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In the present times of intense competition, the only survival strategy for business is to grow. However, as the society is changing, the indicators of success are also acquiring a new meaning. A move toward social responsibility is a fundamental change for business. Over the last decades, corporate social responsibility (CSR) has been a subject of intense debate among academics and practitioners (Galbreath, 2009). One of the early contributors to CSR in the academic literature, Bowen (1953) defined it as "the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society" while Hill (2006) described the term as a set of practices that form part of good management or business practices much of it is about transparency and disclosure.
More generally, the definition of corporate social responsibility is not complex. According to Business for Social Responsibility (BSR), corporate social responsibility is described as achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment. A socially responsible corporation should take a step forward and adopt policies and business practices that go beyond the minimum legal requirements and contribute to the welfare of its key stakeholders. Each company differs in how it implements CSR. The differences depend on factors such as company's size, the particular industry involved, the firm's business culture, stakeholder demands, and how historically progressive the company is in engaging CSR.
In various contexts, companies today are under intense pressure to rebuild public trust and stay competitive in a global economy. Recent business scandals involving sound institutions such as Lehman Brothers, Enron and Société General have shaken public confidence increasing in turn the salience of principles of accountability, transparency, and honesty in all facets of business relationships (Waddock et al., 2002). Due to these financial scandals, the need for CSR has strengthened and it is positively accepted in the world business climate (Chen and Wang, 2011). Consequently, the Deliotte Report (2008) pointed out that CSR can help to restore trust in the corporate world.
It goes without saying that CSR has become of great importance in recent years, very often through public scandals and mismanagement. For that reason, demands from customers, workforce, legislative bodies and the public for detailed information about whether companies are meeting acceptable standards is increasing enormously. Hence these are the reasons why firms are acting responsibly towards the society and business environment.
Overview of the Banking and Insurance sector
Mauritius has a relatively sophisticated banking sector with domestic banks and offshore banks. Under the supervision of the Bank of Mauritius (BOM) and the Financial Services Commission (FSC), the Mauritian banking sector consists of 20 banks. Some banks are among the 10 largest banks in Africa. Mauritius belongs to a select group of developing countries where banks contribute approximately 5.7 % of Gross Domestic Product (GDP) and have a growth rate of 5.9 % as at December 2011.
On the other hand, The FSC licenses under the Insurance Act insurance/reinsurance companies to conduct insurance business activities. The Insurance Act is associated with the International Association of Insurance Supervisors (IAIS) standards and principles and focuses on specific regulatory issues relating to capital adequacy, solvency, corporate governance, early warning systems and the protection of policyholders. Insurance companies are major participants in the contractual savings market. As noted by Vittas (2003), Mauritius belongs to a select group of developing countries where contractual savings (i.e., savings with insurance companies and pension funds) exceed 40 % of GDP and represent a major potential force in the local financial system.
Hence, it can be noted that both the banking and insurance sector are contributing to the economic growth of the country and thus they are important pillar of the economy. Thus all the companies should acknowledge their social responsibility towards the society.
Overview of CSR in Mauritius
The rapid economic growth of Mauritius has brought significant progress in human development. Yet not all part of the society has been able to advance at the same pace. There are 26,400 poor households in Mauritius which represents 7.9 % of the total number of households (Central Statistics Office's Poverty Analysis Report 2006-2007). Thus the government of Mauritius established the theory of CSR in his budget speech of 2007/2008 where the Finance Minister pointed out that "a number of firms in the corporate sector have agreed to voluntarily contribute at least 1% of their profits to CSR activities specifically directed towards pressing social issues of national priority."
However, the Budget 2009 subsequently brought a major transformation to the CSR landscape. In the midst of the global crisis, Government called for solidarity and legislated to make CSR compulsory with the aim of intensifying social involvement of enterprises, particularly in the fight against poverty. Therefore as from July 2009 under the Finance Act (2009), the Government of Mauritius established a policy with the overall objective of mandating registered companies to pay 2% of their book profit towards programmes that contribute to the social and environmental development of the country.
Moreover, as from 1st January 2012, all companies had to establish a CSR Fund and this fund is used to execute approved programmes of organisations, finance the project of an approved Non-Governmental Organisation (NGO), implement an approved programme under the National Empowerment Foundation (NEF) and implement projects in collaboration with public sector organisations. If the CSR fund has not been used after the financial year, then the money should be sent to the Mauritius Revenue Authority (MRA).
