islamic concept and corporate social responsibility in

Islamic Concept and Corporate Social Responsibility in

Banking Sector of Pakistan: Comparative Analysis

Bilal Durani

Student ID # 2012-QUP-S-6378

Ph.D Management Sciences

Qurtuba University of Science & Information Technology

Peshawar, Khyber Pakhtunkhwa

2018

Islamic Concept and Corporate Social Responsibility in

Banking Sector of Pakistan: Comparative Analysis

Bilal Durani

Student ID # 2012-QUP-S-6378

PhD Management Sciences

Department of Management Sciences

Supervisor: Prof. Dr. Qadar Bakhsh Baloch

Qurtuba University of Science & Information Technology

Peshawar, Khyber Pakhtunkhwa

2018

Author’s Declarations

I Bilal Durani hereby state that my Ph.D thesis titled “Islamic Concept and

Corporate Social Responsibility in Banking Sector of Pakistan: Comparative

Analysis” is my own work and has not been submitted previously by me for taking any

degree from this university, Qurtuba University of Science & Information

Technology Peshawar Campus or anywhere else in the country/world. At any time if

my statement is found to be incorrect even after my graduate the university has the

right to withdraw my PhD degree.

Name of Student: Bilal Durani

Date: 09/10 /2018

Signature:

Plagiarism Undertaking

I solemnly declare that research work presented in the thesis titled ―Islamic Concept

and Corporate Social Responsibility in Banking Sector of Pakistan: Comparative

Analysis” is solely my research work with no significant contribution from any other

person. Small contribution/help wherever taken has been duly acknowledged and that

complete thesis has been written by me.

I understand the zero tolerance policy of the HEC and University ―Qurtuba University

of Science & Information Technology‖ towards plagiarism. Therefore, I as an author of

the above titled thesis declare that no portion of my thesis has been plagiarized and any

material used as reference is properly referred/cited.

I undertake that if I am found guilty of any formal plagiarism in the above titled thesis

even after award of PhD degree, the University reserves the rights to withdraw/revoke

my PhD degree and that HEC and the University has the right to Publish my name on

the HEC/University website on which names of students are placed who submitted

plagiarized thesis.

Author Name: Bilal Durani

Student/Author Signature:

Certificate of Approval

TABLE OF CONTENTS

CHAPTER NO. TITLE PAGE NO.

Cover Page .......................................................................................................

Title Page ..........................................................................................................

Author‘s Declaration ........................................................................................

Plagiarism Undertaking ....................................................................................

Certificate of Approval .....................................................................................

Acknowledgements .........................................................................................

Abstract ............................................................................................................

Chapter One: Introduction ....................................................................................... 01

1.1 Overview .............................................................................................. 01

1.2 Background of Study ............................................................................ 01

1.2.1 CSR in Pakistan-----------------------------------------------------

1.3 Statement of Problem ........................................................................... 07

1.4 Research Objectives ............................................................................. 07

1.5 Scope of Research ................................................................................ 07

1.6 Limitations of Study ............................................................................. 08

1.7 Operational Definitions of Concepts and Terms ................................. 08

1.7.1 Corporate Social Responsibility ............................................... 08

1.7.2 Islamic Corporate Social Responsibility .................................. 09

1.7.3 Stakeholders ............................................................................. 09

1.7.4 Carroll Model ........................................................................... 09

1.7.5 UN Global Compact ................................................................. 10

1.7.5.1 Human Rights ............................................................... 10

1.7.5.2 Ethical conduct ............................................................. 10

1.7.5.3 Community development ............................................. 11

1.7.5.4 Environment protection ................................................ 11

1.7.6 Friedman Approach .................................................................. 11

1.7.7 Triple Bottom Line ................................................................... 11

1.7.8 Sustainability ............................................................................ 12

1.7.8.1 Social Sustainability ..................................................... 12

1.7.8.2 Economical Sustainability ............................................ 12

1.7.8.3 Environmental Sustainability ....................................... 12

1.7.9 Agenda 21 ................................................................................ 13

1.7.10 Corporate Governance .............................................................. 13

1.7.11 Organization performance ........................................................ 13

1.7.11.1 Employee performance .............................................. 14

1.7.11.2 Customer Satisfaction ................................................ 14

1.8 Organization of Dissertation ................................................................ 15

Chapter Two: Literature Review .............................................................................. 17

2.1 Introduction .......................................................................................... 17

2.2 Western Approach: CSR Concept, Definition and Evolution .............. 17

2.2.1 Theoretical Perspective of Corporate Social Responsibility .... 28

2.2.1.1 Legitimacy Theory ....................................................... 30

2.2.1.2 Resource based view .................................................... 31

2.2.1.3 Agency Theory ............................................................. 33

2.2.1.4 Stewardship Theory ...................................................... 34

2.2.1.5 Strategic Leadership ..................................................... 36

2.2.1.6 Stakeholder Theory ...................................................... 37

2.2.1.6.1 Limitations of the stakeholder theory ........................ 42

2.2.1.7 Critical Analysis of CSR Theories ............................... 43

2.2.2 Factors Encompassing Western CSR in business .................... 44

2.2.2.1 Human Rights ............................................................... 45

2.2.2.2 Fair Labor Practices ..................................................... 45

2.2.2.3 Ethical Conduct ............................................................ 46

2.2.2.4 Environmental Protection ............................................. 47

2.2.2.5 Community Development Initiatives ........................... 48

2.2.3 CSR and Organizational Performance ..................................... 49

2.2.3.1 Measures of Organization Performance ....................... 50

2.2.3.1.1 Customer Satisfaction ................................... 51

2.2.3.1.2 Employee Performance ................................. 52

2.3 Islamic Perspective and CSR ............................................................... 53

2.3.1 Ethics in Islam .......................................................................... 55

2.3.1.1 Unity in Islam ............................................................... 56

2.3.1.2 Iman (Faith) .................................................................. 58

2.3.1.3 Khilafah (trusteeship) ................................................... 59

2.3.1.4 Equilibrium (Adl or justice) ......................................... 59

2.3.1.5 Free Will (Ikhtiyar) ...................................................... 61

2.3.2 Factors Encompassing Islamic CSR in business ...................... 63

2.3.2.1 Human Rights concepts and practices in Islamic

Organizations ............................................................... 63

2.3.2.2 Fair Labor Practices concepts and practices in

Islamic Organizations ................................................... 64

2.3.2.3 Ethical Conduct concepts and practices in Islamic

Organizations ............................................................... 65

2.3.2.4 Environmental Protection concepts and practices in

Islamic Organizations ................................................... 66

2.3.2.5 Community Development Initiatives concepts and

practices in Islamic Organizations ............................... 66

2.3.3 Islamic CSR and Organizational Performance ......................... 67

2.3.3.1 Measures of Organizational Performance and

Islamic CSR .................................................................. 69

2.4 Comparison and Differences between Islamic and Western CSR ....... 69

2.4.1 Human Rights: Islamic concept and Western thoughts ........... 70

2.4.2 Fair Labor Practices: Islamic concept and Western thoughts .. 73

2.4.3 Code of Ethics: Islamic concept and Western thoughts ........... 75

2.4.4 Environment Protection: Islamic concept and Western

thoughts .................................................................................... 77

2.4.5 Community Development Initiatives: Islamic concept and

Western thoughts ...................................................................... 79

2.8 Conceptual Framework for Islamic and Conventional Banks

Practicing CSR ..................................................................................... 81

2.8.1 Dependent Variables: Organization Performance .................... 82

2.8.2 Independent variables: Corporate Social Responsibility ......... 82

Chapter Three: Research Methodology ................................................................... 84

3.1 Introduction .......................................................................................... 84

3.2 Philosophy of Research ........................................................................ 84

3.2.1 Research Design and Research Method ................................... 85

3.3 Population ............................................................................................. 87

3.3.1 Accessible Population of Study ................................................ 89

3.4 Sample Plan .......................................................................................... 90

3.4.1 Sample design and techniques .................................................. 90

3.4.2 Sample Size determination ....................................................... 91

3.4.3 Sample size for measuring banks social performance ............. 91

3.5 Data Collection Plan ............................................................................. 93

3.5.1 Sources & techniques of data collection .................................. 94

3.5.2 Questionnaire Content .............................................................. 98

3.3.5 Pilot Study ................................................................................ 99

3.4 Reliability Test ..................................................................................... 99

3.4.1 Validity of questionnaires ........................................................ 101

3.5 Data Analysis Plan ............................................................................... 101

3.5.1 Data Analysis tools and techniques .......................................... 101

3.5.2 Econometric Model for Conventional banks ........................... 103

3.5.3 Econometric Model for Islamic banks ..................................... 103

3.5.4 Construction of Indexes for the Variables ................................ 104

3.5.5 Test of Heteroscedasticity ........................................................ 105

3.5.6 Test of Multicollinearity ........................................................... 106

Chapter Four: Analyzing Respondents Profile and Perceptions of

Employees and Customers of Conventional and Islamic

Banks ............................................................................................. 108

4.1 Introduction .......................................................................................... 108

4.2 Comparative Analysis and Findings .................................................... 109

4.2.1 Contribution of Islamic & Conventional Banks ....................... 109

4.2.2 CSR Practices of Conventional Banks ..................................... 109

4.2.3 CSR practices of Islamic Banks ............................................... 112

4.2.4 Comparative CSR practices between Islamic &

Conventional Banks ................................................................. 114

4.3 Respondents Perception for primary Data Analysis of

Conventional Banks ............................................................................. 116

4.3.1 Demographic Profile Analysis of Conventional Banks ........... 116

4.3.2 Analyzing by comparing Knowledge and Perception of

Respondents regarding CSR of Conventional Banks ............... 117

4.3.3 Matching Different Variables for Meaningful comparison ...... 118

4.3.4 CSR Practices and Perception of Respondents for

Individual Conventional Bank ................................................. 120

4.3.4.1 CSR Practices of National Bank of Pakistan................ 120

4.3.4.2 CSR Practices of Allied Bank Limited ........................ 122

4.3.4.3 CSR Practices of United Bank Limited ........................ 123

4.3.5 Analysis of all 3 conventional banks CSR practices ................ 125

4.4 Respondents Perception and Data Analysis of Islamic Banks ............. 126

4.4.1 Demographic Profile Analysis of Islamic Banks ...................... 126

4.4.2 Analyzing by comparing Knowledge and Perception of

Respondents regarding CSR of Islamic Banks ........................ 127

4.4.3 Matching Different Variables for Meaningful comparison ...... 128

4.4.4 CSR Practices and Perception of Respondents for

Individual Islamic Bank ........................................................... 129

4.4.4.1 CSR Practices of Meezan Islamic Bank ....................... 129

4.4.4.2 CSR Practices of Al- Baraka Bank .............................. 131

4.4.4.3 CSR Practices of Bank Islami ...................................... 132

4.4.5 Analysis of All 3 Islamic Banks CSR Practices ....................... 134

4.5 Regression Analysis of All Conventional and Islamic Banks for

Hypothesis Testing ............................................................................... 135

4.5.1 Comparative analysis of Conventional Banks and

Organization Performance ........................................................ 135

4.5.2 Comparative analysis of Islamic banks and Organization

Performance ............................................................................. 144

Chapter Five: Conclusion and Recommendation ................................................. 152

5.1 Introduction .......................................................................................... 152

5.2 Summary of Research Findings ........................................................... 152

5.2.1 Practices of CSR in Conventional and Islamic Banks ............. 155

5.3 Research Contribution .......................................................................... 159

5.3.1 Contribution to Theory ............................................................. 159

5.4 Recommendations ................................................................................ 160

5.5 Future directions ................................................................................... 162

REFERENCES ............................................................................................... 163

LIST OF TABLES

TABLE NO. DESCRIPTION PAGE NO.

Table 2.1: CSR Concepts and Definitions …………………………………… 19

Table 2.2: Opinions for and Against CSR ………..………..………..……….. 21

Table 2.3: The 10 Principles of UN Global Compact ………..………..…….. 27

Table 2.4: CSR actions through key stakeholders (Papasolomou et al., 2005) …… 41

Table 2.5: Comparison between contemporary and Islamic CSR for Human

Rights CSR ………..………..………..………..………..………… 71

Table 2.6: Comparison between contemporary and Islamic CSR for fair labor

practices ………..………..………..………..………..………..…... 74

Table 2.7: Comparison between contemporary and Islamic CSR for Ethical

Conduct ………..………..………..………..………..………..…… 76

Table 2.8: Comparison between contemporary and Islamic CSR for

environment protection ………..………..………..………..……… 78

Table 2.9: Comparison between contemporary and Islamic CSR for community

development initiatives ………..………..………..………..……… 80

Table 3.1: Accessible Population of Research ………..………..……………. 89

Table 3.2: Summary of Banks Branches, Employees & Customers in Peshawar … 92

Table 3.3: Sample Size Determination ………..………..………..………….. 92

Table 3.4: Proportionate Sampling Method ………..………..………..…….. 93

Table 3.5: Questionnaires distribution & Response by Islamic Banks

Employees & Customers in Peshawar ………..…………………. 96

Table 3.6: Questionnaires distribution & Response by Conventional Banks

mployees & Customers in Peshawar ………..………..………..… 97

Table 3.7: Reliability Statistics of Conventional Banks ………..…………… 100

Table 3.8: Reliability Statistics of Islamic Banks ………..………..………… 100

Table 3.13: Heteroscedasticity Test Results ………..………..………..……… 105

Table 3.14: The Variance Inflation Factor (VIF) Analysis Results ………….. 106

Table 4.1: Source Annual Reports: 2013-2016 ………..………..………..…. 109

Table 4.2: Display CSR practices of Conventional banks in %, Mean and

Standard Deviation ………..………..………..………..………..… 111

Table 4.3: Display CSR practices of Islamic banks in %, Mean and Standard

Deviation ………..………..………..………..………..………….. 113

Table 4.4: Display CSR practices of Conventional & Islamic banks in %,

Mean and Standard Deviation ………..………..………..……….. 115

Table 4.5: Summary of Respondents Background, Profile & Demographics

of Conventional Banks ………..………..………..………..……... 116

Table 4.6: How you will describe CSR ………..………..………..…………. 118

Table 4.14: Respondents Perception for CSR Initiatives of National Bank of

Pakistan and Customer Satisfaction as Dependent variable …….. 120

Table 4.15: Respondents Perception for CSR Initiatives of National Bank of

Pakistan and Employee Performance as Dependent variable ……. 121

Table 4.16: Respondents Perception for CSR Initiatives of Allied Bank of

Pakistan and Customer Satisfaction as Dependent variable ……… 122

Table 4.17: Respondents Perception for CSR Initiatives of Allied Bank of

Pakistan and Employee Performance as Dependent variable …….. 123

Table 4.18: Respondents Perception for CSR Initiatives of United Bank Ltd

and Customer Satisfaction as Dependent variable ………………... 124

Table 4.19: Respondents Perception for CSR Initiatives of United Bank Ltd

and Employee Performance as Dependent variable ……………… 125

Table 4.20: Summary of Respondents Background, Profile & Demographics

of Islamic Banks ………..………..………..………..……………. 126

Table 4.21: How you will describe CSR ………..………..………..…………. 128

Table 4.28: Respondents Perception for CSR Initiatives of Meezan Bank and

Customer Satisfaction as Dependent variable ………..…………… 129

Table 4.29: Respondents Perception for CSR Initiatives of Meezan bank and

Employee Performance as Dependent variable ………..………… 130

Table 4.30: Respondents Perception for CSR Initiatives of Al Baraka Bank and


Table 4.31: Respondents Perception for CSR Initiatives of Al Baraka bank and

Employee Performance as Dependent variable ………..…………. 132

Table 4.32: Respondents Perception for CSR Initiatives of Bank Islami and


Table 4.33: Respondents Perception for CSR Initiatives of Bank Islami and

Employee Performance as Dependent variable ………..………… 133

Table 4.34: Customers and Employee Perception for CSR Initiatives

Regressing Customer Satisfaction and Employee Performance

as Dependent variable in CB (Customer Respondents 375,

Employee Respondents 239) ………..………..………..………… 136

Table 4.35: Summary of Hypothesis tested for Conventional Banks ………… 143

Table 4.36: Customer and Employee Perception for CSR Initiatives Regressing

Customer Satisfaction as Dependent variable in IB (Customer

Respondents 374, Employee Respondents 115) ………..………… 145

Table 4.37: Summary of Hypothesis tested for Islamic Banks ……………….. 151

Abstract

The today‘s dynamic business environment demand organizations to meet

expectations about good governance, business ethics and social responsibility. The

research study aimed to describe the Islamic and conventional concept of Corporate

Social Responsibility (CSR) by establishing their relationship with organization

performance and draw comparison between the effectiveness of CSR in their

performance. Top 3 Islamic and conventional banks were selected on the basis of

superior performance as published in the year 2013. The secondary data were collected

from annual reports, web sites and descriptive statistics revealed that conventional

banks allocating increase amount on CSR practices, mostly in Education, Sports and

Collaboration with Government. On other side, Islamic banks are found more inclined

towards Health, Arts and Culture, Water purification, Special person, Relief &

Disaster recovery & Social welfare. However both modes of banks are found mostly

inclined towards philanthropic perspective. The primary data collected through survey

from bank customers and employees and was tested through STATA. The finding of

Regression analysis reveals that conventional banks were actively investing in

dimensions like Human rights, fair labor practices, ethical conduct and community

development initiatives. Almost similar findings were also found in Islamic banks. The

results indicated that there is a significant relationship between CSR and organization

performance in the context of customer satisfaction and employee performance.

However, there is a need to develop a standard and comprehensive CSR

framework for both banks regarding CSR practices in Pakistan.

Key words: Corporate Social Responsibility, conventional and Islamic banks,

Human rights, Fair labor practices, code of ethics, environment

protection, community development

Islamic Concept and Corporate Social Responsibility in Banking Sector of Pakistan: Comparative Analysis

1

Chapter One

Introduction

1.1 Overview

This chapter provides information about the background of CSR in the context of

Western and Islamic perspective for business organizations. The purpose of research,

scope of research, research problem, and objectives of research, limitations and other

operational definitions used in study are defined for conceptual understanding.

1.2 Background of Study

The contextual nature of Corporate Social Responsibility (CSR) in western world is

progressing but still in infancy stage in developing economies like Pakistan. CSR

includes social, economic, ethical and philanthropic responsibilities (Carroll, 1979).

The phenomena of CSR is to provide good governance, employee‘s rights, education

and training, customer satisfaction, environment protection, charitable activities to

attain sustainability in the market and other relevant dimensions for organization

success(Ali et al., 2010).The importance of research in CSR is recognized in both

developed as well as in developing countries.

A traditional view of business organizations is to earn profit and show responsibility to

its owners and shareholders. According to Drucker (1986) the primary obligation of

business organizations is to make enough profit and to stabilize business operations for

better growth and customer satisfaction. Furthermore, he strive managers to see the

responsibilities of business and to turn social problems into economic benefits and

opportunities, human competence, efficient production that generate wealth for

organization. In addition, organizations are liable to follow legality of state and fair

returns to investors. However, in contemporary world, due to emergence and

exploration of CSR concept in business organizations the traditional bear curacy and

focus of organizations are shifted towards to value maximization of all stakeholders

(Freeman, 1984). It includes broader view of its responsibilities including employees,

managers, suppliers, customers, distributors, local and general community,

environment, government, interest groups along with shareholders.


2

Keeping in view the material means, the individual social responsibility of every

member of society is to perform his duties that cannot affect his surrounding

environment. Every individual that belongs to any culture can make small contribution

to society. It may be cost saving, optimal utilization of resources or charity. To serve

the planet in individual capacity every human show certain level of commitment and do

benefit for society at large. To advance the social goals there is shift from individual

responsibility towards to corporate social responsibility. It is the commitment of

business to behave ethically, building the culture of work life balance that contributes

towards to economic development and improving life of local community. It helps to

create better positioning and positive image of the organization. CSR are the

organizations actions and procedures that affect the society.

The issue of CSR is addressed in different ways by various authors in developed

economy (Friedman 1970; Freeman 1984; Carroll 1991). In corporate calculus, writers

like (Friedman, 1970) belief that CSR implication for business organizations is an extra

cost, pushing down the incentives of employees, consumers and environment. The

primary obligation of organizations is to maximize profits along with shareholder

wealth and improve market share (Friedman, 1970). It can be done by introducing

market oriented products for customer satisfaction, building trust and improve

corporate image that lead organization to increase its market share. In addition, Internal

and other connected stakeholders like shareholders argue that CSR expenditure is

burden on organization profitability and effects in negative consequences on financial

performance of organization (Jensen, M.C., 2001).It‘s not business organizations that

are responsible to solve society problems; basically it‘s the government duty to address

the issues of society (Haynes, 2007).Due to involvement in CSR activities, the

expectation of society from every organization beyond product and services are also

increasing. Scholars like (Bhattacharyya, 2008), argued that it will very difficult for

organizations to answer every problem of society and meet there diverse expectations

that they demand from organizations. Moreover, in the context of Agency problem

many organization managers initiate CSR programs to catch their personal goals at the

expense of shareholders interest (Adhikari, 2016).However, the issues can be resolved

by developing harmonious relationships through increased communication and


3

coordination between managers, shareholders and other stakeholders (Dibella and

Woodilla, 2006).

In competitive and dynamic businesses, CSR is an integral part of the business

organizations. Every culture demands responsible business practices. Responsible

organizations act in broad interest of society and gain profit, keeping in view legal

responsibilities, ethical dealings to become a good corporate citizen (Carroll, 1991).

The advancement in IT and other innovation in business conduct activities,

organizations are not only accountable to share holder but also to the stake holders such

as suppliers, consumers, employees and community etc. In line of Stakeholder theory,

CSR activities have many aspects for organization effectiveness and better

performance. Organization‘s obligation is not only to earn profits but to satisfy the

needs of maximum stakeholders (Freeman‗s, 1984). In addition, Carroll (1991)

introduced four characteristics of CSR i.e. economic, legal, ethical and discretionary

CSR. She was also in agreement with the view of (Friedman, 1984) to maximize wealth

of shareholders. She further added economic responsibilities in context of CSR along

with profit maximization. She also clarified that organization economic responsibilities

are based on fulfilling legal responsibilities to meet diverse stakeholder needs. This

view of stakeholder satisfaction was also supported by Freeman (1984). Moreover,

organizations depend on society for continuous success and behave in ethical way to

various stakeholders. Furthermore, to improve infrastructure of community,

organizations tend to highly practice philanthropic activities as CSR manifestation. In

addition, the globe is facing various overwhelming perils like economic growth,

scarcity, unemployment, food shortage, flawed education, drought, environment

pollution, injustice, corruption, and human rights violations (Zadek, 2001; Rischard,

2002; Schrecker, 2014).

Many multinationals companies are adopting United Nations Global Compact (UNGC)

in their CSR plans. In 2003, United Nations Global Compact (UNGC) laid down 10

principles in context of CSR. These principles are divided into 4 key dimensions. The

Human Rights area focus on inclusion and support of internationally proclaimed human

rights in organization culture. In the area of Labor standards, business organizations

eliminate discrimination, abolition of child labour and uphold freedom of association

for effective collective bargaining. To protect the Environment by adopting


4

precautionary measures through environment friendly technologies is 3rd

dimension of

UNGC. Business organizations should work against corruption in all forms of dealings

and transactions in last area of UNGC. It reveals that the scope and practices of CSR

are escalating day by day due to awareness, communication technologies and increase

knowledge of customers, employees and other business stakeholders. The underlying

phenomena behind CSR is that both business and society are interdependent with each

other and could not operate in isolation therefore business organizations are obliged to

care and deliver mutual benefit to community (Jan, 2012).

In the light of above discussion regarding CSR, two concepts evolved. Writers like,

Friedman (1984) belief that CSR is an extra cost and detract organization primarily

responsibility of profit making. Another concept that favors CSR and belief that it will

benefit stakeholders (Freeman, 1984) and build image of responsible organization in

society through economic, ethical, legal and philanthropic activities (Carroll, 1991).In

addition, UNGC, also added 10 principles to support the framework of CSR.

The social phenomenon of every country differs from other. It will also affect

organization business culture and practices. In addition, the notion of CSR seems to be

slow, unsustainable and at its emerging stage in Pakistan and most of the organizations

merely focused on only Philanthropic aspect of CSR (Yunis, Durrani, Khan, 2017).

Due to poverty, lack of knowledge, weak infrastructure, inadequate government

policies, corruption in developing country like Pakistan demand the implementation of

CSR from different national and multinational organizations beyond their profitability

(Durrani, 2016). It includes business sectors like banking, textile, food, electronics,

education, health, cement etc. This increases competitiveness and customer

expectations from business organizations to show responsible behavior and fulfill other

stakes of maximum stakeholders.

Moreover, dynamics of business demand executives to display socially responsible

practices and give superior value to general public and other stakeholders. Corporate

Social Responsibility is one such niche area that brings synergy between organizational

performance, growth and development in social, economic and environmental

dimension of human life. In Pakistan, due to awareness and competition, beyond

economic gains many entrepreneurs now are paying special attention to social aspects


5

in order to establish strong social bond. In addition, to promote national sustainable

plans Pakistan signed Agenda-21in 1992. It consists of four sections. The section 1 is

about fighting poverty in developing countries including health improvement,

consumption patterns, sustainable population and settlement. The 2nd

section deals with

management and saving of environment that includes control of pollution, biodiversity,

deforestation, biotechnology. The 3rd

section focuses on strengthening the rights of

children and the role of indigenous peoples, their communities and farmers. The last

section is about means for implication of science and technology, education and other

sources of knowledge.

However, Pakistan is facing serious challenges in achievement of sustainable

development goals. It includes poverty alleviation, climate change adaptation, gender

empowerment, health and education, utilizing natural resource sustainability. It all

requires good governance, support from government and initiations from business

community to integrate economic, social and environmental sustainability.

Most of the corporate culture of corporations in Pakistan is highly western and

following generic approaches. Therefore researchers are encouraged to work on social

responsibility in developing countries, but their approach is mostly on western cultural

based and following western notion of CSR (Jamali 2007). Furthermore, the investment

of MNC‘s in Pakistan encourages CSR initiatives under co operations with government

to solve different societal and environmental problems. This changing business culture

and increase competition due to investment of Multinational companies MNC‘s in the

developing countries demands superior values and responsible behavior from almost all

organizations. Ensuring debate and discussion, confusion is created among

entrepreneurs. At one side, some writers favor CSR and on other side arguments negate

CSR practices by claiming it as an extra burden. The question emerge that, either CSR

practices will improve organization performance or not. To answer this question, there

is a need to carry a research study in Pakistani culture context and to determine the

linkage of CSR practices with organization performance.

However, it has been observed that, over the years Islamic values business system

revivals in Pakistan. Almost 98% of population are Muslims and follow Islam as a

religion. They prefer socio economic practices of business organizations to be in


6

accordance with injunctions of Shariah‘ which governed through Al- Quran and

Sunnah (Ahmad, et al., 2002). Different Islamic Financial Institutions (IFI) is operating

in Pakistan. It includes Islamic banking, Islamic Insurance, Islamic trade activities and

other Islamic based products and services. It depicts that Islam based Institutions are

regularizing at rapid pace in Pakistan. There are some things and dealings in Islam that

permit (Halal) and some are non-permit (Haram). Muslims businessmen have to look

and practice their business transactions and dealings under these constraints.

Mohammad (2007) mentioned Halal practices in Islamic CSR framework as legitimate

earning, fair treatment, fullfing obligations, truthfulness, trustworthiness and Haram

practices are Interest (Riba) fixing prices, hoarding, exploitation, cheating and fraud.

Islamic organizations gain financial success at the expense of moral ethical conduct is

consider as unsuccessful (Mohammed, 2007). Islam states that businessman should also

look the poor people of the community and look for good deeds rather than totally

focuses their energy on material wealth. It also provides and teaches the lesson of

kindness and compassion that mostly ignored in western concept of CSR. It heavy

emphasize that Muslim entrepreneurs do their public dealings lawfully and their good

deeds remains highest standing in the sight of Allah (SWT). Furthermore the divine

principles of Islam provide best guidelines for organizations regarding CSR. The

concept of moral ethics in Islam has been underpinned 1400 years ago. According to

(Chapra, 1992) the concept of social responsibility is definitely embedded in the

Islamic area of knowledge. Dusuki (2008) and Farook (2007) present Islamic CSR

models that outline in detail the scope and limits of CSR practices and their

implementation in business world. From the above discussions it manifest that Islam

sets clear set of standards for not only how to govern life but also governance of

business dealings their decision makings towards customers, community, employees,

community and other business stakeholders.

In Pakistan, the demand of CSR in banking sector is increasing day by day (Gustafson.

2006). It promotes prosperity and establishes positive relationship of bank with society

(Durrani, 2016). The concept of CSR educates managers to make decisions keeping in

align to deliver maximum concerns of society (Ajala, 2005). CSR shows the link of

banks with the society (Akinloye, 2009). CSR consists of social, economic, ethical and

free of restriction responsibilities (Carroll, 1979).


7

Despite being one of the potent Islamic business sectors emerging in Pakistan, the

current research study deals with phenomena of CSR in developing country like

Pakistan. The question emerge that; what sort of CSR practices Islamic Financial

Institutions or Islamic Banking Institutions are adopting in Pakistani business culture.

Either western CSR is emerging in IFI or they implementing Islamic CSR (ICSR)

framework. The both mode of banks operating in Pakistan are influenced by similar

factors or different factors of CSR. The indulgence of CSR is affecting banking

organization performance or not. These worth mentioning lapses are required to study

in this research.

1.3 Statement of Problem

The research investigates the relationship between prevalent level of CSR practices and

Organizational performance of banks in context of customer satisfaction and employee

performance. The research also focused on drawing comparison between the

effectiveness of CSR in Islamic and conventional banks.

1.4 Research Objectives

To describe the features of Islamic philosophy of CSR as enshrined in

Islamic sources of knowledge.

To describe the prevailing concepts of contemporary CSR as evolved in the

Western culture.

To investigate CSR practices in Islamic and Conventional banks of Pakistan

through stakeholder perception.

To test the relationship between the CSR practices and banks performance.

To draw a comparison between the CSR outcomes of Islamic and

Conventional banks.

1.5 Scope of Research

The study is conducted to differentiate Islamic and Western concept of CSR. The scope

of study is to compare social practices of Islamic and Conventional banks in KPK,

Peshawar, Pakistan. In present research top 3 banks are selected based on the published

report of State bank of Pakistan 2012. Initially secondary data from websites and


8

annual reports (2013-2016) are taken. To verify secondary data, questionnaires are

developed, individually for both mode of banking sector operating their CSR practices.

The area of study includes knowledge and perception of customers and employees

(bankers) regarding Islamic and western CSR. Different CSR measures are included as

independent variables based on UN Global Compact that consist of Human rights (HR),

fair labor practices (FLP), ethical conduct (EC), community development initiatives

(CDI) and environment protection (EP). To measure their effects, Organization

performance (OP) is taken as dependent variable in the context of customers‘

satisfaction and employee performance. In comparison efforts have been made to

disclose western CSR theories, principles and concepts that change time to time.

1.6 Limitations of Study

The current study has few limitations due to its nature, availability and knowledge of

Arabic language.

• The base of study that is conducted in Islamic culture like both mode of banks

are working in Pakistan.

• The level of knowledge of respondents and study is based on limited national

banks and the availability of time, interest and resources.

1.7 Operational Definitions of Concepts and Terms

There are some useful terms and concepts used in the research. The definitions of the

key terminologies used in this research are defined below:

1.7.1 Corporate Social Responsibility

CSR refers to an idea that an organization is sensitive to the needs and wants of all

stakeholders. It includes following principles:

a. Planet: It refers to protection of environment from any goods and service that

design by organization must fulfill ethical, legal and environment obligations.

Organizations are responsible protect and clean the planet by lean production

and other optimal utilization.


9

b. People: it consists of any human resource that is directly and indirectly engages

with organization activities and everyone is entitled from mix benefits of

organization. It includes people like, suppliers, employees and other business

partners.

c. Places: it is social obligation of organization to take initiatives in philanthropic

aspects for its local community in which it trades.

1.7.2 Islamic Corporate Social Responsibility

Islamic Corporate Social Responsibility (ICSR) is rooted in Al-Qur‟an and employing

Sunnah of the holy Prophet Mohammed (PBUH). Business organizations are stewards

(caretakers) not only for its shareholders but also for the benefit of society and ultimate

attaining blessings from Allah SWT. It instill organizations to implement good CSR

practices by embracing issues like philanthropy contributions, environment

management, occupational safety, harmless activities and other social benefits. Failure

to do so, will attend consequences in this world and life hereafter.

1.7.3 Stakeholders

It can be any individual or group who are interested in organizations activities and is

affected or affects from organizations actions. It can be categorized as: Internal,

connected and external stakeholders. Responsible organizations understand their needs

and expectations in order to meet their objectives and social obligations. Failure to meet

stakeholder needs may result in distress which could be disastrous for the organization.

1.7.4 Carroll Model

The social responsibility of any organization is the collection of economic, legal,

ethical and philanthropic expectations of local and general community. It allocates

organization attention towards profitability, obeying the legal parameters of state and

religion, obligation towards right and wrong and contribution to community

development.


10

1.7.5 UN Global Compact

United Nations Global Compact (UNGC) includes 10 principles divided into 4 key

dimensions in context of CSR. The Human Rights area focus on inclusion and support

of internationally proclaimed human rights in organization culture. In the area of Labor

standards, business organizations should eliminate discrimination, abolition of child

labour and uphold freedom of association for effective collective bargaining. To protect

the Environment by adopting precautionary measures through environment friendly

technologies is 3rd

dimension of UNGC. Business organizations should work against

corruption in all forms of dealings and transactions in last area of UNGC.

1.7.5.1 Human Rights

According to UNGC (2012) rights of freedom and rights of equality that are acceptable

and implemented worldwide to protect and recognition of human existence. The

declaration of United Nations of Human rights, all human are born free and have equal

rights and no distinction between them on basis on race, color, sex and origin. Islamic

also promotes freedom of human rights i.e. freewill (Ikthiar) but under the parameters

of Halal (lawful) and Haram (Unlawful). Mohammad (2007) in his study showed the

Halal practices as legitimate earning, fair treatment, fulfilling obligations, truthfulness,

trustworthiness, mutual consent. The other Haram practices are Interest, dealing in

prohibited item, fixing price, hoarding, exploitation, cheating and fraud, sale of un-

certainty.

1.7.5.2 Ethical conduct

Ethics is the system of moral principles that examine the concept of right or wrong.

Business ethics is the application of ethical values to business behavior. Stakeholder

theory also deals with principles and values to manage the organization in the context

of business ethics (Freeman, 2002 & Phillips, 2003).The concept of moral ethics and

social responsibility has been underpinned in Islam for over 1400 years ago, The

source of Islamic ethic concept is derived from faith in Unity (Towhid) as Unity for

humankind (Mohammad 2007). The ethical conduct in contemporary CSR issues

include, Objectivity, Integrity, professional competence and confidentiality.


11

1.7.5.3 Community development

It refers to local habitat of society that is connected stakeholders of organization. They

often engage in day-to –day transactions with organizations. There economic, social,

cultural, environmental and philanthropic activities are mostly agreed and depend with

organization exchanges. Therefore responsible organizational practices are required

with local communities for better value and other philanthropic purposes. Most of the

organizations obligations for local community development required initiations like

educational scholarships, medical camps, green belts, plantation of trees, clean water,

hygienic environment, vocational training, woman empowerment and other programs

like sports events along with charity and religious events.

1.7.5.4 Environment protection

Environment management is another important stakeholder for contemporary

organizations. The supply chain of organization is depending with environment

exchanges. Responsible organization practices demand technological advancement,

eco-friendly practices, waste management, pollution control and green marketing that

can least damage the environment. Other initiatives include employee training,

scientific methodology, community awareness, energy efficiency and other measures

are needed by adopting environmental protection laws. It will bring sustainable

business practices and also protect our future generations from health and other scarcity

issues.

1.7.6 Friedman Approach

The only social responsibility of business is to earn profit keeping in view legal

framework of state without deception and fraud. In 1970, Milton Friedman, agreed to

utilize organization resources for maximum wealth generation to organization.

1.7.7 Triple Bottom Line

It culminates CSR into the combination of three different areas in scope and

implementation. It includes 3 P‘s that provides the base of CSR for any contextual

organization. People refer to habitat of particular society, Planet belongs to


12

environment that is pure and natural, and Profit is the reward of the optimal utilization

(Agarwal, 2008).

1.7.8 Sustainability

It refers to the concept of fulfilling the requirements of present age group without

compromising the rights of future people to gather their personal needs (Todaro and

Smith 2006). There are three interconnected layers of sustainability. It includes social,

economic and environment aspects of the world. Islamic teachings also provide divine

knowledge to humanity regarding sustainable practices to get ultimate rewards for

future generations and life hereafter.

1.7.8.1 Social Sustainability

The decisions of organizations for growth and development may be in alignment with

society and local community betterment. In general, the initiatives taken by

organizations may not compromise the stake of future generations and they may also

take same benefits accordingly with current society. It also includes human rights,

environmental law, public involvement and other legislations.

1.7.8.2 Economical Sustainability

It involves creating economic value by utilizing optimal resources keeping

sustainability aspects. To provide greater good to society organizations take equitable

decisions along with its fiscal parameters. It is the combination of social and

environment sustainability for greater good to humanity.

1.7.8.3 Environmental Sustainability

It includes the proper management of environmental resources and mitigation of

harmful activities at practical extent to maintain balance between nature and habitat. An

ecosystem contains pressure of population, the functionality and demand of consumers

and practices of business organizations. It disturbs the natural balance and seeks to

encourage positive growth and development.


13

1.7.9 Agenda 21

It is an action plan describes the ways to countries arrive in 21st century. It consists of 4

sections. The section 1 is about fighting poverty in developing countries including

health improvement, consumption patterns, sustainable population and settlement. The

2nd

section deals with management and saving of environment that includes control of

pollution, biodiversity, deforestation, biotechnology. The 3rd

section focuses on

strengthening the rights of children and the role of indigenous peoples, their

communities and farmers. The last section is about means for implication of science

and technology, education and other sources of knowledge.

1.7.10 Corporate Governance

It can be the system by which organizations are directed, administered and controlled.

It includes organizations Board of Directors that consists of executive and non-

executive directors. It also involves set of relationships between organizations

management, shareholders and other stakeholders. Corporate governance provides

platform to the organizations objective and strategies for attaining those objectives

along with monitoring performance.

1.7.11 Organization performance

Organization performance is a continuous process of meeting and exceeding the

established objectives. Corporate Social practices of organizations have vital role and

effect on organization performance. Hence CSR can affect organization customer

satisfaction, employee performance or other performance both directly and indirectly

through different integration strategies (Lev, et al., 2011). Like other factors, customer

satisfaction and employee performance have significant role on organization

performance, because customer satisfaction generates revenue and employee

performance create and deliver superior quality and value to achieve organization

objectives. This research is focus to determine impact of CSR on organization

performance with aspect of customer and employee satisfaction.


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1.7.11.1 Employee performance

It refers to workforce required for productive and quality output in the organization.

Employee performance can be determined by three factors in this study. These are

employee commitment, employee involvement and support and resources consist of

training and development, reward system and other benefits.

1.7.11.2 Customer Satisfaction

Customer satisfaction is the extent of attachment, superior value by fulfilling and

meeting their hopes and demands (Guzzo, 2010). To determine effect of CSR practices

and customer satisfaction in banks three different factors chosen in this study. It

includes branch availability, service quality, prices and fee.


15

1.8 Organization of Dissertation

The research dissertation is comprised into six chapters as follow:

Corporate Social Responsibility Organization Performance

CSR Process CSR Outcome

Fig. 2.2 Model of Research for Islamic and Western Corporate Social

Responsibility

H1

H2

H3

H4

H5

H6

H7

H8

H9 H10

CSR Practices

Human Rights

Fair Labor Practices

Code of Ethics

Environmental

Protection

Community

development

Initiatives

Employees Performance

Commitment

Involvement

Training andDevelopment

Reward system

CustomersSatisfaction

ProductAvailability

Service quality

Prices and fee

Organizational

Performance


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1. Chapter one introduction of the research:

This chapter includes Introduction, CSR in Pakistan, purpose of research, scope

of research, the research problem, research objectives, concepts and definitions

along with concept of CSR.

2. Chapter two Literature Review:

It includes a detailed review that consists of CSR definitions, Theories

underpinning CSR, Islamic concept of CSR, Factors encompasses CSR,

organization performance and CSR, conceptual framework and hypothesis

development.

3. Chapter three Research Methodology:

Chapter three describes the details of the research methodology followed during

the conduct of this research. The chapter includes research design and research

methods, accessible population, sample size, data collection plan, tools of data

analysis, reliability test etc.

4. Chapter four Data Collection and Analysis

It presents comparative analysis and findings of CSR practices between

Conventional & Islamic banks through collection and interpretation of primary

and secondary data. It also includes regression analysis of all Conventional and

Islamic banks for hypothesis testing and findings.

5. Chapter five findings, conclusions of research

Chapter five unfolds findings of the research arrived after the analyses of the

data. It also suggests measures/ strategies to the banking organizations both

Islamic and conventional for adoption of CSR in its true perspective.


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Chapter Two

Literature Review

2.1 Introduction

This chapter discusses the concept of Corporate Social Responsibility (CSR), its

evolution and various evolving CSR theories as advance in the literature in

contemporary business world. The research review also explores the concept of CSR as

embedded in Islamic parameters laid down in the Shariah. This chapter attempts to

determine theoretical differences between both Islamic and Western perspective of

CSR. The researcher also investigates the factors to measure CSR with reference to

their organization performance. This chapter ends with hypothesis development and

conceptual framework for current study.

2.2 Western Approach: CSR Concept, Definition and Evolution

Corporate Social Responsibility or CSR has discussed by many scholars in the early

twentieth century due to differences in cultural background, motivation behind CSR

and other differences between scholar‘s objectives, motives and discipline to define

CSR. There are many definitions of Corporate Social Responsibility.

To define CSR broadly it is concerned with the establishment of relationship between

international business organizations, governments of countries and individual citizens

of particular habitat. More locally the concept of CSR is concerned with relationship

between organizations and its local society in which it operates. The dynamic and smart

business organizations perceive increase involvement of the stakeholders as ―the

essence of CSR‖. In contemporary business world CSR is considered to be an

important tool and recognized as growing area and create strategic value for

organizations to its customers and other business stakeholders.

The initiation of earlier CSR can be traced back to Ancient Mesopotamia around 1700

BC, where King Hammurabi devise code of conducts in which architecture, innkeeper

or farmers were given punishments and even put to death if their negligence caused the

loss or deaths of others, or major problem to local community. Scholars like (Eberstadt,

2006) claims in his study that the roots of social responsibility were originated and


18

linked with ancient Greece. In the early 18th

century Adam Smith the classical

economist stress on the achievement of personnel objectives and self-interest of

business that will ultimately ended by meeting the interest of public and society at

large. The 2nd

half of 20th

century was the progressive time period for CSR and the

concepts of CSR rapidly changing within both academic and in practice of business

management literature (Kolk, 2016). Beyond economic gains, the continuous debate

and involvement of entrepreneurs encouraged different organizations to introduce

ethical practices and initiate some social practices in order to serve society (White &

Montgomery, 1980; Lewin, 1983). However the evolvement of CSR concept was slow,

reluctant at its emerging stage of development. In present corporate responsibility

movement efforts are made to restore a 2000 year old tradition that business activities

are being interlinked with community. CSR include all those responsibilities that all

local, multinational business organizations owe towards the betterment of local and

general community. These responsibilities include ethical, philanthropic and other

development activities merely focus on environment, community development so on

and so forth.

With advancement in technology, globalization, increase knowledge and awareness of

customers demand contemporary business organizations to initiate different CSR

programs and be smart enough for fulfilling different interests of multiple stakeholders.

