ASSESSMENT OF CORPORATE SOCIAL responsibility ON financial PRODUCTIVITY OF MICROFINANCE BANKS
ASSESSMENT OF CORPORATE SOCIAL RESPONSIBILITY ON FINANCIAL PRODUCTIVITY OF MICROFINANCE BANKS
1.1. BACKGROUND OF THE study
People form businesses in order to pool their resources for the common objective of profit. They also interact with society to achieve this purpose. Organisations are classified into three types based on their motivations: profit organisations, government organisations, and non-profit organisations.
Profit-oriented organisations seek to maximise owner wealth, while government organisations create the regulations and framework of society under which firms operate, and not-for-profit organisations execute social deeds when society requires them.
There are organisations like this in society. They may do separate tasks, but in a well-organized community, they are interconnected. The impact of business on society is expanding throughout time, as is the number of stakeholders.
Historically, social expectations of corporate organisations did not extend beyond efficient resource allocation and maximisation. However, times have changed, and modern company must think beyond profit maximisation to be socially accountable to its community.
CSR is an acronym that stands for Corporate, Social, and Responsibility. Corporate social responsibility (CSR) examines the interaction between corporations and the society in which they operate and interact.
Corporate social responsibility (CSR) is a rapidly emerging concept in the banking industry, with little emphasis made to its language aspects. CSR is prevalent in the literature but not in practise.
Despite the need for moral business practises, one of the key reasons for CSR is whether firms pursue it for economic reasons or because of the benefits involved.
Unfortunately, little or no empirical studies have been undertaken to support the benefits and drawbacks of CSR. This lends credence to the prevalent criticism that CSR is merely a successful public relations and marketing strategy (Adegboyega and Taiwo, 2011).
Stakeholders in the current business world have emphasised corporate social responsibility as a driving tool for success. It has become a more visible and important component of the overall performance of commercial organisations in general.
Ordinary citizens, potential investors, pressure groups, politicians, insurance companies, and a variety of other stakeholders are increasingly demanding that organisations account for the social, natural environment, and economic impacts that they have on each community in which they operate (Nwachukwu, 2006).
Because of the goodwill it produces and the notion that the total health of both corporate entities and the environment in which they operate is mutually dependent, CSR has today become mandatory.
Only by teaching businesses, particularly Nigerian microfinance banks, that doing well requires doing good can we hope to address the key difficulties confronting developing communities today. The economic realities of the future are such that'social demands' can increasingly only be paid if their solution yields comparable earnings,
which is precisely what business is recognised for. Most microfinance institutions in any country are critical to the country's economic development. This is most likely why the banking business is the most heavily regulated of all industries in most countries.
Furthermore, commercial organisations' success is influenced by their strategies and operations in both market and nonmarket situations. As a result, there is a discussion about how much social and environmental factors should be considered by company directors and management when making choices.
In essence, Corporate Social Responsibility (CSR) can be defined as a decision-making method that considers both social and environmental factors. As a result, CSR can be defined as the deliberate incorporation of public interest into business decision making, as well as the observance of a triple bottom line of People, Planet, and Profit (Harpreet, 2009).
Due to financial scandals and a loss in investor confidence, CSR has become a significant factor in microfinance banks' strategic decision making.
CSR has emerged in the twenty-first century to improve a firm's financial performance and recommends that corporate decision makers must address a variety of social and environmental issues in order to maximise long-term financial rewards.
Every MFB implements CSR in strategic business practises differently, with elements such as size, operational industry, stakeholder expectations, past CSR participation, amount of diversification, research and development, and labour market conditions influencing this decision.
STATEMENT OF THE PROBLEM
Microfinance banks face numerous problems in operating and profitably in today's global economy. People are more knowledgeable about banks, their services, and how such MFB conduct business. People are more cognizant of the importance of their work for the well-being of society and the environment in which they operate and profit.
significant of these financial institutions are encountering significant challenges in their new function, which is to meet the demands of the current generation in a socially acceptable manner.
MFB must accept responsibility for how they operate in society and the natural environment because their operations have an impact on both.
Second, corporate social responsibility merits the attention of CEOs everywhere, if public remarks are to be believed, particularly those of microfinance bank management. We can actually argue that MFBs involved in Corporate Social Responsibility are not remorseful because of the increase in sales and profit and how they have harmed the environment.
This, unfortunately, is not the case. Some banks spend more money promoting their CSR initiatives. There is hence the question of determining the extent to which corporate social responsibility affects Nigerian deposit money banks.
The banking industry plays a vital role in a country's economy. In Nigeria, almost all banks declare their social responsibility expenses towards sustainable development in their yearly reports.
The majority of them work hard to address the needs of philanthropic organisations, government agencies, religious organisations, and tertiary institutions.
Microfinance banks' efforts in social responsibility have had a multiplier effect on sustainable development; yet, these social duties come at a cost, which has an impact on their financial performance.
1.3. OBJECTIVES OF THE STUDY
Many empirical studies have been conducted to evaluate the impact of corporate social responsibility on the financial productivity of microfinance banks, particularly in developed nations.
Why were so few research conducted in poor nations, including Nigeria? Against this backdrop, this research paper attempts to investigate corporate social responsibility in Nigerian microfinance institutions.
Other specific goals include:
Determine the impact of CSR disclosure on the firm's profit margin.
Determine the impact of corporate social responsibility on microfinance institutions' financial performance.
Determine the relationship between corporate social responsibility and the profitability of microfinance banks.
