employees.
He added that banking thinking in this field changed quickly, because through practical practice, testing and measuring, the results of those strategies and the degree of their success, made it clear that there is a fourth aspect no less important than the previous three aspects, which is the aspect of creating value for the surrounding community outside the bank. The results of studies and tests confirmed that banks that established the values and principles of social responsibility before were always best able to overcome any crises, such as the COVID-19 crisis. They were able to gain customers’ trust, and trust means more interdependence and customer loyalty.
Social responsibility is a community right
Abdel-Aal pointed out that social responsibility is not an obligation banks need to meet, but rather a right of the community. It is not voluntary or charitable work. It has become an important economic and social phenomenon. He pointed out that banks have realized that customers in their regions prefer to deal with banks that have visible and tangible imprints in improving their communities, through their social responsibility. There is now the new logic: if the bank intends to increase its profitability, then part of those profits should be used in community development.
According to Abdel-Aal, the social responsibility of banks may be branched into societal concerns related to the internal society or inside the bank. It means the concerns directed to the bank’s employees to raise their personal skills, expand and improve health and insurance packages and grant them non-material advantages that relieve them of tax burdens. Other aspects could include improving the work environment and rewarding hard-working employees.
He added that banks’ community roles are not limited to just giving grants and aids to help the poor, especially in times of crises. It is a lifestyle, which is an integrated and reciprocal process between the bank and its society. Banks and major banking institutions can, through the performance of their social responsibility, contribute to creating solutions to eliminate slums, eradicate illiteracy, reduce poverty, and contribute to reducing global warming and other aspects.
“In my opinion, unifying and organizing the efforts of banks under one umbrella, may be a step that helps create a deeper impact and better performance. That said, the proposal of the Federation of Banks (FEB) to form a permanent coordinating committee to oversee the efforts of all banks regarding social responsibility, and coordinate and organize them, might be a good idea,” Abdel-Aal said.
He explained that one of the tasks of that committee might be to develop a vision for the minimum that each bank should contribute, and link that to a fair index as a percentage of annual profits, for example. Another committee could be formed for research to identify and study a map of the banks’ community work, and propose and assemble leading ideas that serve the development and innovation process in the areas and applications of social responsibility of Egyptian banks. He pointed out that it may be a good idea to think of establishing a green non-profit investment fund in which banks, and perhaps some citizens who make donations, can contribute to. Its revenues could be directed to projects that fall within the scope of social responsibility of banks. It is also essential to highlight the importance of the role of institutional communication departments in banks to be part of the success of the goals and roles of banks in the evolving field of community work.
A shift from charity to hands-on approach
On his part, Tarek Metwally, former Deputy Managing Director of BLOM Bank Egypt and a banking expert, said that the concept of social responsibility has changed a lot. It has shifted from just charity work to being a clear and specific work platform within the framework of the strategy of institutions and part of its daily practice
He explained that social responsibility is the company’s commitment to stakeholders, including shareholders, consumers, customers, suppliers, workers, the environment and the community. It is a volunteering act that does not require enforcing certain laws or rules to which companies adhere. However, it has become crucial for companies to play a positive community role, whether locally or internationally.
Metwally added that corporate social responsibility includes the societal aspect, which contains many other aspects, including health, environmental, and economic aspects.
He referred to the World Bank’s definition of social responsibility as the commitment of business owners and commercial activities to contribute to sustainable development, by working with their employees, families, the local community, and society at large, to improve people’s standard of living in a way that serves trade and development.
According to Metwally, the historical development of the concept of corporate social responsibility began in the 20th century, when economic philosophy assumed that it was the primary and only duty of companies to maximize profit without performing any duty towards their societies. However, in the 70s of the last century, the concept of social responsibility developed, through paying wages to workers, paying taxes to governments, and respecting laws and contracts. Over time, executives began to pay attention to other goals besides maximizing profits, such as the interests of consumers, employees, and the local community, with interest in developing legislation to improve the business environment and develop policies for appointing employees without any discrimination, as well as taking interest in limiting pollution and energy wasting.
More than just donations
He added that with the development and growth of the concept of social responsibility and responsible investment, institutions in today’s world should not be satisfied with simply donating funds. They should seek to become innovative in terms of adopting and providing an appropriate work environment, apply policies of non-discrimination in recruitment and employment and environmental conservation and pollution prevention, as well as commit to policies of energy conservation and waste prevention.
This also includes a commitment to full transparency in terms of dealing with stakeholders, whether employees, suppliers, customers, competitors or society as a whole, in addition to including social responsibility within the company’s strategic plan and integrate it into daily business practice, and adhere to sustainable development and responsible investment, as well as ensuring suppliers and stakeholders adhere to the rules of social responsibility. Part of social responsibility also includes applying a minimum wage and preserving the environment. Adhering to fair competition and prohibiting monopolization is also necessary, in addition to establishing departments that are solely responsible for social responsibility inside corporations, under the direct leadership of the higher administration of the entity.
In summary, social responsibility means all of the above, with the aim of making companies serve the societies in which they operate, through many service activities and projects, which would help with advancing the society. Social responsibility achieves many benefits for society and companies, including providing goods and products, creating a healthy society, preserving the environment, and increasing employee loyalty.
Social responsibility is important part of corporate strategies
On his part, Zakaria Salah, a banking expert, stressed that social responsibility represents an important part of institutions’ strategies, as one of the important aspects by which they can strengthen their reputation and emphasize their role and contribution in various development fields. He pointed out that the social responsibility of banks should focus on the aspect of sustainable development.
Salah pointed out that when one thinks of social responsibility, charity work comes to mind. But social responsibility is much bigger than this limited definition. Banks are financial institutions that play a large role in society, and have millions of clients.
He added that the social responsibility of banks begins with the process of issuing banking products and services and marketing them to customers. They must take into account the ethical aspects, transparency and doing no harm to society, and put the interests of customers above their own, because they are entrusted with all financial operations carried out by individuals and companies.
Salah said that banks should take care of this matter by paying attention to the human resources within them and focusing on improving the standard of living and the work environment for employees, as well as adopting transparency in the process of issuing banking products and services, and explaining their benefits and consequences to customers, so that they do not find themselves becoming indebted, for example. Banks should also avoid exaggerating banking service fees, and following quality standards.
He added that banks should also consider limiting or reducing financing of activities that could harm their societies and the environment. An example is projects that result in carbon emissions or the disposal of chemicals in the water drains, or others, as well as limiting print and using paper, and applying small fees on a brief banking statement on ATMs. This would eventually lead to cutting less trees.
Salah also suggested that banks contribute to projects and initiatives that maintain the environment, like allocating a budgeted initiative to planting 1,000 trees in the areas surrounding a bank’s branches, or in public streets and squares. Banks can also allocate budgets for developing museums, sponsoring young talents, and providing academic grants in various fields.
Banks could also allocate an amount of funding to support entrepreneurship, adopt MSMEs, and support non-profit organizations that play a tangible role in their communities.
Salah stressed that banks should not limit social responsibility to business plans. They should work together with their employees, families, and stakeholders to improve their societies and enhance the standard of living for its people, as well as achieve development goals. The costs of such projects will definitely be reflected positively on the bank in several ways.