The emergence of social media and other telecommunication technologies helps the

customers and stakeholders to be more informed, better organized and more demanding

for claiming their stakes from organizations. It demands organization managers have to

be visionary and continuously monitor organization environment and take actions to

make relationships with such strategies for meeting its social objectives. Other

managerial obligations besides operative measures are the requirements of business

ethics, quality control, and environment friendly from stakeholders for sustainability

and continuity. To retain long term relationship with stakeholders organizations are

required to show responsible behavior and apply some CSR traits according to demand

of stakeholders as a key determinant for acceptance, recognition and long term

performance (Carroll & Shabana, 2010). The introduction of CSR must be directly

aligned with organization core business and strategies and build the organization for

renewal, expansion and adaptation of new competencies on continuous basis

(Marrewijk, 2003).The intensive debate and organizations inclination towards CSR


19

gave birth to variety of definitions as evolved in literature periodically. The table 2.1

below provides an overview of changing CSR definitions.

Table 2.1 CSR Concepts and Definitions

Author(s) Definition Drucker (1942) Business organizations primary purpose is to earn profit, but this can only be achieved through

adaptation of customer satisfaction that is external social dimension. Therefore social health

and customer care is one important corporate responsibility beyond economic gains for

corporation.

Drucker (1946) Managers should determine what they should do, and what goals in each area should be. There

should be harmony between company‘s objectives, employee objective and accordingly with

the objective of state. Each objective is interdependent among each other by fulfilling society

demand and wishes, while gaining economic contributions. Therefore, corporations are

responsible to care people resource and educate them by better training and development,

recognition and consider it as important asset not cost. The ruling government is responsible to

devise policy to maintain balance between economic benefits and social contribution.

Bowen(1953) ―Business organizations are obliged to formulate such values and strategies that must

be in alignment with society values and cultural system.‖ Davis(1960) ―business organizations culture, system, objectives and policies must be desirable, beneficial and

adjustable to the society in which it do transactions and exchange‖

McGuire(1963) ―Beyond economic and legal responsibilities, businesses organizations also need

to display other social responsible behaviors merely focus on environment,

community development so on and so forth‖. Walton(1967) ―Organizations top level managers kept social responsible actions and phenomena on

organization vision and mission for better perusal and actions‖

Friedman (1970) ―The only social responsibility is to do business transactions truly and fairly, allocate and utilize

organization resources for wealth generation and profit maximization of business to gain

competitive advantage‖

Frederick(1978)

―Organization understand social pressures by listening post and continuous involvement with

society and respond them accordingly‖

Carroll(1979) ―By conducting business operations in their premises and distinctive culture, business

organizations are bound to display economic, legal, ethical and philanthropic responsibilities as

social responsible behavior‖

Bradshaw and Vogal

(1981)

There are three main pillars for corporate social performance of large organizations:

policy, philanthropy and responsibility.

Freeman (1984) ―Organization CSR basically understanding there stakeholders‘ and what

organization do or take actions to fulfill their stakes‖.

Frederick (1986) ―The core purpose of CSR for business organizations is for betterment of society‖.

Epstein (1987) The societal obligations of business organizations are to earn normal profits, keeping

in view ethical gains for their investors and other shareholders.

Wood(1991) ―There is stringent relationship of business organization principles, inputs, process, policies,

procedures and outcomes to be social responsive as the chain relate to organization societal

relationships‖.

Spielman (2000) CSR have two streams of responsible and irresponsible behavior. In 1st stream organization work

for economic benefit of employees while 2nd

stream organization work against legality and cause

damage to society and itself.

McWilliams and

Siegel (2001)

―Organization social actions are the requirement of law, beyond the interest of

organization i.e. economic gain.‖

Garriga and Melé

(2004)

They classify CSR into 4 categories: Instrumental CSR (profit earning), Political CSR

(organization participation in social co-operations), Integrative CSR (adopting cultural

values), Ethical CSR (doing right things).

Campbell ( 2006) ―Organization are liable to do two things in the context of CSR: At first their

actions do not harm society and at second if they do so, then they must rectify it to

society and inform them for any potential loss‖

Dahlsrud (2008) CSR to organization are divided into five dimensions:(i) social, (ii) environmental,

(iii) voluntariness, (iv) economics and (v) stakeholder.


20

ISO 26000 (2010) ―Social responsibility is the responsibility of an organization and the impacts of its

decisions and activities on society including environment, through clear and ethical

behavior.‖

UNGC (2013) It defines CSR into 4 groups that are divided into 10 principles. It includes Human

Rights, Labor standards, Environment and Anti corruption.

The work of different scholars will contribute in different ways to explore the concept

of CSR. Most of the early literature regarding CSR was contributed by US and

European scholars and explore the concept of CSR (Hamid et al, 2007). Historically,

the formal recognition of CSR was accepted in the era of 1950‘s. At that era, CSR was

referred to more as social responsibility and in 1950‘s most of the corporations were

involved in Philanthropic activities through charity donations (Carroll, 2008).

To explore the concept of CSR the initial work done in literature is marked with

publication by Bowen (1953) in his book ‗Social Responsibilities of Businessman‘. He

defined Social Responsibility of business as, the businessman are required to formulate

polices and make decisions for implementation that are aligned with achievement of

organization objectives and deliver superior values for betterment of society. According

to him, entrepreneurs take social responsibility as an obligation for business practices

and take it as important resource for successful business.

According to (Carroll, 1999) the effort to define CSR grew significantly and the

concept become more formal, precise and broad in the 1960s. In this era many scholars

like Keith Davies (1960), William C. Friedrick (1960) and Clareance Walson (1967)

make contribution to strength the foundation and make further development in CSR

models and concepts. For example, Davis (1960) defined CSR as, relationship between

corporations and society and actions that entrepreneur takes or decisions they made

keeping in mind such relations for reasons other than their economic or technical

benefits.

There has been different point of view for and against the idea of social responsibility

(Davis, 1973). It can be argued by many people according to their own point of view

(Davis, 1960; Votaw, 1972). Depending on who utilize the concept, how CSR could

represent by organization, legal responsibility or liability, social responsible behavior in

the ethical sense, charitable contribution, socially awareness, legitimacy in the context


21

of belonging or duty commanding higher standards of behavior on business persons

than on citizens at large (Votaw, 1972).

Similarly Friedman (1970) advocate the same concept that there is only one social

responsibility of business is to utilize its business resources and increase their

organizations profits without deceiving or doing fraudulent activities. He added that

corporations have no responsibility and is legally established to make profits for their

shareholders or owners.

However, others writers argued that corporation has many responsibilities to their

stakeholders and derive from moral and ethical principles (Freeman, 1984). The most

important concept that promotes CSR in west literature was the introduction of

stakeholder theory in 1980‘s. The concept of stakeholder was introduced in 1963, at

Stanford Research Institute (Mele, 2008) but Freeman in 1984 in his book promotes the

concept of Stakeholder into business enterprise. Stakeholder is an individual or group

who has an interest in what the organization does or who affect or can be affected by

the organizations actions. The theory of Freeman focuses on implementation of moral

and ethical values in managing organizations and stress on social responsibilities for

organization success. He contends that managers have clear vision and must understand

their business mission and objectives to cater the needs of stakeholders. Since then

many scholars utilize the stakeholder approach according to their own knowledge,

perception and cultural context. The table 2.2 below shows arguments for and against

CSR.

Table 2.2 Opinions for and Against CSR

# Opinions Far CSR Opinions Against CSR

1 Organization CSR is a powerful

means to fight for human rights,

because organizations are powerful

entities having pool of resources.

CSR programs are mostly fake and its

only schemes for cash and not truly

helping people.

2 CSR programs bring trust, faith,

image, and loyalty with customers

and better positioning.

Many consumers are wary from CSR

actions. Organizations are asking money

from customers in forms of donations to

help poor‘s and the actually money does

not come from business.

3 Business organizations are

interwoven with society and use their

resources for best interest of society.

Business is an economic activity to

generate wealth and profit without

deception and fraud.


22

4 Business managers have more

professional knowledge and ability

to cater needs of society. i.e. people,

planet and place

Professional managers have no aptitude to

solve societal problems.

5. It is ethical responsibility of business

to solve society problems because its

corporations that cause pollution and

poverty level wages.

It will raise cost to business if they solve

problems of society, its government

liability to cater the needs of people.

In current CSR literature Archie B. Carroll introduced four characteristics in the

definition of CSR:

(1) Economic responsibility, suggests that a corporations has responsibility to

maximize profits. Economic responsibilities further create employment

opportunities, generate investment, develop and transfer new research and

technology and produce safe products and services (Nelson, 2003).

(2) Legal responsibility, indicating that corporations has obligation to bind within

the law. It‘s also important FR corporations to comply with other legal

responsibilities such as employee welfare, consumer protections laws, pollution

control and tax payment.

(3) Ethical responsibility, means behaving corporations in ethical way; to various

stakeholders, even it is not a legal requirement. In this theory the basic

argument is that organization depends on society for its continuity and growth

and for the existence of business itself.

(4) Discretionary responsibility, refer to corporation involvement by supporting

charity activities, helping poor and improvement in infrastructure. This

responsibility was modified by Carroll (2004) and renamed as ‗Philanthropy‘. It

was observed that Philanthropic activity tend to highly practiced as CSR

manifestation (Arora and Puranik, 2004; Ahmad, 2006; Amaeshi et al., 2006).

The literature showed that very few concepts and definitions regarding CSR come

forward in the 1980s and 1990s (Carroll, 1999). In the time frame of 1990s some other

alternative concepts regarding CSR emerged like, corporate citizenship, corporate

social performance, stakeholder theory, and business ethic theory (Carroll, 1999).

In continuation for the defining CSR, different writers reduce their conceptual themes

in 1980‘s regarding CSR yet have very little contribution in this time period. Different


23

studies were interlinked with various themes with concept of public policy, corporate

social responsiveness to expand the core idea of CSR. Jones (1980) in his study defines

the role of CSR in both formulations as well as in implementation of objectives,

broadening the scope of CSR from conceptualization to practical grounds. However

Frederick (1986) emphasized that, the core purpose of CSR for business organizations

to utilize CSR for the betterment of society. Furthermore in this 1980 era urge business

entrepreneurs to be more social responsible and make CSR as an obligation for the

betterment of society.

According to Wood (1991), business activities and society are interlinked with each

other. Each culture of particular society has many expectations from local business,

respective to any size operating in territory. It manifest into three principles of CSR:

legitimacy, public responsibility, managerial discretion. In legitimacy principle of CSR,

society grants power to local organization and expects that institution are obliged to

utilize society power for their improvement and development. In case of public

responsibility, every organization is responsible to solve the problems of society as they

create by utilizing resources and delivering output. The last principle focuses on

managerial discretion and ability to take decisions and actions to achieve social

responsible outcomes.

Desjardins (1998) categorize CSR ideologies into three kinds that are meaningful for

organization practice. These ideologies are:

Owner focused ideology

Stakeholder Ideology

Broad responsibility Ideology

The first Owner focused ideology has the roots similar to classical ideology. In this

ideology, organizations primary concern is to maximize the wealth of shareholders and

financial reputation of the company (Desjardins 1998). The second stakeholder

ideology is more comparable to neoclassical ideology. It describes that every

organization is responsible for their stakeholders that include primary and secondary

stakeholder and works for the maximum benefit to satisfy them. The third Broad

responsibility ideology includes an integration process of economic, legal, socio-


24

cultural, socio political and ecological responsibilities in which every level include

activities toward society, humanity and environment (Desjardins 1998).

However, Spielman (2000) works on ideology of CSR and differentiates CSR into two

categories of responsible and irresponsible behavior of the organization. He argue that

in case of responsible behavior an organization works on economic benefit of

employees, develops involvement and trust building culture to develop and retain

employees and motivate them for better production and delivering maximum value to

customer. Collective culture in organization builds synergy and work best for the

interest of general public and sustainability. While, in irresponsible business behavior

are those actions or means that are against compliance, unethical practices, fraudulent

behavior, deceptive approaches and cause serious damage to consumers, general public,

environment and organization itself (Spielman 2000).

The work of Garriga and Melé (2004) extended the theoretical role of CSR and

classified it in four categories as:

(i) Instrumental theories articulate that the major objective of the business

that expect and produce long-term return. It shows that CSR are only

means to earn profits.

(ii) Political theories insist organization to utilize their power that is

adjustable and acceptable to the society. It means that companies have

to accept social duties and rights or to participate in certain social co-

operations.

(iii) Integrative theories stress on adaptation and utilization of cultural

values in business activities, and

(iv) Ethical theories communicate the message to society to do right things

for nourishing a developed and better society. This leads to a vision of

CSR from an ethical viewpoint and, consequently, organizations ought

to recognize social responsibilities as an ethical obligation above any

other consideration.


25

Brown (2005) work on employee CSR and stress organization managers to avoid

negative consequences and keep employees motivated organizations have to invest and

care employee health, safety and security, housing and nourishment. Moving forward

employee medical, retirement benefits, subsidized worker canteen, interest free loans

and other philanthropic activities were considered as a prototype of contemporary CSR.

In further refining the concept and theories of CSR, Dahlsrud (2008) has categorized

CSR into 5 dimensions in his research: (i) social, (ii) environmental, (iii) voluntariness,

(iv) economics and (v) stakeholder. The finding so this study suggests, that the

environmental dimension was the least likely to be defined in the CSR concept,

probably due to the early literature that has less mention of it. The historical evolution

of the definition seems to present less or probably no explicit terms describing saving

the planet. CSR is a concept of core competencies and performances of organization

which having great impact and stringent relations with society. In this contemporary

world CSR is not an optional for organization (Dahlsrud 2006).

Many corporations now taking CSR initiatives much more beyond only the increase or

maximizing of shareholder wealth due to increase institutional pressures (Waddoock,

2008). Many business organizations are now taking CSR as:

1. Ethical business practices

2. Accountability and transparency

3. Compliance with International standards

4. Advocacy and maintaining good relationships with stakeholders

5. To follow democratic principles, justice and human rights

6. Sustainable business practices

Wang and Juslin (2009) identify CSR as caring, making love with people along with

understanding and giving value to nature. More recently, Russo and Pirrini (2010)

develop a more comprehensive CSR, and it requires organizations to strength

relationships by introducing multi—stakeholder approach. Furthering the CSR

movement transformed from philanthropic practices to regulated cultural incubation

and instrumentally or strategic CSR. In dynamic competitive era organizations are

receiving more pressures from government legislation regarding transparency,


26

environment protection, ethical trading necessitating CSR as strategic tool for better

delivering and meeting challenges effectively (Glan, 2006). In this time period many

researchers are now focusing CSR from ethical concentration towards to using as a tool

for better financial and overall organization performance. So the scope of CSR in this

new competitive is tagged with ―doing good to do well‖ (Rosamaria & Robert, 2011).

In recent time, changes in international business culture, learning and technology,

quality standards involve NGO‘s, NPO‘s, cooperative societies and supra national

bodies such as Global Reporting Initiative (GRI) and International Standard

Organization (ISO 14000), to come forward and make strategies for improving and

implementing corporate social involvement of international business world.

In 2013, United Nations Global Compact (UNGC) includes 10 principles divided into 4

key dimensions in context of CSR. The Human Rights area focus on inclusion and

support of internationally proclaimed human rights in organization culture. In the area

of Labor standards, business organizations should eliminate discrimination, abolition of

child labour and uphold freedom of association for effective collective bargaining. To

protect the Environment by adopting precautionary measures through environment

friendly technologies is 3rd

dimension of UNGC. Business organizations should work

against corruption in all forms of dealings and transactions in last area of UNGC.

Nowadays many organizations utilize CSR concept as central in business reporting.

Organizations have CSR policy and produce annually report showing progress about

CSR. Different large organizations have recruited CSR managers and incorporated

(UNGC, 2013) principles in their CSR plans to publish CSR and sustainability reports.

The following table 2.3 below shows ten principles of UNGC, 2013.


27

Table 2.3 The 10 Principles of UN Global Compact

Substantive Area Principle

Human Rights 1.Business should support and respect the protection of

Internationally proclaimed human rights; and

2. Make sure that they are not complicit in human rights abuses.

Labour Standards 3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

4. The elimination of all forms of forced and compulsory labour;

5. The effective abolition of child labour; and

6. The elimination of discrimination inrespect of employment

and occupation.

Environment 7. Businesses should support a precautionary approach to

environmental challenges;

8. Undertake initiatives to promote greater environmental

responsibility; and

9. Encourage the development and diffusion of environmentally

friendly technologies.

Anti-corruption 10. Businesses should work against corruption in all its forms,

Including extortion and bribery.

Source: Adapted from the UN global Compact

Despite of the diverse nature of the CSR, it is now necessity of every organization even

in developed or developing countries. Due to advancement in IT and social media (e.g.,

the Internet and Facebook) CSR managers have to build communication linkages with

different stakeholders that include customers for awareness of "socially responsible",

general public and employees. In contemporary world trend of western CSR approach

is now more inclined towards to global CSR. Different scholars added new dimensions

of CSR in their cultural context time to time. Lei (2011) in his study by analyzing CSR

as evolutionary approach comprise it as ―sustainability and meeting the social

obligations like economic, legal, ethical and philanthropic responsibilities‖.

Additionally, (Shafiq, 2011) concluded CSR by giving ten dimensional points to


28

broaden the scope of CSR as; ethical trading, legal compliance, environment protection,

quality assurance, accountability and transparency, human rights, stakeholders

concerns, discretionary responsibilities, economic improvement, societal obligations.

The present study used CSR definition as integrated approach of People, Planet and

Place. These definitions are developed from Business for Social Responsibility (BSR),

European Union (EU) and United Nations Global Compact (UNGC). According to

BSR, those organizations want increased market share and popularity in society they

must have to honor social, cultural values of particular community along with

environment protection and friendly adaptation. In addition, European Commission

(2002) define CSR as voluntarily involvement of organization to integrate social and

environment practices in its input, process and output process with interaction with

stakeholders.

Accordingly, organizations need to justify its social contribution and it‘s voluntarily

actions to serve planet, place and people in terms of financial contribution, customer

satisfaction and employee performance. Therefore, CSR is combined into three factors

like planet (environment), place (philanthropy) and people (society). The present study

consists of five dimensions of CSR based on 3p‘s i.e. people, place and planet. These

dimensions are Human rights, fair labor practices, and ethical code of conduct,

community development initiatives and environment protection.

2.2.1 Theoretical Perspective of Corporate Social Responsibility

A long debate on corporate social responsibility (CSR) has been taking place since the

second half of the 20th century and it receive overwhelming attention from different

scholars (Gray et al, 1995). All theories presented by scholars presents theory own

point of views for every set of CSR practice, but still there is no single accepted

theory, perspective, practice and definition of CSR. It means the evolving nature of

CSR constitute to lot of variation in theoretical and implementation perspective (Choi,

1999). Scholars presented their own views in different theories underpinning the

concept of CSR that were interpreted by each stakeholder according to his own

observation and capability. Initially, Bowen (1953) wrote the influential book Social

Responsibilities of the Businessman and shifted the concept of social responsibility


29

towards to CSR followed by classical theory presented CSR as profit maximization

tool for shareholders (Friedman, 1962). Legitimacy theory defines legal parameters to

organization for its operations and sense of belonging to society i.e. Why CSR is

important (Suchman, 1995). Stakeholder theory extends the role of CSR in recognizing

organization to get stakeholders rights that leads to attainment of organization

objectives and arising the question i.e. How CSR is important (Donaldson & Preston,

1995). Strategic theory utilizes CSR as instrument to meet customer relationship

management (CRM) and competitive advantage (Garriga & Mele, 2004). Agency

theory defines managers as agents and legally delegates them to act behalf of owners

(Salazar & Husted, 2008).

The journey is still in progression and new alternative concepts have been proposed,

including corporate citizenship and corporate sustainability and corporate

philanthropy.

Furthermore, Brummer (1991) in his book corporate responsibility and legitimacy

described four approaches to CSR. In relation to CSR he considered four models

namely classical, stakeholder, social demanding and the social activist. In classical

model, he explained, that organizations should be active in society as economically

accountable rather than socially responsible. Therefore, the major goal of the

organization should be to maximize profit and managers are obliged to behave in best

interests of shareholders while fulfilling law. The stakeholder model propose that

organization should work by satisfying all stakeholders, rather than shareholders only

(Freeman 1984). In comparison, the social demanding model focus that organizations

are responsible to answer the demands of the general public. Lastly, the social activism

model believe that companies are responsible to society and that social activism

formulate a universal parameter for determining society‗s responsibilities.

Burke and Logsdon (1996) emphasize strategic importance of CSR that support

business profitability and also advancing organization towards core business activities,

which ultimately lead to organization efficiency and effectiveness for achievement of

mission and vision. The strategic CSR benefits organization to create and deliver value

for competitive advantage (Figge and Hahn, 2004). Organization creates and delivers

value by continuously investing on R&D, Human resource, IT, Operation management


30

and satisfying customers through better marketing efforts. Strategic managers

formulate CSR strategies along with its method of analysis and policies to take benefit

from CSR opportunities (Burke and Logsdon, 1996). Accordingly, to understand the

notion of CSR in the western philosophy the next section describes Legitimacy theory,

Agency theory, Stewardship theory, Resource base view and Strategic leadership

theory, Social contract theory and Stakeholder theory.

2.2.1.1 Legitimacy Theory

Suchman (1995) define legitimacy as ―a generalize concept or assumptions that

organization actions are suitable, desirable and adjustable enough with surrounded

social constructed cultural norms, values and beliefs, attitudes of society in which its

operate‖. Legitimacy theory define the role of organizations that they have to build

social contract, and deliver proceedings that meet the culture acceptance of society that

ultimately fulfill organizations objectives, profitability and relationship with society.

Dowling & Pfeffer (1975) define legitimacy as ―the situation in which entity value

system are in alignment with the value system and other cultural obligations in the

society or target market in which it operates‖. If both the value system does not match

with each other then there is potential danger to entity‘s legitimacy. Therefore a

business in its all phases of organization life cycle, means from Introduction, growth,

maturity, and decline must have to listen and implement their practices according to

social system of society for mutual exchange and increase transactions. Legitimacy

theory stress organization managers to build listening post and understand

environmental factor such as PESTLE (political, economic, social, technological, legal

and ecology) and build strategies, according to environment factors (Preston and Post

1975; Hogner 1982; Lehman 1983; Lindblom 1983). Therefore, to disclose social

actions organizations continuously develop information system with society in order to

be good corporate citizen.

Legitimacy theory provides a platform to organizations mangers to initiate the

disclosure of CSR practices in order to protect organization legitimacy. Pattern (1992)

in his research findings observed a positive relationship between CSR initiatives by

organization and organization legitimacy and supported his findings in the relationship

context between CSR and legitimacy by (Deegan and Rankin 1997; Brown and


31

Deegan 1998). Furthermore, Campbell (2000) also supports organization CSR

initiatives and association among legitimacy. He pointed that previously organization

financial performance was considered as yardstick for its legitimacy, but now

introduction of CSR initiatives bridges the gap between society values, norms and

organization legitimacy.

Legitimacy theory involve organizations to continuously appraise their practices

whether they are upholding and respecting public demands and values by

incorporating effective channels for constructive feedback (Mobus, 2005).

Organization have to established effective communication channels to understand the

cultural values, demands, artifacts and market research to develop strong relationship

to take input from community and by initiating CSR efforts to protect organization

legitimizing for better output (Deegan 2000). In competitive business, Legitimacy

theory educate the entrepreneurs that how a business can effectively respond to

stakeholders expectations even in pressure situations for its better survival. Aguilera

(2007) believe that legitimacy links organization activities with perception of

stakeholders to deliver maximum value to their stakes. Furthermore, (Pallazo &

Scherer, 2006; Dijken, 2007) stated that organization legitimacy is now more

contemporary issue for MNC‘s because many host countries demand MNC‘s to

change their international practices according to that particular host country and also

eliminate child labour, forced labor and other unlawful practices and un hygienic

working conditions etc.

2.2.1.2 Resource based view

The resource-based view (RBV) is the disposal of organization valuable tangible or

intangible resources strategically to gain competitive advantage (Wernerfelt, 1984). It

explores and engages CSR as strategic tool that organization top level mangers use for

achievement of long term objectives. In the past CSR value to the organization in the

context of resource-based view (RBV) has been received little attention to deliver

sustainable competitive advantage. However, Barney (1991) suggested that

organizations have many heterogeneous resources and capabilities that cannot be easily

allocated by the firm to gain competitive advantage. The proper allocation of this

imperfect mobility of resources can result in competitive advantage. A valuable


32

organization allocates resources to implement strategy that cannot be easily followed

by competitor and can be basis of sustainable competitive advantage (Barney, 1991).

Organization resources are more valuable when they are followed by strategy and

enable the firm to develop and implement strategies that enhance efficiency and

effectiveness.

The assumption of RBV approach is that organizations do not have an equal

availability of strategic resources and optimal utilization of these resources is difficult

to allocate within organization. The resources can be of three types: physical capital

resources (Information technology, machinery, location, layout, inventory, etc.); human

capital resources (the training, Knowledge, skill, ability, experience, judgment,

intelligence, leadership, workers); and organizational capital resources (reporting line

structures, planning and forecasting, controlling and coordinating systems, informal

relationships) (Williamson, 1975; Becker, 1964; Tomer, 1987). A resource can be

considered as strength or weakness of any organization (Wernerfelt, 1984). These

resources include organization capital, human resource, technology, efficiency, loyal

customers, trade mark, trade contracts, brand image and managerial expertise. The

RBV combines both internal and external evaluation of factors of organization in which

the enterprise operates. Similarly socially complex resources are initiated from the

group working of a many number of people, such as a dynamic and flexible corporate

culture or a highly-valuable corporate reputation (Dierickx & Cool, 1989).

Organizations can use environmental CSR as a resource for sustainable competitive

advantage (Hart, 1995).

Moreover, Russo and Fouts (1997) empirically found positive relationship between

environmental CSR practices and organization accounting profitability for superior

financial performance. The strategic capability was identified and can be of three types:

product stewardship, pollution prevention, and sustainable development. The scope of

CSR has progressed from more environmental focused issues towards to economic

growth, environmental protection, and social equity (Branco & Rodrigues, 2006;

European Commission, 2002). Hence organization can utilize their resources for

maximum benefit of their all major stakeholders. Organizations those having of

socially-based resources can have competitive advantage and also maintain good

relationships with its stakeholders. Therefore CSR activities are strategic resource for


33

the organization that is a basis of competitive advantage. This activity of allocation of

resources for better interest of stakeholders can generate a hypothesis as ―There is

positive relationship between organizations socially based resources for competitive

advantage and relationships with stakeholders.‖ Moreover, a model of the profit-

maximizing organization was created by McWilliams and Siegel (2001), who present a

framework for keeping the level of resources that a particular organization should

invest in CSR programs, that will based on cost-benefit analysis. The framework

depicts that the organization will invest in CSR to the level for which customers and

other stakeholders value the ―social‖ aspect of the organization or product. Therefore,

McWilliams and Siegel (2001) considered CSR as product differentiation strategy. The

more demand for CSR phenomena are created by consumers and other stakeholders

that include shareholders, employees, and general community.

2.2.1.3 Agency Theory

Agency relationship is a contractual agreement, under which one or more persons (the

principals) engage another person (the agents) to carry out services, and delegate

authority to agent that make initiations for better conduct of business activities (Jensen

and Meckling, 1983). There is a concept of separation of ownership and management in

the large size organizations. The owners (Investors/shareholders) are Principal; those

who run day to day activities are called as agents. In the context of agency, the agents

are those people having authority to utilize organization resources and keep an eye on

social obligations for sustainability and popularity of business. Agents are responsible

to make decisions and implement the affairs of organizations and have more accesses to

information as compared to owners (Fama & Jensen, 1983). Similarly agents have also

fiduciary duty to use their power for proper purpose.

In the involvement of CSR, directors and managers (agents) are responsible for

spending monetary resources of business for a social purpose. Friedman (1970) made

critics on Agent role on spending owner wealth for social responsibilities. He added

that Agents that allocate money resources on social obligations ultimately minimize

shareholder wealth and profitability which is beyond their legislative authority.

Therefore they are not acting properly as agents. In addition, Agents have different

attitudes to risk taking and may breach the trust by intentional action, omission, neglect


34

or incompetence (Tan, 1997). In running day-to-day activities of company Lee and Tan

(2002) studies, that there is danger of potential conflict in interests between

management and shareholders. Agents are not honest and they often subordinate

organization interest against individual interest. It gives rise to the concept of ―Agency

Problem‖. To eliminate Agency problem, Heath and Norman (2004) claimed that the

owner of the organization have to conduct regular meetings and other preventive

measures by additional controlling or becoming director themselves. Moreover,

Agency problem can better be deal by giving some motivational intrinsic and extrinsic

rewards Profit related Pay schemes, rewarding managers by shares and by executive

share option plan.

However, in international business, it is observable that managers (Agents) attend their

moral principles, by avoiding harm to others, by respecting autonomy of others,

assertive and made reputable agreements. By fulfilling these agreements they can

maximize shareholder dividends and profitability of business. They are in good

position, having observable approach with better knowledge to initiate CSR activities

within and external to organizations. They involve CSR approaches in all strategies,

polices, procedures and proceedings of organizations. Scholars like Navarro (1988) in

his studies concluded that any philanthropic contribution by organizations towards to

society is a kind of promotional tool and ―quasi-fringe benefit to employees.

Additionally, the study results also favor that organization CSR programs promotes the

interest of principals and for profit maximization.

2.2.1.4 Stewardship Theory

Stewardship theory presents an alternative to agency theory in understanding the

principal-agent relationship. The fundamental description of stewardship theory is that

managers always act in such way to utilize the interests of a company and

contemporary business environment in educating management towards ethically

responsible behavior, creative and profitable businesses. A steward is a dedicated

person who improves performance successfully, has intrinsic motivation and satisfies

most stakeholders of the organization, by serving these stakeholders for maximizing

organizational wealth (Davis, Schoorman & Donaldson 1997). He further elaborate that

Instead of being characterized as opportunists, as in agency theory, executive managers


35

are described in stewardship theory as good stewards of the organization, with high

self-motivation to attain increase levels of organization profit and returns for the

shareholders. It reflects towards to more democratic leadership style that increase trust,

confidence and empowerment of employees as compared to strict control framework.

In contrast to agency theory, Kiel and Nicholson (2003) describe that since managers

have different traits and naturally trustworthy to serve organization result will be no

major agency costs‘ as incurred by principal in agency theory.

Psaros (2009) state that stewardship theory guide managers to subordinate their own

interest as compared to interest of other stakeholders. There are some business

decisions regarding social responsibility that are mostly based on non-economic returns

and are related to social status in the community. Moreover, if the organization

maintains a good relationship with the stakeholders, including the local community,

individuals will show more creativity and make decisions that identify them with the

organization because that would help promote their social status in the community.

Therefore good stewards always formulate such kind of policies that strength the

association of organization with their stakeholders. They understand organization social

responsibilities and made ethical approach to fulfill them.

The core of stewardship theory is about how individuals rank their social needs in a

community, such as being accepted and valued by their peers and supervisors

(Donaldson and Davis, 1991).

Smallman (2004) there is believe that where shareholder wealth is maximized, the

steward‘s utilities are also maximized, because stewards will have clear mission that if

organization objective meet employee will also succeed. He also states that, stewards

do balance between different stakeholders. Therefore stewardship theory provides a

platform for good corporate governance by balancing requirements of the interested

parties and improves performance. Stewardship theory implies that managers utilize

collectivistic behavior rather than individualistic and self-serving that result in synergy

towards progressive organization protects and maximizes shareholder wealth through

better firm performance (Robins, 2008).


36

2.2.1.5 Strategic Leadership

Leaders are visionary people that influence their followers, formulate effective strategic

plans, and then capable workforce in order to implement the rapid changes. Strategic

leadership is the ability of leaders to anticipate and make vision, maintain flexible

approach, think strategically, and make initiation for changes that will produce a

competitive advantage and sustain high performance for the business and other

organizations in the future (Amagoh, 2009). Strategic leaders are responsible for

maintaining appropriate balance at all levels in organization.

Leadership have decisive role for creating CSR agenda for organization and delivering

maximum value to different stakeholders of organization. According to Waddock

(2004), leaders are responsible to include CSR practices as organization strategy and to

influence stakeholders and natural environment. It further enhance the practical

importance of CSR as a subject and its impact on stakeholders, and views CR not just

as an outcome but as a process (Bhattacharya, Korschun; &Sen, 2009; Waddock,

2004). The role of transformational leadership is also vital in progressing any

organization towards to their CSR agenda and maximization of value for different

stakeholders (Waddock, 2004).

Scholars like Perrini and Minoja (2008), articulate that contemporary organizations are

actively responsible and contributing towards to be ‗responsible player‘ to answer

different stakeholders. Responsible leadership theory divert the attention of leaders

from traditional leader- subordinate relationship towards to more leader- stakeholder

relationship and builds ethically sound relations with different organizational

stakeholders (Maak and Pless, 2006). Therefore, effective leaders are responsible to

create social responsible culture for an organization and even define, articulate their

role to inspire workforce to be cohesive and bring synergy at workplace (Mulki,

Fernando Jaramillo, & Locander, 2009). Furthermore, organization involve employees

in decision making process and must create effective CSR strategies as it has to

potentially mobilize their workforce at every levels where employees will show

creativity and will find their CSR niche within the organization. Successful

organization leaders formulate strategies, that they can attract diverse workforce who

serve as internal or external allies on behalf of organization by exercising good citizen


37

in different manners. This will have positive impact to maintain strong social

responsible partnership among employees is an effective way to gain customer

satisfaction. Usman (2010) enhance the role of leadership in influencing their followers

and governing good governance for both internal and external satisfaction.

In developing countries many organizations are actively showing their concerns

towards social responsible products, promotion and public relations. Effective leaders

in organizations depict leadership traits like transparency, honesty, dedication, good

management, accountability, and ethical behavior (Mulki et al., 2009). Strategic

management is a subject that helps CSR leadership to use the process as a mean to

measure CSR performance. The job of strategic leaders is to establish trust among

workforce by creating CSR strategies and implement it for binding organization with

society. To gain customer loyalty organizational leaders have to devise solid social

responsible strategies that can deliver maximum value to customers. This will enhance

positive relationships by delivering social responsible dealings to lock in customers and

lock out competitors.

2.2.1.6 Stakeholder Theory

Stakeholder theory deals with principles and values to manage the organization in the

context of business ethics (Freeman, 1984). This theory focuses the relationship

between business organization and all those entities who are directly or indirectly

involved in perusing objectives of organization. In defining the purpose of business

organization, Ansoff (1965) was to be considered first to introduce the term

―stakeholder theory‖. Stakeholder can be any person or entities that have any claim,

interest or ownership rights with the organization (Clarkson, 1995). Stakeholders can

be any individual or group of people who has an interest with the organization actions

and can be affected or have an effect on business decision making process (Freeman

1984; Friedman 2007). The latest definition in context of stakeholder‘s concept added

by Freeman (2004) is ―those groups or entities who have essential role in organization

success and survival are term as stakeholders‖. The duty of managers is to understand

the perspective and activities of each stakeholder critically (Freeman, 2004).


38

In classification of stakeholders (Starik, 1995) divide it into human and non-human

entities. The natural environment can be classified as non-human entity as it has major

impact on organization CSR policy and other legal issues while making any decisions

for organization. According to Jones (1999), there are two types of stakeholders;

primary and secondary stakeholders. Primary stakeholders have major influence on

organization in a direct manner, organization managers always consider their concerns

and they have participative role in decision making process. For long term success

organizational managers need continuous monitoring the needs and stakes of each

stakeholder and deliver valuable products to satisfy its shareholders, customers,

employees, suppliers, government and investors as primary stakeholders. However,

secondary stakeholders have not direct participation in organization decision making

and have not direct impact on organization survival. Furthermore most commonly

identified stakeholder groups include shareholders (or owners), employees, customers,

suppliers, local community, competitors, interest groups (or sometimes civil society

representatives, government, the media, and society-at-large (Carroll, 1991).

The stakeholder theory broaden the scope of organization objectives from profit

maximization to the inclusion of rights and claims of non- shareholders (Mitchell et al,

1997). Stakeholder theory given the platform to organize business objectives and

thinking about organization responsibilities (Jamali, 2008). In suggestion the needs of

shareholders cannot be met without sacrificing stakeholders‘ demands at large. In other

words, even an organization when want to fulfill stakes of its shareholders as primary

obligation, its accomplishment of acquiring shareholder objectives is likely be affected

by other stakeholders (Foster and Jonker, 2005; Hawkins, 2006).

Stakeholder theory is mainly classified into three categories; normative, descriptive and

instrumental. In normative stakeholder theory the main concern of managers is how to

treat stakeholders based on some ethical principal (Friedman 2006). The descriptive

stakeholder theory explains how to listen, manage and communicate with stakeholder

and how they view their actions and roles. The instrumental theory deals with

maintaining good relationship with stakeholders for maximizing shareholder wealth

and better organization performance (Donaldson & Preston, 199l).


39

Moreover (Ansoff 1965) define that major objective of organization is to maintain

equilibrium in best interest of all stakeholders. The key aspect of CSR is the way that

businesses engage to its shareholders, employees, customers, suppliers, governments,

NGOs, international organizations and other stakeholders (Fontaine et al. 2006).

However, according to (Mele, 2008) business organizations have different stakeholders

and for organization it will be very difficult to fulfill the stakes and demands of each

stakeholder at one time and is quite challenging. Further, organizations should not only

limit to satisfy manager concerns, but look at broadly to maximize the value of all

shareholders. It means that besides fulfilling fiduciary obligations, organizations will

have to consider wide benefit of all stakeholders (Mele, 2008). To satisfy stakeholders,

Clarkson (1995) stated that the primary obligation of stakeholder theory is to map the

stakeholders of an organization and disclose the organization‘s responsibility for them.

Organization performance is justified with how it serves their stakeholders demands

because both organization performance and stakeholder‘s satisfaction are positively

interrelated to each other (Ruff et al. 2001). For better results in terms of stakeholders

satisfaction managers have to build strong communication channels and activate its

marketing efforts by bridging the gap and targeting particular stakeholders for their

insights and then try to meet the expectation of individual stakeholder through greater

CSR efforts. Despite the criticism to fulfill each stakeholder demand, this theory is

supported by many empirical studies and gain popularity in organization context that

indicates its role and importance in engagement of CSR to meet and deliver social

obligations (Maignan & Ferrell, 2000).

According to (Wood, 1991) by the end of decade many scholars use stakeholder ideas

and use the terminology of stakeholder in CSR context. To create maximum value for

business (Longo et al., 2005) identified 4 key stakeholders and their stakes i.e.

employees, suppliers, customers and community for value creation of business. These

value creation tools are used by many scholars in literature and also utilized by

organization entrepreneurs in their CSR social audits and sustainability reports

(Brickson, 2007). A similar study was conducted by Abreu et al., (2005) in Portugal,

and he investigate CSR in different organizations working and practicing CSR in

Portugal, whereby they identified five key that many organizations were practicing to

explore CSR as an stakeholders approach. The key stakeholders were mostly external


40

to organization including customers, community, suppliers, government and

environment. Furthermore they also examined employees as an internal to better the

workplace practices. Their research findings suggest that most organization in CSR

context were approaching to external stakeholders in practicing CSR. In another

research conducted by (Uhlaneret al., 2004) studied CSR implementation in different

Spanish organizations and found that they also engage stakeholder approach in

adaptation of CSR to accomplish their social responsibility. The findings classified

stakeholders in two categories i.e. social and economic stakeholders. In social group

they included environment, sports and other religious activities, whereas in economic

they included employees and clients.

Another study in literature conducted by (Papasolomouet al., 2005) found CSR

utilization as a stakeholder approach in many Cypriot business organizations. They

consider stakeholders as key element of business and consider their effect on different

business aspects and vice versa. The measurement of various actions related to CSR by

different stakeholders, table 2.4 below describes six different key groups of

stakeholders that include both internal and external categories. The six different

stakeholders namely include investors, employees, customers, suppliers, environment

and community. The findings conclude that most of the Cypriot organizations were

delineate customers and employees as major, community stakeholder as moderate and

other supplier, environment and investors were given limited attention for their

persuasion of CSR.


41

Table 2.4 CSR actions through key stakeholders (Papasolomou et al., 2005)

Stakeholder Organizations actions to their Stakeholders

Employees Provide culturally adjustable Environment

Promoting responsible Human Resource Activities

Designing fair reward and remuneration system

Promote better Inter communication relationships

Encourage Training and Development programs

Organizing reporting lines of command and promoting employees

involvement culture

Encourage employees by designing better motivational techniques for

increase hard work

Promote employee diversity by employing equal opportunity for citizens

Provide justice, equity and fair treatment to all employees in organization

Consumers Always respect consumers rights

Invest resources on marketing research and deliver maximum value to

customers

Avoid deceptive advertisement

Offer quality and valuable products to customers

Augmented marketing activities are used to enhance customer value

chain

Promote green marketing activities

Packaging and labeling properly used to educate customers

Disclose complete information including substantial risk and any danger

associated with product

Community Investment in community oriented project

Promote the lesson of sustainability and public messages to community

Provide charitable financial donations to needy people

Fosters relationships between organization and community

Corporate Governance Promoting good governance practices (e.g. transparency, no corruption

etc.)

To build trustable relationship with stakeholders by engaging in honest

business relationships

Designing annual reports to provide clear picture of organization

performance

Suppliers Establishing proper ethical system for selection of suppliers

Maintain ethical and long term purchasing relationship with key suppliers

To assist suppliers for improvement in environmental and social

performance

Engage in ethical trading with suppliers

Environment To formulate environment protection policy

To switch organization traditional system towards to electronic system

and environment friendly activities

To care sustainability and energy conservation process by lean production

strategy

Educate employees about environment commitment and introduce the

practice of environment audits in organization


42

2.2.1.6.1Limitations of the stakeholder theory

Many authors discussed the limitations of stakeholder theory. According to Capron

(2003, cited in Branco and Rodrigues 2006) mute stakeholders that belongs to natural

environment has not addressed in stakeholder theory. Phillips and Reichart (2000)

suggested that natural environment must be considered as stakeholder. Many scholars

criticized that natural habitat cannot be classed as stakeholder. Any groups or

individuals can only include as stakeholder (Buchholz 1991). It means that only human

beings can be considered as corporation stakeholders (Branco and Rodrigues 2007).

Another criticism to stakeholder theory is that organization should equally treat all

stakeholders, so it means dominant stakeholders like employees unions will not be

justified as required (Weiss 2008). In addition, organization at one time cannot meet to

serve all stakeholders interest as well as owners at same time.

To summarize, organizations in CSR relations must focus to meet the need and stakes

of all stakeholders. It will ultimately improve its performance, reputation and social

obligations. It will also effect to strength relationships between organizations and

society.


43

2.2.1.7 Critical Analysis of CSR Theories

The following table 2.5 below shows the analysis of all theories that are related with

CSR.

Theory CSR Description

Legitimacy Theory This theory is build upon an idea that business organizations

inherently have social bond with community and they have

to respect society norms and values to achieve their

objectives. The community is subjected to judge and

comment on the practices of organization and determines

the congruency between value, norms, expectations and

organization output. CSR practices of organizations bring

harmonious relationship with society. It enables

organization to answer social obligations and update itself

to gain better relationships, financial rewards and other

profitability.

Resource based View

(RBV)

Organizations have different resources and can utilize their

resources optimally for maximum benefit of their all major

stakeholders. In competitive age, those organizations that

utilize socially-based resources can have competitive

advantage and also maintain good relationships with its

stakeholders. Organizations that devote their resources to

CSR activities and value the intangible characteristics that

are product quality and reliability have linkage with

organization that initiates CSR programs. Therefore

organization allocations and investment on CSR programs

are strategic tools for competitive advantage and creation of

sustainability.

Agency Theory

In large size organizations, there is a contractual agreement,

under which one or more persons (the principals) engage

another person (the agents) to carry out services, and

delegate authority to agent that make initiations for better

conduct of business activities. The agents are professional

people having assertive approach to conduct business social

programs and profitability. On behalf of owners they are

responsible to carry social responsibility both inside and

external to organizations. Agents have authority to maintain

ethical and social desirable activities that promote

organization image and generate wealth to owners.

Stewardship Theory In stewardship theory managers always act to utilize the

interests of a company and contemporary business

environment and promote organization towards ethically

responsible behavior, creative and profitable businesses. A

steward is a dedicated person who improves performance

successfully, has intrinsic motivation and satisfies most

stakeholders of the organization, by serving these


44

stakeholders for maximizing organizational wealth.