Determine the meaning and application of corporate social responsibility in terms of its influence on financial productivity.
Examine the relationship between Microfinance Bank's EPS, ROA, ROE, Net Profit, and CSR.
Examine the impact of education support on the profitability of Nigerian microfinance banks.
Determine the impact of financial literacy programmes for clients on the profitability of Nigerian microfinance banks.
1.4. RESEARCH QUESTIONS
In light of the concerns mentioned above, there is a need to assess the impact of CSR on the financial productivity of microfinance institutions in Nigeria. The following questions were created to guide the research:
What effect does CSR disclosure have on a company's profit margin?
What are the implications of corporate social responsibility for microfinance institutions' financial performance?
Is there a link between corporate social responsibility and the profitability of microfinance banks?
What is the definition and practise of corporate social responsibility, and how does it affect financial productivity?
Check the relationship between Microfinance Bank's EPS, ROA, ROE, Net Profit, and CSR.
What are the implications of education support on the profitability of Nigerian microfinance banks?
What effects do financial literacy programmes for clients have on the profitability of Nigerian microfinance banks?
1.5. HYPOTHESIS STATEMENT
The first hypothesis
H0: There is no meaningful association between corporate social responsibility and business performance. Profitability of Microfinance Banks
The second hypothesis
H0: connection between Microfinance Bank's EPS, ROA, ROE, Net Profit, and CSR
1.6. SIGNIFICANCE OF THE STUDY
This study contributes to a better understanding of the relationship between corporate social responsibility and bank financial productivity.
The findings should be of interest to managers considering CSR initiatives, investors and financial analysts evaluating corporate performance, and policymakers developing and implementing CSR rules.
The project's findings will be utilised to improve information available to key players on the current state of corporate social responsibility in the banking industry and how it relates to the sector's profitability.
This study also aimed to generate recommendations for other businesses interested in incorporating corporate social responsibility practises into their various business activities.
The study's findings would be extremely useful to policymakers in the banking industry, as they will be informed about the impact of corporate social responsibility on the financial viability of Microfinance banks in Nigeria.
Finally, the study will be very useful to future academics and academicians because it will supply literature for future research as well as a foundation for future research.
1.7. SCOPE OF THE STUDY
Business organisations' performance is influenced by their strategy and operations in both market and non-market situations. As a result, there is a discussion about how much social and environmental factors should be considered by company directors and management when making choices.
In light of the aforementioned, this study investigated the impact of corporate social responsibility on the financial productivity of a microfinance bank, utilising Seedvest Microfinance Bank in Ibadan as a case study.
Although there are many microfinance institutions in Nigeria, the scope of this research is limited to microfinance banks, with a special focus on Seedvest Microfinance Bank Limited as a case study.
The research study will concentrate on the review and interpretation of CSR, MFB, and other problems that Microfinance banks face when implementing social responsibility.
LIMITATIONS OF THE STUDY
The largest obstacle was the secrecy surrounding the allocation of funding to various tasks within the bank, which resulted in the researchers being withheld vital information.
Environmental factor: another restriction anticipated in the research study due to the business environment in which the selected case study was located and the fact that most microfinance banks have low capital earnings in comparison to other commercial banks.
The distribution and retrieval of questionnaires from respondents (bank officials and clients) is also a restriction because we were unable to obtain all of the questionnaires distributed.
1.9. DEFINITION OF TERMS
1. Volunteerism is defined as “the policy or practise of donating one's time or talents to charitable, educational, or other worthwhile activities, particularly in one's community” (Tuffey, 2009).
2. Corporate Social Responsibility (CSR) is a management concept in which businesses incorporate social and environmental issues into their business operations and interactions with its stakeholders. 2011 (Obrien).
3. Financial Literacy: the ability to grasp how money works in the world: how someone earns or makes it, how that person manages it, how that person invests it (turns it into more), and how that person donates it to benefit others.
4. Profitability (Kweyun, 2009): The state or circumstance of providing financial profit or gain.
5. Donation: The donation determinant demonstrates the willingness of a financial institution to pay a specified amount of money to help the society.
6. Financial Performance: Financial performance is defined as the measurement of a firm's financial status over a particular time period in order to determine how efficiently a company uses its resources to generate income.
7. Net profit: Net profit is defined as revenue less all expenses. The organization's net profit is indicated after deducting interest payments and profit taxes.
8. Earnings per Share: Earnings per Share shows how much profit a bank earns over the course of a year for each outstanding share of common stock.
9. Microfinance Banks (MFBs)
1.10 CASE STUDY SEEDVEST MICROFINANCE BANK LIMITED BACKGROUND HISTORY:
– SEEDVEST MICRO-finance BANK LIMITED was established in Lagos in 2006 A.D. as a FINANCE HOUSE known as SEEDVEST LIMITED RC439825.
It was a financial institution service provider with exceptional financial strength and an interest in MICRO-FINANCE and SMALL SCALE BUSINESS funding.
SEEDVEST MICRO-FINANCE BANK LIMITED was registered on the 25th of June, 2007 to carry on micro-finance business under the provisions of the banks and other financial institution Acts No 25 of 1999 as amended and was officially opened as a micro-finance bank on the 30th of July, 2007 by the then deputy governor of Central Bank of Nigeria finance sector surveillance Mr Tunde Lemo,
also in attendance were the promoters of seedvest limited, and the then Managing Di The company's mission is to be the top finance organisation in Nigeria by delivering crucial finance to neglected entrepreneurs.