This paper examines corporate social responsibility (CSR) in Saudi Arabia's banking industry, investigating the attitudes of banking professionals toward social issues such as poverty, environmental concerns, infrastructure development, and gender inequality. Drawing on existing scholarship and proposing a mixed-methods research design, the paper traces the historical development of CSR in Saudi Arabian banking from the establishment of the Saudi Arabian Monetary Agency in 1952 through the expansion era of the 1970s and 1980s. It reviews literature on the motivations and benefits of CSR participation, considers the influence of Islamic banking principles on social responsibility practices, and outlines a methodological framework — combining qualitative interviews with quantitative analysis — for gathering primary data from banking professionals in the Kingdom.
The global financial system has become increasingly smaller and more complex, with individual countries and their financial and banking infrastructures more intertwined and mutually dependent on each other. Because of this, understanding the role that banking systems and entities play in the social and political spheres is essential for policy makers and for individuals working in the banking sector. Of special importance are the social responsibilities borne by banks and the banking industry, which can vary greatly from country to country based on a multitude of factors. The research described and proposed herein will yield a greater understanding of how these responsibilities are viewed by bankers in Saudi Arabia.
Scholarship on Saudi Arabia's banking industry has focused almost entirely on the financial implications — for the country and for the globe — of various banking activities, touching on issues of ethicality only tangentially, though providing ample preliminary information upon which to base more direct investigations (Ford 2007; Gorvett 2009). It is the aim of this research to provide one small part of these direct investigations, opening a new area of inquiry.
Several key research questions will serve as guides to focus and narrow the proposed research. The attitudes of individuals involved in the banking system in Saudi Arabia toward issues of poverty, the environment, infrastructure development, and overall social and cultural progress will be investigated, as will past and current actions by banking institutions and individuals with regard to these social issues. Research will be driven by the desire to understand exactly what degree of social responsibility is perceived to exist among the banking institutions and individuals of Saudi Arabia, and to what extent these senses of responsibility are acted upon.
Throughout the development of the Saudi Arabian banking sector — which largely attributes its growth and historical background to the first foreign banks to open operations in the country — corporate social responsibility has developed in parallel. The Saudi Arabian Monetary Agency (SAMA), established in 1952, has helped integrate a CSR culture into the banks operating in the country through its policies and regulations. The most notable period in which this occurred was between the 1970s and 1980s, when SAMA focused on expanding the country's banking sector while also making it responsible and beneficial to the Saudi community.
Wilson (2002, 44–77) has noted in his studies that banks operating in Saudi Arabia have increasingly become conscious of what they do with the profit they generate and how they make it. As a result, philanthropy has been integrated into banks' corporate structures, alongside considerations of competitiveness and risk management.
The Saudi Arabian community has also been keen to observe how banks not only benefit from them but also offer a helping hand. Such awareness among locals has prompted banks to respond with philanthropic programs aimed at making meaningful contributions to the Saudi community and its national development objectives (Ilias 2004, 309).
The reason this research has focused on Saudi Arabia is the country's recent economic growth — enabled by the oil industry and a strong banking sector. The banking sector in particular offers a productive subject of study because it is still in a developing stage, and because of recent trends reported on CSR within it: CSR is becoming a competitive issue; there is a growing focus on transparency and accountability; and CSR is being integrated into university and banking school curricula (Butters 2009, 44–77).
This research aims to provide insights into the workings of social responsibility in Saudi Arabia's banking industry, with the overarching objective of improving the level of social involvement and the sense of responsibility in the banking industry as a whole. This research will not be able to directly achieve this objective, but aims to make viable and more approachable a new area of research focusing specifically on the ethical aspects of banking in specific countries given the modern geopolitical climate. The larger objective of actually influencing change in these ethics and in the social responsibility of the global banking system, as well as its individual domestic constituent parts, will be accomplished by a growing body of research in this and related areas (Campbell 2007). By clearly identifying attitudes toward social responsibility in Saudi Arabia, this research will serve as both an initial contribution to this body of research and as an indicator for future areas of inquiry.