Managers as stewards use collective and participative style

for target achievement. Managers made good relations with

stakeholders, local community and promote social status of

organizations towards society.

Strategic Leadership Strategic leaders are organizations top level managers,

having vision and deliver major role in formulating CSR

agenda and to deliver maximum value to stakeholders. They

understand organizations social obligations. They include

CSR as process and made a continuous activity for effective

organization performance. Leaders are responsible players

and create culture of organization by keeping stakeholder

approach and bring synergy at workplace.

Stakeholder Theory In the context of business ethics, stakeholder theory deals

with principles and values for effective organization

management. It posits that organization have different

primary and secondary stakeholders. Organization CSR

activities engage different stakes of employees, customers,

suppliers, governments, NGOs, international organizations

and other stakeholders. By engagement of CSR activities,

organizations are able to meet their social obligations. Due

to intervention of stakeholder theory in CSR perspective,

contemporary organizations are considered as ―extended

enterprises‖ that operate as a ―network of interrelated

stakeholders to create value and ultimate benefit to society‖.

Source: Author own compilation

2.2.2 Factors Encompassing Western CSR in business

Many business entrepreneurs expect that in contemporary world, customers and other

stakeholders are smart enough to select those organizations who not only to earn

profits, but also make responsible dealings in social and environmental context (Mulki

et al., 2009). Recognizing this importance different organization managers incorporate

the concept of corporate social responsibility in their business practices to establish

long term relationships by maximizing intangible assets such as goodwill, trust,

reputation and opportunities for innovation with market and society in which it

operates. There are different factors that business organizations realize to establish

good business sense and integrate the interests and needs of customers, employees,

suppliers, communities, and our planet - as well as to those of shareholders to create

social relationships with different stakeholders in business and society. The different

factors that encompass CSR in business world are:


45

2.2.2.1 Human Rights

According to UNGC (2012) human rights are universally accepted rights of freedom

and rights of equality and implemented worldwide to protect and recognition of human

existence. The declaration of United Nations of Human rights states that all human are

born free and have equal rights and no distinction between them on basis on race, color,

sex and origin. Human rights are mostly directed towards organizations people that

includes customers, employees and other stakeholders. All humans are treated honestly

and free from slavery, unlawful punishment, marriage, idea generation, nationality and

collective bargaining. Human rights promote friendly culture, equitable reward and

wage system, openness in communication and bring harmony among various

stakeholders of organization (Lee and Miller 1999).

The contemporary organizations demand the role of governance to be true and

meaningful by incorporating social responsibilities and human rights in their decision

making practices. Governance includes set of relationships between organization

management and its stakeholders to exchange power, privilege, and wealth among

relevant authorities. Top level managers are responsible for devising polices direction,

administration and controlling of organization and is responsible to protect human

rights of people through whole organization. It is the responsibility of every one in

organization and in society to respect and care of other habitat of society. promotes

CSR initiatives in respect of human rights for all stakeholders and has reported positive

relationship between human rights and financial performance.

2.2.2.2 Fair Labor Practices

Human resource refers to the employees who serve the organization for achievement of

its objectives. There are many HR problems are emerging in organizations that require

such kind of practices that bend towards social by organizations. Employee CSR

programs answer adequate practices for justice, ethics, motivation and retention of

employees at workplace. The most common issues include workforce diversity,

discrimination, harassment, redundancy, contingent workers, system and culture of

organization. Davenport (2000) emphasize the importance of CSR towards employees

practices that will provide intrinsic and extrinsic motivation for improve productivity,


46

efficiency and effectiveness. Organizations that effectively respond to these issues are

generally considered to be ―employers of choice‖(Lee, 2001). If an organization do

discrimination and injustice between employees it may increase de-motivation and

incompetency among employees. It will last decrease in efficiency and productivity in

organization performance.

2.2.2.3 Ethical Conduct

Businesses are part of society. Society expects certain standards and professional

behavior from individuals and organizations. Business ethics is the application of

ethical values to business behavior. The ethical behavior depends upon person

motivation, guiding principles, key values such as human rights and its consequences.

Responsible organizations see ethics as a driver for profitability. They adopt ethical

framework as a part of good corporate governance and motivate their employees to

operate in an environment of good ethical behavior. Business managers required ethical

trading, terms and conditions, prompt delivery, quality products from their suppliers

and formulate integrated strategies to maintain good ethical relations.


47

To gain social returns managers can devise business ethical culture and relations to

conduct responsible business practices that include:

1. The concern for Environment: By eliminating Waste disposal,

environmental degradation, emission of ozone-depleting chemicals,

toxic chemicals, production of agricultural chemicals and recycling.

2. The value of Product: By not engaging activities that produce revenues

from alcohol, tobacco, firearms, and gambling, marketing controversy,

price fixing or fraud.

3. The Relations with Community: By giving them litigation, establishing

better community relations, degrading controversial policy issues,

charitable contributions, conducting social programs for the

economically advantaged.

4. The Employee Relations: Employee Union relations, safety, layoffs,

benefits plans, profit sharing, information sharing are the tools for

investors to strength relationships with people working in their

organizations.

2.2.2.4 Environmental Protection

Responsible business organizations always make sure to protect environmental natural

resources and do not exploit them for their profits. Organizations need to understand

the possible impacts of business and its environment may have on each other. The

business effects upon the environment such as Pollution, wastage of resources,

destruction of natural habitats and other loss of plants and species. The environment

also effects on business activities i.e. changing climate conditions, lack of resources,

and loss of sales. Environment protection is in large community interest and promotes

sustainability (Mazurkiewicz, 2004). If an organization have poor environmental

record, customers may no longer wish to trade with it. Therefore, it is an important

stakeholder for business organizations and many studies shows positive relationship

between organization performance and its natural environment (Asemah et al., 2013,

Mocan et al, 2014, Josh, 2015).


48

Organizations initiatives to protect environment by adapting measures like

environmental management standards, eco-labeling, and recycled-content standards

(Mishra and Suar, 2010). Furthermore, the practice of eco-efficiency by utilizing less

input in product life cycle and creating value for business and society, even in

industries. It also include practices by reducing energy inputs, elimination of toxic

materials, enhancing material recyclability; ensuring quality and long lasting products,

sustainable usage of renewable resources. Thus environmental aspect of CSR is

incorporated in organizational supply chain for valuable creation and sustainability for

future generations.

Evidence proves that those organizations that care environment and promote eco

friendly activities enhance its market value, reputation and market share (Klassen and

McLaughlin 1996). Many organizations in developing countries do environment

protection on voluntarily basis. Moreover, past evidence depicts negative relation in

India, among organization environment investment and OP (Mishra and Suar, 2010).

2.2.2.5 Community Development Initiatives

Communities can include local communities around a business organization. Beside

other aspects of CSR community element is one of major and important for social

benefits. Companies can make important contribution to these communities and

provide meaningful jobs, fair wages and benefits, and tax revenues. Lesser (2001)

showed that as time passes organization age, size and improve market share ultimate

improve its performance that ultimately pay special attention to community in which it

operates. The entrepreneurs social bond to integrate and respond to societal issues in

which it operates are important for loyality, word of mouth and other market research

activities. Further, Husted (2003) demonstrated that philanthropic organizations can

work and support community by activities like, Charity, Social investment and making

collaboration with government organizations for helping needy people of particular

community.

According to ISO (2010), to bring continuous effectiveness in organization activities

the relationship between society and community development programs is considered

as critical success factor in which it operates. Other community development initiatives


49

includes philanthropic activities in health and education infrastructure, culture and

sports promotion, plantation of trees, providing scholarships and many more. In

developing countries, consumers prefer to purchase and involve themselves with those

organizations that initiate community development programs. E.g. in Pakistan,

especially in Ramadan (fasting religious month) many consumers prefer Coca Cola

brand, because of their philanthropic programs for support of orphans in collaboration

with Edhi welfare.

2.2.3 CSR and Organizational Performance

In literature, some researchers conclude positive, neutral and negative impact of CSR

on organization performance (Orlitzky, et al., 2003), while empirical findings shows

positive relation of CSR with improve organization performance (Hill, et al., 2007;

Hull & Rothenberg, 2008; Wood, 2010). Opponents of CSR claims that for improve

organizational performance, CSR is a tool to engage business actions only for

economic gains and conduct business activities by doing free competition without any

deception and fraud (Friedman, 1970). Despite the arguments against CSR was

challenged and found incorrect (Drucker, 1984), opponents continue and found that

organization social investment will add an extra cost and consider it as burden for

organization and will result in negative consequences on their financial performance

(Jensen, M.C., 2001). Furthermore, organizations are unable to answer every problem

of society and it will also not good for both organization and society to do such

interventions (Bhattacharyya, 2008). In addition, the affiliation between CSR and

organizational performance is not always directly favorable into some context because

many entrepreneur belief that CSR counts extra added costs and generally develop

intangible asset creation like brand popularity, brand image and reputation (Carroll &

Shabana, 2010).

The criticism against CSR is repeatedly refuted and many organizations in competitive

age belief CSR as an improvement strategy to build social bond of organization with

society. To meet the challenges, organization top level managers have to consider CSR

in broad spectrum and favor each stakeholder ethically and socially to deal them under

the umbrella of CSR for better organization performance (Hopkins, 1999).Moreover,

Robbins and Coulter (2007) enhance the role of CSR and explained that beyond profit


50

maximization CSR can be used in managerial decisions to protect and improve social

performance of organization for its stakeholders and the environment in which it

operates. Even though there may be some future measurement problems, CSR have

handy role in addressing and satisfying various stakes and used as a strategic tool for

improve market share and performance (Luo & Bhattacharya, 2009). In addition, by

initiating community development projects, companies can build their image positively,

that ultimately effects the improvement in organization performance but not to

compromise on their profits (Wood, 2010). Moreover, Carroll & Shabana (2010)

broaden the scope of CSR in more holistic, beneficial and for long term perspective of

organization in different areas of business along with improve financial performance.

Further they added that this holistic management concept of CSR provides

interdependent relationship of CSR between society and organizational performance.

Hence CSR can affect organizational financial or other performance both directly and

indirectly through different integration strategies (Lev, et al., 2011).In general, most of

the researchers found positive relation of CSR to organization performance in

quantitative measurement like ROA, ROE and net profit (Nadeem, et al., 2014, Mahtab,

2015, Khan, et al., 2016).

By following the notion of Stakeholder theory, organization CSR disclosure has

different aspects to improve organizational effectiveness and better performance.

Entrepreneurs may take the concept of CSR with different approaches. Some may take

it as development in Supply chain, other may consider CSR as increasing value to

stakeholders, strategic tool for competitive advantage, conformity to law,

environmental protection and friendliness adaptation approaches, ethical trading,

philanthropy or discretionary efforts and increase in shareholder worth by improving

market share and employee commitment. In addition, CSR improves relations with

stakeholders and this result to both improve performance and better reputation of

organization.

2.2.3.1 Measures of Organization Performance

In this study two different measures are used for organization performance. It includes


51

2.2.3.1.1Customer Satisfaction

Customer satisfaction is the persistence feelings that are derived by meeting the

expectations from product /services that company offer to the target market (Oliver,

1980). The continuous business success demands customer satisfaction for improve

market share and increase profitability. A satisfied customer use word of mouth and

high level of re-purchase of particular product or services. Organization CSR activities

build positive image in mind of customers and company better positioning. Responsible

behavioral engagements of organization towards customer‘s satisfaction include market

research, ethical trading, honest and fair dealing, green production, bio degradable

packaging, fair price, promotion without any deception, convenient availability of

product and better quality.

CSR initiatives are important for creating customer loyalty, ethical trading, and word of

mouth and for improve market share. McDonald (2008) conducted a study in banking

sector at Taiwan and found positive relationship between bank CSR practices and

customer satisfaction. Moreover, result shows that customers prefer those initiatives

that proceed to their personal benefits rather than bank overall other CSR programs that

benefit the large community. In another study conducted by (Mandhachitara &

Poolthong, 2011) at Bangkok banking sector, aimed to study the role of CSR practices

and customer attitudes. They concluded that banks commitment towards to CSR

created loyalty to banks customers. In the study at banking sector of Pakistan (Hafeez

and Muhammad, 2012) found positive association between CSR practices and loyalty

of customers.

In this study, based on the research work from (Belas et al., 2014) customer satisfaction

is measured on basis of three factors in relation with CSR practices in banking sector of

Pakistan. Different researchers contributed to determine the dimensions of customer

satisfaction and their affect to the banking activities. Longo (2000), Haron (2000),

Mishkin (2001), Rashid (2003), Nelson (2006), Khan (2007), Gritti and Foss (2007),

etc. were contributor specially in this purposes. The factors included in this study

are: branch availability, service quality, prices and fee. All the factors are predictors to

determine customer satisfaction in banking sector and ultimate for organizational

performance.


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2.2.3.1.2Employee Performance

Employees are vital resource for organizational performance and excellence. They

utilize their knowledge, skills and abilities and contribute to achievement of

organizational objectives. In CSR literature, few researchers have focused on CSR and

their impact on employee performance, although it is an important internal stakeholder

for organization. It is required to understand the relationship between CSR and

employee performance because organizational performance largely depends on

employee efficiency and effectiveness.

According to (Luce et al., 2001) CSR programs of organization can increase employer

attractiveness. Similarly, (Greening and Turban, 2000) find that social responsible

organizations attract more applicants as compared to those organizations not exhibiting

CSR. Furthermore, (McWilliams and Siegal, 2001) suggest that employees are valuable

assets for any organization and demand CSR to meet social obligations and

accountability. Maignan and Ferrell (2001) survey 120 French managers and concluded

that CSR activities influence on employee commitment. The effort of organizations ‗to

do better‘ will also ensure employee dedication and create positive image in society. In

addition, (Porter and Kramer, 2006) argued that in social responsible organizations,

employees do work hard and willing to work for less and shows their commitment,

loyalty and increase morale for their companies. In another study, Edmans (2011) finds

that investment in CSR activities by organizations can increase employee commitment

and customer satisfaction. Moreover, customer satisfaction is also stems from better

working of employees and their job satisfaction that ultimate influences customer‘s

perception and better positioning (Gounaris and Boukis, 2012) and therefore, employee

satisfaction significantly reflects their behavior towards customers (Khartabiel and

Saydam, 2014). The above studies suggest that CSR efforts of organizations effectively

result in increased loyalty and morale of workforce in organization.

Based on the research work from (Porter and Kramer, 2006) employee performance is

measured on basis of three factors in relation with CSR practices in banking sector of

Pakistan. The factors are: employee commitment, involvement and support and

resources consist of training and development, reward system and other benefits. All


53

the factors are predictors to determine employee performance in relation to CSR

practices in banking sector.

2.3 Islamic Perspective and CSR

Islam is second largest religion numerically and having 1.6 billion followers all around

the globe. Islam discusses each element of life and thereby present solution regarding

every problems that human face in life. The concept of moral ethics and social

responsibility has been underpinned in Islam for over 1400 years ago while CSR is still

debating issue for contemporary business world. The practice of ethical and social

behavior can be adopted in detail that helps us to deduce the presence of social

responsibility in Islam (Haniffa and Hudaib, 2002). Islam presented the framework

through Al-Quran and Prophet (P.B.U.H) behavior and spell out practically values and

disvalues and desirable traits morally, spiritually and socially (Chapra, 2000). Further,

there will be two rewards, one in his life and other is hereafter, if a person incorporating

it in his life and these will be the source of self-motivation (Ahmad, 2003). Islam

describes the fundamentals such as Aquidah (belief and faith), Ibadah (worship) and

Akhlaq (morality and ethics). These fundamentals are presented in Islamic Shariah

which is essential to the worldview of Islam. According to (Dusuki, 2008) Shariah as

Islamic law, but the boundaries of Shariah extend beyond the limited horizons of law

(Sardar, 2003).

In the context of Islamic teaching the concept of CSR is inscribed in Shari‘ah. In

Islamic CSR the concept of Shari‘ah has two major implications. The first is that,

organizations should be good in every transaction and have belief of Unity of

Allah SWT and pursue working to bring happiness in this life and Hereafter, despite

having any financial consequences. Second, Islamic CSR promotes behavior of

brotherhood and justice to balance employee rights and better coherence between

self-interest and altruism. According to Naqvi (1981), the elements like brotherhood,

social justice and social welfare are foundations for Islamic CSR. The concept of social

justice has been preached and implement as practiced by God (Allah) messengers to

bring harmony and quality of life. Islamic CSR comes under Taqwa paradigm (Dusuki,

2008).CSR in Islam consists a broader meaning acceptance of the Taqwa (God


54

consciousness) dimension by which organizations as group of individual, assuming the

roles and responsibility as servants and vicegerents in all situations (Dusuki, 2008).

As for Muslims, CSR have much broader and holistic significance. As Muslims are

vicegerent of Allah, they must have intrinsic quality to live and trust on Allah described

parameters (Al- Attas, 1996). According to (Ahmed and Hassan 2003), the relationship

between man and Allah should not be fictitious and must be bind with ‗Divine

contract‘. Muslims must cooperate with each other rather than compete with each other,

as success in life to obtain ultimate happiness (falah). Hassan (1983), guided man to

maintain proper relationship with God, he should bring truthfulness, fairness, respect to

law, firmness, kindness, tolerance, uprightness. Further he argued that profit earning is

not only sole purpose of organizations but they should be good to society for ultimate

happiness in this life and Hereafter. This does not mean that Islam is against profit

making, rather it is necessary condition though not the sole purpose.

Furthermore, Islam recognizes self-interest as a natural intrinsic motivation of human

but it should be linked with overall concept of goodness and justice. The role and

importance of Islamic teachings are needed to solve many dilemmas and ethical

problems of today‘s business world. From this point of view, the relationship between

civil and commercial society in Islam is taken naturally and provides the rules for

practicing of ethical codes (Mohammad, 2007) which ultimately promote compassion,

caring, cooperation, harmony.

In organization context, according to Abeng (1997) for economic and social prosperity

corporations has been played an important role throughout the ages. Islam has

parameter to evaluate organization against material and non- material objectives. The

material objectives includes financial and another important religious obligation

regarding social as non-material (Rehman and Goddard, 1998). In present era, many

organizations seek profit goals at the expense of social good (Mohammad, 2007).

However Islam provides a framework to maintain sustainability similar to concept of

CSR. The notion of CSR developed in Western context is not the same with the notion

of CSR in Islam (Mohammad and Zakaria, 2012). At one side the existing values and

culture and other include principles of values and culture. In Islam CSR is built on the

foundation of tasawur (world view) and epistemology of Islam, which is different from


55

the CSR formulated in the West. The principles of CSR in Islam are depends on

organization ideology according to Al-Qur'an and Sunnah. In contrast western CSR is

highly cultural oriented. Many western organizations undertake CSR approach as for

strategic gains (Burke and Logsdon 1996); and others, which is totally against Islamic

Shariah. While Western philosophy of CSR is based on principles of Western values

and culture that is highly different from Islamic CSR. However, Scholars like Zinkin

and Williams (2010) concluded that there is no basic difference between Islamic

CSR and UN Global Compact concept of CSR. It manifest in contradiction with

the findings of Mohammad (2007) and Dasuki (2008) that shows fundamental

differences between Islamic CSR principles and activities comparing Western

CSR. Islam covers both aspects of knowledge and includes economic side, and

also focuses on spiritual values, which is not emphasized by (Zinkin and William,

2010).

The present demand of society from business corporations is that besides making their

profits, organizations have a positive role to serve in the broad interest of all

stakeholders and do not harm the society and care the well-being of others.

Organizations have several responsibilities that are taken from ethical principles and

values. The Islamic CSR can be describing by including the following concepts.

2.3.1 Ethics in Islam

Ethics are set of moral principles that distinguish what is right from wrong, and in

Islamic context, the Qur‘anic term khuluq is closest to it. Scholars like (Rice, 1999)

presented that Islamic ethics for Muslims derived from four sources: Al-Quran, Holy

prophet Sunnah and behavior as a role model, cultural formulated by companions of

prophet, and different scholars and Imam as they work to integrate the scattered data.

These sources provide the base for human kind as an example and code of conduct to

harmonize an ethical culture regarding to their society. According to (Chapra 1992),

Islamic system educate the lesson of human well-being, cultural justice, dealing and

presentation system, brotherhood and sisterhood, and a balanced life for both spiritual

and material.


56

Islam is complete code of life and practice of Islam regarding to subject like economics

cover a detailed presentation and manners of buying and selling, fair trading, interest,

taxation, monetary and fiscal policy, exchange process, lenders and borrowers and

employees and employers (Rice 1999). Islam guide the behaviors of all human kind,

introduces rules to control their desires, fear from God and comply the legislation

provided by Islam, and business success is not judge in material terms (Dusuki 2008).

The Holy Quran teaches the entire lessons of all behavioral economic activities, and

complete motivation for all aspect of human and business life.In general, Islamic ethics

are governed to various ethical principles and each have significant business

implications and include:

2.3.1.1 Unity in Islam

Islam as a religion and consider Unity of God as a corner stone. The source of Islamic

ethic concept is derived from faith in Unity (Towhid) as Unity for humankind

(Mohammad 2007). According to (Naqvi, 1981) all other characteristics of Islamic

ethics are derived from the concept of Unity. All people in the universe praise God,

cooperate to carry out His will as He is sole creator (Rice 1999). The implication for

businesses is: one God, then one constitution, the divine constitution. Many prophets

spent their life‘s to educate the humankind about the fundamental belief that ‗there is

no God but Allah and none is worth worship except Him‘. Muslim submits their entire

life completely to the Will of Allah.

Allah‘s unity guides the humankind a powerful integration principle, that we should not

divide and discriminate humans into sections and all Muslims are brother to each

other. The unity principle is for all humans are the ultimate aim of the teachings of

Islam. Islam delivers the message of respect, safety, security and prosperity of the non-

Muslims as well and Unity teaches peace, equality and paternity.

The concept of unity discussed in Quran on three levels. The one is the unity of

humanity. Almighty Allah in the Quran says that we divide the people in the races and

tribes are only for their orientation. The best one out of them is the man of piety. Allah

said in Quran:


57

O mankind! We have created you from a single pair of male and female,

and made you into nations and tribes, that you may know one

another…”(Sura Al Hujarat-49: 13)

Islam forces the lesson of tolerates, protect all humans, promote unity regardless of

color, race, language and no discrimination.‖ According to a Hadith of the Holy

Prophet all persons belong to Adam and Adam was from soil. Holy Prophet had clearly

announced in last sermon from Mount Arafat ―no Arab has any superiority over a non-

Arab; or the white over the black‖.

The Quran addresses the believers (momineen) or the people (Annas) and nowhere

addresses the Muslims. At second level Quran refer to the unity of the people of the

Books: the Jews, the Christians and the Muslims.

Quran says:

” O, people of the Book! Come to a word that is just between us and you,

that we worship none but Allah, and that we associate no partners with

him, and that none of us will take others as lords besides Allah. Then if

they turn away, say; Bear witness that we are Muslims” (Sura Al-e-Imran

3:64).

At third level the Quran emphasize on the unity of the Muslims. In the Quran says;

“And hold fast, all of you together to the rope of Allah, and be not divided

among yourselves.” (Sura Al-e-Imran 3:103).

Holy Prophet said:

“The Muslims are like a body; if one limb aches, the whole body

aches.” Then the Messenger of Allah says; “whoever does not care about

the affairs of the Muslims is not one of them.”


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2.3.1.2 Iman (Faith)

Imanis regarded as faith or belief, and is way to verify something, having confidence,

to rely or to be convinced towards something to accept truthfully. Iman is an

acceptance without argument, reason or proof. Quran explore the concept of Iman as

belief based upon reason and knowledge; an acceptability with full confidence and

willingness either consciously or unconsciously. Allah praise Mu‘min and describe him

a person who accepts truth in such a way and ensures his own peace and helps him to

protect it the same for other mankind. The definition of Iman in Quran can be defined

as:

"To believe in Allah, and in the hereafter, and in Malaika (angels or

Allah‟s forces), and in the Book, and the Prophets." (Sura Al-

Baqarah2:177)

In Islam, Iman consists of six pillars i.e. belief in Allah, belief in Angels, belief in

revealed books, belief in Messengers, belief in Qiyamah, belief in predestination by

Allah of all things. According to (Alawneh 1998), in business context entrepreneurs are

guided by Islamic law (Shariah) and ensure Iman as a guidelines for making their

decisions and engage permitted (Halal) practices, and avoid the forbidden (Haram)

practices. However (Gibbs 1998) argued that managers are free to make their decisions

but must consider their religious contextual framework to implement it properly.


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2.3.1.3 Khilafah (trusteeship)

In Islam human being, is considered a vicegerent (khalifah). The term Khilafah

(trusteeship) is used for mankind, which shows that all sovereignty belongs to Allah

alone and humans are sent to earth as Khilafah and considered as trustee of Allah

resources. Allah delegated us certain powers and we have to obey it as vicegerent,

within defined boundaries of law provided by Allah.

Beside this Allah revealed Holy Quran as guidance for mankind and focus it as central

subject. The duty of human being as a vicegerent is to perceived as the trustee of the

earth and fulfills the responsibilities with accountability and fear from Allah. In Quran

Allah blessed mankind and stated as:

“Ye are the best of peoples, evolved for mankind, enjoining what is right,

forbidding what is wrong, and believing in Allah...” (Surah Al-Imran:110)

According to Hasan (1992) described the dual function of human being as follows. At

one aspect we all humans are created by Allah and we are servant of Allah (SWT) and

it‘s our duty to praise him and spent our life by obeying rules and do good to all

creatures and to seeks pleasure of Allah and prevent our self from bad deeds and have

faith on Aakherat (Day of judgment). However as Khalifah, humans need to maintain

peace, harmony, brotherhood, HuqooqulIbad (rights owed to fellow men or humanity),

and enforce Shariah in his entire life.

Man is trustee of Allah, and all power and possessions belong to him. In other words

(Bardai, 2002), mentioned the role of human being is to create maximum value in

social responsibility to society and with intention to satisfy and create benefit to whole

society. Tawhid is the essential principle of CSR and leaders play the role of Khalifah,

to practice CSR for broad interest of society.

2.3.1.4 Equilibrium (Adl or justice)

The concept of ―Al-Tawazan‖. To produce best social order, it is duty of man to do

balance among various aspects of his life. Allah has created everything perfectly with

balance. Al supreme level equilibrium is absolute trait of Allah. Allah has absolutely


60

carried His will and rationale, which are love, forgiveness and kindness to His

creatures. Man is obliged as a vicegerent to fulfill his social responsibility while

maintaining equilibrium in the society. in fact , the divine perfection and Allah has

created the universe with a balance to maintain equilibrium in nature exists, and Quran

states it as;

―It is not for the sun to overtake the moon, nor doth the night outstrip the

day. They float each in an orbit” (SuraYa Sin 36:40)

To word equilibrium that is often used in the context of Al‗Adl, and another meaning of

Al‘Adl is justice and equity (Umar-ud-din, 1991). Islam insists to implement justice in

society and if justice is introduced everywhere then a delicate balance (equilibrium)

is build and hold throughout such a society. Naqvi (1994) concluded that it is

societal responsibility to ensure that income and wealth are distributed fairly and

configuration of production, consumption and distribution be based on social

equilibrium. In other words every member of society will get the justice in terms of

social equilibrium, harmony and prosperity.

Islamic Scholars like Chapra (1992) holds the importance of social justice and optimal

utilization of resources provided by Allah to deliver quality of life for society by

keeping humane, respect, brotherhood and belief on trustee nature of ownership.

Therefore, Muslim society is collectively obliged to provide equal opportunities for

everyone for an honest living by keeping in view members ability and effort. Further,

Chapra (1992), stress on four elements to maintain equilibrium are;

1. Need fulfillment

2. Respectable source of earning

3. Equitable distribution of wealth

4. Prompt growth and stability

Mohammad (2007), focused on implication of Khalifa (vicegerency) and Al‘Adl (social

justice) for economic prosperity and minimization of economic instability that mostly

cause due to unequal distribution of wealth that further leads to problems like

Inflation, poverty and economic recession. The principle of equilibrium and justice

applied figuratively and literally to business.


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According to Beekun (1997) Islam as a religion promote equal treatment to all living

beings. In promoting decisions and evaluating one person against another in

organization, justice, equal opportunity, faireness are must. Similarly Islam prohibit

that if an employee had some physical problem or had done something wrong in past,

so employer do not publicize it. Employer has obligation to pay a fair remuneration to

his employees (IbnTaymiyah 1992). Allah directs man that;

“Allah commands you to render back your trusts to those whom they are

due, and when you judje between man and man that you judge with justice

(SuraAnNisaa 4:58)

2.3.1.5 Free Will (Ikhtiyar)

Human beings as God‘s trustees on earth have the free will to guide their own lives

(Rice 1999), but this free will is directly linked with accountability. It is an element that

individual has to exercise and provide them ability to make alternatives and select the

best decisions in their life. However, (Naqvi, 1994) claims that human freedom is

―unrestricted and voluntarily‖.

Allah created human beings virtuous and pure; and gave him intelligence, grace and

mercy. Now it is the test of humans on earth that how they utilize these instruments. If

they spent their life in the parameters given and suggested by Allah they will be happy

on earth and on Day of Judgment. But if human distorts his own will and goes against

Allah‘s will, yet Allah forgiveness is open to him, if he takes it.

As man has to be assigned most distinguish niche by Allah. Man has freedom either to

become God-like, and thus His vicegerent on earth, or denies God. Islam teaches man

not to be slave of his desire. Every person has free will to make their own choices

hence achieve success in his life and hereafter. Islam teaches man to make such prayer

to Allah:

According to Islam, although people can fully exercise this free will in making

decisions, including business decisions, it is a religious essential to exercise

responsibility to those they deal with and, ultimately, to God by observing His rules on

earth (Naqvi, 1994). By implementing God‘ srules Muslims do not lose their


62

individuality, but they become less selfish and more motivated to serve the wider public

(Rice 1999).The table below shows description against each dimension.

Dimension Sources from Al Quran Inherent Values

Unity of Allah “Then when the Shalat (prayer) is

finished, you may disperse through the

land, and seek the Bounty of Allah (by

working, etc.), and remember Allah

much, that you may be successful”

(AlQuran 62:10)

All activities belong to

Allah.

“The creation of the heavens and the

earth is indeed greater than the creation

of mankind, yet most of mankind know

not..” (Al-Quran 40:57)

Seek financial and social

responsibility

“And if the debtor is in a hard time (has

no money), then grant him time till it is

easy for him to repay, but if you remit it

by way of charity, that is better for you if

you did but know.” (Al-Quran 2:280)

Show leniency to debtor

Benevolence “And for all, there will be degrees

according to that which they did, that He

(Allah) may recompense them in full for

their deeds. And they will not be

wronged” (Al-Quran 46:19)

Treat all customers equally

“And spend of your substance in the

cause of Allah, and make not your own

hands contribute to (your) destruction;

but do good; for Allah loveth those who

do good.” (Al-Quran 2:195)

Optimal utilization of

resources and practice

sustainable business

“And violent is he in his love of wealth.”

(Al-Quran 100:8). Win- win benefit for all

Equilibrium “If ye are on a journey, and cannot find

a scribe, a pledge with possession (may

serve the purpose). And if one of you

deposits a thing on trust with another,

Let the trustee (Faithfully) discharge His

trust, and let him fear his Lord. Conceal

not evidence; for whoever conceals it,-

His heart is tainted with sin. And Allah

Knoweth all that ye do.” (Al-Quran 2:

283)

Do balance with all

stakeholders

“If both the parties spoke the truth and

describe the defects and qualities (of the

goods), then they would be blessed in

their transaction. And if they told lies or

hide something then the blessing of their

transactions will be lost” (Hadist by

Bukhari, no: 1937)

Be honest, avoid deceptive

marketing

Justice and Equity

Trusteeship

“And those in whose wealth are a

recognized right. For the (needy) who

asks and him who is prevented (for some

reason from asking).” (Al-Quran 70:24–

25)

Philanthropy for needy

people

“Those who devour usury will not stand

except as stand one whom the Evil one

by his touch Hath driven to madness.

Forbidden of riba


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That is because they say: “Trade is like

usury,” but Allah hath permitted trade

and forbidden usury. ...” (AlQuran

2:275).

“Give full measure when ye measure,

and weigh with a balance that is

straight: that is the most fitting and the

most advantageous in the final

determination”(Al-Quran 17:.35).

Promote fair pricing

Woe to those that deal in fraud; 2) Those

who, when they have to receive by

measure from men, exact full measure;

3) But when they have to give by

measure or weight to men, give less than

due; 4) Do they not think that they will

be called to account?” (Al-Quran 83:1)

Cheating and other

deceptive, harmful to

society are prohibited

Source: Author own compilation

2.3.2 Factors Encompassing Islamic CSR in business

Muslims in the world believes on oneness of God (Allah) and practice Islam is a

religion of peace and its divine knowledge guide direction to every human in this

world. Its obligation for any Islamic identity based organization to follow practices of

Muslim Ummah and apply Shari' ah principles for implementation of ICSR practices.

Indeed the fact that Islam has more stringent ethical codes in every conduct of business

and enforcement of social responsible practices. The different factors that

encompassing CSR in Islamic business organizations are:

2.3.2.1 Human Rights concepts and practices in Islamic Organizations

In Islam each Muslim is khalifah (vicegerent) and in context of managers they must

possess qualities and carry their duties as an ―agent‖ to Allah S.W.T. They are

responsible to carry out business activities in effective manner. All human beings are

created by Allah S.W.T and are equal. Every Muslim entrepreneur must recognize

some basic human rights laid down in Islam to interact with different stakeholders.

Islam encourage to deal equality among all humans belong to any race, color, nation or

group. According to Islamic CSR principle i.e. faith (Emaan), it man obligation to

protect dignity and human virtues of all people even belong to any religion. In this

context Islamic CSR encourage all individuals to protect basic human rights of all

human beings. It includes some primary duties like, to give respect to human beings


64

and let others to live their life without interfering. In addition, Islam also promotes

freedom of human rights i.e. freewill (Ikthiar) but under the parameters of Halal

(lawful) and Haram (Unlawful). Furthermore, Islam is a religion of peace and justice

and educates the lesson of justice, respect and equality in every transaction. It also

emphasizes to help poor‘s and other needy peoples. It includes by providing basic

necessities of life in shape of health, education, food and some others physiological

needs. In conclusion, human rights given by Allah cannot be withdrawn in any

condition and need to be practiced, as Holy Prophet says,

“On the Day of Judgment, rights will be given to those to whom they are due (and

wrongs will be redressed).”

Therefore, Muslim entrepreneurs are obliged to adopt human rights practices in

Islamic domain for better prosperity, peace, love and justice; otherwise they will be

answerable on Day of Judgment. It is highly demanded in competitive era from

business organization, to deliver good governance, focused towards sustainability and

devise ethical values that ultimately lead towards organizations ideology and

objectives. These human rights practices will result in business success, minimization

of wastage, investor confidence and better relationships with stakeholders.

2.3.2.2 Fair Labor Practices concepts and practices in Islamic Organizations

To enhance organization performance, the relationship between religion and ethical

behavior in employee practice is very important. Islamic business ethics and principles

guide employee sustainability and retention in organizations. Islamic HRM consider

employee as powerful and dynamic asset for organization and not treat employee as

slaves (Beekun, 1997). It focuses to invest on employee training and development,

improvement in knowledge, skills and abilities of employees for achievement of

organization objectives (Ali, 2005). Many researchers like (Beekun, 1997; Ali,

2005) found positive linkage between Islamic HRM practices and employee job

satisfaction, retention and high performance. Islamic principles regarding employee

practices educate the lesson of human well-being, justice, harmony and fairness.

Islamic CSR in business organizations set the rules for both employee and

employer. For peace and prosperity it‘s mandatory to maintain justice and fair


65

dealing within organizations. It‘s obligation to do consultation and duly made

agreement on employment contract before starting the work. It may further include

honesty, security and justice for better protection and motivation. In addition, to

maintain ethical conduct and fair labor practices, employers are bound to give

wages at agreed time, right amount, allocate optimal workload to employee, make

them work easy, provide hygiene working conditions, well behavior, respect and

kindness, employee welfare.

Similarly, employees may also have obligations in Islamic CSR. It requires that

employee put effort in job with best his skills and knowledge for welfare of his

employer and fear from Allah. He must show loyalty, full obligations and

accountability to his employer, show spirit of worship for the satisfaction of Allah.

He may also care his colleagues and maintain safe, hygiene and clean environment.

In conclusion all the Islamic principles are balanced way to do justice between

employer and employee to serve mankind. It is the responsibility of Muslim

employer and employee to do welfare for entire humanity. Allah said in Quran,

“You are the great nation. you are created for the welfare of mankind. you order people to do the

right and stop wrong doing.”(Quran “Surah 3, Verse 110)

2.3.2.3 Ethical Conduct concepts and practices in Islamic Organizations

In the light of Islamic knowledge ethical values are very important in all part of human

life. If an entrepreneur do ―Trade‘ according to the standards of Islam it will be

considered as ‗Ibadat‘. Islamic organizations are obliged to conduct their business

activities without any greediness, and ensure to balance business profits by delivering

safe and quality products to customers and society (Abdullah, 2010). It educates to

enhance value maximization and welfare of society by equity and justice (Saeed, et al.,

2011).

Various ethical principles and code of ethics are frequently taught throughout the Holy

Al-Quran and Sunnah. According to (Mohammad et al, 2008) it is difficult to

comprehend all ethical code of conduct from Al-Quran and Sunnah, because of variety

of knowledge and implications. In Islamic business ethics few frequently used ethical


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dimensions in Islamic CSR are i.e. unity of Allah, justice and equality, equilibrium,

honesty, trusteeship and responsibility.

The teachings of prophet (SAW) also stressed on areas of moral and ethical values and

principles. In Quran, the most closely relative term used for ethics is ―Khulaq‖. Islam

places increase emphasis on all human aspect of life and are the core principles of

Islamic CSR. In conclusion, Islamic ethical CSR principles are constellation that

governs human behavior in dealing with all stakeholders.

2.3.2.4 Environmental Protection concepts and practices in Islamic Organizations

According to Islamic beliefs mankind has responsibility to protect environment and

maintain ecological balance created by Allah. Everything created by Allah have

purpose and is according to divine plan with perfect wisdom (hikmah). All the

provisions made by Allah are for sustenance of human and non-human beings. In the

context of Islamic corporate social responsibility any activity that is hazard to the

environment and human quality of life is clearly prohibited (Dusuki and Dar, 2005). It

is integral part of Islamic beliefs to maintain cleanliness, greenery, animal protection

and avoiding wastage of resources. The nature is ―gift of Allah‖ that includes water,

earth, air, forest, animals, bird‘s etc. Quran says,

Responsible organizations do green practices and utilize optimal organizational

resources by utilizing lean production with efficiency and effectiveness and fear from

Allah. Thus, it is obligation to organizations to care human and do well for the society

and guarantee sustainability for future generations. Furthermore, besides generating

dividends for shareholders organizations must ensure to protect natural environment

and also do charitable contributions, social justice, safety, brotherhood to seek pleasure

of Allah (Dusuki, 2008). As trustee of nature, its human duty to protect environment

and use resources in right ways and does not waste it in any case.

2.3.2.5 Community Development Initiatives concepts and practices in Islamic

Organizations

To bring prosperity in community, Islam define the principles of CSR like Unity,

Caliphate, brotherhood, social justice along with Tawheed and Taqwa paradigm


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(Dasuki, 1998). Community development in Islam is not for gaining personal goals or

any selfishness, but it‘s pure for the sake of welfare of mankind and pleasure of Allah.

Organizations can do much more and for the greater interest of society as compared to

single individual (Yasir, 2006). In fact, entrepreneurs are obliged to Allah SWT laws

along with other living creatures and humans around them. As a vicegerent,

―representative of Allah on earth‖ entrepreneur have to act within authority delegated to

him by Allah SWT. It is an effort, in Islam, to make balance in society among poverty

and luxury and for development of society. Indeed, charity is purely for the sake of

Allah, it should be made for seek Allah‘s forgiveness and His blessings.

To fulfill CSR obligations and create relationships with society organizations must

follow Islamic Philanthropic principles to create social welfare in the society (Ekawati,

2004). Philanthropy in Islam can be of 2 types: obligatory and voluntarily. In

obligatory terms, Zakat and fitrana whereas voluntarily includes sadaqa and waqf. In

addition, (Alsiba, 1988) devised instruments for Islamic organizations that are used as

tool for community development. It includes, zakat, charity (sadaqa), waqf, ransome

(kaffara), social welfare fees (for baitul-mal), mosques, education, health, free

accommodation for needy travelers, hostels for homeless and poor‘s, free serving

restaurants, clean water, infrastructure improvement, environment protection,

foundations for orphans, community library.

2.3.3 Islamic CSR and Organizational Performance

In Islam, any business activities are bound towards to religious obligations and are

responsible to contribute and protect society (Beekun, 1997). The concept of social

responsibility is stem from brotherhood and social justice and have significant role in

improvement of organization performance. The lesson of brotherhood give rise to

coordinated culture that reflect to team working among employees for better

productivity and effectiveness. Social justice contributes to big picture of fulfilling and

meeting interest of diverse stakeholders in ethical framework as inscribed in Shariah. In

Islamic business organizations management should respect the legitimate haq (right) of

all stakeholders involved, such as shareholders, employees, suppliers as well as the

environment. In this context, Muslim action towards others must be in the form amal

salih (good deeds), which is the key to the attainment of al-falah and business success


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(Hassan, 2001).It manifests in developing harmony and long lasting relations for

Islamic business organizations with the society.

In Islam, business performance are appraise base on how well the resources are manage

to improve the society. It may be financial and other non-financial resources like

employees and information. The effective utilization of resources within organization,

including the knowledge held by employees in creativity, will source to advantage and

innovation. By adopting Islamic principles, business leaders are Khalifa and should

practice CSR to maintain the justice, peace and protect the environment, do fair

dealings, honest and trustworthy actions for organization reputation and performance

(Naqvi, 1981).

In literature, study conducted by Dasuki (2006) concluded that Islamic banks must

adopt CSR practices in order to get comparative advantage against conventional banks.

He added that Islamic banks CSR influences in all their operations and decision

making. The study also reveal significant contribution that Islamic banks, gain increase

market share, loyalty and long term relations with its stakeholders through CSR

disclosure. CSR reputation builds trust, confidence, satisfaction, retention, profits and

sustainability in banking sector.

Similarly, Arshad et al. (2012) found positive relations between Islamic CSR

disclosure, corporate reputation and firm performance. In addition, the results show that

management attitude towards Islamic CSR disclosure meet diverse needs of

stakeholders. Their findings disclose that Islamic CSR practices are important business

strategies and add value to existing value chain of organization and for superior

performance.

Samina (2012) found that, in Bangladesh all Islamic banks adopt mandatory

dimensions of CSR. However, recommended dimension of CSR varies among different

Islamic banks. Moreover, in the study she found positive correlation between Islamic

CSR expenditure and bank deposits, reputation and its profits.


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2.3.3.1 Measures of Organizational Performance and Islamic CSR

In order to verify the organization performance of Islamic banks, customer satisfaction

and employee performance dependent variables are taken to gauge their empirical

worth.

As it is comparative study, almost similar factors are used, as mentioned in previous

section (2.2.3.1), to determine customer satisfaction in Islamic banks practicing CSR. It

includes branch availability, service quality, prices and fee.

Moreover, to determine employee performance of Islamic banks in relation with CSR

practices the following factors are adopted from (Porter and Kramer, 2006). It includes

employee commitment, involvement and support and resources consist of training and

development, reward system and other benefits.