In addition, the companies of Mauritius have a high level of commitment towards their social responsibilities (Ragodoo, 2009). Most of these companies have well established CSR programmes with purpose to choose and prioritize funding in deprived areas. As stated earlier, the acceptance of CSR is happily welcomed globally due to corporate scandals and Mauritius also forms part of countries suffering from corporate scandals such as the case of Infinity BPO and the State Trading Corporation. The legislation want organisations to contribute towards CSR and this will help to restore the trust of stakeholders. Many companies such as the Mauritius Commercial Bank, CIEL Ltd, Airports of Mauritius Ltd, British American Investment Group and Beachcomber Group had already implemented CSR strategies before it became legally compulsory (Gokulsing, 2011).
Hence, Corporate Social Responsibility represents the new millennium challenge and a truly paradigmatic shift for business corporations. So, banks and insurance companies should engage in CSR activities in order to help the economy to combat against all the problems that the economy is facing. Particularly in the case of developing countries where Government need help from private enterprises to be able to make the economy resilient to any calamity.
1.4 Problem Statement
The social impact of corporations is becoming a very important issue in business administration (Fiori et al., 2007). CSR has been defined as "a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis" (Green Paper Promoting a European Framework for Corporate Social Responsibility 2001). On the other hand, Helg (2007) described CSR as the set of standards to which a company subscribes in order to make its impact on society.
The integration of CSR principles in operating activities of business is very much imperative to ensure sustainable development of an economy. The potential benefits of CSR have generated interest of regulatory authorities, society, NGOs, employees, customers as well as international bodies to the issue. In banking and insurance sector, several international initiatives like United Nations Environment Programme Finance Initiative, Global Reporting Initiative are underway to ensure the adoption of CSR practices in normal business operations. These initiatives have favorably turned up developed countries to behave in a socially responsible manner. But in developing nations, there is a dearth of deliberate and effect actions to the current need. In addition to this is a very limited research work that has been done to investigate the CSR practices in developing and emerging nations. In fact the academic publication in this fiery issue is primarily western centric. Belal ( 2001) also noted that most of the CSR studies conducted so far has been in the context of developed countries such as western Europe, USA and Australia and we still know too little about practices in emerging countries.
In order to increase our knowledge about CSR practices in developing countries, this study tries to investigate the current CSR practices in the banking and insurance sector in Mauritius and to disclose the reasons motivating them to engage in such activity. Thus it is worth investigating on this topic as it is an attempt to bridge the gap and to contribute towards the literature in this field.
1.5 Aims and Study Objectives
The focus of this dissertation is on assessing the current CSR practices in the Banking and Insurance sector in Mauritius. The main purpose of this dissertation is to identify to what extent the CSR framework can be applied to these institutions.
Hence the objectives of this study are to:
Evaluate the manager's perception of the CSR practices in these companies
Identify the main reasons behind the adoption of CSR and how they benefit from these activities
Assess the possible impact of CSR on these companies
Examine the main focus of companies' CSR initiatives
Determine whether there is a correlation between CSR usage and financial performance
1.6 Outline of the study
Chapter One: Introduction
The first chapter introduces the concept of CSR and highlights the need for CSR practices. It also provides an overview of the banking and insurance sector as well as an overview of CSR in the Mauritian context. It also presents an outline of the research emphasizing on the problem statement and study objectives.
Chapter Two: Literature Review
This chapter looks at the various theoretical frameworks that have served as a basis of analysis on CSR. It also gives a better idea to what has been said and found by previous studies. The section regarding the empirical review discusses applied studies, methods and findings of various researchers.
Chapter Three: Research Methodology
The third chapter provides support for the methodological approach in describing the process of how the research is planned and carried out. It also elaborates on the research objectives, population and sample size, questionnaire design and administration, data collection and research limitations. It also gives an overview about the various techniques applied in data analysis and discussion
Chapter Four: Results and Discussion
This chapter consists of analysis and discussions where the different variables are tested and analyses all the findings from the survey questionnaires, interviews and results from different tests. This chapter also discussed the relationship between CSR and firm performance.
Chapter Five: Conclusions and Recommendations
The last chapter depicts an overall picture of the study. It also gives an overview around the subject matter as well as some recommendations related to this subject and some limitations of the study along with proposals for future research.