Islamic banks’ CSR spending halves to Tk18.36cr; only Tk5 lakh from profit

Bangladesh’s 10 Islamic banks spent Tk18.36 crore on corporate social responsibility (CSR) activities in the first half of this year, down 50% from a year earlier.

However,  almost the entire CSR expenditure came from doubtful income, zakat funds, and compensation realised, shows Bangladesh Bank data. Only Standard Bank spent from net profit, with the amount limited to Tk5 lakh.

The banking sector spent Tk119 crore on CSR activities in January-June this year, down Tk78 crore from Tk198 crore in July-December 2025.

Private banks accounted for Tk103 crore of the spending, followed by foreign banks at Tk13 crore, state-owned banks at Tk2.30 crore and specialised banks at Tk11 lakh.

The sharp decline in CSR spending comes as banks grapple with rising non-performing loans, capital shortfalls, and sluggish credit growth, which have weakened their profitability.

In January-June 2025, the same 10 Shariah-based banks spent Tk36.67 crore on CSR, of which Tk7.43 crore, or about 20%, came from net profits. The remaining 80% was financed through doubtful income, zakat funds, and compensation realised.

The 10 banks are Islami Bank Bangladesh, Al-Arafah Islami Bank, Shahjalal Islami Bank, Exim Bank, First Security Islami Bank, Global Islami Bank, Standard Bank, Social Islami Bank, Union Bank, and ICB Islamic Bank. Five have since merged to form Sammilito Islami Bank.

Doubtful income refers to income deemed non-compliant with Shariah principles due to lapses in investment practices. Compensation realised refers to money collected from customers as compensation for overdue payments on Islamic financing. These are not treated as profit and are kept in a separate account and used for charitable purposes.

Bankers said the decline in net profits has reduced banks’ capacity to spend on CSR.

M Kamal Uddin Jasim, additional managing director of Islami Bank, told TBS that CSR spending largely depends on net profit and Islamic banks used to spend substantially on CSR.

However, lending irregularities in the past have left most in a weak financial position, preventing them from generating net profits,” he told The Business Standard.

He added that more than two dozen banks are burdened with high levels of default loans, while nearly 20 banks are facing capital shortfalls. Many of these banks are reporting net losses and therefore cannot spend on CSR.

“Some banks have continued CSR spending, but have financed it from income generated through other sources,” he added.

Banks’ CSR spending falls by Tk78cr in six months

Eighteen banks made no CSR spending during January-June. Among state-owned banks, Janata Bank, Agrani Bank, BASIC Bank, Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank reported no CSR expenditure.

Of the total spending, Tk24.13 crore (20%) went to education, Tk34.66 crore (29%) to healthcare, Tk11.72 crore (9.84%) to environmental protection and climate change mitigation and adaptation, and Tk48.53 crore (40.77%) to other areas.

Bangladesh Bank’s CSR guidelines generally require banks to spend 1% of their annual net profit on CSR activities. The guidelines recommend allocating 30% of CSR expenditure to education, 30% to healthcare, 20% to environmental and climate-related activities, and the remaining 20% to disaster management, social welfare, culture and sports.

Meanwhile, 34 non-bank financial institutions (NBFIs) spent Tk1.25 crore on CSR activities in the first half of this year. Twenty-six of the NBFIs did not spend any money on CSR.

Weak bank finances constrain CSR

The central bank recently presented an overview of the banking sector at the second meeting of the parliamentary standing committee on the finance ministry.

The report showed that 22 banks – four state-owned, 15 private and one foreign bank – had accumulated losses of Tk2.53 lakh crore. High levels of default loans, required provisioning, capital shortfalls, and weak asset quality are undermining banks’ earning capacity.

As a result, many banks are making operating profits but slipping into net losses after provisions, other expenses, and expected credit losses are taken into account.