2.4 Comparison and Differences between Islamic and Western CSR

The concept of Corporate Social Responsibility (CSR) is gaining wider acceptability

both in developed and developing countries. Different medium and large organizations

are encouraged to behave socially responsible activities for better satisfaction of diverse

stakeholders. In literature, Islamic and Western CSR principles are based on different

philosophy and dissimilar values, however, the basic concepts are same and make

resemblance with each other. Islamic CSR are divine in nature and is God-centered in

scope and time and supports every activity aimed at the welfare of the whole society. In

contemporary business world, western thoughts of CSR proposed by international

bodies like United Nations make similarity in various notions to Islamic knowledge in

many dimensions. Therefore different Islamic organizations adopt western CSR

philosophy in many dimensions like economic, ethics, environment, people and

philanthropy because of their consistency with learning of Islamic knowledge. Scholars

like Zinkin and Williams (2010) concluded that there is no basic difference between

Islamic CSR and UN Global Compact concept of CSR. In their research work they

compared Islamic CSR with Ten principles of the UN Global Compact. They

concluded that teachings of Islam are close conformity with UN Global Compact

principles in many dimensions. Furthermore Islamic principles are wider in scope in


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dimensions like human capital, transparency, permissible of Halal and forbidden of

Haram, accountability of individual for unethical behavior on Day of Judgment.

Similarly, Durrani (2016) concluded that in Pakistani banking sector, Islamic banks

practicing almost similar CSR practices compared to conventional banks. Islamic banks

in Pakistan lacks Islamic CSR model and still in infancy stage of CSR disclosure. It

manifest in contradiction with the findings of Mohammad (2007) and Dasuki (2008)

that shows fundamental differences between Islamic CSR principles and activities

comparing Western CSR. Islam covers both aspects of knowledge and includes

economic side, and also focuses on spiritual values, which is not emphasized by Zinkin

and William (2010). However, there are some dimensions of CSR of both western and

Islamic principles that are similar to each other in business practice. It manifest from

that CSR is not new concept and consists of many similar dimensions that are applied

to Islamic along with traditional business as proposed by many western scholars and

international bodies that are consistent with the teachings of Islam.

Therefore, in the light of Islamic and western knowledge, in this study, similarities and

differences are identified against CSR dimensions like, Human rights, fair labor

practices, ethical conduct, environment protection and community development

initiatives. Furthermore, different hypothesis are generated in comparison and for

implementation of CSR practices in conventional and Islamic banks operating in

Peshawar, Pakistan.

2.4.1 Human Rights: Islamic concept and Western thoughts

In the light of Holy Quran, Holy Prophet (S.A.A.W) issued vast variety of human rights

that is given by Allah and cannot be withdrawn at any condition or need. It is

obligatory for all Muslim government, entrepreneurs and all other professional workers

to practice human rights and fear from Allah. Islamic human rights framework

includes, right to life to all human beings belong to any color, religion, gender or cast.

It also promotes freedom of thought, religion, expression, protection against torturebut

under the parameters of Halal (lawful) and Haram (Unlawful). Islam gives equal

opportunity to all humans to acquire knowledge, profession and develop his

personality. It also educates humanity to get food, shelter, medical, education and other


71

basic necessities within domain and teachings of Islam. Infect Islam grant almost equal

rights to non-Muslims.

In Western thought Human rights evolved over time. The establishment of United

Nations in 1945 is with primary purpose is to respect human rights. According to UN

global compact human rights are codified under four headings of; (1) Equality (2) Life

and security (3) Personal freedom (4) Economic, social and cultural freedom.

Moreover, in literature, the basic concept of Islamic and Western thoughts against

human rights is almost same, except Halal and Haram parameters given by Islam and

other obligations of life hereafter. In this context, Muslim businesses should have no

problem complying with the UN Global Compact, since the Qur‘an and the Shari‘ah

often go further than the Compact requires. The core issues that mostly evolve in

Islamic and contemporary CSR practices for business organizations are differentiated

below in the table:

Table 2.5 Comparison between contemporary and Islamic CSR for Human

Rights CSR

Measure of CSR Contemporary CSR Issues Islamic CSR issues

Human Rights (a) Respecting employee rights, resolve their

issues fairly and with justice.

(b) Designing culture inhibit human rights

disclosure.

(c) Respect human rights and implement in

organization with true spirit.

(d) Administer human rights while in

integration with supplier, distributors or to

maintaining network with other stakeholders.

(a) ―I have made oppression unlawful for

Me and for you, so do not commit

oppression against one another‖ Sahih

Muslim, Vol.3 Hadith No. 6254.

(b) ―help thy brother whether he is the

oppressor or the oppressed i.e. If he is

an oppressor he should prevent him

from doing it, for that is his help and if

he is oppressed he should be helped

(against oppressor)‖ Sahih Muslim,

Vol.3, Hadith No. 6246.

The current study identified human rights as CSR dimension for banking sector in

Pakistan. An efficient banking culture can promote greater amount of investment which

can further help to achieve a faster growth rate of economy. Therefore Human rights is

an important CSR dimension for both mode of banking sector in Pakistan. According to

(Ruf et al. 2001) human rights CSR initiative had positive impact in corporate social

performance in banking sector of Malaysia and human right was performance indicator


72

for CSR-CP relationship. Therefore keeping in view above literature the following

hypothesis regarding Human rights in current study can be proposed for conventional

and Islamic banks in the context of customer satisfaction and employee performance:

Hypothesis 1:

H0: There is insignificant relationship of CSR practices in Human Rights on Customer

satisfaction in Conventional banks.

H1: There is significant relationship of CSR practices in Human Rights on Customer


Hypothesis 2:

H0: There is insignificant relationship of CSR practices in Human Rights on Employee

performance in Conventional banks.

H1: There is significant relationship of CSR practices in Human Rights on Employee


Hypothesis 3:


satisfaction in Islamic banks.



Hypothesis 4:


performance in Islamic banks.




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2.4.2 Fair Labor Practices: Islamic concept and Western thoughts

Islamic CSR labor practices should be a moral, spiritual and physical aspect and have

Divine guidance. It should also accompany with the concept of rewards in the

Hereafter. Islamic approach to labor practices maintains balance and harmony between

the interests of the individual and the group. Prophet Mohammad PBUH gave a

comprehensive model regarding sustainable labor practices. In Islamic CSR, labor

practices are based on three major aspects; (1) Taqwa which can be explained as piety,

uprightness, devotions, God-fearing among others. (2) Itqan which means that the

person does things in the right order and of the desired quality. (3) Akhlak refers to

attitudes, feelings, dispositions among others which employees possess. Other

components in Islamic framework for human resource practices in organizations are;

Trust (Amanah), Sincerity (Ikhlas), Justice (Adl), Equality, Accountability (today (life)

than tomorrow (Hereafter)), Consultation (Shura), Patience (Sabar), Safety and

security, Humbleness, Humility, Kindness and care (Ihsan), Delegation of Authority

(Tafweedah Al-sulitoh), Division of Labor, recruitment etc.

In comparison, Western labor practices are based on classical and humanistic theories.

In classical school of thought management of organization was more focused on

organization productivity and ignoring employee needs. In humanistic thought

managers concentrate on employee needs and maintaining relationship between

management and employees through provision of controlling on staff behavior. In

addition, UNGC (2012) also give universal labor laws that are required in organizations

cultures for improving standards and employee‘s performance. The human resource

activities that are commonly practice in organizations are; HR-planning, recruitment,

selection, training and development, employee orientation, performance appraisal,

carrier development, negotiations and other motivational techniques to maintain and

retain employees in organization. Furthermore, many companies find that caring for

employees results in greater customer satisfaction. The core issues that mostly evolve

in Islamic and contemporary CSR practices for business organizations are differentiated

below in the table:


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Table 2.6 Comparison between contemporary and Islamic CSR for fair labor

practices

Measure of CSR Contemporary CSR Issues

Selected Corresponding Sources from

the Qur’an and Hadith of the Prophet

Fair Labor Practices 1. Utilization of Collective Bargaining

constructive forum.

2. Freedom of association by

formulating non- discriminatory

policies.

3. Abolition of Child labor.

4. No discrimination in HR practices

like, recruitment, selection,

appraisal and career development.

―Your employees are your brethren upon

whom Allah has given you authority. So if

one has one‘s brother under his control,

one should feed him with the like of what

one eats and clothe him with the like of

what one wears. You should not

overburden him with what he cannot bear,

and if you do so, help him in his job.‖

Sahih Muslim Vol. 3, Hadith No.4093.

―Allah (SWT) says: ―I will be an opponent

to three persons on the Day of Judgment:

One who makes a covenant in My Name,

but he proves treacherous, One who sells a

free person (as slave) and eats the price,

and one who employs a labourer and gets

the full work done by him but does not pay

him wages‖ Sahih al-Bukhari Vol. 3:

Hadith No. 2.

This study include fair labor practices as CSR dimension for improve customer

satisfaction and employee performance in banking sector of Pakistan.

Therefore, following hypothesis were developed in this study to test the above

argument in relation to Islamic and conventional banks as follows:

Hypothesis 5:

H0: There is insignificant relationship of CSR practices in Fair labor dimension on

Customer satisfaction in Conventional banks.

H1: There is significant relationship of CSR practices in Fair labor dimension on


Hypothesis 6:


Employee performance in Conventional banks.


Employees performance in Conventional banks.


75

Hypothesis 7:


Customer satisfaction in Islamic banks.



Hypothesis 8:


Employee performance in Islamic banks.


Employees performance in Islamic banks.

2.4.3 Code of Ethics: Islamic concept and Western thoughts

In Islam, ethics are religious faith (iman) that defines good principles and values that

covers all aspects of life (Mohammed, 2011).Ethics have different terms in Al-Quran,

haqq (truth and right), taqwa (piety), birr (righteousness), adl (equilibrium). However,

the most closely term related to ethics is akhlaq (Beekun, 1996). In Islamic virtue

business organizations must dohonest, fair and ethical trading in society. Islam

promotes free market where individuals should act fairly and do justice. In Islamic CSR

context there are three types of ethics: individuals, organization, and society

(Mohammed 2005). The examples of individual ethics are honesty, truth, self-purity,

modesty, trustworthy and integrity. In organization settings respect, justice, kindness,

brotherhood, fair dealing, honesty are some examples for effective Islamic culture

within organization (Mohammed 2005). Similarly in societal ethical dealing, protecting

and respecting rights of others, prohibition of fraud, robbery, injustice and spreading

love, fulfilling promises, brotherhood, fear Allah, friendship among all members of

society are examples of ethics related to society (Mohammed 2005). In general, Islam

have comprehensive framework of ethical issues given by Allah s.w.t and spelled out

by the Sunnah through Prophet actions of identifying what is right and wrong.

In Western literature the concept of ethics evolved over time to time. Several ethical

theories presented based on different standards. Some of them focused on kind of

actions that organization follow, few theories deal with character of an individual, and

some follow religious beliefs and principles, and other deal with culture that deal with


76

society of a particular area. The western concepts are still progressing and debatable in

ethical domain in explaining what is right and wrong. However, Islamic ethical

framework are divine source, complete, believes on collectivism, realism and balance.

The table below differentiates the code of ethics between Islamic and conventional

CSR in business practices.

Table 2.7 Comparison between contemporary and Islamic CSR for Ethical

conduct

Measure of CSR Contemporary CSR Issues Selected Corresponding Sources from


Ethical conduct 1. Objectivity, deals with the

judgment of businessman

without any conflict of interest.

2. Integrity implies true and fair

dealings.

3. Professional competence is

necessary to carry out duties.

4. Confidentiality of business

information and not to be used

for personal advantage.

5. Professional behavior must

comply with all relevant laws

and regulations.

Islam gives special importance and stress

on lawful and unlawful codes of business

affairs ( Trade is „Halal‟ and interest is

„Haram‟)

“You are the best nation that has been

raised up for mankind; you enjoin right

conducts, forbid evil and believe in Allah”

Furthermore, as mentioned earlier in Agency theory, the ethical relationship of trust,

confidence, honesty between employer and employees is required for improve

organization performance. Similarly, Griffin and Mahon (1997) and Margolis and

Walsh (2001) analyzed more than 100 research papers and found positive relationship

between ethical CSR and OP. keeping in view of their work, some other scholars

contributed to the literature of CSR (Tsoutsoura 2004; Coombs and Gilley 2005; Brine

et al. 2006).

Taking in view these considerations this study developed following hypothesis to test

ethical CSR practices in Pakistani Islamic and conventional banking. The hypothesis

for ethical CSR and OP related to customer and employee performance in this study are

follows:


77

Hypothesis 9:

H0: There is insignificant relationship of CSR practices in ethical behavior on


H1: There is significant relationship of CSR practices in ethical behavior on Customer

Satisfaction in Conventional banks.

Hypothesis 10:


Employee performance n in Conventional banks.

H1: There is significant relationship of CSR practices in ethical behavior on


Hypothesis 11:




Satisfaction in Islamic banks.

Hypothesis 12:



H1: There is significant relationship of CSR practices in ethical behavior on Employees


2.4.4 Environment Protection: Islamic concept and Western thoughts

To maintain the balance of life it is crucial for humans to protect environment. Islam

integrates the concept of environmental management into the philosophy of Muslims.

Islam educates people through Al Quran and Sunnah to do responsible behavior and

accountable for any damage done on earth. It is also mandatory for Islamic

organizations to behave on Taqwa-centric level and should protect the environment and

preserve the natural resources. The organizations conduct their environmental

activities, voluntarily regardless of the financial consequences, whether positive or

negative. In addition, Islam emphasizes and prefers common interests over individual

interests. Therefore, organizations are obliged in Islamic framework to protect and


78

maintain the environment even if doing so will affect their specific interests. Moreover,

Allah created everything in balance. Islam forbids all types of excesses, whether in

drinking, eating, using resources in organizations and other activities.

Western knowledge regarding environment protection is mostly as a response to

external forces, pressures, legislation, penalties, fines and for the achievement of

special interest. They consider it as strategic tool for brand image, popularity and for

continuous success. It indicates that organizations should protect the environment as

part of protecting their interests in the environment. In addition, laws and social duties

against environment protection vary from one organization to another. Furthermore,

sustainable business practices are mandatory in order to protect the resources for future

generations. Therefore, modern organizations are adopting advance technology,

environment protection laws for increase efficiency and ecofriendly adaptation to save

the planet.

The table below differentiates environmental protection practices regarding to

contemporary and Islamic CSR.

Table 2.8 Comparison between contemporary and Islamic CSR for

environment protection


Selected Corresponding Sources from


Environmental

Protection

1. Controlling wastages, pollution and

other toxic emissions.

2. Preventing harmful environmental

activities.

3. Eco-friendly technology and

methods are adapted.

4. Sustainability for the sake of future

generations.

5. Community benefit initiatives.

a. “And when he goes away, he strives

throughout the land to cause

destruction therein and destroy crops

and animals. And Allah (SWT) does not

like mischievous act. (Qur‟an, 2:205).

Keeping in view, the above literature in the context of western and Islamic

perspectives, the present study constructs following hypothesis, to test environmental

CSR practices in banking sector of Pakistan and its impact on customer satisfaction and

employee performance.


79

Hypothesis 13:

H0: There is insignificant relationship of CSR practices in Environmental protection on


H1: There is significant relationship of CSR practices in Environmental protection on

Customer Satisfaction in Conventional banks.

Hypothesis 14:



H1: There is significant relationship of CSR practices of Environmental stakeholder on


Hypothesis 15:




Customer Satisfaction in Islamic banks.

Hypothesis 16:




Employees performance in Islamic banks.

2.4.5 Community Development Initiatives: Islamic concept and Western thoughts

In Islam charity is one of the five pillars of faith and binds Muslims together. Islamic

CSR emphasize on the idea of social justice and building community through faith. It is

the duty of each human to take care of the creatures of Allah s.w.t, especially the

people of community to which organization deliver its value. Islam expects from all

Muslim leaders to make philanthropic initiations and feed the hungry, heal the sick, and

house the orphan and widow and make other contributions. In Islam zakat, fitraana are

charitable obligations and all other types such as sadaaqa, khairaat are voluntary

charity. Another charity contribution for Islamic institutions called waqf. Islamic

organizations do philanthropy by establishment of masjids, promoting education, building

hospitals, dispensary or clinics and supporting needy, making marriage arrangements,

help the poor, women and orphans, developing aid programs to affected communities

such as earthquakes or floods.


80

According to Hopkins (2003) the core purpose of CSR is to create higher standards of

living, while meeting the stakes of its stakeholders both inside and outside organization.

He added that community CSR initiatives by organization are of three ways. (a)

charitable donations (b) designing and promoting inbound logistic, research and

development culture for better invention and innovation (c) activities for sustainable

development and other anti-poverty alleviation programs. However, community

contributions added extra cost to organization, although it is CSR strategy for brand

popularity and increase market share for ultimate improve profits.

The key issues regarding community development in the western and Islamic literature

are shown below:

Table 2.9 Comparison between contemporary and Islamic CSR for

community development initiatives


Selected Corresponding Sources from the

Qur’an and Hadith of the Prophet

Community

Development

Initiatives

1. Infrastructure Development

2. Donations

3. Training and Development

4. Equipment support

5. Merit and need based

scholarships

6. Plantation of trees

7. Waste management

8. Sports events

9. Cultural heritage exhibitions

10. Sports events

a. ―And fear Allah as much as you can, listen and

obey; and spend in charity for the benefit of

your own souls. And those saved from the

covetousness of their own souls; they are the

ones who achieve prosperity.‖ (64:16)

Taking this information into considerations, this study formulate following hypotheses

in banking sector and to test the acceptance or rejection of community development

initiatives and its impact on organization performance as follows:

Hypothesis 17:

H0: There is insignificant relationship of CSR practices in Community development on


H1: There is significant relationship of CSR practices of Community development on



81

Hypothesis 18:





Hypothesis 19:





Hypothesis 20:





2.8 Conceptual Framework for Islamic and Conventional Banks Practicing

CSR

The conceptual framework (figure 2.2) shows the relation between CSR variables and

its impact on organization performance investigated in the study. It includes

independent CSR variables such as, Human rights (HR), Fair labor practices (FLP),

Code of ethics (COE), Environment protection (EP) and Community development

initiatives (CDI). The study includes non-financial dependent variables to measure

organization performance (OP) as dependent variable in the context of Customer

satisfaction (CS) and Employee performance (EP) to banking sector in Pakistan. In

empirical studies research work conducted in CSR so far have different areas, however,

this study at present disclose the comparative analysis between Islamic and western

CSR practices in Pakistani banking sector specially related to Islamic and conventional

banks based on empirical grounds. The research also investigates the perception and

attitude of employees and customers regarding CSR practices of both Islamic and

conventional banks in Pakistan and its impact on organization performance. The study

in hand uses both quantitative and qualitative approach and based on secondary as well

as primary sources of information.


82

2.8.1 Dependent Variables: Organization Performance

The present study considers Organization performance (OP) as dependent variable

because OP element is the feedback of the organization whole process. Many scholars

(Ahmed et al, 2012; Rahman et al, 2014; Kakakhel et al, 2014; Kiran et al, 2015,

Mehtab 2015) have used OP as dependent variable in financial performance context in

different business sectors of Pakistan. This study used OP to determine customer and

employees performance in conventional and Islamic banking sector of Pakistan.

Keeping in view the Organization Performance both customer and employees has key

role and major stake in obtaining efficiency and effectiveness of any organization. Both

stakeholders also have greater influence on banks decision making and other strategic

social concerns to the habitat of particular area. Studies conducted by (Luo and

Bhattacharya, 2006; Godfrey 2005; Margolis and Walsh 2003) measured non -

financial performances like customer satisfaction, employee turnover, employee

performance, stakeholder satisfaction implementing CSR. The present study used two

non-financial measures, CS and EP, based on the work of Luo and Bhattacharya

(2006).

2.8.2 Independent variables: Corporate Social Responsibility

The present research expands previous research by (Luo and Bhattacharya, 2006;

Godfrey 2005; Margolis and Walsh 2003). This study considers different CSR

variables that are taken from literature, mostly related to UNGC (2013). Each

independent CSR variables influence organization performance through its CSR

actions. Using primary data for each independent variable was analyzed and measured

by using CSR dimension (human rights, fair labor practices, code of ethics,

environment protection, and community development initiatives) disclosed in

questionnaire survey. The present study, measured the perception, knowledge of banks

customers and employees regarding each independent variable in the context of CSR.

An effort was made to verify the responses from questionnaire survey against the CSR

disclosure made by banks in their annual reports. This study considers CSR as

independent variable and investigates their role on organization performance by making

comparison and determining their CSR effectiveness in both mode of banking sectors

operating in Pakistan.


83

On basis of following cited literature following conceptual framework developed for

the study.

Corporate Social Responsibility Organization Performance

CSR Process CSR Outcome

Fig. 2.2 Model of Research for Islamic and Western Corporate Social

Responsibility

H1

H2

H3

H4

H5

H6

H7

H8

H9 H10

CSR Practices

Human Rights

Fair Labor Practices

Code of Ethics

Environmental

Protection

Community

development

Initiatives

Employees Performance

Commitment

Involvement

Training andDevelopment

Reward system

CustomersSatisfaction

ProductAvailability

Service quality

Prices and fee

Organizational

Performance


84

Chapter Three

Research Methodology

3.1 Introduction

The research study in chapter one identified the following questions: what is CSR and

how Islamic concept of CSR is different from western philosophy, to what extent the

prevalent levels of CSR practices exist in both Islamic and conventional banking

system of Pakistan, to compare and determine any similarities or differences in CSR

practices of both mode of banking sector and is there any relationship between CSR

practices of banks and organization social performance in the context of customer

satisfaction and employee performance? To answer these questions different variables

of qualitative nature deductive from Stakeholder theory are used however research

approach is quantitative and it is done to investigate the relationship between CSR and

Organizational performance. Furthermore, this study using co- relational research

design having focus on CSR and Organizational Performance on both mode of banking

sectors in Pakistan, based on secondary as well as primary sources of information.

The previous section of the research have offered extensive knowledge and

understanding to formulate the conceptual framework and providing insights of

literature review on CSR and its impact on organization performance relevant to

customers and employees. This chapter focuses on operational aspect of the research

and attempt to make clear on research framework and methodology use in this research

study.

The earlier part of this chapter presents research philosophy employed in the study. It

also elaborates research design, population and sampling procedures, data collection

techniques, data analysis procedures to precede the research with principal focus on the

CSR aspects of the Islamic and Conventional banking sector in Pakistan and its impact

on organizational performance.

3.2 Philosophy of Research

A research philosophy is a framework that guides and set direction to conduct research


85

study (Collis and Hussey, 2003). The term philosophy, according to Oxford dictionary,

defined as an investigation process to find truth and knowledge empirically keeping in

view principles and causes of subject. To understand research philosophy is importance

for research study because it contributes to better management and application for

research. In the context of this research there are two reasons to understand and

implement research philosophy (Smith et al, 1991).

1. It helps researcher to answer research questions and clarify research designs. It

promote the way of data collection, data analysis,

2. Furthermore it helps to clarify a research designs, data collection methods and

analysis techniques that is appropriate to be adopted in the study.

There are many sources of knowledge in research philosophy. The branch of research

philosophy that deals with possibilities, nature and sources and limitations of

knowledge is called as Epistemology. In this research four different sources of

knowledge are applied as:

1. Intuitive knowledge referred to sixth sense that comprise of charismatic

ability of a person to predict about near future.

2. Authoritarian knowledge relies on secondary sources of information

obtained from websites, annual reports, books, research papers, experts

etc.

3. Logical knowledge that compares old learning with new learning of a

person ability to withdraw some new concepts of implication worth of

logical response.

4. Empirical knowledge relies on reality and depends on creation of

objective facts and its demonstration.

The research process of this study integrate all of these sources of knowledge according

to need of a study at different stances.

3.2.1 Research Design and Research Method

Research design is a framework that constitutes and help researcher to formulate

strategy and structure to pursue research investigations (Bryman and Bell, 2003). It acts


86

as a blueprint and as instrument used to accomplish the result of the study, which

particularly describes how data is collected and analyzed. Research designs can be

classified into three aspects based priority and dimension of research study:

quantitative, qualitative and mixed method quantitative by nature for analysis (Bryman

and Bell, 2003). Quantitative research in common and related to the quantifiable

or numerical representation of the subject under study through quantifiable data

collected for the study, while qualitative research creates a narrative or textual

explanation on the happening of the study (Vandestoep and Johnston, 2009) by

using primary data as discussion or wording.

In the context of this research study, the variables are qualitative in nature but research

approach is quantitative, however, it has shades of qualitative research, because nature

of variables and question based on subjectivity that are deductive from Stakeholder

theory. The current study is quantitative in nature and it is done to investigate the

relationship between CSR and OP by qualifying different CSR variables drawn from

Stakeholder theory and their effect on OP..According to Bryman and Bell (2011), a

deductive approach is mostly used in quantitative research. In this approach, hypothesis

are extracted from existing theory and then tested for acceptance or rejection. Similarly,

present study also investigates the relationship between different CSR independent

variables with OP in banking industry of Pakistan. The primary data is collected from

selected sampled banks of Islamic and conventional modes and results are generalized

to the whole population. A deductive approach is used to verify the hypothesis for their

acceptance and rejection.

The study in hand is using co- relational research design having focus on CSR and

Organizational Performance on both mode of banking sectors in Pakistan, having

quantitative and qualitative approach and based on secondary as well as primary

sources of information. This particular research design establishes and explores

relationship between two variables and determines the existence of relationship

between two variables (Kumar, 2005). Similarly in this research effort has been made

to determine the effect of CSR practices drawn from Stakeholder based point of view

and their relationship on OP in the context of customer satisfaction and employee

performance in both mode of banking sector operating in Pakistan.


87

It is important to collect data in order to guage the perception and thought of

respondents in social science study. This research used both primary and secondary

data. The first hand collected data through questionnaires and interview methods

referred as primary data while existing literature and information available on internet,

books known as secondary data (Sekaran, 2003).The major concern in this study is to

compare the social practices of Conventional and Islamic banks in Pakistani banking

system. For this purpose secondary source of data are taken from both banks practicing

Islamic and Conventional CSR from their annual reports, websites, news articles and

CSR literature at Peshawar in particular and Pakistan in general. In addition, primary

data are also acquired regarding the perception and behavior of customers and

employees of both banking system. In this study questionnaire approach is used

through e-mail and also by visiting different banks personally. In self-completion

technique the respondents themselves are required to answer the question through mail

or on spot giving feedback as prospective respondent. Furthermore, the effort to collect

first hand data not only answer the research questions but also to seek the validity of

secondary data through employees and customer perception regarding the concept of

social banking practices of both sector banks. Both categories of respondents are

administered with different set of questionnaire practicing CSR in Conventional and

Islamic banking in Peshawar, Pakistan.

3.3 Population

Huysamen (1994) says that population is the total of all items or entities or elements

that are focus of the research and upon which the research intends to draw findings and

conclusions. According to (Sekaran, 2003) it is the total group of people, elements

under study, events or things of interest that the researcher wishes to investigate. The

present research is focused to determine relationship between CSR practices and

Organizational Performance in banking industry of Pakistan. To understand this

relationship the entire banking industry of Pakistan that operates under the umbrella of

State bank of Pakistan are taken as population. In Pakistan, banking sector contribute to

development of various sectors and display their social responsible actions for

maximum benefit of diverse stakeholders. The steady growth in different mode of

banking industry in Pakistan consists of 7 public sector banks, 15 private banks and 6

Islamic banks.


88

The criteria in this study lay down for selection of banks is purposive sampling. It is a

type of non-probability sampling in which researcher provides criteria to somebody and

then leaves on his or her judgment according to subject. In this study, according to

State Bank of Pakistan (SBP) report in 2012as a base year, top 3 conventional banks

(National Bank of Pakistan, Allied Bank Ltd, United bank Ltd) are selected because of

three core reasons. It includes their increase profits, extensive range of services towards

to customer satisfaction and their inclination towards sustainability projects derived

from their annual reports in base year 2012.Similarly Islamic banks are providing vital

role in economic development of a country. To compare social practices, top 3 Islamic

banks (Meezan Bank, Al Baraka Bank, Dubai Islami Bank) are selected. The rationale

behind their selection is their continuous growth in network, Shairah compliance

products and tendency towards social dimensions. All banks are providing their

financial services and social practices in Pakistan. Moreover each bank is working

under the permission of State Bank of Pakistan (SBP) as a parent bank, and need to

report SBP for any conduct and bound by any decision made by their parent bank.

Islamic banks follow the structure and mechanism of Islamic philosophy as enshrined

in Islamic knowledge while conventional banking sector mostly adopted traditional

banking structure and other conventional banking practices influenced from western

knowledge. The present study also compares both banks CSR practices according to

knowledge of bankers and customers and how their CSR practices influence banks

performance. The structure of Islamic and Conventional banks taken as target

accessible population in this study is depicted below in figure 3.1.

Islamic & Conventional

Banking in Pakistan

Conventional Banks Islamic Banks

National Bank of Pakistan Meezan Bank

Allied Bank Ltd. Al-Baraka Bank

United Bank Ltd. Bank Islami

Fig. 3.1 Structure of selected sample top ranked (2012) Islamic and

Conventional banks in Pakistan


89

3.3.1 Accessible Population of Study

The population of research that a researcher can follow and have access, reach to apply

conclusions is called accessible population. It can be subset of target population and

can also be known as study population. The researcher that can easily have accesses to

collect data frequently and effectively is known as accessible population. In present

research top 3 banks is selected based on the published report of State bank of Pakistan

2012. However to approach the selected banks employees and customers only

Peshawar region will be taken as accessible population for data collection and

understating the perception of relevant stakeholders. The detail of accessible population

is as under:

Table 3.1 Accessible Population of Research

Islamic & Conventional Banks in KPK, Peshawar, Pakistan

Islamic banks Conventional Banks

Meezan

Bank Ltd

Al

Baraka

Bank

Pakistan

Bank

Islami

Pakistan

Total

National

Bank of

Pakistan

United

Bank

Ltd

Allied

Bank

Ltd

Total

Branches 551 190 176 917 1406 1311 1048 3765

KPK-based 34 10 11 55 232 116 127 475

Peshawar

based

06 04 05 15 18 16 16 50

(47%) (30%) (23%) 100% (36%) (32%) (32%) 100%

Source: www.sbp.org.pk

From Table 3.1 it can be observed that for determining social performance of both

mode of banking sector operating in Pakistan, the accessible population for this study

include top 3 Islamic with similar proportion of 3 conventional banks. To collect the

primary data Peshawar region bank branches are targeted and their population weighted

is shown in above table 3.1. In case of Islamic banks total 15 branches are operating in

Peshawar and primary data is collected as per weighted shown in above table. Similarly

for conventional banks total of 50 branches are delivering their financial services and

data is collected respectively according to assign weight age from individual


90

conventional bank. To determine and analyze the perception, data is collected from

both mode of banks employees and customers regarding social practices of banking

sector and their satisfaction level of customers and employees is determined as a

measure for organization performance (OP).

3.4 Sample Plan

A sample is a portion of total accessible population from whom researcher can collect

data for research analysis (Gujarati, 2003). After finalizing the research population the

next step for data collection is to identify right research respondents for meaningful

analysis and conclusion. The sample plan illustrates in detail and generates the

questions like that, how much sample is required for the study? How sample will be

selected? It further requires right sampling design and techniques to formulate a sample

that will represents true population for further generalization.

3.4.1 Sample design and techniques

Sample design represents techniques that help researcher to select sample from

accessible population. A major alternative technique in sample design may be grouped

into probability and non- probability technique. For equal probability and wider

generalizability, probability sampling is used in which every element of the population

has a known nonzero probability of selection (Gujarati, 2003).However, in non-

probability sampling the chance of occurrence of any particular element of the given

population that has been chosen is unknown (Gujarati, 2003). The research utilizes

arbitrary personal judgment to select of units in non-probability sampling. In present

research non probability sampling design is adopted for convenience and better

projection of data.

A non-probability convenience sampling is utilized to collect data from banks

customers and employees regarding social practices of Islamic and conventional banks

in KPK, Peshawar, Pakistan i.e. In self-completion technique the researcher visit each

bank branch and distribute the questionnaires and give opportunity to respondents to

answer the questions through e-mail addresses that were taken by developing PR

(personal relations) and through browsing personal profile of bankers or on spot giving

feedback as prospective respondent to collect primary data.


91

3.4.2 Sample Size determination

According to Fink (2009) sample size is the collection of number of units drawn from

population to be surveyed for research study in order to reach precise and reliable

findings. To study whole population is not possible; therefore, sampling is optimal

approach to imitate the total population idea or perception (Bryman, 2001; Vandestoep

and Johnston, 2009). To estimate correct sample size from large samples is very

important because it save time, money and other resources and small samples will also

lead to conclude accurate results. It facilitates to collect data from right research

respondents. The present study endeavors to compare the CSR practices of both Islamic

and Conventional banks, that include the respondents of both banking sector like

―Branch Managers, Operational Manager, CSR Officers‖ and customers respectively.

3.4.3 Sample size for measuring banks social performance

To estimate sample size confidence interval approach is used in this study to measure

the social performance of Islamic and Conventional banks in Pakistan. In order to keep

accuracy of collected data the margin of error was kept as low to carry the operations as

possible i.e. 5% while maintain 95% confidence interval to its maximum degree.

By incorporating Table 3.2 two criteria is used to calculate sample size from known

population.

1. By integrating formula as derived from research work of (Yamane, 1967 &

Israel, 1992) for calculation of sample sizes. A 95 % confidence level and P =

0.05 are assumed for formula below:

n = N

1 + N (e) 2

Where

n = sample size

N = Population size

e = level of precision

OR

Sample size = Population / [1 + (Population * Margin of Error2)]


92

2. The mechanism shows in tabulated form by Yamane (1967) and Israel (1992)

for calculation of sample.

Table 3.2 Summary of Banks Branches, Employees & Customers in Peshawar

Conventional Banks Islamic Banks

Total Population of respondents in Banks

Banks Branches Employees Customers Banks Branches Employees Customers

NBP 18 270

(38%)

700000

(46%)

Meezan

6 110

(50%)

210000

(60%)

ABL 16 224

(32%)

350340

(23%)

Al Baraka 4 52

(23%)

84700

(24%)

UBL 16 208

(30%)

486900

(31%)

Bank

Islami

5 60

(27%)

53800

(16%)

Total 50 702 1537240 Total 15 222 348500

To obtain specific and with +-5 percent degree of precision, the actual respondents for

selected banks i.e. customers and employees working in Peshawar from table 3.2, we

can draw sample size for each individual bank respondents that include both bankers

(employees) and customers. The table 3.3 & 3.4 below describes the sample size

determination and proportionate sampling for each conventional and Islamic banks

respondent.

Table 3.3 Sample Size Determination

Population of Employees in CB Total

n=N/1+N*(e)2 n= 702/1+702*(0.05)2 n= 255

Population of Customers in CB

n=N/1+N*(e)2 n= 1537240/1+1537240*(0.05)2 n= 400

Population of Employees in IB

n=N/1+N*(e)2 n= 204/1+204*(0.05)2 n= 134

Population of Customers in IB

n=N/1+N*(e)2 n= 348500/1+348500*(0.05)2 n= 400


93

Table 3.4 Proportionate Sampling Method

S# CB (Employees) Formula ni = Ni / n * N Sample (ni)

1 National Bank of Pakistan 270*255/702 98

2 Allied Bank Ltd 224*255/702 81

3 United Bank Ltd 208*255/702 76

Total 255

S# CB (Customers) Formula ni = Ni / n * N Sample (ni)

1 National Bank of Pakistan 700000* 400 /1537240 182

2 Allied Bank Ltd 350340*400/1537240 91

3 United Bank Ltd 486900*400/1537240 127

Total 400

S# IB (Employees) Formula ni = Ni / n * N Sample (ni)

1 Meezan Islamic Bank 110*134 / 204 72

2 Al Baraka Islamic Bank 52*134 / 204 34

3 Bank Al Islami 42*134 / 204 28

Total 134

S# IB (Customers) Formula ni = Ni / n * N Sample (ni)

1 Meezan Islamic Bank 210000*400 / 348500 241

2 Al Baraka Islamic Bank 84700*400/348500 97

3 Bank Al Islami 53800*400/348500 62

Total 400

3.5 Data Collection Plan

Data collection plan constitutes, data collection sources, its techniques, tools, strategy,

reliability and validity to collect needed data for the study. To answer the research

questions of the study it is important to formulate a plan for its execution in order to

achieve research objectives. Information is needed either from primary or secondary

sources to answer those questions of research study. In this research an effort is made

that collected data is accurate, reliable, authentic and verifiable. The data collection of

can be disused below:


94

3.5.1 Sources & techniques of data collection

Data collection is integral part of the research design and it can be collected from two

major sources (Sekaran, 2003). It can be collected from secondary sources that include

statistical bulletins, government publications, annual reports, case studies, electronic

data, web sites, and the Internet. The other source is primary data, which mostly based

on communication and is original, first hand, specific to problem solving, purpose

focus. It can be collected through survey, experiment and observation (Sekaran, 2003).

In this research both sources of data is utilized, to study CSR practices of Islamic and

Conventional banks operating in Pakistan and to draw comparison between their

practices on the basis of collected data. For this purpose secondary source of data is

taken from both mode of banks practicing Islamic and Conventional CSR from their

annual reports, websites and CSR Literature, Peshawar in particular and Pakistan in

general. However, secondary data is mostly collected from banks annual reports

through internet from 2013-2016. It discloses CSR practices of both Islamic and

conventional banks in Pakistan.

To investigate the social objectives of both banking sector, primary data is also

acquired regarding the perception and behavior of customers and employees of both

banking system. In this study self-completion questionnaire approach is used through

mailed questionnaire and self-administered questionnaire method is adopted for

selected banks employees and customers to verify their perception regarding CSR

practices and its impact on banks performance. In self-completion technique the

respondents themselves is required to answer the question through mail to prospective

respondent. The respondents are given specific time period to return and mail the

questionnaire. However in self-administered questionnaire method on the spot filling of

questionnaires is adopted for selected banks employees and customers. The

questionnaires are distributed during various working days and mostly evening time is

optimized for employees and branch managers for data collection. The entire

questionnaires are distributed mainly at Peshawar. Mostly questionnaire are given

directly to respondents and visited different bank branches located at different areas of

Peshawar. Some of the respondents gave immediate feedback, while others that prefer

email, took minimum 10-15 days to return back to survey. Several reminders and


95

follow up are made to get back positive response rate. The researcher took almost 4

months to collect primary data and completed questionnaires. All the returned

questionnaires are thoroughly checked by researcher to verify the validity of

questionnaires and effort was made to make sure that questionnaire is fine enough to

analyze.

Both categories of respondents are administered with different set of questionnaire

practicing CSR in Conventional and Islamic banking in Peshawar, Pakistan. In present

research, to measure CSR, 05 point Likert scale is used for different questionnaires

consists of multiple dimensions of each mode of banks operating in Pakistan the table

3.5 and 3.6 below shows the number of questionnaire distributed, among respondents

of both modes of banking, response rate, and useable questionnaire for study from each

group.


96

Table 3.5 Questionnaires distribution & Response by Islamic Banks Employees & Customers in Peshawar

Target Groups

Bank names

Meezan Al-Baraka Bank Islami

Distributed

Questionnaire

Returned

Questionnaire

Usable

Returned

Distributed

Questionnaire

Returned

Questionnaire

Usable

Returned

Distributed

Questionnaire

Returned

Questionnaire

Usable

Returned

Methodology

Adopted

Customers 241

233

229

(95%) 97 91

88

(91%)

62

59

57

(92%) By hand (Field work)

Employees

65

59

53

(82%)

29 25

25

(86%)

23

22

20

(87%) By hand / e mail

Branch

Managers 6 6

6

(100%)

4 4

4

(100%)

5 5 5


CSR Officers 1 1

1

(100%)

1 1

1

(100%)

--- ---- ---

E mail

Total 313 299 289 131 121 118 90 86 82


97

Table 3.6 Questionnaires distribution & Response by Conventional Banks Employees & Customers in Peshawar

Target Groups

Bank names

National Bank of Pakistan Allied Bank Ltd United Bank Ltd

Distributed

Questionnaire

Returned

Questionnaire

Usable

Returned

Distributed

Questionnaire

Returned

Questionnaire

Usable

Returned

Distributed

Questionnaire

Returned

Questionnaire

Usable

Returned

Methodology

Adopted

Customers

182

176

171

(93%)

91

88

85

(93%) 127 122

119

(94%) By hand (Field work)

Employees 79 74 71

(90%) 74 70

67

(90%) 59 55

54


Branch

Managers 18 17

16

(89%) 16 15

15

(93%) 16 13

13


CSR Officers 1 1

1

(100%) 1 1

1

(100%) 1 1

1

(100%) E mail

Total 280 268 259 182 174 168 203 191 187


98

3.5.2 Questionnaire Content

In present research self-administered questionnaire is designed to collect data regarding

social practices and performance of Islamic and conventional banks operating in

Peshawar, Pakistan. Before designing the questionnaire variables of study and

hypothesis were identified and defined in literature review chapter of the thesis. The

primary data was acquired from the employees that belong to managerial and non-

managerial level and customers of the sampled bank branches of both Islamic and

conventional banks practicing their CSR, in Peshawar. Both categories of respondents

were administered with different set of questionnaires. Two different set of

Questionnaires were designed (Annexure A and B), to investigate the perception of

employees and customers of both banking sector. For collection of data from

respondent‘s personal visits were scheduled and made for 8 months after 2pm to

Islamic and conventional bank branches at Peshawar. The questionnaire consists of

different qualitative variables derived from Stakeholder‘s theory. Each variable further

constitute different questions about individual variable. The questionnaire was designed

as closed-ended question and the Likert scaling method was utilized to judge the

perception and attitude of respondents. The likert-scale range from 1 to 5, that indicates

1 for strongly disagree and 5 for complete agreement. These questions are subdivided

into following sections:

(i) Section A include questions with regard to demographics of respondents

details that specifically look into ‟Individual background such as gender,

age, occupation, educational level, monthly income and etc.

(ii) Section B attempts to determine the respondents, awareness of Corporate Social

Responsibility in the prospective of different Stakeholders of Islamic and

Conventional banks operating in Peshawar, Pakistan.

(iii) Section C endeavors to collect information from the respondents view, against

each variable of CSR that practice that make contribution to organization

performance.


99

3.3.5 Pilot Study

To verify the uniformity, quality, language, consistency, reliability, validity of items

used in instrument and for further improvement pilot test was conducted to guarantee

the appropriateness of the questions in the instrument. A total of 35 survey questions

were sent to University of Agriculture teachers and to bankers through e-mail. There e-

mail addresses are taken through personal contacts and by visiting their official web

page. Only 24 respondents sent back their constructive comments through e mail as a

feedback to improve the survey. The pilot study was fruitful for improving

presentation; interrelationship and helpful to researcher in potential to avoid mistakes

of questionnaire before launching it to actual target respondents.

3.4 Reliability Test

Reliability can be defined as ―to consistently obtain same result, after evaluating each

time same object, by applying a particular technique, that lead to credible research

findings‖ (Vaus, 2002). According to Skearan (2003) reliability is used to measure the

internal consistency among set of items regarding questionnaire of study and also to

find harmonious relationship among set of items. There are different methods that are

used according to content of specific research in performing of reliability test, but many

studies prefer to use Cronbach‘s Alpha coefficient.

The Cronbach‘s Alpha is calculated by utilizing the average inter-correlation between

the questionnaire items for evaluating the reliability. The more reliable questions are

those whose internal consistency that is Cronbach‘s Alpha value is closer to 1. If items

has zero value or less than 0.6, indicates no or unsatisfactory correlations between the

questionnaire items, conversely if the value is 1 or above 0.7 indicates a perfect or

satisfactory correlation between the items of questionnaire (Pallant, 2007; Vaus, 2002).

In present study reliability test regarding different dimensions for both Conventional

and lslamic banks is presented in table 3.7 and 3.8.


100

Table 3.7 Reliability Statistics of Conventional Banks

Dimension Item Cronbach's Alpha

Human Rights 9 .659

Fair Labor Practices 9 .778

Ethical Conduct 9 .863

Community Development 9 .791

Environment Protection 9 .674

Organization Performance

(Customer Satisfaction)

6 .804


(Employee Performance)

6 .774

After running reliability test of different dimensions of conventional banks, the value of

Cronbach‘s Alpha coefficient of all dimensions is in between 0.659 for Human rights

variable and for maximum range of 0.863 for Ethical conduct variable of the present

study. The table 3.7, further indicates that the value is almost for all dimensions are in

agreement with mechanism stated by (Pallant, 2007; Vaus, 2002). It predicts that

degree of internal consistency among questionnaire items in present study was highly

reliable conforming for further applicability of statistical analysis.