Taking steps to ensure that the global financial crisis and recession of the recent past are not repeated due to similar failures in the international finance system, a clear definition of the banking sector's social responsibilities must be developed. These responsibilities must be agreed upon and adhered to by banking institutions and/or governments in all countries that are major international trading partners. International understandings of these social responsibilities are widely divergent, however, and research is needed to determine the perceived role of social responsibility in Saudi Arabian banking.
The Kingdom of Saudi Arabia also faces several pressing social issues, including ongoing gender inequality that faces heavy criticism from the international community, ongoing poverty, environmental and infrastructure challenges, and the more fundamental issue of continued development in a nation that has only been able to independently join the modern world over the past half-century or so (Krieger 2008; Butters 2009). The highly religious governance of finance in the country and in the region generally, however, has somewhat limited and largely directed the level of perceived and acted-upon social responsibility of the banking industry in Saudi Arabia (Wilson 2002). Research is necessary to determine the degree to which various social issues are seen as at least the partial responsibility of the banking system in Saudi Arabia, according to different stakeholders.
Saudi Arabia has attracted considerable interest from scholars, authors, and business analysts due to the robust economic growth witnessed in the country over the past few decades — growth that many analysts attribute to the country's rich oil resources. Of particular importance to this research is the country's banking sector, which according to Butters (2009, 44–77) attracts interest due to its consolidation, stability, and heightened competition over the four decades since the inception of Islamic banking in the country. Ford (2007, 48–50) attributes the stability, resilience, and strength of the Saudi Arabian banking sector to Islamic banking practices — practices that notably left the sector largely unaffected by the recent global economic crisis — as well as to effective government supervision and consistent policy.
Players in the Saudi Arabian banking industry have embraced their social responsibility in ways that have led to community improvement, workforce recruitment and retention, and consumer trust. Ford (2007, 48–50) noted that an estimated 35% of people in the country place greater confidence in banks that participate in corporate social responsibility activities. Banks engaging in CSR in the country have donated grants aimed at improving the living standards of the poor, and have also taken part in initiatives promoting entrepreneurship and reducing unemployment levels.
Campbell (2007, 946–947) argues that "banks in Saudi Arabia engage in CSR activities with the motive of helping the poor in the community as well as practicing religious beliefs." Due to the fact that most banks are Sharia-compliant, most are driven by Islamic religious beliefs that call upon the fortunate in society to help those who are less fortunate. Thus, banks participating in CSR use it as a channel through which they can fulfill their religious obligations (Jaywant et al. 2003, 597).
According to studies conducted by Wilson (2002, 143–163) on corporate social responsibility, banks that participate in CSR activities create a positive brand image in the communities they serve. They appear to be financially stable, are able to attract talented employees who take pride in working for such institutions, and are regarded as having good business ethics — all of which translates into better financial performance.
Business analysts and authors such as Gorvett (2009, 42–51) have noted that banks engaging in CSR activities are also set to benefit from it, as participation has a positive impact on loyalty, image, reputation, and customer retention. Participation in CSR activities by banks in Saudi Arabia has been viewed as improving their corporate reputation and thus making it easier to attract new customers, manage the business effectively, and secure better future prospects. Banks that participate in CSR activities also tend to witness increases in stock market valuation and find it easier to access capital.
"Mixed-methods design rationale and data collection"
"Timeline, tools, and anticipated challenges"
The importance of the banking sector in matters of social responsibility has become increasingly clear in recent years from a variety of sources. The global financial crisis is only one example of the ways in which decisions of the financial and banking worlds have direct impacts on a variety of global social issues. Through this research, the attitude of one country's banking sector toward social responsibility can be determined and form a nucleus for similar research elsewhere. As the body of such research grows, it is hoped that practical change in banking ethics and social responsibility across the global financial system will become achievable.
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