Table 3.8 Reliability Statistics of Islamic Banks

Dimension Item Cronbach's Alpha

Human Rights 9 .620

Fair Labor Practices 9 .837

Ethical Conduct 9 .863

Community Development 9 .791

Environment Protection 9 .674


(Customer Satisfaction)

6 .804


(Employee Performance)

6 .774

Almost similar results were also depicted in table 3.8 regarding reliability statistics for

Islamic banks. After running reliability test of different dimensions of conventional

banks, the value of Cronbach‘s Alpha coefficient of all dimensions is in between 0.62


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for Human rights variable and for maximum range of 0.86 for Ethical conduct variable

of the present study. It predicts that degree of internal consistency among questionnaire

items in present study was highly reliable conforming for further applicability of

statistical analysis.

3.4.1 Validity of questionnaires

Validity test is conducted in this study to determine whether the research actually

measures what it intended to measure and how precise the research results are.

In this study to gain insight of questionnaires and before gathering of original data,

thirty five questionnaires were distributed to different mentor, customers and

supervisor. Only 24 respondents sent back their constructive comments and most of the

respondents agreed with face validity. Few suggestions were made by experts on

content validity of questionnaires. Keeping in view their valuable suggestions, language

and some other modifications were made accordingly and resubmitted to them. To

robust the questionnaire for improvement and validity of questions contents, the

formatted questionnaire were approved from supervisor in all aspects of content

validity.

3.5 Data Analysis Plan

In order to measure research variables and testing of research hypothesis, it is required

to have appropriate plan to analyze the collected data. In this stage of research process,

the collected data either primary or secondary is summarize, interpret and present into

meaningful form for decision making process. Furthermore, the data analysis plan also

identifies tool and techniques for data manipulation and presentation. The research plan

of present study includes the following:

3.5.1 Data Analysis tools and techniques

In social science, researcher use different software packages and statistical programs as

a computer based tools for analyzing the data. It mostly includes Microsoft Excel [Ms-

Excel], STATA, Statistical Package for Social Sciences [SPSS] to name a few.

In present study, to analyze secondary data Ms-Excel is used for implementation of


102

descriptive statistics and also for presentation of results in tables. Descriptive

statistics/analysis describes numerical data and also the characteristics of tabulated

data. It provides information about sample data that helps in understanding and

interpretation of data. In present study percentages, mean, standard deviation and co

efficient of variance is used for interpreting the primary and secondary data of the

study.

To analyze primary data and for estimation of results multiple regression analysis is

used, with robust standard errors, because of the reason that there is a problem of

heteroscedasticity across the cross sections in the data. This methodology has also been

employed by Khan et al. (2010) and Granato, Inglehart, and Leblang (1996). The co

efficient for all the equations will be estimated through Ordinary Least Square (OLS)

method.

As cross sectional data is used for the estimation of the model so it becomes crucial to

carry out different diagnostic tests in order to address certain issues concerning the

cross sectional data. These tests includes heteroscedasticity and multicollinearity.

The selected CSR variables show level of practices and their effect on customer and

employee performance. The raw data were coded variable wise separately in the

statistical package. Effort had been made to determine and evaluate CSR practices of

each conventional and Islamic bank. It also helps to analyze the perception of

respondents and comparison of both mode of banking social practices in the context of

Peshawar, Pakistan.


103

3.5.2 Econometric Model for Conventional banks

To compare CSR practices in Islamic Banks the following econometric model is

depicted below:

Y1 = α˳+ α1X1+α2X2+α3X3+α4X4+α5X5 + ε˳… (3.2)

Y2 = β˳+ β1X1+β2X2+β3X3+β4X4+β5X5 + ε˳… (3.3)

Where Y1 and Y2 are dependent variables of study (i.e. Customer satisfaction and

Employee performance).

Y1 = Customer satisfaction

Y2 = Employee performance

X1 = Human Rights

X2 = Fair Labor practices

X3 = Ethical conduct

X4 = Environment protection

X5 = Community development initiatives

And ε˳ is the error term.

We will find α and β by using Ordinary least Square (OLS) method.

3.5.3 Econometric Model for Islamic banks

To compare CSR practices in Islamic Banks the following econometric model is

depicted below:

Y1 = γ˳+ γ1X1+ γ 2X2+ γ 3X3+ γ 4X4+ γ 5X5 + ε˳… (3.4)

Y2 = δ˳+ δ1X1+ δ 2X2+ δ 3X3+ δ 4X4+ δ 5X5 + ε˳… (3.5)


104

Where Y1 and Y2 are dependent variables of study (i.e. Customer satisfaction and

Employee performance).

Y1 = Customer satisfaction

Y2 = Employee performance

X1 = Human Rights

X2 = Fair Labor practices

X3 = Ethical conduct

X4 = Environment protection

X5 = Community development initiatives

And ε˳ is the error term.

We will find γ and δ by using Ordinary least Square (OLS) method.

3.5.4 Construction of Indexes for the Variables:

The index of different CSR variables was created by using Principal component

analysis (PCA). PCA is a multivariate statistical technique used to reduce number of

variables in a dataset by converting them into small number of components each

component being a linear weighted combination of the initial variables (Bishoi,

Prakash, & Jain, 2009). In present research, PCA is used to reduce the size of questions

of one variable for smooth analysis of data.

The results obtained after running PCA for Conventional banks are shown in Annexure

A1 (table 3.9) and A2 (table 3.10) while PCA for Islamic banking CSR are in Annexure

B1 (table 3.11) and B2 (table 3.12).

Each individual table shows Eigen values and Eigen vectors obtained from PCA. The

first one i.e. Eigen values shows the variance of each principal component. However,

Eigen vectors are the allocated weights given by PCA to corresponding principal

components. Those components having Eigen values greater than 1 are extracted in


105

PCA. It can be standard method for extracting principal components. Therefore in this

study those components having Eigen values more than 1 is being used. For both

modes of banks first four components have Eigen values greater than one have been

used and extracted for the purpose of analysis.

3.5.5 Test of Heteroscedasticity

To investigate the existence of heteroscedasticity problem in the data used in the study,

Breusch-Pagan test and IM test were conducted. The results of these tests are presented

in table 3.13.

Table 3.13 Heteroscedasticity Test Results

Test for Heteroscedasticity for Equation # 1

Ho: Constant variance

Test of Heteroscedasticity Probability

Breusch-Pagan 0.0614

IM Test 0.0150





IM Test 0.0170





IM Test 0.0175





IM Test 0.0157

Source: Author‘s Estimation


106

The diagnostics shows the evidence of the heteroscedasticity in all four models is

present; as both the tests are significant at 10% and 5% significance level respectively.

Hence, the null hypothesis of constant variance (H0= constant variance/homoscedastic)

can be rejected. The problem of heteroscedastic variance is present in the cross-

sectional data (Gujarati, 2003). To counter the problem the White‘s Robust Standard

Errors are incorporated in the regression model.

3.5.6 Test of Multicollinearity

To check the presence of multicollinearity, Variance Inflation Factor (VIF) analysis is

conducted. The results for the correlation matrix analysis among the repressors are

given in Table 3.14 as follow:

Table 3.14 The Variance Inflation Factor (VIF) Analysis Results

Variables VIF 1/VIF

HR 1.06 0.943396

FLP 1.05 0.952380

COE 1.04 0.961538

EP 1.02 0.980392

CDI 1.07 0.934579

Variables VIF 1/VIF

HR 1.07 0.934579

FLP 1.89 0.529100

COE 1.92 0.520833

EP 1.75 0.571428

CDI 1.03 0.970873

Variables VIF 1/VIF

HR 1.27 0.787401

FLP 1.01 0.990099

COE 1.03 0.970873

EP 1.12 0.892857

CDI 1.07 0.934579

Variables VIF 1/VIF

HR 1.09 0.917431

FLP 1.04 0.961538

COE 1.01 0.990099

EP 1.17 0.854700

CDI 1.05 0.952380


107


Variance Inflation factor (VIF) and tolerance both are used interchangeably. As the

value of varies, the value of tolerance changes accordingly. The lower value of VIF

indicates less severity of multicollinarity (Gujarati, 2003). The results indicates that the

models lacks the evidence of presence of strong correlation among regressors as the

values of VIF is hovering between 1 and 2 which is indicator of low level of

correlation. Hence, on the basis of VIF and (1/VIF) it can be concluded that the

problem of multicollinarity is not severe and hence require no remedial measure.


108

Chapter Four

Analyzing Respondents Profile and Perceptions of Employees and

Customers of Conventional and Islamic Banks

4.1 Introduction

This chapter explains the analysis of secondary and primary data that is collected

through annual reports, questionnaires from respondents of Conventional and Islamic

banks practicing in Peshawar, Pakistan. The annual reports were downloaded by

visiting websites of different banks. Each annual report was thoroughly studied and

specifically data is collected regarding their corporate social responsibility practices in

previous years for meaningful comparison. To analyze secondary data the CSR

practices of each specific bank for previous 4 years is collected and analyzed by

applying descriptive statistics for comparison. Individual table for Islamic and

conventional banks will be formulated for comparison.

Furthermore, two different set of questionnaires were designed to understand

perception of each bank respondents and distributed through Google docs‘ software and

some are personally filled from respondents. The respondents are banks employees as

an internal stakeholder and customers are taken as an external stakeholder. All the data

is documented in Google software that includes date, time and respondents feedback to

the relevant questions. All the data variables and data of different respondents are

keyed-in and initially analyzed through descriptive statistics to locate percentages,

frequencies and mean value for analyzing the profile of respondents.

For analyzing secondary and primary data, this chapter is divided into different

sections. Beginning with Introduction followed by comparative analysis based on

secondary data of both modes of banks. In section 4.3 data analysis of conventional

banks that also include comparison of social practices of all 3 selected conventional

banks. Similarly section 4.4 analyzes primary data of Islamic banks regarding CSR

practices. Further, it examines the respondents perceptions of each mode of banking

regarding different variables included in the study. In addition, section 4.4 shows

meaningful comparison that is made by analyzing feedback taken from both


109

respondents of different mode of banking by comparing all variables and applying

Inferential statistics for decision making. The concluding remark is organized at end of

chapter.

4.2 Comparative Analysis and Findings

4.2.1 Contribution of Islamic & Conventional Banks

In CSR financial contribution, table 4.1 below shows, total investment of Islamic and

conventional banks for last 4 years regarding CSR in Pakistan. The comparative result

indicted that conventional banks are investing more on CSR practices as compared to

Islamic banks. The results specify that in Islamic banking despite Meezan bank other 2

banks are quite immature in their CSR practices due to Age and Size of organization in

Pakistan, even though they belong to the context of foreign Islamic bank. But on other

hand conventional banks are quite rich in investing on CSR; due to their increase Age

and size in Pakistan and NBP that belongs to public sector are doing much better in this

stream.

Table 4.1 Source Annual Reports: 2013-2016

Total CSR investment of Islamic & Conventional banks in 4 years (Rs. in millions)

Islamic Banks Conventional Banks

Years Meezan Al Baraka Bank

Islami NBP UBL ABL

2013 137633 2000 4400 57535 55524 38260

2014 130110 5681 8500 96600 81001 61295

2015 10850 5699 7185 177924 7706 103515

2016 98294 53654 15692 57849 75225 80183

Total 376887 67034 35777 389908 219456 283253

4.2.2 CSR Practices of Conventional Banks

The Table 4.2 shows comparison between different conventional banks and

demonstrates CSR investment according to each dimension in context of percentage,


110

Mean and Standard Deviation. All conventional banks are more inclined towards

Education (55.97, 49.3, 42.96), Health (15.45, 15.0, 16.97) and Relief and disaster

recovery (12.82, 32.94,24.36). Their support is lacking as far as Qard e Hasana is

concerned. In the dimension of water purification and collaboration with government

only UBL invest (3.18 and 4.46). Each bank participated in Social welfare support

activities but only ABL score (7.33) exceeding other banks. However NBP preferred

Sports (13.13) and Legal (0.12) for conducting CSR activities. All banks displayed

Environmental Concerns (1.3.0.86, 1.035) by undertaking activities related to

environment awareness.


111

Table 4.2 Display CSR practices of Conventional banks in %, Mean and Standard Deviation

Dimensions

Bank names

UBL ABL NBP

Column Sum % Mean Standard

Deviation Column Sum % Mean

Standard

Deviation Column Sum % Mean

Standard

Deviation

Education 55.97 30708.25 20200.27 49.39 34978.25 18874 42.96 41853 58564

Health 15.45 8479.25 7964.60 15.00 10624 5571 16.97 16545 11445

Qard Al Hasana 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Environmental 1.30 957.33 444.12 0.86 612.5 193 1.035 2019 33.23

Water Purification 3.18 1746.5 1138.50 0.00 0.00 0.00 0.00 0.00 0.00

Government 4.46 9793 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Special person 7.17 5248.33 6347.51 0.00 0.00 0.00 0.56 1091 1344.91

Relief and Disaster

recovery

12.82 28142 0.00 32.94 23328.75 18888 24.36 47500 3535.53

Social welfare 0.41 450 353.55 7.33 5195 1986 0.406 791 835.80

Sports 0.00 0.00 0.00 0.00 0.00 0.00 13.13 17063 14700.78

Legal 0.00 0.00 0.00 0.00 0.00 0.00 0.128 500 0.00


112

4.2.3 CSR practices of Islamic Banks

The table 4.3 below display different dimensions of CSR of Islamic banks. It shows

comparison between different Islamic banks and show investment according to each

dimension in context of percentage, Mean and Standard Deviation. All Islamic banks

are more inclined towards Education, Health, Relief and disaster recovery. Bank Islami

displayed (43.04) while Al Baraka and Meezan show (17.06 and 19.8) in Education

sector. In context of Health sector Al Baraka bank invest (48.9) as compared to Bank

Islami and Meezan bank. In the mode of disaster and recovery only Meezan bank

invested (70.87). Meezan and Al Baraka Islamic banks are more concerned to Islamic

Microfinance by scoring (0.13, 4.9). In the dimension of water purification and

collaboration with government no Islamic banks have invested for CSR in last 4 years.

Each bank participated in Social welfare support activities and Bank Islami score (24.5)

exceeding other banks. However no Islamic bank preferred Sports and Legal concerns

for conducting CSR activities while only Meezan and Al Baraka banks displayed

Environmental Concerns (0,02 and 2.50) by undertaking activities related to

environment awareness.


113

Table 4.3 Display CSR practices of Islamic banks in %, Mean and Standard Deviation

Dimensions

Bank names


Column Sum % Mean Standard Deviation Column Sum % Mean Standard Deviation Column Sum % Mean Standard Deviation

Education 19.81 24896.66 36270.13 17.05 3812 4735.48 43.04 3850 2463.73

Health 9.11 11445.66 15372.18 48.95 10939.33 13278.99 31.94 2857.25 1978.30

Qard Al Hasana 0.13 500 0.00 4.92 3300 0.00 0.00 0.00 0.00

Environmental 0.02 100 0.00 2.50 560 391.76 0.00 0.00 0.00

Water Purification 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Government 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Special person 0.00 0.00 0.00 0.00 0.00 7459.97 0.51 185 0.00

Relief and Disaster

recovery 70.87 89036.66 75415.60 0.00 0.00 0.00 0.00 0.00 0.00

Social welfare 0.03 150 0.00 9.32 1562.5 1025.81 24.59 2200 725.71

Sports 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


114

4.2.4 Comparative CSR practices between Islamic & Conventional Banks

The comparison table furnishes the detailed information about different dimensions of

CSR activities. In it, secondary data were collected for the last 4 years (2013 – 2016)

from annual reports. The results conclude Percentage, Mean and Standard deviation of

different CSR practices of both Islamic and Conventional banks.

In first dimension of Education, Conventional banks demonstrate 48.2%, Mean value

35854.7 and S.D is 5622.74. In comparison Islamic banks exhibit 21.1%, Mean value

8460.5 and S.D is 12162.2. Both modes of banks are rich in investing on Education

sector as CSR practice. However, Conventional banks are more inclined and giving

priority towards to Education.

In second dimension of Health, Conventional banks demonstrate 15.97%, Mean value

1188.83 and S.D 4177.74. In comparison Islamic banks exhibit 16.38%, Mean value

6548.66 and S.D 4819.01. Both types banks are more closely show their CSR

comparison regarding Health sector. However, Islamic banks are little more inclined

towards Health sector in CSR context.

In third dimension of Qard Al Hasana, which is not presented in the conventional

banking (0.00) system. Islamic banks provide Qard Al Hasana (non-profit loans) by

demonstrating 0.79%, Mean value 316.6 and S.D 1778.57 to the needy and deserving

people. Thus the practice of Qard Al Hasana exempts the recipient from the payment of

interest. This is notable mode of support complying with the tenets of Sharia.

In the fourth dimension related to Environment, Conventional banks show 1.04%,

Mean value 779.91 and S.D 732.78 while Islamic banks score 0.37%, Mean value

148.33 and S.D 298.66. Thus illustrate that Conventional banks are more inclined

towards Environment as compared to Islamic banks.

In other dimensions like Arts & Culture, Water Purification and collaboration with

Government only Conventional banks concern an active presentation by scoring

(0.81%, 0.81%, 1.34%), Mean value (605.5, 605.5,1.34) and S.D (1036.9,

1036.9,6153.24). It showed that these dimension in Pakistan were only initiated by

Conventional banks. On comparison Islamic banks are lacking behind regarding CSR

practices in Arts & Culture, Water Purification and collaboration with Government.


115

In the eight dimension, CSR activities regarding Special Person (disabled habitat of

society), Conventional banks score 0.00017%, Mean value 1312.08 and S.D 2987.44.

However Islamic banks were more inclined towards donating to Special person by

scoring 2.44%, Mean value 977.96 and S.D 3952.72.

In the ninth dimension, CSR activities regarding Relief & Disaster Recovery, Pakistan

were badly affected by earthquakes and flood in 2010 -2012. Conventional banks

focused 24.24%, Mean value 18038.08 and S.D 12794.19. Islamic banks were more

inclined towards this dimension by scoring 55.68%, Mean value 22259.16 and S.D

62958.4.

In tenth dimension of Social welfare, Conventional banks invested 2.6%, Mean value

1938.5 and S.D 2646.58. Similarly Islamic banks have score of 3.1%, Mean value

1266.6 and S.D 1049.13. This shows that Islamic banks were more focused towards to

social investment as CSR practice comparatively to Conventional banks for welfare of

society.

In eleventh dimension that related to CSR practices towards Sports Conventional banks

invested 5.73%, Mean value 4265.8. On other hand Islamic banks had not showed any

interest towards sports activities in context of CSR.

Table 4.4 Display CSR practices of Conventional & Islamic banks in %, Mean

and Standard Deviation

Dimensions Conventional Bank Islamic Bank

% Mean S. Deviation % Mean S. Deviation

Education 48.2 35854.75 5622.74 21.16 8460.5 12162.28

Health 15.97 11882.83 4177.74 16.38 6548.66 4819.01

Qard Al Hasana 0 0 0 0.79 316.66 1778.57

Environmental 1.04 779.91 732.78 0.37 148.33 298.66

Arts & Culture

Events 0.81 605.5 1036.97 0 0 0

Water Purification 0.814011 605.5 1036.97209 0 0 0

Government 1.34 997.91 6153.24 0 0 0

Special person 0.00017 1312.08 29876.44 2.44 977.96 3952.72

Relief & Disaster

Recovery 24.24 18038.08 12794.19 55.68 22259.16 62958.43

Social Welfare 2.60 1938.5 2646.58654 3.16 1266.66 1049.13

Sports 5.73 4265.83 0 0 0 0

Legal 0.05 41.66 0 0 0 0


116

4.3 Respondents Perception for primary Data Analysis of Conventional Banks

4.3.1 Demographic Profile Analysis of Conventional Banks

This section describes the result findings by comparing background and demographic

of either banker or customer of selected conventional banks operating in Peshawar. In

demographic analysis it includes gender, age, religion and occupation of respondents. It

also includes knowledge of customers and employees about their perception regarding

CSR.

Table 4.5 Summary of Respondents Background, Profile & Demographics of

Conventional Banks

Conventional Banks

National Bank of Pakistan Allied Bank Ltd United Bank Ltd

Respondent Category

Frequency Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Customer 182 65 91 50 127 62

Banker 98 35 86 47.2 76 38

Total 280 182 203

Gender

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Male 251 89.6 146 81.1 185 91.1

Female 29 10.3 36 19.7 18 8.8

Total 280 182 203

Age

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

15-20 22 7.8 23 12 14 6.9

21-30 73 26 31 17.2 48 23.6

31-40 134 47 73 40.1 78 38.5

41-50 51 18 55 30.2 63 31

Total 280 182 203

Religion

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Islam 280 100 182 100 203 100

Occupation

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Admin 81 38.9 57 31.3 82 40.3

Professiona

l

172 61.4 110 60.4 88 43.3

Student 27 9.6 15 8.2 33 16.2

Total 280 182 203


117

Table 4.5 identifies the respondent‘s demographic analysis by applying descriptive

analysis. The descriptive analysis includes frequency, percentage, mean and Standard

deviation. For National bank a total 280 respondents participated in this study that

consists of 182 customers and 98 employees. A total of 182 respondents included for

Allied bank Ltd that constitutes 146 customers and 86 employees. Furthermore 203

respondents were targeted for United bank Ltd that includes 127 customers and 76

employees.

The next category in present table 4.5 includes gender comparison for all conventional

banks selected for the study in Peshawar region. For bank most of the respondents

belong to age group of 30 and above. Almost similar age group of respondents was

targeted mostly for data collection in other two Islamic banks as shown in table 4.5.

In term of religion, almost all the participants were Muslims for all conventional banks,

because in Pakistan 97% of people belongs to Muslim community.

In this study majority of respondents were literate, and Table 4.5, depicts wide range of

occupation background people. For Conventional banks mostly professional level such

as lawyers, accountants, doctors, teachers etc. was targeted as respondents and have

highest percentage. Other respondents like Administration and Students were

constituted small portion as respondents.

4.3.2 Analyzing by comparing Knowledge and Perception of Respondents

regarding CSR of Conventional Banks

This section will determine knowledge and perception of respondents regarding CSR

practices of all Conventional banks. Different variables of the study having different set

of questions compared in tabulated fashion to understand perception of respondents of

all selected conventional banks.


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Table 4.6 How you will describe CSR

Keywords to describe CSR for Conventional Banks

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Giving back to

Society 22 7.8 36 19.7 82 40.3

Business Ethics 59 21 48 26.3 23 11.3

Charity/Zakat/

Philanthropy 53 18 77 42.3 32 15.7

Business &

Society 146 52.1 21 11.5 66 32.5

Total 280 182 203

After establishing the familiarity comparison of respondents between Conventional

banks regarding CSR, the next table 4.8 establishes different keywords to describe

CSR. The respondents of NBP understand mostly CSR as, ―Business and society‖ and

make highest score of 52%. Majority of respondents of ABL understand CSR as,

―Charity and Zakat‖ and for UBL ―Giving back to Society‖.

4.3.3 Matching Different Variables for Meaningful comparison

After understanding knowledge and perception of CSR, this section will provide

comparison of each variable of study for Conventional banks. According to theoretical

framework there are 5 independent variables i.e. Human rights, Fair Labor practices,

Ethical conduct, Environment protection and Community development initiatives. Each

variable of study includes 9 different conceptual questions to understand perception of

customers and bankers for meaningful comparison regarding each variable of study.

Each variable is assigned by different alphabets for easy understanding. In general, for

―A‖ is for Human Rights, ―B‖ for Fair Labor Practices, ―C‖ for Ethical conduct, ―D‖

for Environment protection, ―E‖ for Community development initiatives., ―F‖ for

Customer satisfaction and ―G‖ for Employee performance. Furthermore, each variable

of conventional banking sector is individually interpreted in their respective table. To

compare CSR practices for individual variable descriptive statistics is utilized that

include Mean, Standard Deviation and Co efficient of variation.

The table 4.7 in Annexure ―A3‖ depicts results of individual question of CSR practices

in conventional banks of human rights variable of the study. The table consists of total

9 questions for conventional banks and was filled by each respondent for CSR practices


119

in each Conventional bank. Descriptive statistics is used to interpret the results of

questionnaires of both customers and employees as respondents for conventional banks

and results were interpreted by applying three values i.e. mean, standard deviation and

co efficient of variation for comparison of CSR practices. For NBP in the dimension of

Human rights the results shows that highest mean value 3.72 for Question 8 from

employee respondents. Furthermore customers ranked Question 3 with highest mean

value 3.72. SD for 2,4,6,7,8 describe smallest value around mean. To represent

consistency of data, conventional banks according to respondents have more CV value

except in Questions 4 and 8. The analysis of table 4.7 is attached in Annexure A3.

Similarly table 4.8 shows the descriptive analysis of Fair labor practices. The result

depicts that customers of NBP ranked Question with highest mean value followed by

ABL bank customer in Question 1,3,5. For UBL banks most of the bankers are in

agreement with Question 3 and 8, respectively. The analysis of table 4.8 is attached in

Annexure A4.

Furthermore in the dimension of Code of Ethics customer of NBP are mostly inclined

with Question 1 and 6. However most of customer shows less concern with Question

and 5. The bankers of NBP made agreement with Question 1,2,4 and 9. The detailed

analysis of Ethical dimension of all other banks of study is attached in Annexure A5

and depicted in table 4.9.

According to data analysis from customers of NBP the mean average value for

Environment dimension against Question 1,4 and 9 is highest compared to other

dimensions. Similarly the customers of ABL are more inclined towards to Question

3,7&9. UBL customers show their maximum satisfaction against Question 1,3& 6. The

detailed analysis is shown in table 4.10 attached in Annexure A6.

The data analyses for Community development are given in 4.11, attached in Annexure

A7. It reveals that majority of respondents of NBP made agreement with highest mean

value in Question 3,4,7,8 & 9. Almost similar perception of respondents reveals in

Question 1, 4, 6 and 9 for ABL. For UBL majority made agreement with Question 1,

3,4,7,8 & 9.


120

The analyses of both dependent variables of all conventional banks are shown in table

4.13 and 4 14 respectively and attached in Annexure A8.

4.3.4 CSR Practices and Perception of Respondents for Individual Conventional

Bank

To analyze CSR practices of both conventional and Islamic banks by collecting primary

data from customers and bankers are another important objective of the study. The

collected data for individual bank were analyzed by applying regression analysis for

individual bank. It includes 5 independent variables regressing 2 dependent variables

i.e. customer satisfaction and employee performance. The tables 4.16 below describe

individual statistics for individual CB, that we will be useful to compare their CSR

performance, according to the perception of respondents. It will also help to

distinguish, the comparison that which bank is more superior in practicing CSR as

compared to another.

4.3.4.1 CSR Practices of National Bank of Pakistan:

The table below describes multiple regression analysis on data collected from

respondents of National bank of Pakistan. It depicts CSR practices and its impact on

customer satisfaction and employee performance of NBP. At first collected data

National bank of Pakistan is analyzed to understand respondent‘s perception regarding

NBP CSR practices for customer satisfaction.

Table 4.14 Respondents Perception for CSR Initiatives of National Bank of

Pakistan and Customer Satisfaction as Dependent variable

S # CSR Variables Respondents N Coef. Std.Err t-Statistics P-value Remarks

1 Human Rights Customers 171 .1766195 .0783438 2.25 0.02 Accepted

Employees 88 .498586 . 1022775 4.87 0.00 Accepted

2 Fair Labor

Practices

Customers 171 .2874234 .0808844 3.55 0.00 Accepted

Employees 88 .4316182 .0900111 4.80 0.00 Accepted

3 Code of Ethics Customers 171 .1759712 .0768322 2.29 0.02 Accepted

Employees 88 .0672903 .0867816 0.78 0.43 Rejected

4 Environment

Protection

Customers 171 .0841186 .078724 1.07 0.28 Rejected


5 Community

Development

Initiatives

Customers 171 .3689112 .0779075 4.73 0.00 Accepted


For NBP Customer respondents against Customer Satisfaction as Dependent Variable R2 = 0.3491

For NBP Employees respondents against Customer Satisfaction as Dependent Variable R2 = 0.5259


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The table 4.14 above shows perception of customers and bankers, that how they

perceive NBP CSR practices and their impact on customer satisfaction. For human

rights variable customers perceives that 1% change in human rights practices will

change customer satisfaction 17% and is significant at 5% as the t value is 2,25 which

is greater than t tabulated 1.96 at 171 degree of freedom. Similarly for human rights

employees (bankers) also have positive attitude with 4.87 t value at 88 degree of

freedom. Furthermore other variables also have positive association on customer

satisfaction and are significant at 5%, except data revels from customers regarding

environment protection have t value 1.07 that shows co efficient of 0.08% impact on

customer satisfaction that reveal meager effect according to perception perceive by

customers of NBP. Furthermore the perception of both respondents also match with

secondary data collected from annual reports that NBP are paying more attention

towards CD initiatives and also have significant and positive effect on customer

satisfaction. The model is also good fit because of R2 value that is 34% for customer as

respondents and 52% for employees. F statistics also shows that all the variables are

overall significant at 5% level of significance.

Table 4.15 Respondents Perception for CSR Initiatives of National Bank of

Pakistan and Employee Performance as Dependent variable

S # CSR Variables Respondents N Coef. Std.Err t-Statistics P-value

1 Human Rights Customers 171 .3745543 .0784195 4.77 0.00

Employees 88 .4998233 .0964083 5.18 0.00

2 Fair Labor

Practices

Customers 171 0.402228 .0803252 5.01 0.00

Employees 88 .418657 .0849328 4.93 0.00

3 Code of Ethics Customers 171 0.25722 .0762559 3.37 0.01

Employees 88 .5835752 .0979054 5.96 0.00

4 Environment

Protection

Customers 171 0.205224 .078068 2.62 0.01

Employees 88 -.0700164 .0818051 -0.86 0.39

5 Community

Development

Initiatives

Customers 171 0.418931 .0778476 5.38 0.00

Employees 88 .4076284 .1079373 3.78 0.00

For NBP Customer respondents against Employee Performance as Dependent Variable R2 = 0.3546

For NBP Employees respondents against Employee Performance as Dependent Variable R2 = 0.5839

Almost similar findings were found after analyzing data received from respondents for

employee performance table 4.15. All respondents are in agreement that all

independent variables have significant and positive effect on employee performance. It


122

shows the perception of NBP respondents that CSR practices conducted by NBP are in

alignment of what they claimed in their annual reports. Only bankers are not in

agreement with environment protection practices of NBP. They perceive that EP

activities have negative and insignificant effect with employee performance. The co

efficient for this variable is -0.07 which shows that EP has negative impact with t value

of -0.86. Furthermore the model is good fit because of R2 value that is 35% for

customer as respondents and 58% for employees.

4.3.4.2 CSR Practices of Allied Bank Limited

To find the impact of CSR practices for Allied Bank Ltd, the table 4.16 below depicts

the data by regressing customer satisfaction as dependent variable.

Table 4.16 Respondents Perception for CSR Initiatives of Allied Bank of

Pakistan and Customer Satisfaction as Dependent variable



Employees 83 .498586 .1083914 2.79 0.00

2 Fair Labor

Practices

Customers 85 .2874234 .1114729 2.74 0.00

Employees 83 .4316182 .1095007 3.72 0.00

3 Code of Ethics Customers 85 .1759712 .1117195 2.00 0.04

Employees 83 .4662802 .1127836 3.58 0.00

4 Environment

Protection

Customers 85 .0841186 .1326398 1.11 0.27

Employees 83 .6844739 .1087549 1.48 0.14

5 Community

Development

Initiatives

Customers 85 .3689112 .1112561 3.73 0.00

Employees 83 .2672903 .1083183 2.46 0.01

For ABL Customer as respondents against Customer Satisfaction as Dependent Variable R2 = 0.2492

For ABL Customer as respondents against Customer Satisfaction as Dependent Variable R2 = 0.4262

The respondents for ABL have also mostly positive projection towards CSR practices

and its impact on customer satisfaction. Although ABL customers are not in agreement

with practices of Human rights and EP that they have little impact on customer

satisfaction. It shows that the perception of customers mostly endorse that CSR

practices are in alignment with customer satisfaction. Furthermore employees also

shows concern on EP that ABL practices of this variable have little impact on customer

satisfaction. However all bankers were shows satisfactory response regarding ABL

CSR practices have positive impact on customer satisfaction. Furthermore the model is


123

good fit because of R2 value that is 24% for customer as respondents and 42% for

employees.

Table 4.17 Respondents Perception for CSR Initiatives of Allied Bank of

Pakistan and Employee Performance as Dependent variable

S # CSR

Variables Respondents N Coef. Std.Err t-Statistics P-value


Employees 83 .3787289 .1059514 3.54 0.00

2 Fair Labor

Practices

Customers 85 .4081381 .111415 3.66 0.00

Employees 83 .3938012 .1070358 3.67 0.01


Employees 83 .2079338 .1058799 1.97 0.05

4 Environment

Protection

Customers 85 .1586484 .1328292 1.19 0.23

Employees 83 .0475965 .1063068 0.45 0.65

5 Community

Development

Initiatives

Customers 85 .144207 .111632 1.29 0.20

Employees 83 .0352086 .1118789 0.31 0.75

For ABL Customer respondents against Employee Performance as Dependent Variable R2 = 0.2657

For ABL Employees respondents against Employee Performance as Dependent Variable R2 = 0.3182

Table 4.17shows the concern of respondents of ABL CSR practices and its effect on

dependent variable employee performance. After analysis the data, except 1st three

independent variables all respondents have perception that EP and CDI have little

impact on employee performance. The results further reveals that EP and CDI have t

value less than tabulated t value 1.e 1.96. All other variable are significant and have

positive impact on employee performance. Furthermore the model is good fit because

of R2 value that is 26% for customer as respondents and 31% for employees.

4.3.4.3 CSR Practices of United Bank Limited

The tables below shows the results of CSR practices of United bank Ltd. The

perception of respondents against dependent variable customer satisfaction shown in

table 4.18.


124

Table 4.18 Respondents Perception for CSR Initiatives of United Bank Ltd and

Customer Satisfaction as Dependent variable



Employees 68 -.0273974 .1447566 -0.19 0.84

2 Fair Labor

Practices

Customers 119 .318895 .0974895 3.27 0.01

Employees 68 -.014625 .1363525 -0.11 0.91


Employees 68 .0468862 .1327762 0.35 0.72

4 Environment

Protection

Customers 119 .147712 .0997072 1.48 0.14

Employees 68 .0565806 .1367569 0.41 0.68

5 Community

Development

Initiatives

Customers 119 .3959488 .0961147 4.11 0.00

Employees 68 .3362135 .1275262 2.63 0.01

For UBL Customer as respondents against Customer Satisfaction as Dependent Variable R2 = 0.3566

For UBL Employees as respondents against Customer Satisfaction as Dependent Variable R2 = 0.4859

The respondents of UBL banks were moderately satisfied with CSR practices and its

impact on customer satisfaction. The data reveals that majority of customers of UBL

bank are in agreement with CSR practices in the dimension like HR, FLP, COE,EP.

Furthermore they were not in agreement and not align with EP practices and shows

insignificant relation with customer satisfaction. However, employees of UBL were not

in agreement with CSR practices mostly in dimensions like HR, COE, EP,CDI. Its

shows that perception of bankers depicts that UBL were mostly not focusing on CSR

dimensions as compared to other conventional banks practicing CSR in Pakistan.

Furthermore the model is good fit because of R2 value that is 35% for customer as

respondents and 48% for employees.


125

Table 4.19 Respondents Perception for CSR Initiatives of United Bank Ltd and

Employee Performance as Dependent variable



Employees 68 -.2931236 .1252098 -2.34 0.02

2 Fair Labor

Practices

Customers 119 .0291282 .0964306 2.37 0.10

Employees 68 .2548639 .1103061 2.31 0.02


Employees 68 .0796785 .1148471 0.69 0.49

4 Environment

Protection

Customers 119 .0359894 .0986241 3.54 0.00

Employees 68 .3766003 .1182903 3.18 0.00

5

Community

Development

Initiatives

Customers 119 .1991988 .0950707 2.01 0.04

Employees 68 .3165933 .1179406 2.68 0.00

For UBL Customer respondents against Employee Performance as Dependent Variable R2 = 0.3491

For UBL Employees respondents against Employee Performance as Dependent Variable R2 = 0.3259

The data analysis to relate the employee performance with UBL CSR practices shows

that customers as respondents were made agreement that UBL CSR practices have

positive and significant impact on FLP, EP, CDI. The data analysis also shows rejection

on basis of t value for independent variables like HR and COE. It depicts the perception

of UBL customers that they are not satisfied with UBL CSR practices in dimensions of

HR and COE and therefore have insignificant impact on employee performance.

Almost bankers at UBL have similar perception they believe regarding UBL CSR

practices and also shows negative but significant relationships in HR dimension on

employee performance. Furthermore the model is good fit because of R2 value that is

34% for customer as respondents and 32% for employees.

4.3.5 Analysis of all 3 conventional banks CSR practices

On the basis of collected and analyzed data from both respondents of all CB, it was

concluded in the light of results that NBP was showing more positive and significant

deviation towards social practices. It may be the fact that NBP is public sector bank and

fulfilling its social obligations under the support of government initiatives. Furthermore

NBP also awarded best bank in the context of CSR practices in the year of 2014-15-16.

However, according to perception of respondents UBL was worst in practicing CSR.

According to table 4.1 UBL have allocated least budget on CSR programs with worth

of Rs. 219456 million from 2013-16. ABL was ranked 2nd

in all 3 CB selected in study

followed by NBP. Its CSR budget was Rs. 283253millions form 2013-16 and NBP

CSR budget was Rs. 389908million from 2013-16. It depicts that customer and


126

employee perceptions of all CB are in alignment with the claim that given in their

annual reports.

4.4 Respondents Perception and Data Analysis of Islamic Banks

4.4.1 Demographic Profile Analysis of Islamic Banks

This section describes the result findings by comparing background and demographic

of either banker or customer of selected Islamic banks operating in Peshawar. In

demographic analysis it includes gender, age, religion and occupation of respondents. It

also includes knowledge of customers and employees about their perception regarding

CSR.

Table 4.20 Summary of Respondents Background, Profile & Demographics of

Islamic Banks

Islamic Banks

Meezan Bank Al-Baraka Bank Islami

Respondent Category


(%)


(%)


(%)

Customer 241 76.9 97 74 62 68.8

Banker 72 23 34 25.9 28 31.1

Total 313 131 90

Gender

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Male 285 91 102 77.8 72 80

Female 28 8.9 29 22.1 18 20

Total 313 131 90

Age

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

15-20 07 2.2 09 6.8 18 20

21-30 28 8.9 16 12.2 25 27.7

31-40 248 79.2 93 70.9 38 42.2

41-50 30 9.5 13 9.9 09 10

Total 313 131 90

Religion

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Islam 313 100 131 100 90 100

Occupation

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Admin 93 29.7 30 22.9 23 25.5


127

Professional 203 64.8 78 59.5 61 67.7

Student 17 5.4 23 17.5 06 6.6

Total 313 131 90

Table 4.20 identifies the respondent‘s demographic analysis by applying descriptive

analysis. The descriptive analysis includes frequency, percentage, mean and Standard

deviation. For Meezan bank a total 313 respondents participated in this study that

consists of 241 customers and 72 employees. A total of 131 respondents included for

Al-Baraka Islamic bank that constitutes 97 customers and 34 employees. Furthermore

90 respondents were targeted for Bank Islami that includes 62 customers and 28

employees.

The next category in present table 4.20 includes gender comparison for all Islamic

banks selected for the study in Peshawar region. For Meezan bank most of the

respondents belong to age group of 30 and above. Almost similar age group of

respondents was targeted mostly for data collection in other two Islamic banks as

shown in table 4.20.

In term of religion, almost all the participants were Muslims for all Islamic banks,

because in Pakistan 97% of people belongs to Muslim community.

In this study majority of respondents are literate, and Table 4.20, depicts wide range of

occupation background people. For Islamic banks mostly professional level such as

lawyers, accountants, doctors, teachers etc. is targeted as respondents and have highest

percentage. Other respondents like Administration and Students have constituted small

portion as respondents.

4.4.2 Analyzing by comparing Knowledge and Perception of Respondents

regarding CSR of Islamic Banks

This section will determine knowledge and perception of respondents regarding CSR

practices of Islamic banks. The table 4.21 below establishes different keywords to

describe CSR and analyzes the perception of Pakistani respondents regarding definition

of CSR.


128

Table 4.21 How you will describe CSR

Keywords to describe CSR for Islamic banks

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Frequency

Percentage

(%)

Giving back to

Society 19 6

19 14.5

07 7.7

Business

Ethics 48 15.3

31 23.6

31 34.4

Charity/Zakat/

Philanthropy 158 50.4

68 51.9

39 43.3

Business &

Society 88 28.1

13 9.9 13 14.4

Total 313 131 90

According to table 4.21, majority of respondents of almost all Islamic banks agree and

consider CSR as Philanthropic activity. However some respondents understand CSR

as, ―Business and Society‖ and ―Business Ethics‖. The least score is for ―Giving back

to Society‖.

4.4.3 Matching Different Variables for Meaningful comparison

The format of CSR is set in Al Quran and Hadith and is natural component of Islam. It

clarifies the parameters of those things (Halal) and not permitted (Haram). It reflects on

every action of Muslims, even in business transactions and other consumptions in life.

After understanding knowledge and perception of CSR, this section will provide

comparison of each variable of study. Each variable of study includes 9 different

conceptual questions for Islamic banking to understand perception of customers and

bankers for meaningful comparison regarding each variable of study. Each variable is

assigned by different alphabets for easy understanding. In general, ―A‖ is for Human

Rights, ―B‖ for Fair labor practices ―C‖ for Ethical code of conduct, ―D‖ for

Environment protection, ―E‖ for Community Development Initiatives. Furthermore,

each variable of all Islamic banks are individually interpreted in their respective table

for comparison and statistically verification by applying mean, standard deviation and

co efficient of variation. The description for all the tables is attached in Annexure- B3 –

B8.


129

4.4.4 CSR Practices and Perception of Respondents for Individual Islamic Bank

The data analysis for IB below in individual tables, demonstrate the perception of

customers and employees of IB. In the study top ranked Islamic banks were selected

and data were collected in response to independent variables of CSR. Regression

analysis were made for meaningful comparison, in the light of perception perceives by

customers and employees. Efforts were made to determine the relationship between

dependent and independent variables of individual bank. At first, Meezan IB was taken

and collected data were analyzed to find its relation with customer satisfaction.

4.4.4.1 CSR Practices of Meezan Islamic Bank

The table below describes multiple regression analysis on data collected from

respondents of Meezan Islamic bank. It depicts CSR practices and its impact on

customer satisfaction and employee performance of Meezan Islamic bank. At first

collected data of Meezan Islamic bank is analyzed to understand respondent‘s

perception regarding CSR practices for customer satisfaction.

Table 4.28 Respondents Perception for CSR Initiatives of Meezan Bank and



1 Human Rights

Customers 229 .2315858 .0680172 3.40 0.00

Employees 60 .3100077 .1385035 2.23 0.02

2 Fair Labor

Practices

Customers 229 .2139632 .0678332 3.15 0.00

Employees 60 .0796346 .1366127 0.58 0.56

3 Code of Ethics

Customers 229 .1387102 .067114 2.06 0.04

Employees 60 .2908078 .1432977 2.02 0.04

4 Environment

Protection

Customers 229 .1209826 .0669613 1.81 0.07

Employees 60 -.0216124 .1360265 -0.16 0.87

5

Community

Development

Initiatives

Customers 229 .2408765 .0666402 3.61 0.00

Employees 60 .2939814 .1377463 2.13 0.03

For Meezan Bank Customers respondents against Customer Satisfaction as Dependent Variable R2 = 0.3891

For Meezan Bank Employees respondents against Customer Satisfaction as Dependent Variable R2 = 0.3359

The customers of Meezan IB were based from Peshawar and majority of them were

based on agreement that practices of CSR of Meezan IB were quite satisfactory. All

independent factors like HR, FLP,COE and CDI were accepted because calculated t


130

value is greater than t tabulated. In context of HR, co efficient of determination has

23%, that illustrate 1% change in HR practices will change customer satisfaction by

23% at 229 degree of freedom. It shows the positive attitude of customers due to its

nature and its existence as premium Islamic bank in Pakistan. Similarly for human

rights employees (bankers) also have positive attitude with 2.23 t value at 60 degree of

freedom. But employees were not satisfied with FLP of Meezan IB. They perceive their

policies are not stringent according to Islamic CSR as enshrined in literature.

Furthermore both made positive attitude towards practices Meezan IB made against

CDI, which reflect that bank work with Islamic assumptions. Meezan IB are inclined

towards CDI and spend Rs. 376887 billion against CSR for 2013-16 years.However,

both types of respondents were not in agreement with EP CSR of Meezan IB. It reflects

that perception of customers and bankers both rejected the EP practices although its

operates under Islamic parameters. The model is also good fit because of R2 value that

is 38% for customer as respondents and 33% for employees. F statistics also shows

that all the variables are overall significant at 5% level of significance.

Table 4.29 Respondents Perception for CSR Initiatives of Meezan bank and




Employees 60 .2561277 .1304272 1.96 0.05

2 Fair Labor

Practices

Customers 229 .1632139 .0674943 2.42 0.01

Employees 60 .0490378 .1286467 0.38 0.70


Employees 60 -.3462508 .1349419 -2.57 0.01

4 Environment

Protection

Customers 229 -.0696707 .0666267 -1.05 0.29

Employees 60 .1394293 .1280947 1.09 0.28

5 Community

Development

Initiatives

Customers 229 .2329962 .0663071 3.51 0.00

Employees 60 .2819372 .1297142 2.17 0.03

For Meezan Bank Customers respondents against Employees Performance as Dependent Variable R2 = 0.5282

For Meezan Bank Employees respondents against Employees Performance as Dependent Variable R2 = 0.6260

Almost similar response from both customers and respondents were obtained for

employee performance at Meezan IB. Regression analysis in STATA was implemented

to judge the perception of respondents. Almost relatively similar perception was given

by customers and bankers regarding social practices of Meezan IB. In case of FLP,


131

bankers were not in align with customers perception and declare insignificant results

against employee performance. Similarly for EP customers have negative and

insignificant approach towards Meezan IB. Both respondents are in agreement that CDI

have significant and positive effects on employee performance. It concludes that

Meezan IB are playing active role in philanthropic activities as enshrined in Islamic

CSR literature, that corporations beside profit making are obliged for other practices

like social obligations and poverty alleviation. The model is also good fit because of R2

value that is 52% for customer as respondents and 62% for employees.

4.3.4.2 CSR Practices of Al- Baraka Bank

To find the impact of CSR practices for Al- Baraka Bank, the table 4.30 below depicts

the data by regressing customer satisfaction as dependent variable.

Table 4.30 Respondents Perception for CSR Initiatives of Al Baraka Bank and




Employees 30 -.3841928 .1825115 -2.10 0.04

2 Fair Labor

Practices

Customers 88 .2241673 .0986701 2.27 0.02

Employees 30 -.3942062 .1836065 -2.18 0.03


Employees 30 .3938057 .2002261 1.96 0.06

4 Environment

Protection

Customers 88 .3290226 .1018979 3.23 0.00

Employees 30 -.5696188 .207106 -2.75 0.01

5 Community

Development

Initiatives

Customers 88 .2564811 .1015555 2.52 0.01

Employees 30 .3927932 .1978856 1.98 0.05

For Al Baraka Bank Customer as respondents against Customer Satisfaction as Dependent Variable R2 = 0.2491

For Al Baraka Bank Employees as respondents against Customer Satisfaction as Dependent Variable R2 = 0.2359

Al Baraka IB is the 2nd

largest IB in Pakistan serving community with its pure Islamic

mode of banking operations. According to t able above Al Baraka IB also allocates its

CSR budget for betterment of community. The respondents were made agreement in all

dimensions of social responsibility and have significant effect on customer satisfaction.

But in the context of HR, FLP and COE employees as respondents perceives negative

relationship with CSR practices of Al Baraka IB. It demonstrate their perception that

employees think that these activities have significant impact but in negative altitude.


132

However all variables are accepted in positive and negative way. Furthermore the

practices of Al Baraka IB are quite few in implementation as the secondary data depicts

and also the perception of respondents. It may be due to its age, size and allocation of

budget for social practices in Pakistan. The R2 value is also low showing little impact

of independent variables on customer satisfaction.

Table 4.31 Respondents Perception for CSR Initiatives of Al Baraka bank and




Employees 30 .463537 .2052467 2.25 0.03

2 Fair Labor

Practices

Customers 88 .0444212 .1123436 0.40 0.69

Employees 30 .0441278 .2064782 2.15 0.04


Employees 30 -.4357729 .225168 -1.93 0.06

4 Environment

Protection

Customers 88 .2272891 .1160186 1.95 0.05

Employees 30 -.0914588 .2329049 -0.39 0.69

5 Community

Development

Initiatives

Customers 88 -.25642 .1156288 -2.21 0.02

Employees 30 -.4298014 .222536 -1.92 0.06

For Al Baraka Bank Customer as respondents against Employees Performance as Dependent Variable R2 = 0.3725

For Al Baraka Bank Employees as respondents against Employees Performance as Dependent Variable R2 = 0.4763

To regress employee performance, the perception of respondents was analyzed in

STATA. The result reveals different attitude of respondents for Al Baraka IB social

practices. The customers of bank were agree with CSR practices of HR, COE and CDI

and show positive association towards employee performance. Furthermore they

rejected the dimension like FLP and EP, may be they perceives there practices are not

in line compared to other IB and CB in territory. Similarly employee of Al Baraka bank

was also not satisfied with social practices and rejected almost all dimensions of CSR

except HR practices. Bankers have shown negative trend and insignificant relationships

of CSR practices with employee performance.

4.3.4.4 CSR Practices of Bank Islami

The tables below show the results of CSR practices of Bank Islami. The perception of

respondents against dependent variables customer satisfaction shown in table 4.32.


133

Table 4.32 Respondents Perception for CSR Initiatives of Bank Islami and




Employees 25 .4002498 .1748924 2.24 0.03

2 Fair Labor

Practices

Customers 57 .4233002 .1348656 3.13 0.00

Employees 25 .4066307 .1822779 2.23 0.03

3 Code of Ethics Customers 57 -.3488467 .1372124 -2.54 0.01

Employees 25 .1712912 .1784343 0.96 0.34

4 Environment

Protection

Customers 57 .0217769 .1446663 0.16 0.87

Employees 25 .1361924 .2176059 0.63 0.53

5 Community

Development

Initiatives

Customers 57 .3395161 .139395 2.35 0.02

Employees 25 .368228 .1843297 2.00 0.05

For Bank Islami Customer respondents against Customer Satisfaction as Dependent Variable R2 = 0.3191

For Bank Islami Employees respondents against Customer Satisfaction as Dependent Variable R2 = 0.4635

Bank Islam respondents have mix response and perception regarding CSR practices and

its impact on customer satisfaction. Majority of customers have interest and belief on

bank CSR practices. It may be the fact that in private banking and intensive

competition Bank Islami also struggling and maintain their standards to deliver

customer value. Customers were made satisfactory response due their newly

established infrastructure, technology and other quality practices for customer

satisfaction. Similar response was also made by employees streamline with customer

perception. Both bankers and customers rejected EP CSR practices of bank and shows

insignificant relationship with customer satisfaction. The model is also good fit because


Table 4.33 Respondents Perception for CSR Initiatives of Bank Islami and


S # CSR

Variables Respondents N Coef. Std.Err t-Statistics

P-value

1 Human Rights Customers 57 -.3249565 .1514086 -2.13 0.03

Employees 25 .51857 .2335665 2.22 0.03

2 Fair Labor

Practices

Customers 57 .2995789 .1351988 2.21 0.03

Employees 25 -.4959485 .2434296 -2.03 0.05

3 Code of

Ethics

Customers 57 -.1418817 .1375514 -1.03 0.30

Employees 25 -.5439237 .2382966 -2.28 0.03

4 Environment

Protection

Customers 57 -.1049299 .1450237 -0.72 0.47

Employees 25 .0650928 .2461698 0.26 0.79

5

Community

Development

Initiatives

Customers 57 .3019125 .1397393 2.16 0.03

Employees 25 .5831518 .2906098 2.20 0.03

For Bank Islami Customer as respondents against Customer Satisfaction as Dependent Variable R2 = 0.5891

For Bank Islami Employees respondents against Customer Satisfaction as Dependent Variable R2 = 0.4659


134

Islami Bank is working under Islamic principles and serving society according to

Islamic mode of banking. They have few branches operating in Peshawar, Pakistan.

Customers perceive that bank CSR practices in the dimensions like HR, FLP and CDI

were satisfactory and have significant contribution in employee performance. Almost

similar perception made by bankers of Bank Islami. The model is also good fit because


4.4.5 Analysis Of All 3 Islamic Banks CSR Practices

Islamic banking is not new and strange concept in banking industry, since its inception

in 1960s. The popularity and positioning of Islamic banking is not only acceptable in

Muslim countries but also recognize in non-Muslim world. The approach in existence,

purpose and other characteristics like product and services of IB are quite different

from conventional banking (Ahmad, 2000). Scholars like (Nathan and Rebiere, 2007)

identify five major elements if IB and for its religious recognition: prohibition of Riba,

undertaking business activities on Halal and Haram parameters, Speculations or

uncertainty, Zakat payment to poor‘s, Shariah compliance. Similarly effort is made in

this study to disclose CSR practices and understand the perception of IB customers and

employees. Furthermore the respondent perception about CSR practices of IB is

analyzed in by applying regression analysis and its impact on customer satisfaction and

employee performance. Three top most IB was selected in the study and data was

collected through survey method. Efforts were also made to compare the CSR practices

of all 3 IB in the study. It further describes that among 3 IB, what customer and

employees perceives and how they evaluate their CSR practices.

It is concluded that among 3 IB, Meezan IB CSR practices are much better followed by

Bank Islami and Al Baraka IB. But it was aforementioned by Chong and Liu (2010)

that IB deviate their CSR practices from true Islamic spirit. It manifest that the CSR

practices of IB is not much different from conventional banking CSR practices. It

means that ICSR practices are only based to literature. However, the performance of

CSR in Pakistani Isamic banking industry depicts that they must needed to follow and

adhere the ICSR in true spirit as they are more inclined to philanthropic CSR only.


135

4.5 Regression Analysis of All Conventional and Islamic Banks for Hypothesis

Testing

4.5.1 Comparative analysis of Conventional Banks and Organization

Performance

The table 4.37 below describes customer and employee perception of CSR practices

and its impact on customer satisfaction and employee performance of selected

conventional banks practicing CSR in Pakistan. To determine the interdependency and

relationship between independent and dependent variables regression analysis is

implemented regarding corporate social performance of Conventional banks. Each

variable of CB include Co efficient, Standard Error, t-test, significance and probability

value. The table below further describes comparative study of CSR practices with the

help of dimensions scores for each variable for acceptance and rejection of hypothesis.

The primary data is analyzed by in order to compare and determine the relationship

between customer satisfaction and employee performance as dependent variable and

other independent variable used in study as CSR practices that include human rights,

fair labor practices and code of ethics, environment protection and community

development. Both analyses were conducted separately in table 4.34 and 4.35 to

understand customer and employee perception regressing customer satisfaction and

employee performance as dependent variable for CSR practices in conventional

banking in Peshawar Pakistan. Inferential statistics is used to determine acceptance or

rejection of hypothesis, in order to verify differences in CSR practices for each

dimension of specific variable. It also enables to draw conclusion for conventional bank

social practices keeping in view the perception of selected customer and employee

perception for each variable in fulfilling the need of people and implementing CSR

initiatives actively to meet customer satisfaction and employee performance for

superior organization value and its reputation.


136

Table 4.34 Customers and Employee Perception for CSR Initiatives Regressing Customer Satisfaction and Employee Performance as

Dependent variable in CB (Customer Respondents 375, Employee Respondents 239)

Conventional Banks

Customer Perception Employee Perception

S # CSR Variables DV Coef. Std.Err t-Statistics P-value DV Coef. Std.Err t-Statistics P-value

1 Human Rights

CS 0.11064 .0520097 2.12

0.03 CS .372751 .0578402 6.44 0.00

EP .111328 .0513179 2.17

0.03 EP 0.120899 .061851 1.96

0.05

2 Fair Labor

Practices

CS 0.146716 .0520846 2.81

0.00 CS 0.13985 .0604305 2.31 0.02

EP .184028 .0513785 3.58

0.00 EP .2783844 .0614494 4.53

0.00

3 Code of Ethics

CS 0.143795 .0518256 2.77

0.00 CS .13766 .0596349 2.31 0.02

EP .184028 .0513785 3.58

0.00 EP .2783844 .0614494 4.53

0.00

4 Environment

Protection

CS .14766 .0596349 2.49

0.01 CS -.049073 .0582183 -0.84

0.40

EP -.0306853 .0510444 -0.60

0.54 EP .0402199 .0632387 0.64

0.52

5

Community

Development

Initiatives

CS 0.209747 .0523229 4.01

0.00 CS .138317 .0595244 2.32

0.02

EP -.0130192 .051627 -0.25

0.80 EP -.1077259 .0642014 -1.68

0.09

For Conventional Banks Customer respondents against Customer Satisfaction as Dependent Variable R2 = 0.4628 For Conventional Banks Customer respondents against Employee Performance as Dependent Variable R2 =0.4277 For Conventional Banks Employee respondents against Customer Satisfaction as Dependent Variable R2 =0.4498

For Conventional Banks Employee respondents against Employee Performance as Dependent Variable R2 =0.4163


137

In order to view, human rights practices regarding objectives of CSR and to understand

the perception of participants for meaningful comparison of CB, CSR practices for

Human Rights, the hypothesis below is formulated earlier to test and verify the

approach of participants:

Hypothesis 1:





Hypothesis 2:





To test hypothesis 1, the analysis shown in table 4.34 reveals, according to CB

customer perception that 1% change in human rights practices as CSR variable will

change the level of customer satisfaction by 11% and is significance at 5% as the t-

value is greater than calculated value at 375 degree of freedom. The table further

compares the perception analysis of both customer and employee of CB. Data collected

from CB employee regarding human rights practices in CB perceives that 37% change

in customer satisfaction is due to human rights variable. It shows that co efficient is

17% higher as compared to customer perception, though both are significant and

positively affecting the customer satisfaction. i.e. Human Rights calculated t value is

6.441 and its probability (P) value is 0.000 which is less than 0.05 (level of

significance) or margin of error, therefore we can reject H0 and accept our alternate

hypothesis H1, which conclude that there is significant relationship of CSR practices in

Human Rights on Customer satisfaction in Conventional banks.


138

Furthermore, for employee performance as dependent variable, the data gathered from

customer reveals that that 1% change in human rights practices as CSR variable will

change the level of employee performance by 11% and is significance at 5% as the t-

value is 2.17 greater than calculated value at 375 degree of freedom. Similarly,

according to employee perception the analysis also shows 12% change in human rights

will affect employee performance and are significant and positively affecting employee

performance with acceptance of alternate hypothesis H1.

It should be noted that similar results were also established by other empirical studies

conducted in Bangladesh and Malaysia. For example, Ershad (2015) found 88% of the

respondents were made agreement that in Bangladesh both mode of banking sector

implement similar CSR Human Rights practices for superior customer value.

In further for variable no 2 i.e. Fair Labor practices hypothesis 3 and 4 below is

formulated to compare Fair Labor CSR practices for CB to the objectives of study.

Hypothesis 3:





Hypothesis 4:


Employee satisfaction in Conventional banks.


Employees satisfaction in Conventional banks.

Employees are asset of any organization and according to Uddinet al.(2008) the

importance of social responsibility for employees extends beyond their formal

agreement of employment with the organization. From empirical findings it shows that

CB was more inclined towards to HR practices as shown in above table 4.34. Both


139

customer and employees as respondents were in agreement of responsible practices of

conventional banks towards customer satisfaction. The calculated t value is 2.810 for

Human Resource factor with p value of 0.000 which is less than 0.05 (level of

significance) or margin of error and also with t value of 2.318 for employee perception

regressing customer satisfaction, therefore we can reject H0 and accept our alternate

Hypothesis H. It concludes that almost all CB practicing their HR activities positively

in contribution for customer satisfaction. Almost similar perception for employee

performance was found from customer and employee perception. It will further leads

towards to acceptance of alternate hypothesis. This result is consistent with the studies

conducted by Uddinet al. (2008) where more than 98% of respondents made agreement

with similar practices of CB in Bangladesh with respect to HR practices and

comparison made between contemporary views and practices on CSR.

In the context of Code of Ethics as a variable for CSR different questions were asked

from customers and bankers of CB to judge their perception regarding bank practices

against customer satisfaction and employee performance. Majority of respondents are

agreed with Quality services offered by CB with high mean score followed by other

ethical practices for better cultural environment. To support the above statements for

Ethical conduct CSR practices according to objectives of study Hypothesis 5 and 6 are

formulated to verify the perception of customer and employees of CB.

Hypothesis 5:




Satisfaction in Conventional banks.

Hypothesis 6:





In above table, variable no 3 i.e. Code of Ethics, co efficient of variation is almost

similar as per perception given by both customer and bankers of CB i.e. 14%. It means


140

1% change in code of ethics will change the customer satisfaction by 14%.

Furthermore, calculated value t is 2.773and 2.313 along with its probability (P) value is

0.000 which is less than 0.05 (level of significance) or margin of error, therefore we can

reject H0 and accept our alternate Hypothesis H1, which conclude that there is

significant relationship between data and CSR practices with customer satisfaction of

CB. Almost similar findings were also declared for employee performance. The

analysis shows that both customer and employees were mostly inclined that ethical

practices of CB have significant effect on employee performance as shown in Table.

Thus rejecting, null hypothesis, and have alignment with ethical CSR in CB.

It shows that Ethical practices of CSR for CB banks are almost similar in practice for

banks in India were found by (Lipunga, 2013) in which 90% were agreed that banks in

India were highly involved improving ethical practices, and improving organizational

culture for better respect, trust and developing ethical relationships with their valuable

customers.

In furthering the discussion the next CSR variable is Environment protection

stakeholder and Table shows the perception of respondents. Environment concentration

is important for any organization and consider as key pillar of CSR (Uddinet al., 2008),

therefore in this study diverse environment oriented questions were asked from

different respondents of CB. To support the above statements for Environmental CSR

practices according to objectives of study Hypothesis 7 and 8 were formulated for CB.

Hypothesis 7:




Customer Satisfaction in Conventional banks.

Hypothesis 8:




Employees satisfaction in Conventional banks.


141

From empirical findings customer respondents made agreement that CB environmental

CSR have positive effect on customer satisfaction but shows negative concern that

environmental protection practices have not satisfactory relationship with employee

performance. Furthermore, the data collected from both customer and employees

regarding EP also show mostly positive relation with employee performance. It shows

that, in Pakistan, most of the respondents are still have very little mind sets regarding

organization role towards protecting the environment. Although, in western world its

really consider, as a key component for social obligations. But, in developing countries,

it‘s still in infant stages, due to lack of knowledge, awareness, consciousness and other

factors like poverty, inflation and some other physiological needs. Similar practices for

Environmental CSR were found by banks in India in Literature, which substantiates

with findings of Lipunga (2013), in which 90% environmental CSR practices were

focused on Environmental protection, 40% on tree plantation and banks in India were

not neglecting other variables like sustainability, smoking free area in bank,

environmental standards.

To uphold CSR, banks are accountable to another external important stakeholder

known as Community Development. In the developing countries majority of the CSR

discussion and implementation were mostly focused around welfare of the community.

In the context of CSR many entrepreneurs believe that beside customer satisfaction and

economic gains they have the role to serve community for satisfaction and profitability.

Furthermore they also believe on philanthropic CSR as their primarily obligation for

society development and nourishment. Similarly banking sector in Pakistan also display

and practice their CSR activities by fulfilling their social justice liability and superior

value to community stakeholder. To uphold CSR agenda for community development

banks in Pakistan are investing their huge amount of budget as charity in different

sectors like education, health care, water purification projects, disaster recovery

projects, rehabilitation of orphans and special persons, arts events & culture and other

social welfare projects. To verify the community development initiatives for

conventional banks the following hypothesis were formulated:

Hypothesis 9:




142



Hypothesis 10:




Employee Satisfaction in Conventional banks.

To test the hypothesis of community variable the data were collected from CB

respondents. The respondents made agreement that CB were actively participating in

community development projects. From Table it was calculated in community

stakeholder, according to customer and employee respondents regressing customer

satisfaction as dependent variable, t value is 4.01 and 2.32 with p value of 0.00 that

represents less than 0.05 (level of significance) or margin of error, therefore we can

reject H0 and accept our alternate hypothesis. It represents that the CSR practices for

community stakeholder for CB have significant impact on customer satisfaction and

was making their active role to deliver best for community development. Similar

practices were also found in the study conducted by (Arshad et al, 2012) that concluded

both mode of banking in Bangladesh were also displaying similar practices for

community stakeholder in the context of CSR. Furthermore it also match with the

secondary data collected from banks annual reports for last 4 years that IB were

investing more in health care and CB were active in Education promotion to

community. However, different results were obtained from both customer and

employees, that employee performance has no effect with community development

practices by CB, with t value of -0.25 and -1.68. It shows that employee performance

have negative coefficient with CD practices of CB. Almost, both respondents have

negative and insignificant relationship with employee performance. It may be the fact

that CD practices are belong to external orientation and better improvement of

community as stakeholder and employee performance is mostly internal focused. The

value of R2 for each is low due to using cross section data and which is always low as

compared to time series regression models. Though the value of R2 is low but the

probability value of F-statistics favors the overall significance of the model.


143

It shows the importance of CSR in Pakistani banking industry and almost all banks

despite having intensive competition initiate different CSR practices for employee

involvement, motivation, conformity to law, ethical trading, philanthropy and

delivering maximum value to their customers for improve organization performance.

Similar results were found in study conducted by (Siddiq and Javed, 2014; Rehman et

al., 2014; Nadeem et al., 2014; Khan et al., 2016) and found positive relationship

between CSR practices of banks and their impact on organization performance. The

summary of all hypotheses tested for Conventional banks are depicted in table 4.35.

Table 4.35 Summary of Hypothesis tested for Conventional Banks

Hypothesis

#

Relationship between

two variables

Results of

Customer

Perception

Outcome Results of

Employee

Perception

Outcome

H1 Human Rights and

Customer Satisfaction

P< 0.03 Accepted P< 0.00 Accepted

H2 Human Rights and

Employee performance


H3 Fair labor practices and


P< 0.00 Accepted P<0.02 Accepted




H5 Ethical conduct and






H7 Environment protection

and Customer

Satisfaction

P< 0.01 Accepted P> 0.40 Rejected


and Employee

performance

P> 0.54 Rejected P> 0.52 Rejected

H9 Community

Development Initiatives

and Customer

Satisfaction


H10 Community


and Employee

performance



144

4.5.2 Comparative analysis of Islamic banks and Organization Performance

To determine the interdependency and relationship between independent and dependent

variables regression analysis was implemented regarding corporate social performance

of Islamic banks. Each variable of IB include Co efficient, Standard Error, t-test,

significance and probability value. The table 4.38 below further describes comparative

study of CSR practices with the help of dimensions scores for each variable for

acceptance and rejection of hypothesis. The primary data was analyzed by using

STATA in order to compare and determine the relationship between customer

satisfaction and employee performance as dependent variable and other independent

variable used in study.


145

Table 4.36 Customer and Employee Perception for CSR Initiatives Regressing Customer Satisfaction as Dependent variable in IB

(Customer Respondents 374, Employee Respondents 115)

Islamic Banks

Customer Perception Employee Perception

S # CSR Variables DV Coef. Std.Err t-Statistics p-value DV Coef. Std.Err t-Statistics p-value

1 Human Rights CS 0.105384 .0519506 2.02

0.04 CS 0.21457 .08996 4.11

0.00

EP 0.11993 .0485638 2.46 0.01 EP 0.186031 .0940489 1.97 0.05

2 Fair Labor Practices CS 0.150321 .0522251 2.87 0.00 CS 0.19032 .090096 2.11 0.03

EP 0.09813 .0486057 2.01 0.04 EP 0.19265 .0941919 2.04 0.04

3 Code of Ethics CS 0.123442 .0524639 2.35

0.01 CS 0.213442 .09053 4.06

0.00

EP 0.09813 .0486057 2.01 0.04 EP 0.19265 .0941919 2.04 0.04

4 Environment

Protection

CS .0018432 .0523646 0.04 0.96 CS .0018432 .090208 0.04 0.96

EP -0.081358 .0487355 1.66 0.09 EP -.0645697 .0943088 -0.68 0.49

5 Community


CS 0.171629 .0522378 3.28 0.00 CS 0.141629 .090159 2.71 0.00

EP .0368469 .0486175 0.76

0.44 EP -.094903 .0942577 1.01

0.31

For Islamic Banks Customer respondents against Customer Satisfaction as Dependent Variable R2 = 0.5283

For Islamic Banks Customer respondents against Employee Performance as Dependent Variable R2 =0.5499

For Islamic Banks Employee respondents against Customer Satisfaction as Dependent Variable R2 =0.4876

For Islamic Banks Employee respondents against Employee Performance as Dependent Variable R2 = 0.5083


146

In order to view, human rights practices regarding objectives of CSR and to understand

the perception of participants for meaningful comparison of IB, CSR practices for

Human Rights, the hypothesis below is formulated earlier to test and verify the

approach of participants:

Hypothesis 1:





Hypothesis 2:





For Islamic banks in case of human rights variable as stakeholder for CSR the value of

coefficient is significant and positive for customer satisfaction and employee

performance. This depicts that both customers and bankers are in agreement that IB are

inclined and include human rights in their policies to deliver value to their respective

customers. The reason for this is because of intrinsic nature of IB that operates their

practices on Shariah. Probability (p) value is 0.001 which also shows significant

association between human rights and customer satisfaction along with employee

performance, which is less than 0.05 (level of significance) or margin of error, therefore

we can reject H0 and accept our alternate hypothesis H1, which conclude that there is

significant relationship of CSR practices in Human Rights on Customer satisfaction in

Conventional banks.

In response for fair labor practices for IB, hypotheses 3 and 4 below is formulated to

compare Fair Labor CSR practices for IB to the objectives of study.


147

Hypothesis 3:





Hypothesis 4:


Employee satisfaction in Islamic banks.


Employees satisfaction in Islamic banks.

Almost similar fair labor practices were found as compared to CB practices. Both

customer and employees perception have significant effect on customer satisfaction and

employee performance. Data analysis shows that 1 % change in FLP will change

customer satisfaction 15 and 19%. Almost similar practices and perception shown for

employee performance from both customers and bankers. All results are significant at

5% and t value is greater than tabulated value i.e. 1.96.

Islamic banks are based on assumption of ethical values. The culture of all Islamic

banks has rooted ethical assumptions on the reference of Al Quran and Sunnah of

Prophet Mohammad PBUH. Therefore all stakeholders that do any kind of transaction

have firm belief on the existence and implementation of ethical culture of IB. Therefore

all the respondents of IB have shown positive attitude and perception regarding ethical

practices of IB, and have significant effect on customer satisfaction and employee

performance. Hence accepting, alternate hypothesis and rejecting alternate hypothesis

shown below:


148

Hypothesis 5:




Satisfaction in Islamic banks.

Hypothesis 6:





Many Islamic banks are now incorporating their focus on protecting the environment.

Islam has clearly promoting its teachings on environment protection and any activity is

clearly prohibited, either in terms of transactions, lending loans to finance tobacco or

any other thing to disturb ecological balance. Banks are indirectly play important role

for developing policies for environment protection and promoting sustainable business

practices for future generations. IB are claiming in their annual reports for environment

protection policies and promoting the lesson of green corporation towards to their

employees and other stakeholders. However the perception of both customers and

bankers are not in alignment with promises depicted by many IB. It means that

empirically banks are not much active in environment protection or its influences are

not yet transfer to society. Furthermore, IB in Pakistan, are still in infant stage to learn

and deliver the environment protection messages like other developed western

adaptation. Like CB, the respondents of IB have almost similar responses regarding

environment protection and by accepting null hypothesis and t value is also less than t

tabulated in each case for IB as given in table. Therefore in both hypotheses 7 and 8,

Ho is accepted.


149

Hypothesis 7:




Customer Satisfaction in Islamic banks.

Hypothesis 8:




Employees satisfaction in Islamic banks.

IB functioning their social practices under the umbrella of overall Islamic economic

system (Chapra, 2000). As inscribed in Shariah, IB operates under Islamic economic

system that also includes practicing fair and balanced way for greater benefit of society

(Dusuki, 2008). Thus any IB has much greater and contributive role to the achievement

of socio- economic objectives for a balanced society. To evaluate the performance of

IB, they must have to match both material and social objectives for better interest of

society. To understand the perception of bankers and customers regarding community

development initiatives for IB and their impact on customer satisfaction and employee

performance the following hypotheses were tested:

Hypothesis 9:






150

Hypothesis 10:




Employee Satisfaction in Islamic banks.

In external variable like community development initiatives IB demonstrate strong

positive relation with dependent variables. It reflects that CDI independent variable

have significant positive interdependency with dependent variable like customer

satisfaction and employee performance. It also shows that the perception of respondents

of Islamic banks that they firmly belief that these variables have positive role with

improvement of organization social performance according to the knowledge and data

collected from respondents of Islamic banks working in Peshawar, Pakistan. In

conclusion it can be verified that there is significant positive association between CD

CSR practices of Islamic banks with organization performance in context of customer

satisfaction and employee performance. The value of R2 for each is low due to using

cross section data and which is always low as compared to time series regression

models. Though the value of R2 is low but the probability value of F-statistics favors

the overall significance of the model. The summary of hypothesis tested for Islamic

banks is shown in table 4.37.


151

Table 4.37 Summary of Hypothesis tested for Islamic Banks

Hypothesis # Relationship between two

variables

Results of

Customer

Perception

Outcome Results of

Employee

Perception

Outcome

H1 Human Rights and



H2 Human Rights and
















and Customer Satisfaction



and Employee

performance


H9 Community Development

Initiatives and Customer

Satisfaction


H10 Community Development

Initiatives and Employee

performance



152

Chapter Five

Conclusion and Recommendation

5.1 Introduction

The primary purpose of this research is to recognize the concepts and principles of CSR

in Western and Islamic literature. The study aims to investigate CSR practices of

banking industry in Pakistan and its effects on organization performance. The research

also elucidates the comparison between CSR practices of Islamic and Conventional

banks and their effectiveness in each mode of banking operations in Pakistan. The

effort has been made to disclose the impacts of socially responsible programs of banks

on organization performance in terms of customer satisfaction and employee

performance. Additionally the knowledge, perception, attitude of customers and

employees (bankers) as stakeholders is determined through primary data collection

regarding social performance of Islamic and Conventional banks. Also, the research

questions were affirmatively answered in regards by respondents according to their

limited level of knowledge regarding CSR. Independent variables like Human rights,

Fair labor practices, Ethical conduct, community development initiatives and

environment protection is used to measure CSR perception of customers and employees

as core for formulating conceptual model and their impacts on organization

performance is identified. The secondary data is also taken from Islamic and

conventional banks annual reports to determine their CSR initiatives in terms of area

dimensions and financial allocation. The secondary data consists of last 4 years CSR

practices of both mode of banking in Pakistan. It shows that in Pakistan the banking

industry are more inclined towards philanthropic activities in their CSR programs. This

chapter is organized by including: section 5.2 summary of research findings, section 5.3

deals with research implication, section 5.4 discuss limitations and recommendation for

future research.

5.2 Summary of Research Findings

The concept of CSR in the contemporary business is now established as global

international academic concept. The advancement of CSR trends even in developing

country like Pakistan, demand organization to practice CSR as an important resource


153

for sustainability and community nourishment. Different firms are now offering

consultancy regarding CSR programs to entrepreneurs for its better implementation.

Most of them have employed CSR officers who worked in consultation with their

senior executives to develop and coordinate with CSR function (The Economist, 2012).

Like other organization resources, CSR is an important resource for any organization

and is considered as either strength or weakness for strategy formulation. The overall

study shows that CSR is an important concept in Pakistani banking industry. However,

most of the focus is made on philanthropic dimension as shown in their websites and

annual reports. Furthermore the perception of customers and employees is almost

similar in different mode of banking. It reflects that Islamic banks and Conventional

banks are practicing their CSR obligations in similar fashion.

In general, beyond profit making banks take CSR to donate its corporate activities

which include environment protection, ethical trading, customer relationship

management, caring for employees, supplier relations, better governance practices and

other different community development projects. They are developing organization-

society interface by making strong relationships through wide enhancement with

different stakeholders. In sum contemporary world demands and expects responsible

behavior from organizations of any kind in terms of their accountability and

contribution to society. In Pakistan, banking industry is promoted rapidly under the

umbrella of State bank of Pakistan. The popularity of e CSR is novel and gaining

popularity through e banking. It includes e communication, e customer relationship

management through branchless banking and other valuable services to make delighted

customers. This integration of different valuable suit from banking industry serves

society in more advance fashion. It will also improve living standard of society.

However, Islamic banks are trying to carry their business activities under Islamic

parameters of Halal and Haram, but their CSR practices are not in full alignment with

ICSR. The trading should be with mutual consent and earn for Halal profit. Beside

basic principles of ICSR, it also promotes the lesson of social wellbeing, kindness and

compassion, good actions for others, welfare of community especially towards to needy

people. For entrepreneur Islam gives equal importance to both ethical and moral

behavior of successful business (Mohammad, 2007). Each sustainable business activity

has answer in Islam. Therefore, each organization when dealing with its stakeholders


154

must follow the truthfulness, trust, honesty and it is lawful for them. The basic problem

that many Islamic corporations are still facing and struggle to implement the true and

actual format of ICSR. However, Islamic banks are trying to carry their business

activities under Islamic parameters of Halal and Haram, but their CSR practices are not

in full alignment with ICSR. In Pakistan, almost all Islamic banks are practicing CSR in

association with conventional banks CSR practices.

The dilemma of Islamic corporations is that most of them are still facing and struggle to

implement the true and actual format of ICSR. Most of them are philanthropic centered

and serving society in health and education sectors. Moreover Islamic banks CSR

practices in dimensions like Human rights, fair labor practices, ethical behavior, and

community development are streamlining with CB, although most branches of IB in

Pakistan are newly established. According to perception of customers and employees,

the nature of establishment on Shariah principles, IB are behaving in CSR dimensions

optimally and superficially as compared to CB.

The core of CSR concept in the western context was transform and is in state of

continuous emergence. The overlapping nature of CSR according to different authors

range them with multi labels like; Businessman Responsibility, Corporate social

Responsiveness, Corporate Sustainability, Corporate Social Performance, Corporate

Citizenship, Business and Society, Triple Bottom Line etc.(Garrigaand Melé2004).

Due to emergence of social problems like poverty, harassment, unemployment,

fraudulent behavior, discrimination, inequality, deceptive marketing, pollution etc

necessitate the emergence of CSR to resolve social problems. Other reason for

popularity of CSR is the investment of MNC‘s and other local giants in developing

countries, because government alone is not in position to invest and address each and

every social problem. Therefore these investors by implementing CSR programs are

able to meet the requirements of various stakeholder groups and put helping hand to

government. Due to extensive resources these private business organizations also

provide employment opportunities, taxes, availability of quality products, transfer of

technology and other philanthropic CSR activities like education, healthcare, natural

calamities (Lunt 2001). Other reasons of CSR emergence are government legislations,

power of communication like social media, other strategic competitive advantage and

most importantly meeting stakeholder‘s expectations.


155

The notion of CSR is directly or indirectly relates to Islamic business ethical conduct. It

is based on four ethical axioms of Islamic economies theory i.e. Unity, Iman (Faith),

free will (Ikhtiyar), equilibrium (Justice) and Khalifah (trusteeship). The format of CSR

was set in Al Quran and Hadith and is natural component of Islam. It describes the

fundamentals such as Aquidah (belief and faith), Ibadah (worship) and Akhlaq

(morality and ethics) that are constant and presented in Islamic Shariah which is

essential to the worldview of Islam.Islamic CSR comes under Taqwa paradigm

(Dusuki, 2008). It clarifies the parameters of those things (Halal) and not permitted

(Haram). It reflects on every action of Muslims, even in business transactions and other

consumptions in life. The trading should be with mutual consent and earn for Halal

profit. Beside basic principles of ICSR, it also promotes the lesson of social wellbeing,

kindness and compassion, good actions for others, welfare of community especially

towards to needy people. For entrepreneur Islam gives equal importance to both ethical

and moral behavior of successful business (Mohammad, 2007). Each sustainable

business activity has answer in Islam. Therefore, each organization when dealing with

its stakeholders must follow the truthfulness, trust, honesty and it is lawful for them.

Furthermore there are two rewards for Muslims, one in this life and other is hereafter, if

a person incorporate the social practices in true spirit, dedication and honesty. In order

to operate under Devine contract Muslims must cooperate with each other to obtain

ultimate happiness (falah). Failure to do so, will attend consequences in this world and

life hereafter.

5.2.1 Practices of CSR in Conventional and Islamic Banks

The present research is focused to determine relationship between CSR practices and

Organizational performance in banking industry of Pakistan. The steady growth in

different mode of banking industry in Pakistan consists of 7 public sector banks, 15

private banks and 6 Islamic banks. In this study, according to State Bank of Pakistan

(SBP) report in 2012 as a base year, I have selected top 3 conventional and 3 Islamic

banks that are providing vital role in economic development of a country and have

ranked top in their banking practices in the said year. For comparing their social

responsible dimensions, the population for this research composed of 3 Conventional

(National Bank of Pakistan, Allied Bank Ltd, United bank Ltd) and 3 Islamic banks


156

(Meezan Bank, Al Baraka Bank, Bank Islami) that are practicing their financial and

social practices in Peshawar, Khyber Pakhtunkhwa (KPK) province, Pakistan.

In this study, UNGC principles are selected as independent variables and customers

satisfaction and employee performance is used as Organizational performance. To

compare CSR practices, secondary data is collected from annual reports and websites,

as shown in table 4.2 and 4.3 for both CB and IB. The comparative analysis are made

by applying descriptive statistics and concluded that both mode of banking sector in

Pakistan are mostly inclined towards philanthropic dimension of CSR. Furthermore

practices of CB and IB are almost found similar as shown in table 4.4, but in some

dimension like education, water purification, sports, CB are investing more CSR budget

as compared to IB. However, in many dimensions IB are investing more due to their

nature of establishment by following Shariah (Islamic principles) in dimensions like

health, environment, special persons and relief and disaster recovery as shown in table

4.4.

To verify CSR practices of both IB and CB, primary data is collected from customers

and employees through survey methods. Two different set of questionnaires were

formulated shown in annexure for primary data collection. Hypothesis are developed,

based on UNGC, selected variables and their implementation in both mode of banking

sector were investigated by analyzing data in STATA.

In step 1, CSR practices of all three CB were interpreted individually, to understand the

perception of customers and employees against each independent CSR variable as

shown in table 4.16, 4.17, 4.18, 4.19, 4.20 and 4.21 for individual selected CB in the

study. It is concluded that in CB customers and employees made agreement that NBP

CSR practices are much superior against customer satisfaction and employee

performance followed by ABL and UBL. It may be the fact that NBP is public sector

bank and is supported by government. Other factor is its age, size, assets and number of

customers and facilities are more compared to other CB selected in the study. It is also

concluded from table 4.1, that NBP were also investing more CSR budget against other

CB.


157

In step two, similarly CSR practices of all three IB were interpreted individually, to

understand the perception of customers and employees against each independent CSR

variable as shown in table 4.31, 4.32, 4.33, 4.34, 4.35 and 4.36 for individual selected

Islamic banks in the study. It is concluded that in Islamic banks customers and

employees made agreement that Meezan Islamic bank CSR practices are much superior

against customer satisfaction and employee performance followed by Bank Islami and

Al Baraka IB. It manifest that the CSR practices of IB is not much different from

conventional banking CSR practices. It means that ICSR practices are only based to

literature. However, the performance of CSR in Pakistani Islamic banking industry

depicts that they must needed to follow and adhere the ICSR in true spirit as they are

more inclined to philanthropic CSR only.

Furthermore to test the hypothesis regarding CSR practices of CB table 4.37 depicts

regression analysis of all selected CB of study. The interpretation shows that human

rights dimension of CSR will affect employee performance and are significant and

positively affecting employee performance with acceptance of alternate hypothesis H1.

Similar results were also established by other empirical studies conducted in

Bangladesh and Malaysia. For example, Ershad (2015) found 88% of the respondents

were made agreement that in Bangladesh banking sector implement similar CSR

Human Rights practices for superior customer value and employee performance. It

further concludes that almost all CB practicing their fair labor practices positively and

contributing for customer satisfaction. Almost similar perception for employee

performance is found from customer and employee perception. It will further leads

towards to acceptance of alternate hypothesis for fair labor practices in CB. This result

is consistent with the studies conducted by Uddinet al. (2008) where more than 98% of

respondents made agreement with similar practices of CB in Bangladesh with respect to

HR practices and comparison made between contemporary views and practices on

CSR. The analysis also shows that both customer and employees were mostly inclined

towards ethical practices of CB have significant effect on employee performance as

shown in Table 4.37. Thus rejecting, null hypothesis, and have alignment with ethical

CSR in CB. Ethical practices of CSR for CB banks were almost similar in practice for

banks in India were found by (Lipunga, 2013) in which 90% were agreed that banks in

India were highly involved improving ethical practices, and improving organizational


158

culture for better respect, trust and developing ethical relationships with their valuable

customers. However, in CB data collected from both customer and employees

regarding Environment Protection show no positive relation with employee

performance. Similar practices for Environmental CSR were found by banks in India

in literature, which substantiates with findings of Lipunga (2013), in which 90%

environmental CSR practices were focused on Environmental protection, 40% on tree

plantation and banks in India were not neglecting other variables like sustainability,

smoking free area in bank, environmental standards. In context of CSR practices for

community stakeholder for CB have significant impact on customer satisfaction and

was making their active role to deliver best for community development. Similar

practices were also found in the study conducted by (Ershad et al, 2015) that concluded

both mode of banking in Bangladesh were also displaying similar practices for

community stakeholder in the context of CSR. It shows the importance of CSR in

Pakistani banking industry and almost all conventional banks despite having intensive

competition initiate different CSR practices for employee involvement, motivation,

conformity to law, ethical trading, philanthropy and delivering maximum value to their

customers for improve organization performance.

For Islamic banks in case of human rights variable as stakeholder for CSR both

customers and bankers are in agreement that IB are inclined and include human rights

in their policies to deliver value to their respective customers. The reason for this is

because of intrinsic nature of IB that operates their practices on Shariah. Therefore,

accept our alternate hypothesis H1, which conclude that there is significant relationship

of CSR practices in Human Rights on Customer satisfaction in Islamic banks. The

culture of all Islamic banks has rooted ethical assumptions on the reference of Al Quran

and Sunnah of Prophet Mohammad PBUH. Therefore all the respondents of IB have

shown positive attitude and perception regarding ethical and fair labor practices of IB,

and have significant effect on customer satisfaction and employee performance. Hence,

accepting alternate hypothesis as shown in table 4.38.Islamic banks in Pakistan are still

in infant stage to learn and deliver the environment protection messages like other

developed western adaptation. The respondents of IB have almost similar responses

regarding environment protection and by accepting null hypothesis and t value is also

less than t tabulated in each case for IB as given in table. Therefore in both hypotheses


159

7 and 8, H1 is accepted. Community Development Initiatives independent variable has

significant positive interdependency with dependent variable like customer satisfaction

and employee performance. It also shows that the perception of respondents of Islamic

banks that they firmly belief that these variables have positive role with improvement

of organization social performance according to the knowledge and data collected from

respondents of Islamic banks working in Peshawar, Pakistan.

5.3 Research Contribution

5.3.1 Contribution to Theory

In literature many scholars worked on the concept of CSR and developed CSR

frameworks that are mostly based on western culture along with principles, theories and

mostly scholars relate CSR with company financial performance by showing mixed

results. This research contributes to the level of knowledge in the area of CSR by

comparing Islamic and traditional phenomena in the following ways.

Firstly, the framework developed in the research by adopting UN Global Compact CSR

variables and their impact on banks performance in the context of customer and

employee performance are major contribution to the knowledge. This will add valuable

contribution to the literature in the context of Pakistan and also help other organizations

to explore and adopt CSR approaches beside philanthropy. It will also promote and

strengthen the concept of CSR for organizations shareholders and other primary and

secondary stakeholders. It will add to broaden the scope of CSR by identifying new set

of CSR practices for Pakistani organizations in order to become par with global

standards.

Secondly, it will cultivate Islamic based organizations to adopt Islamic CSR principles

in true spirit. The literature suggest that Islamic institutions in Pakistan practicing CSR

by adopting western approaches and principles. However, this research helps the

Islamic institutions to practice CSR by adopting Islamic principles to improve CSR

image and its outcomes to general public. The comparison of western and Islamic CSR

also contributes to literature and providing base to other scholars for theoretical

framework in future and promote CSR concept in Pakistani based organizations.


160

Thirdly, stakeholder theory is used as base theory to explore the CSR concept in

Pakistani banking industry. The study confirms the importance of meeting and

satisfying stakes of employees, customers, environment, local and general community.

Consequently, it will help to understand the importance of each stakeholder for

organization in both modes of organizations. Therefore, this study urges the need to

understand each stakeholder for maximum benefit and value for organization to gain

competitive advantage.

Fourth, the study investigates the relationship of CSR dimensions with organization

performance in context of customer satisfaction and employee performance. It will add

major contribution in literature because the nature of qualitative variables is used by

applying quantitative techniques for measurement of customer satisfaction and

employee performance. The findings of this study are in same streamline with other

previous studies that adopted financial performance as measurement tool for

organization performance. Therefore, it is another contribution to the literature in the

area of CSR and organization performance.

Finally, a comparative analysis is made, on basis of perception of customers and

employees for both Islamic and conventional mode of CSR practices in Pakistan. In

general, the study disclose close conformity between Islamic and conventional

practices of CSR in banking sector of Pakistan and useful to emphasize the

commonalities and divergence between stakeholder of capitalism and Islam. It will

explore the knowledge and information by providing base to future scholars to

formulate suitable framework for CSR practices in both mode of institutions.

5.4 Recommendations

The research suggest that both Islam and conventional CSR have close conformity with

UN Global compact principles in order to protect the rights of stakeholders of banking

industry in Pakistan. Although Islamic banks due to their nature of existence are wider

in scope, transparency, promote the permission of Halal and forbidden of Haram

products, activities and accountability for unethical behavior on Day of Judgment. The

study recommends that, Islamic banks CSR practices are need to be different from

those of conventional banking CSR activities because Islamic CSR principles as


161

mentioned in chapter 2 are divine and based on economic well-being of the whole

community covering values such as fairness, integrity, equality, and morality.

Therefore, Islamic banks are obligated to adhere to these principles and exceed

conventional CSR. Furthermore, a comprehensive Islamic CSR framework is required

for all Islamic institutions to practice their CSR obligations in true spirit of Islam and

CSR reporting disclosure. Importantly, Islamic principles must be actually translated

into practice of CSR for Islamic based institutions, otherwise such principles become in

theory only for guidance. In Pakistan, the concept of CSR need exploration, because

most of the organizations only belief CSR as philanthropic contribution to society.

Strategic philanthropy engagements are recommended and make alliance with other

reputable non-profit organization for sustainable competitive advantage and better

positioning. For example, bank can cooperate with any NGO or other social

organization to target any market niche for promotion of employee rights, environment

protection, customer satisfaction, eradication of poverty, corruption and other social

contribution in health, education and other rehabilitation activities. CSR is an

important resource for any organization, fulfilling the needs of primary and secondary

stakeholders which lead to higher profitability and value creation. In a nutshell,

strategic inclusion of UN Global compact are recommended in totality to organizations

strategic and operational policy framework that would advance human and labor rights,

ethical practices, environment protection and anti-corruption approaches.

Foregoing in view, the following recommendations for banks performing CSR in

Pakistan includes flares like following:

Crafting banks vision, mission statements in strategic intent with CSR view and

sustainability.

Promote human rights, workforce diversity, labor standards, trustworthy culture,

ensure justice and avoid discrimination in all its manifestations.

Training and development of employees for improve learning, highest standards of

business ethics, integrity and other corporate obligations to serve the society.

Strict adherence to state laws and ensures legality in all other dimensions and

engagement with its stakeholders.


162

Respect the social cultural norms of society and support strategic philanthropy for

its neighborhood.

Educate the awareness and importance of environment management and its

protection for better sustainability by installing better technology along with

environment friendly initiatives.

Ethical practices must be adopted in all stages of product life cycle to deliver

maximum value and customer satisfaction.

The business should encourage honesty, fear from Allah and discourage corruption

and corrupt practices in all its manifestations.

5.5 Future directions

A research study is needed to compare CSR practices of multi dimensional

culture and its impact on banking industry.

An Islamic CSR model for Islamic organizations is required for practical

implantation of CSR in true Islamic spirit.

Most of the banks in Pakistan providing financial services of both Islamic and

traditional banking through one window, research study is required to analyze

CSR practices of designated banks.

An indigenous CSR scale comprising of social practices is required to

understand the role of local and multinational institutions in promotion of CSR

in the context of Pakistan.

Environment issues include energy conservation, pollution, waste management,

recycling, green business issues need to address in the context of CSR

perspective in Pakistan.

To promote Islamic CSR, a research is required by keeping references of Al

Quran and Prophet Sunnah with propagation of Islamic principles regarding

CSR.


163

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184

Annexure 1

SURVEY QUESTIONNAIRE

Corporate Social Responsibility in Conventional Banks

I am currently conducting a PhD research project regarding ―Islamic Concept and

Contemporary Corporate Social Responsibility in banking sector of Pakistan:

Comparative Analyses‖. The main objective of this research is to analyze and compare

Islamic and contemporary CSR practices in banking sector of Pakistan. My target

respondent groups are: (1) CEOs, (2) CSR Officers (3) Senior Managers, (4) Managers

(5) Employees (6) Customers I would be grateful if you could authorize your staff to

participate in this survey. Their participation will provide invaluable input to the

success of this study.

All information will be treated as highly CONFIDENTIAL and used for academic

purposes only. Your cooperation is very much appreciated.

Thank you.

Sincerely,

(BILAL DURRANI)

PhD Candidate

Qurtuba University Peshawar

PART A: Personal Profile and Bank Profile

a. Gender

Male Female

b. Religion

Islam Christianity Others

c. Age

20 or below 21-30 31-40 41-50 50 or above

d. Respondent Category

Customer Banker

e. How you will describe Corporate Social Responsibility

Giving back to society Business Ethics Charity / Zakat /

Philanthropy

People, Planet, profit Business & Society Responsible Business

Other


185

PART B: CONVENTIONAL BANK CORPORATE SOCIAL RESPONSIBILITY

a. Human Rights

S. No. Questions Strongly

Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. CB has incorporated Human right policy in

overall organization structure

b. CB Human right policy is effectively

communicated to all stakeholders

c. CB has comprehensive appraisal system to

get feedback from stakeholders regarding

implementation of human rights

d. CB have instant information system to

aware stakeholders regarding any breaches

in Human rights

e. CB promote good governance practices e.g.

transparency, no corruption

f. CB ensure to provide hygiene factors to

eliminate dissatisfaction of employees and

customers

g. CB provide non discriminatory practices to

all its stakeholders

h. CB hold respect of religious rights of

relevant stakeholders

i. CB deliver quality services to improve

lively hood of its local community

b. Fair Labor Practices

S. No. Question Strongly

Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. CB encourage gender and ethnic

employment diversity in selecting

employees

b. CB considers employee rights as an

strategy for improved organization

performance

c. CB have competent leadership to influence

employees

d. CB have alliance with other organizations

to against eliminate child and forced labor

e. CB provide learning and development

opportunities to employees

f. CB promote a dignified and fair treatment

to all employees

g. CB encourage and financially support

employees to improve their living standards

h. CB provides an equitable reward and wage

system to employees

i. CB encourage gender and ethnic


employees


186

c. Code of Ethics


Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. CB implies fair dealing and truthfulness

in practice.

b. CB employees have necessary

professional knowledge and skills to

carry work for customers

c. CB follow technical and professional

standards when carrying out work

d. CB comply all relevant laws and

regulations

e. CB policy ensures that professional

judgment is not compromised with

conflict of interest

f. CB ensures that confidential information

does not disclose to third party without

specific provision

g. CB prohibit creative accounting to boost

or suppress reported profits

h. CB banks discourage bribes to facilitate

contacts with third party

i. CB consider while working public

interest along with business profitability

d. Environment Protection S. No. Question Strongly

Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. CB have any Environmental protection

policy promotes awareness messages to

general public regarding environmental

management

b. CB ensure that their investment will not

harm environment have any practice for

Environmental audits

c. CB shift their traditional communication

system to e –communication to

promote lean production strategy

d. CB care energy conservation process and

sustainability environmental care

activities should be left up to the

government only

e. CB support government for IDP‘s

affected from War against Terrorism

have any Environmental protection policy

f. CB promotes awareness messages to

general public regarding environmental

management ensure that their investment

will not harm environment

g. CB have any practice for Environmental

audits shift their traditional

communication system to e –

communication

h. CB promote lean production strategy

care energy conservation process and

sustainability

i. CB environmental care activities should

be left up to the government only


187

e. Community Development Initiatives


Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. CB encourages employees in community

projects beyond profit maximization

support job training programs

b. CB keep some funds to help poor‘s

micro-finance (banking for the poor)

c. CB allocate funds for disaster recovery

purposes By implementing CSR, bank

promises a better future for the

community

d. CB provide educational sponsorships to

needy students donate to Health care

facilities

e. CB should directly contribute to

community development projects

encourages employees in community


f. CB support job training programs

keep some funds to help poor‘s

g. CB micro-finance (banking for the poor)

Allocate funds for disaster recovery

purposes

h. CB by implementing CSR, bank


community provide educational

sponsorships to needy students

i. CB donate to Health care facilities

f. Organization Performance: “Customer Satisfaction”


Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. Bank CSR practices create better brand

image.

b. Bank social responsible behavior will

increase loyalty among depositors.

c. Bank expansion in branch and

convenient availability increase

customer confidence.

d. Philanthropic programs persuade

customers to do word of mouth and

encourage others to do business with

bank.

e. e-banking activities promote awareness

in society to be environment friendly.

f. Bank fair price initiations deliver

reliability and attract customers.

g. Bank improves services deliver better

customer value.

h. banks provide varieties of mode of

services (Front-desk, e-banking, SMS

banking )


188

g. Organization Performance: “Employee Performance”


Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. Bank CSR practices encourage gender

and ethnic employment diversity in

selecting employees.

b. Bank CSR promotes freedom of speech

and protects employee rights.

c. Bank educates employees and increases

the awareness to be environment

friendly.

d. Bank provides learning and development

opportunities to employees.

e. Bank gives an equitable reward and

wage system to employees.

f. CSR educate to Involve bankers in

philanthropic activities

g. Bank CSR practice will increase

employee‘s satisfaction and efficiency


189

Annexure 2

SURVEY QUESTIONNAIRE

Corporate Social Responsibility in Islamic Banks

I am currently conducting a PhD research project regarding ―Islamic Concept and

Contemporary Corporate Social Responsibility in banking sector of Pakistan:

Comparative Analyses‖. The main objective of this research is to analyze and compare

Islamic and contemporary CSR practices in banking sector of Pakistan. My target

respondent groups are: (1) CEOs, (2) CSR Officers (3) Senior Managers, (4) Managers

(5) Employees (6) Customers

I would be grateful if you could authorize your staff to participate in this survey. Their

participation will provide invaluable input to the success of this study. All information

will be treated as highly CONFIDENTIAL and used for academic purposes only. Your

cooperation is very much appreciated.

Thank you.

Sincerely,

(BILAL DURRANI)

PhD Candidate Qurtuba University Peshawar

PART A: Personal Profile and Bank Profile

a. Gender

Male Female

b. Religion

Islam Christianity Others

c. Age

20 or below 21-30 31-40 41-50 50 or above

d. Respondent Category

Customer Banker

e. How you will describe Corporate Social Responsibility

Giving back to society Business Ethics Charity / Zakat /

Philanthropy

People, Planet, profit Business & Society Responsible Business

Other


190

PART B: ISLAMIC BANK CORPORATE SOCIAL RESPONSIBILITY

a. Human Rights


Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. Human right policy is effectively


b. Bank has comprehensive appraisal

system to get feedback from

stakeholders regarding implementation

of human rights

c. Bank have instant information system to

aware stakeholders regarding any

breaches in Human rights

d. Bank promote good governance

practices e.g. transparency, no

corruption

e. Bank ensure to provide hygiene factors

to eliminate dissatisfaction of employees

and customers

f. Bank provide non discriminatory

practices to all its stakeholders

g. Bank hold respect of religious rights of


h. Bank deliver quality services to improve


b. Fair Labor Practices


Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. encourage gender and ethnic


employees

b. CB considers employee rights as an


performance

c. have competent leadership to influence

employees

d. Bank have alliance with other

organizations to against eliminate child

and forced labor

e. provide learning and development

opportunities to employees

f. promote a dignified and fair treatment to

all employees

g. Bank encourage and financially support

employees to improve their living

standards

h. provides an equitable reward and wage

system to employees

i. Bank maintain effective feedback and

control mechanism to ensure fair labor

practices in organization structure


191

c. Code of Ethics S. No. Question Strongly

Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. Bank implies fair dealing and

truthfulness in practice.

b. Bank employees have necessary



c. Bank follow technical and professional

standards when carrying out work

d. Bank comply all relevant laws and

regulations

e. Bank policy ensures that professional



f. Ensures that confidential information


specific provision

g. Prohibit creative accounting to boost or

suppress reported profits

h. Banks discourage bribes to facilitate

contacts with third party

i. Bank consider while working public

interest along with business profitability

d. Environment Protection S. No. Question Strongly

Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. have any Environmental protection policy

promotes awareness messages to general

public regarding environmental

management

b. ensure that their investment will not harm

environment have any practice for


c. shift their traditional communication



d. care energy conservation process and

sustainability environmental care

activities should be left up to the

government only

e. support government for IDP‘s affected

from War against Terrorism


f. promotes awareness messages to general




g. have any practice for Environmental



communication

h. promote lean production strategy


sustainability

i. environmental care activities should be

left up to the government only


192

e. Community Development Initiatives S. No. Question Strongly

Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. encourages employees in community



b. keep some funds to help poor‘s

micro-finance (banking for the poor)

c. Allocate funds for disaster recovery

purposes By implementing CSR, bank


community

d. provide educational sponsorships to

needy students donate to Health care

facilities

e. should directly contribute to community

development projects encourages

employees in community projects

beyond profit maximization

f. support job training programs

keep some funds to help poor‘s

g. micro-finance (banking for the poor)


purposes

h. By implementing CSR, bank promises a

better future for the community

provide educational sponsorships to

needy students

i. donate to Health care facilities

f. Organization Performance: “Customer Satisfaction”


Disagree

Disagree

Do not

know

Agree Strongly

Agree

a. Bank CSR practices create better brand

image.

b. Bank social responsible behavior will

increase loyalty among depositors.

c. Bank expansion in branch and

convenient availability increase

customer confidence.

d. Philanthropic programs persuade

customers to do word of mouth and

encourage others to do business with

bank.

e. e-banking activities promote awareness

in society to be environment friendly.

f. Bank fair price initiations deliver

reliability and attract customers.

g. Bank improves services deliver better

customer value.

h. Islamic banks provide assurance on their

Shariah compliance products


193

g. Organization Performance: “Employee Performance”


Disagree

Disagree

Do not

know

Agree Strongly

Agree

a Bank CSR practices encourage gender

and ethnic employment diversity in

selecting employees.

b Bank CSR promotes freedom of speech

and protects employee rights.

c Bank educates employees and increases


friendly.

d Bank provides learning and development

opportunities to employees.

e Bank gives an equitable reward and

wage system to employees.

F CSR educate to Involve bankers in

philanthropic activities

G Bank CSR practice will increase

employee‘s satisfaction and efficiency


194

Annexure A

Tables of Empirical Findings of Conventional Banks

Annexure A1

Table 3. 9 Eigen Values and Eigen Vectors of Correlation Matrix of

Conventional Banks of Customer Respondents

PC1 PC2 PC3 PC4 PC5 PC6 PC7 PC8 PC9

Variable: Human Rights

Eigen

Values 1.276 1.186 1.093 1.050 1.024 0.978 0.871 0.849 0.673

Variance 0.142 0.132 0.122 0.117 0.114 0.109 0.097 0.094 0.075

Cumulative 0.142 0.274 0.395 0.512 0.625 0.734 0.831 0.925 1.000

Variable: Fair Labour Practices

Eigen

Values 1.332 1.171 1.126 1.073 0.960 0.928 0.863 0.815 0.733

Variance 0.148 0.130 0.125 0.119 0.107 0.103 0.096 0.091 0.081

Cumulative 0.148 0.278 0.403 0.522 0.629 0.732 0.828 0.919 1.000

Variable: Code of Ethics

Eigen

Values 1.223 1.113 1.066 1.010

0.

987

0.

898

0.

767

0.6

65

Variance

0.1413 0.136 0.124 0.119 0.112

0.

110

0.

100

0.

085

0.0

74

Cumulative

0.141 0.277 0.401 0.519 0.632

0.

741

0.

841

0.

926

1.0

00

Variable: Environment Protection

Eigen

Values 1.260 1.108 1.081 0.968 0.919 0.838 0.768 0.671

Variance 0.154 0.140 0.123 0.120 0.108 0.102 0.093 0.085 0.075

Cumulative 0.154 0.294 0.417 0.537 0.645 0.747 0.840 0.926 1.000


195

Variable: Community Development Initiatives

Eigen

Values 1.253 1.223 1.124 1.074 1.021 0.975 0.909 0.730 0.691

Variance 0.139 0.136 0.125 0.119 0.114 0.108 0.101 0.081 0.077

Cumulative 0.139 0.275 0.400 0.519 0.633 0.741 0.842 0.923 1.000

Variable: Organization Performance (Customer satisfaction)

Eigen

Values 1.218 1.165 1.018 1.008 0.824 0.769

Variance 0.203 0.194 0.170 0.168 0.137 0.128

Cumulative 0.203 0.397 0.567 0.735 0.872 1.000

Variable: Organization Performance (Employee performance)

Eigen

Values 1.373 1.132 1.005 0.920 0.884 0.686 1.373

Variance 0.229 0.189 0.168 0.153 0.147 0.114 0.229

Cumulative 0.229 0.418 0.585 0.738 0.886 1.000 0.229

Eigen

Vectors

Variables PC1 PC2 PC3 PC4 PC5 PC6 PC7 PC8 PC9

HR 1 0.04 0.17 0.59 0.16 0.03 0.68 0.07 -0.26 -0.24

HR 2 0.31 0.28 0.10 -0.39 -0.58 0.15 0.30 0.40 0.25

HR 3 0.29 -0.48 0.24 -0.06 -0.07 -0.31 0.57 -0.43 0.02

HR 4 -0.29 0.31 -0.12 0.65 -0.02 -0.04 0.55 0.07 0.27

HR 5 0.36 0.61 -0.03 0.07 -0.02 -0.41 0.01 -0.16 -0.55

HR 6 -0.03 0.14 0.70 -0.01 0.34 -0.42 -0.14 0.30 0.31

HR 7 0.59 0.01 -0.07 0.41 -0.13 0.06 -0.40 -0.24 0.48

HR 8 0.47 -0.29 -0.10 0.25 0.36 0.16 0.17 0.60 -0.28

HR 9 0.17 0.31 -0.25 -0.40 0.63 0.20 0.25 -0.21 0.32

FLP 1 -0.444 -0.246 0.280 0.150 -0.233 0.480 -0.127 0.551 0.194


196

FLP 2 0.255 -0.447 -0.407 -0.316 0.300 0.272 0.226 0.065 0.501

FLP 3 0.419 0.346 0.296 0.130 0.305 0.180 -0.566 0.009 0.392

FLP 4 0.571 0.303 -0.147 -0.005 -0.023 -0.318 0.014 -0.206 0.645

FLP 5 0.115 0.437 -0.225 0.534 0.209 0.113 0.522 0.361 0.016

FLP 6 0.241 0.030 0.572 -0.333 -0.095 -0.416 0.394 0.343 0.220

FLP 7 0.320 0.121 0.415 -0.216 0.541 0.379 0.306 -0.333 -0.153

FLP 8 0.166 -0.386 0.305 0.574 -0.206 0.026 0.238 -0.491 0.246

FLP 9 0.188 0.417 -0.054 -0.297 -0.612 0.482 0.183 -0.225 0.097

COE 1

0.5069

-

0.3589 0.1408 -0.019 -0.037 -0.126 0.513 0.555 0.0758

COE 2 -0.335 0.3352 0.348 0.138 0.230 -0.553 0.333 -0.034 0.406

COE 3

-0.075

-

0.2774 0.538 0.283 -0.132 0.505 0.299 -0.422 0.092

COE 4

0.1109

-

0.3976 0.326 -0.230 0.564 -0.013 -0.510 0.016 0.303

COE 5 -

0.3865

-

0.3649 -0.124 0.489 0.416 -0.101 0.073 0.171 -0.495

COE 6 0.5921 0.2496 0.228 0.118 0.232 -0.270 -0.008 -0.407 -0.479

COE 7 0.2105 0.2501 0.129 0.705 -0.163 0.091 -0.429 0.339 0.214

COE 8 -

0.1394 0.4783 0.364 -0.263 0.270 0.444 0.070 0.430 -0.301

COE 9 0.2218 0.1923 -0.497 0.168 0.534 0.367 0.285 -0.139 0.344

EP 1

0.4855 0.2696

-

0.2865 -0.052 0.0797 0.327 0.4931

-

0.3406

-

0.3666

EP 2 -

0.4798 0.1737

-

0.2703

-

0.0932 0.413

-

0.1041 0.5755 0.1465 0.3518

EP 3 -

0.3346 0.2865 0.1676 0.5811

-

0.1634 0.198

-

0.0186 -0.576 0.2055

EP 4 0.1834 0.2357 -

0.6409 0.4039 - -

0.279 -


197

0.1389 0.3815 0.1438 0.2713

EP 5

0.3732 0.4078

-

0.1795

-

0.0702

-

0.4579 -0.461 0.0408 0.0056 0.4832

EP 6

0.2859 0.2364 0.413

-

0.2765 0.6207 0.0078

-

0.2528

-

0.2608 0.313

EP 7 -

0.0335 0.5423 0.3986

-

0.0019

-

0.1654 0.4235 0.0744 0.5755

-

0.0495

EP 8

0.1159 -0.239 0.6575 0.1162

-

0.0769

-

0.3831 0.5624

-

0.0456 -0.112

EP 9

0.3911

-

0.4315 -0.059 0.3813 0.0704 0.3985 0.131 0.227 0.5287

CDI 1 -0.062 -0.436 0.273 0.383 -0.312 0.252 0.533 0.368 0.0689

CDI 2 0.496 0.193 0.026 0.485 -0.324 0.179 -0.272 -0.120 -0.505

CDI 3 0.525 -0.156 -0.368 -0.084 0.390 -0.213 0.154 0.551 -0.183

CDI 4 0.228 0.532 0.250 0.034 -0.344 -0.454 0.060 0.300 0.429

CDI 5 -0.068 0.385 -0.457 0.329 0.126 -0.025 0.627 -0.347 0.027

CDI 6 0.461 0.148 0.263 -0.082 0.357 0.600 0.057 -0.128 0.428

CDI 7 -0.112 -0.174 0.012 0.697 0.409 -0.232 -0.364 0.009 0.343

CDI 8 -0.420 0.465 -0.172 0.090 0.086 0.447 -0.186 0.566 -0.088

CDI 9 -0.128 0.221 0.648 0.035 0.458 -0.198 0.227 0.005 -0.462

OP (CS) 1

0.4506 0.3188

-

0.4696 0.3308

-

0.5849 0.1525

OP (CS) 2

0.6596 -0.111 -0.226

-

0.2187 0.3563

-

0.5716

OP (CS) 3

0.176

-

0.2651 0.1713 0.8563 0.3596 0.0834

OP (CS) 4

0.3882

-

0.5962 0.034

-

0.3061

-

0.0625 0.6285

OP (CS) 5

0.3366 0.1015 0.82

-

0.0126

-

0.4036

-

0.2023


198

OP (CS) 6

0.2587 0.6708 0.1596

-

0.1252 0.4846 0.4551

OP (EP) 1

0.6433 -0.026 -0.091

-

0.0693 0.3598 0.6655

OP (EP) 2

0.6454

-

0.0976 0.0328 0.2757 0.1671

-

0.6848

OP (EP) 3 -

0.3232

-

0.3198 -0.469 0.6246 0.4217 0.0729

OP (EP) 4

0.128 0.6363

-

0.0324 0.6189

-

0.4032 0.1792

OP (EP) 5 -

0.0513 -0.382 0.818 0.3798

-

0.0154 0.1944

OP (EP) 6 -

0.2148 0.5803 0.317

-

0.0411 0.7085

-

0.1137

OP (EP) 7

0.6433 -0.026 -0.091

-

0.0693 0.3598 0.6655

Source: Author’s Estimation


199

Annexure A 2

Table 3.10 Eigen Values and Eigen Vectors of Correlation Matrix of

Conventional Banks of Employee Respondents



Eigen Values 2.159 1.434 1.209 0.981 0.905 0.676 0.600 0.544 0.492

Variance 0.240 0.159 0.134 0.109 0.101 0.075 0.067 0.061 0.055

Cumulative 0.240 0.399 0.534 0.643 0.743 0.818 0.885 0.945 1.000


Eigen Values 2.084 1.202 1.143 0.990 0.928 0.781 0.660 0.652 0.560

Variance 0.232 0.134 0.127 0.110 0.103 0.087 0.073 0.073 0.062

Cumulative 0.232 0.365 0.492 0.602 0.705 0.792 0.865 0.938 1.000


Eigen Values 2.326 1.333 1.028 0.957 0.842 0.753 0.683 0.566 0.512

Variance 0.259 0.148 0.114 0.106 0.094 0.084 0.076 0.063 0.057

Cumulative 0.259 0.407 0.521 0.627 0.721 0.804 0.880 0.943 1.000


Eigen

Values 1.951 1.405 1.069 0.970 0.855 0.807 0.774 0.634 0.535

Variance 0.217 0.156 0.119 0.108 0.095 0.090 0.086 0.070 0.060

Cumulative 0.217 0.373 0.492 0.599 0.694 0.784 0.870 0.941 1.000


Eigen

Values 1.871 1.397 1.120 1.027 0.876 0.869 0.740 0.569 0.531

Variance 0.208 0.155 0.125 0.114 0.097 0.097 0.082 0.063 0.059

Cumulative 0.208 0.363 0.488 0.602 0.699 0.796 0.878 0.941 1.000



200

Eigen

Values 1.717 1.150 1.005 0.818 0.684 0.626

Variance 0.286 0.192 0.167 0.136 0.114 0.104

Cumulative 0.286 0.478 0.645 0.782 0.896 1.000


Eigen

Values 1.978 1.356 0.985 0.812 0.738 0.677 0.453

Variance 0.283 0.194 0.141 0.116 0.105 0.097 0.065

Cumulative 0.283 0.476 0.617 0.733 0.839 0.935 1.000

Eigen

Vectors


HR 1

0.2831

-

0.3711 0.2046 0.36 0.5397 0.3526 0.2721 0.0378 0.3458

HR 2 -

0.4119

-

0.0088 0.49 0.2111 0.2046

-

0.0439 0.1358

-

0.4705

-

0.5119

HR 3

0.4532 0.0141 0.2795

-

0.1104

-

0.2294 0.6096

-

0.3521 0.0154

-

0.3946

HR 4

0.3232

-

0.0443 0.571

-

0.1918 0.1256

-

0.5606

-

0.3835

-

0.0275 0.2299

HR 5

0.3031 0.2155 0.2489 0.4335

-

0.5952

-

0.1516 0.4729 -0.032 0.0995

HR 6

0.0309 0.5662

-

0.1797 0.533 0.1835 0.0631

-

0.4765

-

0.2511 0.1855

HR 7

0.3149 0.4938

-

0.0461

-

0.0933 0.4511

-

0.1722 0.3089 0.3797

-

0.4164

HR 8 -

0.2032 0.4954 0.304

-

0.4778 0.0348 0.3493 0.2362

-

0.1529 0.4361

HR 9

-0.455 0.0619 0.3537 0.2605 -0.076 0.0962

-

0.1858 0.738 0.0448

FLP 1 0.101 0.088 0.780 0.331 -0.018 0.278 0.003 -0.082 0.424


201

FLP 2 0.248 0.555 0.094 0.386 0.369 -0.347 0.063 -0.149 -0.435

FLP 3 0.439 -0.032 0.212 -0.136 -0.334 -0.292 -0.634 0.357 -0.130

FLP 4 0.341 -0.099 -0.377 0.486 -0.328 -0.347 0.233 -0.028 0.460

FLP 5 0.320 -0.429 0.040 0.046 0.598 0.023 0.225 0.549 0.019

FLP 6 0.404 0.128 -0.144 -0.448 0.399 -0.019 -0.220 -0.446 0.438

FLP 7 0.255 0.589 -0.073 -0.325 -0.233 0.280 0.403 0.418 0.088

FLP 8 0.378 -0.344 0.289 -0.280 -0.263 -0.102 0.479 -0.380 -0.352

FLP 9 0.382 -0.089 -0.292 0.315 -0.065 0.712 -0.220 -0.156 -0.280

COE 1 0.445 -0.064 -0.304 -0.117 -0.225 -0.183 -0.390 0.611 0.286

COE 2 0.455 -0.089 0.008 0.225 -0.069 0.200 -0.592 -0.488 -0.318

COE 3 0.426 0.148 0.158 -0.032 -0.220 -0.602 0.383 -0.023 -0.462

COE 4 0.298 -0.140 0.228 -0.624 0.519 0.290 0.038 0.182 -0.251

COE 5 0.316 -0.069 -0.680 -0.161 -0.034 0.211 0.452 -0.352 0.181

COE 6 0.249 -0.389 0.431 0.237 -0.428 0.449 0.339 0.170 0.127

COE 7 0.129 0.618 -0.159 0.410 0.162 0.401 0.127 0.360 -0.277

COE 8 0.346 0.461 0.391 -0.001 0.193 -0.081 0.016 -0.252 0.639

COE 9 0.163 -0.443 -0.065 0.545 0.616 -0.260 0.117 0.091 0.086

EP 1 0.369 -0.179 0.244 -0.559 0.085 0.395 -0.314 0.284 -0.343

EP 2 0.420 0.191 -0.103 -0.278 -0.356 -0.584 0.143 -0.263 -0.378

EP 3 0.346 0.328 -0.255 0.330 0.330 0.457 0.310 -0.215 -0.372

EP 4 0.141 0.253 0.736 0.020 0.333 -0.221 0.406 0.188 0.121

EP 5 0.382 0.238 -0.371 0.025 0.441 -0.318 -0.391 0.310 0.339

EP 6 0.400 -0.284 0.340 0.290 0.014 0.024 -0.377 -0.606 0.224

EP 7 0.239 -0.486 0.007 0.561 -0.156 -0.176 0.071 0.495 -0.294

EP 8 0.344 -0.417 -0.246 -0.276 -0.034 0.135 0.561 -0.013 0.486


202

EP 9 0.259 0.461 0.102 0.159 -0.653 0.308 -0.073 0.246 0.314

CDI 1 0.449 0.237 -0.078 0.199 -0.274 -0.197 -0.651 0.025 -0.399

CDI 2 0.343 -0.271 -0.454 0.305 0.450 -0.001 -0.209 -0.153 0.489

CDI 3 0.291 0.293 -0.053 -0.482 0.590 -0.325 0.191 -0.132 -0.294

CDI 4 0.389 -0.407 -0.164 -0.067 -0.259 -0.343 0.375 0.571 -0.032

CDI 5 0.273 -0.355 0.419 0.197 0.360 0.522 0.011 0.152 -0.400

CDI 6 0.348 -0.034 0.584 -0.420 -0.112 -0.017 -0.246 -0.013 0.535

CDI 7 0.221 0.253 0.390 0.606 -0.032 -0.322 0.426 -0.270 0.095

CDI 8 0.137 0.652 -0.108 0.096 0.096 0.371 0.098 0.568 0.237

CDI 9

OP (CS) 1 0.438 -0.014 0.614 -0.049 -0.611 0.237

OP (CS) 2 0.435 0.234 -0.544 0.287 -0.433 -0.437

OP (CS) 3 0.294 0.586 0.373 0.410 0.505 -0.088

OP (CS) 4 0.415 -0.481 -0.248 0.448 0.229 0.531

OP (CS) 5 0.439 -0.491 0.192 -0.304 0.319 -0.580

OP (CS) 6 0.410 0.359 -0.300 -0.674 0.176 0.358

OP (EP) 1 0.410 0.321 0.111 -0.067 -0.750 -0.364

OP (EP) 2 0.125 0.438 0.695 0.405 0.150 0.351

OP (EP) 3 0.447 -0.298 0.337 -0.078 0.357 -0.533

OP (EP) 4 0.490 -0.428 0.022 0.109 0.129 0.159

OP (EP) 5 0.390 0.275 -0.067 -0.738 0.158 0.431

OP (EP) 6 0.453 -0.075 -0.463 0.486 -0.138 0.331

OP (EP) 7 0.140 0.593 -0.415 0.181 0.477 -0.374

Source: Author’s Estimation


203

Annexure A3

Table 4.7 Verification of Human Rights CSR Stakeholder in Conventional banks

A Questions of Human Rights incorporate in CSR for Conventional banks (CB) as …

Banks CSR Stakeholder

“Human Rights” Target Respondents

Bank names

National Bank Of Pakistan Allied Bank Ltd United Bank Ltd

N Mean SD CV N Mean SD CV N Mean SD CV

1 CB has incorporated Human right policy in

overall organization structure

Employees 88 3.27 .757 23.14985 83 3.50 1.227 35.05714 68 2.99 .854 28.56187

Customers 171 3.20 1.036 32.375 85 2.63 .859 32.6616 119 2.43 .988 40.65844

2 CB

Human right policy is effectively


Employees 88 3.28 1.150 35.06098 83 3.00 1.325 44.16667 68 3.37 .884 26.23145

Customers 171 3.27 .757 23.14985 85 3.65 .434 13.35385 119 3.36 .883 26.27976

3 CB

has comprehensive appraisal system to

get feedback from stakeholders regarding

implementation of human rights

Employees 88 3.45 .661 19.15942 83 3.38 1.113 32.92899 68 2.71 .967 35.68266

Customers 171 3.72 .449 12.06989 85 3.63 .859 23.66391 119 3.98 .741 18.61809

4 CB

Bank have instant information system to

aware stakeholders regarding any breaches

in Human rights

Employees 88 3.46 .499 14.42197 83 3.63 .697 19.2011 68 3.00 .741 24.7

Customers 171 3.12 1.075 34.45513 85 3.63 .697 19.2011 119 3.91 .281 7.186701

5 CB Bank promote good governance practices

e.g. transparency, no corruption

Employees 88 3.55 .499 14.05634 83 2.88 1.055 36.63194 68 3.54 .993 28.05085

Customers 171 3.27 .757 23.14985 85 3.50 1.227 35.05714 119 2.99 .854 28.56187

6 CB

Bank ensure to provide hygiene factors to

eliminate dissatisfaction of employees and

customers

Employees 88 3.20 1.036 32.375 83 2.63 .859 32.6616 68 2.43 .988 40.65844

Customers 171 3.28 1.150 35.06098 85 3.00 1.325 44.16667 119 3.37 .884 26.23145

7 CB Bank provide non-discriminatory practices

to all its stakeholders

Employees 88 3.27 .757 23.14985 83 3.65 .434 13.35385 68 3.36 .883 26.27976

Customers 171 3.45 .661 19.15942 85 3.38 1.113 32.92899 119 2.71 .967 35.68266

8 CB Bank hold respect of religious rights of


Employees 88 3.72 .449 12.06989 83 3.63 .859 23.66391 68 3.98 .741 18.61809

Customers 171 3.46 .499 14.42197 85 3.63 .697 19.2011 119 3.00 .741 24.7

9 CB Bank deliver quality services to improve


Employees 88 3.12 1.075 34.45513 83 3.63 .697 19.2011 68 3.91 .281 7.19

Customers 171 3.55 .499 14.05634 85 2.88 1.055 36.63194 119 3.54 .993 28.05


204

Annexure A4

Table 4.8 Verification of Fair Labor Practices CSR Stakeholder in Conventional banks

B Questions of Fair Labor Practices incorporate in CSR for Conventional banks (CB) as …

CSR Stakeholder

“Fair Labor Practices” Target Respondents

Bank names



1 CB encourage gender and ethnic employment

diversity in selecting employees Employees 88 3.83 .562 14.67363 83 2.62 .895 34.16031 68 3.13 .601 19.20

Customers 171 3.73 .607 16.27346 85 2.43 .892 36.70782 119 3.00 1.02 33.4

2 CB

CB considers employee rights as an


performance

Employees 88 3.28 .881 26.85976 83 2.91 .801 27.52577 68 3.00 .741 24.7

Customers 171 2.46 1.154 46.91057 85 2.44 .785 32.17213 119 3.91 .281 7.186

3 CB have competent leadership to influence

employees Employees 88 1.99 .939 47.18593 83 4.01 .728 18.15461 68 3.07 1.08 35.21

Customers 171 3.07 1.081 35.21173 85 3.00 .744 24.8 119 3.19 1.04 32.67

4 CB

Bank have alliance with other


and forced labor

Employees 88 3.19 1.042 32.66458 83 2.63 .777 29.54373 68 3.46 .499 14.4219

Customers 171 3.27 .879 26.88073 85 2.55 .981 38.47059 119 3.12 1.07 34.4551

5 CB

provide learning and development

opportunities to employees Employees 88 3.09 1.009 32.65372 83 2.90 .906 31.24138 68 3.20 1.03 32.375

Customers 171 3.83 .562 14.67363 85 2.62 .895 34.16031 119 3.28 1.15 35.0609

6 CB promote a dignified and fair treatment to

all employees Employees 88 3.73 .607 16.27346 83 2.43 .892 36.70782 68 3.28 .881 26.86

Customers 171 3.28 .881 26.85976 85 2.91 .801 27.52577 119 2.46 1.15 46.91

7 CB

Bank encourage and financially support

employees to improve their living

standards

Employees 88 2.46 1.154 46.91057 83 2.44 .785 32.17213 68 3.50 .868 24.8

Customers 171 1.99 .939 47.18593 85 4.01 .728 18.15461 119 3.13 .929 29.6805

8 CB provides an equitable reward and wage

system to employees Employees 88 3.07 1.081 35.21173 83 3.00 .744 24.8 68 3.00 1.00 33.4

Customers 171 3.19 1.042 32.66458 85 2.63 .777 29.54373 119 3.63 .485 13.3608

9 CB encourage gender and ethnic employment

diversity in selecting employees Employees 88 3.27 .879 26.88073 83 2.55 .981 38.47059 68 2.71 .967 35.68266

Customers 171 3.09 1.009 32.65372 85 2.90 .906 31.24138 119 3.98 .741 18.61809


205

Annexure A5

Table 4.9 Verification of Code of Ethics CSR Stakeholder in Conventional banks

C Questions of Code of Ethics incorporate in CSR for Conventional banks (CB) as …

CSR Stakeholder

“Code of Ethics” Target Respondents

Bank names



1 CB Bank implies fair dealing and

truthfulness in practice. Employees 88 2.99 .854 28.56187 83 2.71 .866 31.95572 68 3.75 .831 22.16

Customers 171 3.91 .281 7.186701 85 2.89 .799 27.64706 119 3.63 .697 19.2011

2 CB

Bank employees have necessary



Employees 88 3.38 1.113 32.92899 83 3.27 .974 29.78593 68 3.63 .697 19.2011

Customers 171 3.65 .434 13.35385 85 3.27 .620 18.96024 119 3.50 .868 24.8

3 CB

Bank follow technical and

professional standards when carrying

out work

Employees 88 3.50 1.227 35.05714 83 3.07 .905 29.47883 68 3.13 .929 29.68051

Customers 171 2.63 .859 32.6616 85 3.36 .897 26.69643 119 3.38 .697 20.6213

4 CB

Bank comply all relevant laws and

regulations Employees 88 3.00 1.325 44.16667 83 2.91 .801 27.52577 68 3.13 .601 19.20128

Customers 171 3.63 .859 23.66391 85 3.46 .499 14.42197 119 3.00 1.002 33.4

5 CB

Bank policy ensures that professional



Employees 88 3.63 .697 19.2011 83 2.90 .678 23.37931 68 3.63 .485 13.36088

Customers 171 2.99 .854 28.56187 85 2.71 .866 31.95572 119 3.75 .831 22.16

6 CB

Ensures that confidential information

does not disclose to third party

without specific provision

Employees 88 3.91 .281 7.186701 83 2.89 .799 27.64706 68 3.63 .697 19.2011

Customers 171 3.38 1.113 32.92899 85 3.27 .974 29.78593 119 3.63 .697 19.2011

7 CB

Prohibit creative accounting to boost

or suppress reported profits Employees 88 3.65 .434 13.35385 83 3.27 .620 18.96024 68 3.50 .868 24.8

Customers 171 3.50 1.227 35.05714 85 3.07 .905 29.47883 119 3.13 .929 29.68051

8 CB

Banks discourage bribes to facilitate

contacts with third party Employees 88 2.63 .859 32.6616 83 3.36 .897 26.69643 68 3.38 .697 20.6213

Customers 171 3.00 1.325 44.16667 85 2.91 .801 27.52577 119 3.13 .601 19.20128

9 CB

Bank consider while working public

interest along with business

profitability

Employees 88 3.63 .859 23.66391 83 3.46 .499 14.42197 68 3.00 1.002 33.4

Customers 171 3.63 .697 19.2011 85 2.90 .678 23.37931 119 3.63 .485 13.36088


206

Annexure A6

Table 4.10 Verification of Environment Protection CSR Stakeholder in Conventional banks

D Questions of Environment Protection incorporate in CSR for Conventional banks (CB) as …

CSR Stakeholder

“Environment Protection” Target Respondents

Bank names



1 CB

have any Environmental protection

policypromotes awareness messages to general

public regarding environmental management

Employees 88 3.38 0.85 25.41 83 2.62 .895 34.16 68 3.83 .562 14.67

Customers 171 3.35 0.83 36.93 85 2.43 .892 36.71 119 3.73 .607 16.27

2 CB

ensure that their investment will not harm



Employees 88 2.13 0.78 36.71 83 2.91 .801 27.53 68 3.28 .881 26.86

Customers 171 2.63 0.99 37.79 85 2.44 .785 32.17 119 2.46 1.15 46.91

3 CB

shift their traditional communication system to e

–communication to


Employees 88 3.13 0.93 29.68 83 4.01 .728 18.15 68 1.99 .939 47.19

Customers 171 2.88 0.60 20.86 85 3.00 .744 24.80 119 3.07 1.08 35.21

4 CB


sustainability environmental care activities

should be left up to the government only

Employees 88 2.75 0.97 35.27 83 2.63 .777 29.54 68 3.19 1.04 32.66

Customers 171 3.75 0.83 22.16 85 2.55 .981 38.47 119 3.27 .879 26.88

5 CB

support government for IDP‘s affected from

War against Terrorism


Employees 88 3.38 0.86 25.41 83 2.90 .906 31.24 68 3.09 1.01 32.65

Customers 171 3.38 0.86 25.41 85 2.62 .895 34.16 119 3.83 .562 14.67

6 CB

promotes awareness messages to general public

regarding environmental management

ensure that their investment will not harm

environment

Employees 88 3.35 0.83 36.93 83 2.43 .892 36.71 68 3.73 .607 16.27

Customers 171 2.13 0.78 36.71 85 2.91 .801 27.53 119 3.28 .881 26.86

7 CB

have any practice for Environmental audits

shift their traditional communication system to e

–communication

Employees 88 2.63 0.99 37.79 83 2.44 .785 32.17 68 2.46 1.15 46.91

Customers 171 3.13 0.93 29.68 85 4.01 .728 18.15 119 1.99 .939 47.19

8 CB



sustainability

Employees 88 2.88 0.60 20.86 83 3.00 .744 24.80 68 3.07 1.08 35.21

Customers 171 2.75 0.97 35.27 85 2.63 .777 29.54 119 3.19 1.04 32.67

9 CB

environmental care activities should be left up to

the government only Employees 88 3.75 0.83 22.16 83 2.55 .981 38.47 68 3.27 .879 26.88

Customers 171 3.38 0.85 25.41 85 2.90 .906 31.24 119 3.09 1.01 32.65


207

Annexure A7

Table 4.11 Verification of Community Development Initiatives CSR Stakeholder in Conventional banks

E Questions of Community Development Initiatives incorporate in CSR for Conventional banks (CB as …

CSR Stakeholder

“Community Development Initiatives” Target Respondents

Bank names



1 CB Encourages employees in community



Employees 88 2.50 1.00 40.08 83 4.25 .434 10.21 68 3.27 .757 23.15

Customers 171 2.88 1.06 36.63 85 3.75 .663 17.68 119 3.20 1.03 32.375

2 CB keep some funds to help poor‘s

micro-finance (banking for the poor) Employees 88 3.45 .661 19.15942 83 2.88 .601 20.86806 68 3.28 1.150 35.06098

Customers 171 3.27 .757 23.14985 85 2.75 .831 30.21818 119 3.27 .757 23.14985

3 CB


purposesBy implementing CSR, bank

promises a better future for the community

Employees 88 3.27 .757 23.14985 83 3.50 .868 24.8 68 3.45 .661 19.15942

Customers 171 3.20 1.036 32.375 85 2.75 1.201 43.67273 119 3.72 .449 12.06989

4 CB

Provide educational sponsorships to needy

students donate to Health care facilities Employees 88 3.28 1.150 35.06098 83 2.88 .929 32.25694 68 3.46 .499 14.42197

Customers 171 3.72 .449 12.06989 85 3.38 .859 25.4142 119 3.12 1.075 34.45513

5 CB

Should directly contribute to community

development projects encourages employees

in community projects beyond profit

maximization

Employees 88 3.46 .499 14.42197 83 3.63 .994 27.38292 68 3.55 .499 14.05634

Customers 171 2.50 1.002 40.08 85 4.25 .434 10.21176 119 3.27 .757 23.14985

6 CB

Support job training programs

keep some funds to help poor‘s Employees 88 2.88 1.055 36.63194 83 3.75 .663 17.68 68 3.20 1.036 32.375

Customers 171 3.45 .661 19.15942 85 2.88 .601 20.86806 119 3.28 1.150 35.06098

7 CB

Micro-finance (banking for the poor)

Allocate funds for disaster recovery purposes Employees 88 3.27 .757 23.14985 83 2.75 .831 30.21818 68 3.27 .757 23.14985

Customers 171 3.27 .757 23.14985 85 3.50 .868 24.8 119 3.45 .661 19.15942

8 CB

By implementing CSR, bank promises a

better future for the community provide

educational sponsorships to needy students

Employees 88 3.20 1.036 32.375 83 2.75 1.201 43.67273 68 3.72 .449 12.06989

Customers 171 3.28 1.150 35.06098 85 2.88 .929 32.25694 119 3.46 .499 14.42197

9 CB

donate to Health care facilities

Employees 88 3.72 .449 12.06989 83 3.38 .859 25.4142 68 3.12 1.075 34.45513

Customers 171 3.46 .499 14.42197 85 3.63 .994 27.38292 119 3.55 .499 14.05634


208

Annexure A8

Table 4.12 Verification of Customer Satisfaction in Conventional banks

F Questions of Customer Satisfaction as dependent variable for Conventional banks (CB as …


“Customer Satisfaction” Target Respondents

Bank names



1 CB Social responsible behavior gives

better brand image and improve

organization performance

Employees 88 3.65 .778 21.31507 83 3.75 .831 22.16 68 3.50 .868 24.8

Customers 171 3.81 .717 18.8189 85 3.63 .697 19.2011 119 3.13 .929 29.68051

2 CB Social responsible behavior will

Increase loyalty among depositors Employees 88 3.34 .782 23.41317 83 3.63 .697 19.2011 68 3.38 .697 20.6213

Customers 171 3.63 .649 17.87879 85 3.50 .868 24.8 119 3.13 .601 19.20128

3 CB

CSR activities will help to increase

annual profit and timely dividends Employees 88 3.99 .425 10.65163 83 3.13 .929 29.68051 68 3.00 1.002 33.4

Customers 171 3.71 1.065 28.7062 85 3.38 .697 20.6213 119 3.63 .485 13.36088

4 CB

CSR practices persuade customers to

do word of mouth and encourage

others to do business with bank.

Employees 88 3.72 .751 20.18817 83 3.13 .601 19.20128 68 3.50 .868 24.8

Customers 171 3.71 .758 20.43127 85 3.75 .831 22.16 119 3.13 .929 29.68051

5 CB

CSR activities, increases the

awareness of society to be

environment friendly

Employees 88 3.72 .632 16.98925 83 3.63 .697 19.2011 68 3.38 .697 20.6213

Customers 171 3.65 .778 21.31507 85 3.63 .697 19.2011 119 3.13 .601 19.20128

6 CB

Through implementing CSR, bank


community

Employees 88 3.81 .717 18.8189 83 3.50 .868 24.8 68 3.00 1.002 33.4

Customers 171 3.34 .782 23.41317 85 3.13 .929 29.68051 119 3.63 .485 13.36088

7 CB

CSR practices, overcomes the barrier

between bank and society Employees 88 3.63 .649 17.87879 83 3.38 .697 20.6213 68 3.50 .868 24.8

Customers 171 3.99 .425 10.65163 85 3.13 .601 19.20128 119 3.81 .717 18.8189

8 CB

Social responsible behavior gives



Employees 88 3.65 .778 21.31507 83 3.75 .831 22.16 68 3.50 .868 24.8

Customers 171 3.81 .717 18.8189 85 3.63 .697 19.2011 119 3.13 .929 29.68051

9 CB

Social responsible behavior will


Customers 171 3.63 .649 17.87879 85 3.50 .868 24.8 119 3.13 .601 19.20128


209

Annexure A9

Table 4.13 Verification of Employee Performance in Conventional banks G Questions of Employee Performance as dependent variable for Conventional banks (CB as …


“Employee Performance” Target Respondents

Bank names



1 CB

CSR practices encourage gender and

ethnic employment diversity in

selecting employees

Employees 88 2.50 1.002 40.08 83 2.99 .854 28.56187 68 3.27 .757 23.14985

Customers 171 2.88 1.055 36.63194 85 3.91 .281 7.186701 119 3.20 1.036 32.375

2 CB

CSR encourages freedom of speech

and promotes employee rights Employees 88 3.45 .661 19.15942 83 3.38 1.113 32.92899 68 3.28 1.150 35.06098

Customers 171 3.27 .757 23.14985 85 3.65 .434 13.35385 119 3.27 .757 23.14985

3 CB

Educating employees and increases


friendly and maintain safe working

environment

Employees 88 3.27 .757 23.14985 83 3.50 1.227 35.05714 68 3.45 .661 19.15942

Customers 171 3.20 1.036 32.375 85 2.63 .859 32.6616 119 3.72 .449 12.06989

4 CB

CSR provide learning and

development opportunities to

employees

Employees 88 3.28 1.150 35.06098 83 3.00 1.325 44.16667 68 3.46 .499 14.42197

Customers 171 3.72 .449 12.06989 85 3.63 .859 23.66391 119 3.12 1.075 34.45513

5 CB

CSR provides an equitable reward and

wage system to employees

have competent leadership to

influence employees

Employees 88 3.46 .499 14.42197 83 3.63 .697 19.2011 68 3.55 .499 14.05634

Customers 171 2.50 1.002 40.08 85 2.99 .854 28.56187 119 3.27 .757 23.14985

6 CB CSR educate to Involve employees in

philanthropic activities Employees 88 2.88 1.055 36.63194 83 3.91 .281 7.186701 68 3.20 1.036 32.375

Customers 171 3.45 .661 19.15942 85 3.38 1.113 32.92899 119 3.28 1.150 35.06098

7 CB

Have clear vision and mission

statements to employees for better

learning and superior customer value

Employees 88 3.27 .757 23.14985 83 3.65 .434 13.35385 68 3.27 .757 23.14985

Customers 171 3.27 .757 23.14985 85 3.50 1.227 35.05714 119 3.45 .661 19.15942

8 CB

CSR practice will increase employee‘s

satisfaction and efficiency Employees 88 3.20 1.036 32.375 83 2.63 .859 32.6616 68 3.72 .449 12.06989

Customers 171 3.28 1.150 35.06098 85 3.00 1.325 44.16667 119 3.46 .499 14.42197

9 CB social contribution increases

appreciation by Stakeholders Employees 88 3.72 .449 12.06989 83 3.63 .859 23.66391 68 3.12 1.075 34.45513

Customers 171 3.46 .499 14.42197 85 3.63 .697 19.2011 119 3.55 .499 14.05634


210

Annexure B

Tables of Empirical Findings of Islamic Banks

Annexure B1

Table 3.11 Eigen Values and Eigen Vectors of Correlation Matrix of Islamic Banks of Employee Respondents



Eigen Values 1.707 1.291 1.265 1.106 0.873 0.800 0.771 0.647 0.539

Variance 0.190 0.144 0.141 0.123 0.097 0.089 0.086 0.072 0.060

Cumulative 0.190 0.333 0.474 0.597 0.694 0.783 0.868 0.940 1.000


Eigen Values 1.574 1.346 1.165 1.102 0.997 0.841 0.759 0.644 0.572

Variance 0.175 0.150 0.130 0.122 0.111 0.093 0.084 0.072 0.064

Cumulative 0.175 0.324 0.454 0.576 0.687 0.781 0.865 0.937 1.000


Eigen Values 1.494 1.437 1.196 1.065 0.967 0.845 0.779 0.649 0.568


211

Variance 0.166 0.160 0.133 0.118 0.108 0.094 0.087 0.072 0.063

Cumulative 0.166 0.326 0.459 0.577 0.684 0.778 0.865 0.937 1.000


Eigen Values 1.465 1.355 1.299 1.103 0.992 0.874 0.753 0.642 0.517

Variance 0.163 0.151 0.144 0.123 0.110 0.097 0.084 0.071 0.057

Cumulative 0.163 0.313 0.458 0.580 0.690 0.788 0.871 0.943 1.000


Eigen Values 1.559 1.371 1.119 1.093 0.988 0.885 0.713 0.685 0.588

Variance 0.173 0.152 0.124 0.121 0.110 0.098 0.079 0.076 0.065

Cumulative 0.173 0.326 0.450 0.571 0.681 0.779 0.859 0.935 1.000


Eigen Values 1.486 1.234 1.021 0.930 0.780 0.549

Variance 0.248 0.206 0.170 0.155 0.130 0.092

Cumulative 0.248 0.453 0.623 0.779 0.909 1.000



212

Eigen Values 1.521 1.375 1.049 0.868 0.704 0.484

Variance 0.254 0.229 0.175 0.145 0.117 0.081

Cumulative 0.254 0.483 0.657 0.802 0.919 1.000

Eigen Vectors


HR 1 0.405 0.168 -0.223 0.161 0.682 0.323 -0.241 0.090 0.310

HR 2 -0.584 -0.007 -0.081 0.210 0.082 -0.329 -0.096 -0.025 0.695

HR 3 0.517 -0.196 0.097 -0.024 -0.563 0.153 -0.041 -0.071 0.581

HR 4 0.203 0.585 -0.284 -0.093 -0.206 -0.397 0.097 0.562 0.041

HR 5 -0.183 -0.147 -0.566 -0.289 -0.007 0.387 0.609 0.042 0.135

HR 6 -0.299 0.224 0.539 -0.021 -0.059 0.552 0.044 0.497 0.112

HR 7 0.204 -0.557 0.285 -0.020 0.322 -0.353 0.365 0.448 0.067

HR 8 0.095 0.386 0.384 -0.535 0.247 -0.162 0.313 -0.423 0.212

HR 9 0.113 0.244 0.118 0.742 -0.033 0.019 0.564 -0.207 -0.030

FLP 1 -0.070 -0.224 -0.159 0.628 0.581 -0.133 -0.011 0.408 0.061

FLP 2 0.382 -0.048 0.508 -0.211 0.170 -0.577 0.080 0.071 0.419


213

FLP 3 -0.380 0.189 0.290 -0.195 0.451 0.361 0.583 -0.077 0.133

FLP 4 0.303 0.213 0.458 0.331 -0.088 0.591 -0.331 0.110 0.255

FLP 5 0.468 -0.081 -0.150 -0.489 0.236 0.272 0.033 0.530 -0.319

FLP 6 0.403 0.253 -0.041 0.398 -0.317 -0.077 0.681 0.054 -0.204

FLP 7 0.039 0.550 -0.556 -0.113 0.013 -0.020 -0.026 0.151 0.591

FLP 8 -0.113 -0.629 -0.081 -0.048 -0.414 0.213 0.272 0.275 0.466

FLP 9 -0.467 0.313 0.288 -0.038 -0.307 -0.209 -0.070 0.655 -0.168

COE 1 0.185 -0.296 0.561 0.124 -0.156 0.478 0.416 -0.342 -0.072

COE 2 -0.452 0.043 -0.345 -0.069 0.394 0.253 0.632 0.022 0.225

COE 3 0.304 0.293 0.178 0.108 0.738 -0.246 0.015 -0.385 -0.158

COE 4 -0.345 0.251 0.507 -0.122 0.272 0.357 -0.258 0.487 -0.202

COE 5 0.598 -0.133 -0.035 -0.162 0.111 -0.087 0.385 0.644 -0.121

COE 6 0.256 0.619 0.151 0.110 -0.186 0.116 0.060 0.066 0.679

COE 7 0.028 -0.556 0.060 0.422 0.356 0.040 -0.289 0.181 0.513

COE 8 0.263 -0.134 -0.176 -0.713 0.166 0.408 -0.308 -0.212 0.201

COE 9 0.240 0.185 -0.467 0.479 0.014 0.576 -0.173 0.030 -0.314


214

EP 1 0.124 0.238 -0.283 0.611 -0.220 0.541 -0.193 0.163 0.264

EP 2 -0.423 -0.031 0.125 -0.487 0.222 0.619 -0.073 -0.017 0.361

EP 3 -0.132 0.547 0.436 0.178 0.036 -0.325 0.188 -0.146 0.547

EP 4 0.198 0.237 0.219 -0.415 -0.702 0.083 0.095 0.415 -0.054

EP 5 0.488 0.144 0.305 0.038 0.256 0.434 0.505 -0.243 -0.279

EP 6 -0.074 -0.645 0.086 0.218 -0.168 -0.002 0.571 0.207 0.356

EP 7 -0.113 0.357 -0.529 -0.129 0.336 -0.092 0.461 0.478 -0.028

EP 8 -0.447 0.030 0.488 0.338 0.143 0.080 -0.068 0.458 -0.453

EP 9 0.541 -0.151 0.218 -0.078 0.425 -0.095 -0.340 0.489 0.296

CDI 1 0.186 0.592 0.253 0.042 0.019 0.076 0.730 -0.094 -0.050

CDI 2 -0.201 0.449 -0.570 0.242 -0.165 -0.065 -0.084 -0.046 0.579

CDI 3 0.205 -0.429 0.336 0.540 -0.020 -0.179 0.165 -0.272 0.486

CDI 4 -0.390 -0.285 -0.069 -0.276 0.247 0.639 0.292 -0.201 0.301

CDI 5 0.331 -0.009 -0.009 -0.645 0.329 -0.420 0.029 0.018 0.435

CDI 6 0.453 0.264 0.000 0.125 0.400 0.375 -0.448 -0.455 -0.045


215

CDI 7 0.430 -0.193 -0.385 0.255 0.289 0.229 0.214 0.619 0.001

CDI 8 -0.326 0.275 0.536 0.142 0.368 0.059 -0.270 0.486 0.252

CDI 9 0.354 0.036 0.242 -0.236 -0.651 0.420 -0.169 0.220 0.286

OP (CS) 1 0.386 0.418 0.489 0.138 -0.556 0.330

OP (CS) 2 0.373 -0.198 -0.713 0.344 -0.198 0.395

OP (CS) 3 -0.417 0.226 0.135 0.755 0.343 0.264

OP (CS) 4 0.370 0.626 -0.267 0.177 0.196 -0.575

OP (CS) 5 0.291 -0.577 0.318 0.493 -0.111 -0.475

OP (CS) 6 0.562 -0.101 0.248 -0.135 0.696 0.331

OP (EP) 1 -0.352 0.630 0.035 -0.282 -0.114 0.621

OP (EP) 2 0.510 0.306 -0.261 -0.052 0.752 0.107

OP (EP) 3 0.599 0.011 0.190 0.491 -0.377 0.471

OP (EP) 4 -0.131 0.649 -0.014 0.564 -0.071 -0.489

OP (EP) 5 0.482 0.297 0.244 -0.596 -0.351 -0.377

OP (EP) 6 -0.097 -0.009 0.914 0.061 0.390 0.002


216

OP (EP) 7


Annexure B2

Table 3.12 Eigen Values and Eigen Vectors of Correlation Matrix of Islamic Banks



Eigen Values 1.267 1.133 1.064 1.054 1.004 0.971 0.872 0.852 0.784

Variance 0.141 0.126 0.118 0.117 0.112 0.108 0.097 0.095 0.087

Cumulative 0.141 0.267 0.385 0.502 0.614 0.721 0.818 0.913 1.000


Eigen Values 1.410 1.231 1.178 1.042 1.000 0.859 0.834 0.739 0.707

Variance 0.157 0.137 0.131 0.116 0.111 0.095 0.093 0.082 0.079

Cumulative 0.157 0.293 0.424 0.540 0.651 0.747 0.839 0.921 1.000


Eigen Values 1.289 1.230 1.139 1.100 0.996 0.922 0.859 0.765 0.701


217

Variance 0.143 0.137 0.127 0.122 0.111 0.103 0.095 0.085 0.078

Cumulative 0.143 0.280 0.406 0.529 0.639 0.742 0.837 0.922 1.000


Eigen Values 1.335 1.206 1.169 1.047 0.956 0.921 0.870 0.835 0.662

Variance 0.148 0.134 0.130 0.116 0.106 0.102 0.097 0.093 0.074

Cumulative 0.148 0.282 0.412 0.529 0.635 0.737 0.834 0.926 1.000


Eigen Values 1.423 1.212 1.111 1.077 1.047 0.900 0.833 0.731 0.665

Variance 0.158 0.135 0.124 0.120 0.116 0.100 0.093 0.081 0.074

Cumulative 0.158 0.293 0.416 0.536 0.652 0.752 0.845 0.926 1.000


Eigen Values 1.169 1.130 1.048 0.940 0.895 0.817

Variance 0.195 0.188 0.175 0.157 0.149 0.136

Cumulative 0.195 0.383 0.558 0.715 0.864 1.000



218

Eigen Values 1.341 1.131 1.064 0.990 0.936 0.538

Variance 0.224 0.189 0.177 0.165 0.156 0.090

Cumulative 0.224 0.412 0.589 0.754 0.910 1.000

Eigen Vectors


HR 1 -0.375 -0.304 -0.095 0.350 0.426 0.097 0.661 0.090 0.016

HR 2 0.321 0.305 -0.225 0.380 0.455 0.289 -0.175 -0.494 -0.208

HR 3 0.022 0.626 0.004 0.091 0.373 -0.422 0.008 0.435 0.305

HR 4 -0.074 0.464 0.081 0.205 -0.454 0.626 0.254 0.120 0.234

HR 5 -0.119 -0.103 0.541 0.582 -0.161 -0.300 -0.159 -0.335 0.303

HR 6 0.346 -0.403 -0.238 0.428 -0.020 0.180 -0.342 0.541 0.189

HR 7 0.307 0.089 -0.397 0.293 -0.468 -0.458 0.387 -0.061 -0.270

HR 8 0.590 -0.161 0.066 -0.273 0.101 0.019 0.364 -0.231 0.592

HR 9 0.418 0.008 0.650 0.035 0.105 0.073 0.210 0.287 -0.508

FLP 1 -0.403 -0.033 0.591 0.079 0.156 -0.147 0.025 -0.179 0.634


219

FLP 2 -0.430 0.413 0.072 0.185 0.062 0.493 0.385 -0.304 -0.344

FLP 3 0.192 -0.588 0.325 0.051 0.225 -0.197 0.277 -0.387 -0.440

FLP 4 0.111 0.310 0.050 0.731 -0.234 -0.456 -0.208 -0.172 -0.139

FLP 5 0.323 0.101 0.191 0.249 0.669 0.380 -0.425 0.119 -0.024

FLP 6 0.536 0.128 -0.280 0.131 0.100 0.085 0.508 -0.312 0.478

FLP 7 -0.329 -0.273 -0.334 0.434 0.348 -0.146 0.346 0.503 0.043

FLP 8 0.170 -0.349 0.291 0.354 -0.535 0.514 0.071 0.271 0.099

FLP 9 0.274 0.404 0.476 -0.172 0.029 -0.229 0.411 0.508 -0.160

COE 1 0.161 0.4572 0.4539 -0.0891 -0.2477 0.1527 0.5988 -0.0008 0.3284

COE 2 -0.3128 0.0114 -0.2091 0.5543 -0.2098 0.5887 0.2454 0.0941 -0.3023

COE 3 0.378 -0.4089 0.5043 -0.0007 0.0239 0.0532 0.0787 0.4607 -0.4624

COE 4 0.1944 0.1042 -0.1337 0.1653 0.8912 0.1024 0.3161 0.0052 0.0374

COE 5 0.0615 0.4831 0.3655 0.1255 0.158 0.3657 -0.6729 0.0455 0.0024

COE 6 0.5484 -0.0497 -0.416 0.1956 -0.201 0.11 -0.1304 0.4477 0.4643

COE 7 -0.5065 -0.0454 -0.0455 -0.5069 0.1558 0.2532 0.0168 0.5922 0.2074


220

COE 8 -0.16 -0.5888 0.3664 0.2491 0.0914 0.2106 -0.0707 -0.2483 0.5586

COE 9 -0.33 0.168 0.1874 0.5333 0.0424 -0.6021 0.0024 0.405 0.1221

EP 1 -0.362 0.418 -0.129 0.221 -0.093 -0.291 -0.570 0.454 -0.070

EP 2 0.464 -0.267 -0.013 0.413 -0.025 -0.411 0.264 0.419 -0.358

EP 3 -0.095 -0.064 0.420 -0.473 0.654 -0.298 -0.065 0.163 -0.198

EP 4 -0.476 -0.291 -0.018 -0.248 -0.261 0.089 0.423 0.572 0.213

EP 5 0.276 0.379 0.608 0.095 -0.153 -0.137 0.127 0.127 0.572

EP 6 -0.264 0.359 0.167 0.461 0.370 0.456 0.377 0.082 -0.258

EP 7 0.276 0.181 -0.599 -0.070 0.495 0.032 0.107 0.244 0.458

EP 8 0.436 0.258 0.036 -0.419 -0.221 0.496 -0.141 0.368 -0.341

EP 9 0.077 -0.542 0.220 0.305 0.202 0.419 -0.482 0.218 0.251

CDI 1 0.382 0.246 -0.288 0.059 0.142 0.739 0.270 0.258 -0.034

CDI 2 -0.436 0.085 0.119 0.464 0.068 0.318 -0.601 0.295 0.142

CDI 3 0.201 0.123 0.760 0.153 0.233 -0.059 0.141 0.233 -0.460

CDI 4 -0.318 -0.200 0.269 -0.658 0.034 0.184 0.144 0.455 0.302


221

CDI 5 -0.447 0.209 -0.013 0.413 0.114 -0.147 0.687 0.032 0.280

CDI 6 -0.015 0.638 0.354 -0.229 -0.124 0.202 -0.094 -0.510 0.298

CDI 7 0.512 -0.136 0.229 0.270 -0.411 -0.133 0.005 0.245 0.590

CDI 8 0.244 0.103 -0.091 -0.067 0.817 -0.275 -0.182 0.034 0.373

CDI 9 0.003 0.630 -0.257 -0.160 -0.234 -0.400 -0.109 0.513 -0.149

OP (CS) 1 0.495 0.270 -0.327 0.308 0.693 -0.015

OP (CS) 2 -0.007 0.723 0.160 0.218 -0.310 -0.555

OP (CS) 3 0.595 -0.146 0.006 0.464 -0.565 0.301

OP (CS) 4 -0.484 0.426 -0.392 0.246 -0.102 0.600

OP (CS) 5 -0.405 -0.370 0.191 0.763 0.179 -0.222

OP (CS) 6 0.057 0.256 0.823 0.018 0.249 0.437

OP (EP) 1 -0.307 0.183 0.586 -0.463 0.473 -0.302

OP (EP) 2 -0.322 0.206 0.586 0.584 -0.220 0.349

OP (EP) 3 0.190 -0.485 0.078 0.542 0.630 -0.181

OP (EP) 4 0.626 -0.187 0.397 -0.308 0.045 0.565


222

OP (EP) 5 0.113 0.691 -0.309 0.122 0.530 0.345

OP (EP) 6 0.601 0.421 0.233 0.202 -0.222 -0.563


Annexure B3

Table 4.22 Verification of Human Rights CSR Stakeholder in Islamic banks

A Questions of Human Rights incorporate in CSR for Islamic banks (IB) as …

Banks

CSR Stakeholder

“Human Rights” Target Respondents

Bank names



1 IB Bank has incorporated Human right

policy in overall organization structure Employees 60 2.50 1.00 40.08 30 3.27 .757 23.14 25 3.36 .883 26.279

Customers 229 3.13 .929 29.68 88 3.20 1.03 32.37 57 2.71 .967 35.682

2 IB

Human right policy is effectively

communicated to all stakeholders Employees 60 2.75 .970 35.27 30 3.28 1.15 35.06 25 3.98 .741 18.618

Customers 229 2.88 1.16 40.55 88 3.27 .757 23.14 57 3.00 .741 24.7

3 IB

Bank has comprehensive appraisal

system to get feedback from

stakeholders regarding implementation

of human rights

Employees 60 3.00 1.12 37.33 30 3.45 .661 19.15 25 3.91 .281 7.1867

Customers 229 2.75 1.02 39.70 88 3.72 .449 12.06 57 3.36 .883 26.279

4 IB

Bank have instant information system to

aware stakeholders regarding any

breaches in Human rights

Employees 60 2.63 .697 26.50 30 3.46 .499 14.42 25 2.71 .967 35.682

Customers 229 2.88 1.05 36.63 88 3.12 1.07 34.45 57 3.98 .741 18.618

5 IB

Bank promote good governance

practices e.g. transparency, no

corruption

Employees 60 2.88 1.05 36.63 30 3.55 .499 14.05 25 3.00 .741 24.7

Customers 229 2.50 1.00 40.08 88 3.27 .757 23.14 57 3.91 .281 7.1867

6 IB

Bank ensure to provide hygiene factors

to eliminate dissatisfaction of

employees and customers

Employees 60 3.13 .929 29.68 30 3.20 1.03 32.37 25 3.00 1.32 44.166

Customers 229 2.75 .970 35.27 88 3.28 1.15 35.06 57 3.65 .434 13.353


223

7 IB Bank provide non-discriminatory

practices to all its stakeholders Employees 60 2.88 1.16 40.55 30 3.27 .757 23.14 25 3.38 1.11 32.928

Customers 229 3.00 1.12 37.33 88 3.45 .661 19.15 57 3.63 .859 23.663

8 IB

Bank hold respect of religious rights of

relevant stakeholders Employees 60 2.75 1.02 39.70 30 3.72 .449 12.06 25 3.63 .697 19.201

Customers 229 2.63 .697 26.50 88 3.46 .499 14.42 57 3.63 .697 19.201

9 IB Bank deliver quality services to

improve lively hood of its local

community

Employees 60 2.88 1.05 36.63 30 3.12 1.07 34.45 25 2.88 1.05 36.631

Customers 229 2.88 1.05 36.63 88 3.55 .499 14.05 57 3.00 1.32 44.166

Annexure B4

Table 4.23 Verification of Fair Labor Practices CSR Stakeholder in Islamic banks B Questions of Code of Ethics incorporate in CSR for Islamic banks (IB) as …

CSR Stakeholder

“Fair Labor Practices” Target Respondents

Bank names



1 IB

Encourage gender and ethnic


employees

Employees 60 3.65 .778 21.3 30 2.71 .866 31.95 25 2.63 1.32 50.190

Customers 229 3.81 .717 18.8 88 2.89 .799 27.64 57 3.13 1.05 33.706

2 IB

CB considers employee rights as an


performance

Employees 60 3.34 .782 23.4 30 3.27 .974 29.78 25 3.38 .485 14.349

Customers 229 3.63 .649 17.8 88 3.27 .620 18.96 57 3.13 .782 24.984

3 IB

Have competent leadership to

influence employees Employees 60 3.99 .425 10.6 30 3.07 .905 29.47 25 3.50 .708 20.228

Customers 229 3.71 1.06 28.7 88 3.36 .897 26.69 57 2.88 .782 27.152

4 IB

Bank have alliance with other


and forced labor

Employees 60 3.72 .751 20.1 30 2.91 .801 27.52 25 2.88 .601 20.868

Customers 229 3.71 .758 20.4 88 3.46 .499 14.42 57 3.25 .663 20.4

5 IB

Provide learning and development

opportunities to employees Employees 60 3.72 .632 16.9 30 2.90 .678 23.37 25 3.25 .831 25.569

Customers 229 3.65 .778 21.3 88 2.71 .866 31.95 57 2.63 1.32 50.190

6 IB

Promote a dignified and fair treatment

to all employees Employees 60 3.81 .717 18.8 30 2.89 .799 27.64 25 3.13 1.05 33.706

Customers 229 3.34 .782 23.4 88 3.27 .974 29.78 57 3.38 .485 14.349


224

7 IB

Bank encourage and financially

support employees to improve their

living standards

Employees 60 3.63 .649 17.8 30 3.27 .620 18.96 25 3.13 .782 24.984

Customers 229 3.99 .425 10.6 88 3.07 .905 29.47 57 3.50 .708 20.228

8 IB

Provides an equitable reward and wage

system to employees Employees 60 3.71 1.06 28.7 30 3.36 .897 26.69 25 2.88 .782 27.152

Customers 229 3.72 .751 20.1 88 2.91 .801 27.52 57 2.88 .601 20.868

9 IB

Bank maintain effective feedback and

control mechanism to ensure fair labor

practices in organization structure

Employees 60 3.71 .758 20.4 30 3.46 .499 14.42 25 3.25 .663 20.4

Customers 229 3.72 .632 16.9 88 2.90 .678 23.37 57 3.25 .831 25.569

Annexure B5

Table 4.24 Verification of Code of Ethics CSR Stakeholder in Conventional banks C Questions of Code of Ethics incorporate in CSR for Islamic banks (IB) as …

CSR Stakeholder

“Code of Ethics” Target Respondents

Bank names



1 IB

Bank implies fair dealing and

truthfulness in practice. Employees 60 4.25 .434 10.2 30 2.99 .854 28.56 25 2.50 1.00 40.08

Customers 229 3.75 .663 17.6 88 2.43 .988 40.65 57 3.13 .929 29.680

2 IB

Bank employees have necessary



Employees 60 2.88 .601 20.8 30 3.37 .884 26.23 25 2.75 .970 35.272

Customers 229 2.75 .831 30.2 88 3.36 .883 26.27 57 2.88 1.16 40.555

3 IB

Bank follow technical and professional

standards when carrying out work Employees 60 3.50 .868 24.8 30 2.71 .967 35.68 25 3.00 1.12 37.333

Customers 229 2.75 1.201 43.6 88 3.98 .741 18.61 57 2.75 1.02 39.709

4 IB

Bank comply all relevant laws and

regulations Employees 60 2.88 .929 32.2 30 3.00 .741 24.7 25 2.63 .697 26.501

Customers 229 3.38 .859 25.4 88 3.91 .281 7.186 57 2.88 1.05 36.631

5 IB

Bank policy ensures that professional



Employees 60 3.63 .994 27.3 30 3.54 .993 28.05 25 2.88 1.05 36.631

Customers 229 4.25 .434 10.2 88 2.99 .854 28.56 57 2.50 1.00 40.08

6 IB Ensures that confidential information

Employees 60 3.75 .663 17.6 30 2.43 .988 40.65 25 3.13 .929 29.680


225


specific provision Customers 229 2.88 .601 20.8 88 3.37 .884 26.23 57 2.75 .970 35.272

7 IB

Prohibit creative accounting to boost or

suppress reported profits Employees 60 2.75 .831 30.2 30 3.36 .883 26.27 25 2.88 1.16 40.555

Customers 229 3.50 .868 24.8 88 2.71 .967 35.68 57 3.00 1.12 37.333

8 IB

Banks discourage bribes to facilitate

contacts with third party Employees 60 2.75 1.201 43.6 30 3.98 .741 18.61 25 2.75 1.02 39.709

Customers 229 2.88 .929 32.2 88 3.00 .741 24.7 57 2.63 .697 26.501

9 IB

Bank consider while working public

interest along with business

profitability

Employees 60 3.38 .859 25.4 30 3.91 .281 7.186 25 2.88 1.05 36.631

Customers 229 3.63 .994 27.3 88 3.54 .993 28.05 57 2.88 1.05 36.631

Annexure B6

Table 4.25 Verification of Environment Protection CSR Stakeholder in Islamic banks

D Questions of Environment Protection incorporate in CSR for Islamic banks (IB) as …

CSR Stakeholder

“Environment Protection” Target Respondents

Bank names



1 IB

Have any Environmental protection policy

promotes awareness messages to general


management

Employees 60 3.50 1.227 35.05 30 2.50 1.002 40.08 25 2.99 .854 28.56

Customers 229 2.63 .859 32.66 88 3.13 .929 29.68 57 2.43 .988 40.65

2 IB

Ensure that their investment will not harm



Employees 60 3.00 1.325 44.16 30 2.75 .970 35.27 25 3.37 .884 26.23

Customers 229 3.65 .434 13.35 88 2.88 1.168 40.55 57 3.36 .883 26.27

3 IB

Shift their traditional communication



Employees 60 3.38 1.113 32.92 30 3.00 1.120 37.33 25 2.71 .967 35.68

Customers 229 3.63 .859 23.66 88 2.75 1.029 39.70 57 3.98 .741 18.61

4 IB

Care energy conservation process and

sustainability environmental care activities

should be left up to the government only

Employees 60 3.63 .697 19.20 30 2.63 .697 26.50 25 3.00 .741 24.7

Customers 229 3.63 .697 19.20 88 2.88 1.055 36.63 57 3.91 .281 7.186

5 IB Support government for IDP‘s affected Employees 60 2.88 1.055 36.63 30 2.88 1.056 36.63 25 3.54 .993 28.05


226

from War against Terrorism have any

Environmental protection policy Customers 229 3.50 1.227 35.05 88 2.50 1.002 40.08 57 2.99 .854 28.56

6 IB

Promotes awareness messages to general




Employees 60 2.63 .859 32.66 30 3.13 .929 29.68 25 2.43 .988 40.65

Customers 229 3.00 1.325 44.16 88 2.75 .970 35.27 57 3.37 .884 26.23

7 IB

Have any practice for Environmental



communication

Employees 60 3.65 .434 13.35 30 2.88 1.168 40.55 25 3.36 .883 26.27

Customers 229 3.38 1.113 32.92 88 3.00 1.120 37.33 57 2.71 .967 35.68

8 IB Promote lean production strategy

Care energy conservation process and

sustainability

Employees 60 3.63 .859 23.66 30 2.75 1.029 39.70 25 3.98 .741 18.61

Customers 229 3.63 .697 19.25 88 2.63 .697 26.50 57 3.00 .741 24.7

9 IB

Environmental care activities should be

left up to the government only Employees 60 3.63 .697 19.20 30 2.88 1.055 36.63 25 3.91 .281 7.186

Customers 229 2.88 1.055 36.63 88 2.88 1.056 36.63 57 3.54 .993 28.05

Annexure B7

Table 4.26 Verification of Community Development Initiatives CSR Stakeholder in Conventional banks E Questions of Community Development Initiatives incorporate in CSR for Islamic banks (IB) as …

CSR Stakeholder

“Community Development Initiatives” Target Respondents

Bank names



1 IB

Encourages employees in community

projects beyond profit maximizationsupport

job training programs

Employees 60 4.25 .434 10.2 30 3.83 .562 14.67 25 3.38 .859 25.41

Customers 229 3.75 .663 17.6 88 3.73 .607 16.27 57 3.35 .831 36.93

2 IB

Keep some funds to help poor‘s

micro-finance (banking for the poor) Employees 60 2.88 .601 20.8 30 3.28 .881 26.85 25 2.13 .782 36.71

Customers 229 2.75 .831 30.2 88 2.46 1.15 46.91 57 2.63 .994 37.79

3 IB


purposesBy implementing CSR, bank

promises a better future for the community

Employees 60 3.50 .868 24.8 30 1.99 .939 47.18 25 3.13 .929 29.68

Customers 229 2.75 1.201 43.6 88 3.07 1.08 35.21 57 2.88 .601 20.86

4 IB Provide educational sponsorships to needy Employees 60 2.88 .929 32.2 30 3.19 1.04 32.66 25 2.75 .970 35.27


227

studentsdonate to Health care facilities Customers 229 3.38 .859 25.4 88 3.27 .879 26.88 57 3.75 .831 22.16

5 IB

Should directly contribute to community

development projectsencourages employees

in community projects beyond profit

maximization

Employees 60 3.63 .994 27.3 30 3.09 1.00 32.65 25 3.38 .859 25.41

Customers 229 4.25 .434 10.2 88 3.83 .562 14.67 57 3.38 .859 25.41

6 IB

Support job training programs

keep some funds to help poor‘s Employees 60 3.75 .663 17.6 30 3.73 .607 16.27 25 3.35 .831 36.93

Customers 229 2.88 .601 20.8 88 3.28 .881 26.85 57 2.13 .782 36.71

7 IB

Micro-finance (banking for the

poor)Allocate funds for disaster recovery

purposes

Employees 60 2.75 .831 30.2 30 2.46 1.15 46.91 25 2.63 .994 37.79

Customers 229 3.50 .868 24.8 88 1.99 .939 47.18 57 3.13 .929 29.68

8 IB

By implementing CSR, bank promises a

better future for the communityprovide

educational sponsorships to needy students

Employees 60 2.75 1.201 43.6 30 3.07 1.08 35.21 25 2.88 .601 20.86

Customers 229 2.88 .929 32.2 88 3.19 1.04 32.66 57 2.75 .970 35.27

9 IB

Donate to Health care facilities Employees 60 3.38 .859 25.4 30 3.27 .879 26.88 25 3.75 .831 22.16

Customers 229 3.63 .994 27.3 88 3.09 1.00 32.65 57 3.38 .859 25.41

Annexure B8

Table 4.27 Verification of Customer Satisfaction in Islamic banks G Questions of Employee Performance as dependent variable for Islamic banks (IB) as …


“Employee Performance” Target Respondents

Bank names



1 IB

CSR practices encourage gender and

ethnic employment diversity in

selecting employees

Employees 60 3.65 .778 21.3 30 3.75 .831 22.16 25 2.63 1.32 50.190

Customers 229 3.81 .717 18.8 88 3.63 .697 19.20 57 3.13 1.05 33.706

2 IB CSR encourages freedom of speech

and promotes employee rights Employees 60 3.34 .782 23.4 30 3.63 .697 19.20 25 3.38 .485 14.349

Customers 229 3.63 .649 17.8 88 3.50 .868 24.8 57 3.13 .782 24.984

3 IB Educating employees and increases Employees 60 3.99 .425 10.6 30 3.13 .929 29.68 25 3.50 .708 20.228


228


friendly and maintain safe working

environment

Customers 229 3.71 1.065 28.7 88 3.38 .697 20.62 57 2.88 .782 27.152

4 IB

CSR provide learning and

development opportunities to

employees

Employees 60 3.72 .751 20.1 30 3.13 .601 19.20 25 2.88 .601 20.868

Customers 229 3.71 .758 20.4 88 3.00 1.00 33.4 57 3.25 .663 20.4

5 IB

CSR provides an equitable reward and

wage system to employees

have competent leadership to

influence employees

Employees 60 3.72 .632 16.9 30 3.63 .485 13.36 25 3.25 .831 25.569

Customers 229 3.65 .778 21.3 88 3.75 .831 22.16 57 2.63 1.32 50.190

6 IB CSR educate to Involve employees in

philanthropic activities Employees 60 3.81 .717 18.8 30 3.63 .697 19.20 25 3.13 1.05 33.706

Customers 229 3.34 .782 23.4 88 3.63 .697 19.20 57 3.38 .485 14.349

7 IB

Have clear vision and mission

statements to employees for better

learning and superior customer value

Employees 60 3.63 .649 17.8 30 3.50 .868 24.8 25 3.13 .782 24.984

Customers 229 3.99 .425 10.6 88 3.13 .929 29.68 57 3.50 .708 20.228

8 IB

CSR practice will increase employee‘s

satisfaction and efficiency

Employees 60 3.71 1.065 28.7 30 3.38 .697 20.62 25 2.88 .782 27.152

Customers 229 3.72 .751 20.1 88 3.13 .601 19.20 57 2.88 .601 20.868

9 IB social contribution increases

appreciation by Stakeholders Employees 60 3.71 .758 20.4 30 3.00 1.00 33.4 25 3.25 .663 20.4

Customers 229 3.72 .632 16.9 88 3.63 .485 13.36 57 3.25 .831 25.569


229

Annexure B9

Table 4.28 Verification of Customer Satisfaction in Islamic banks

F Questions of Customer Satisfaction as dependent variable for Islamic banks (IB as …


“Customer Satisfaction” Target Respondents

Bank names



1 IB Social responsible behavior gives



Employees 60 3.65 .778 21.31507 83 3.75 .831 22.16 68 3.50 .868 24.8

Customers 229 3.81 .717 18.8189 85 3.63 .697 19.2011 119 3.13 .929 29.68051

2 IB Social responsible behavior will


Customers 229 3.63 .649 17.87879 85 3.50 .868 24.8 119 3.13 .601 19.20128

3 IB

CSR activities will help to increase

annual profit and timely dividends Employees 60 3.99 .425 10.65163 83 3.13 .929 29.68051 68 3.00 1.002 33.4

Customers 229 3.71 1.065 28.7062 85 3.38 .697 20.6213 119 3.63 .485 13.36088

4 IB

CSR practices persuade customers to

do word of mouth and encourage

others to do business with bank.

Employees 60 3.72 .751 20.18817 83 3.13 .601 19.20128 68 3.50 .868 24.8

Customers 229 3.71 .758 20.43127 85 3.75 .831 22.16 119 3.13 .929 29.68051

5 IB

CSR activities, increases the

awareness of society to be

environment friendly

Employees 60 3.72 .632 16.98925 83 3.63 .697 19.2011 68 3.38 .697 20.6213

Customers 229 3.65 .778 21.31507 85 3.63 .697 19.2011 119 3.13 .601 19.20128

6 IB

Through implementing CSR, bank


community

Employees 60 3.81 .717 18.8189 83 3.50 .868 24.8 68 3.00 1.002 33.4

Customers 229 3.34 .782 23.41317 85 3.13 .929 29.68051 119 3.63 .485 13.36088

7 IB

CSR practices, overcomes the barrier

between bank and society Employees 60 3.63 .649 17.87879 83 3.38 .697 20.6213 68 3.50 .868 24.8

Customers 229 3.99 .425 10.65163 85 3.13 .601 19.20128 119 3.81 .717 18.8189

8 IB

Social responsible behavior gives



Employees 60 3.65 .778 21.31507 83 3.75 .831 22.16 68 3.50 .868 24.8

Customers 229 3.81 .717 18.8189 85 3.63 .697 19.2011 119 3.13 .929 29.68051

9 IB

Social responsible behavior will


Customers 229 3.63 .649 17.87879 85 3.50 .868 24.8 119 3.13 .601 19.20128

islamic concept and corporate social responsibility in

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