Justification of Corporate social responsibility by banks

The banks through Corportate social responsibility are giving back to the community to improve the communities in which they operate. Corporate social responsibility is mandated in many countries for corporates.Banks have discovered that it is equally important for business growth apart from providing excellent customer service and even coming up with very innovative products. It has therefore usual to see in the media banks highlighting their Corporate Social Responsibilities undertaken during specific periods.

Options taken by banks as Corporate Social Responsibility

• Education Foundations for the less privileged yet bright students
• Provision of much needed water, either by funding drilling of boreholes in arid and semi arid areas or where communities have no access to clean water
•  building of classrooms or schools facilities like libraries
•  hold marathons to support eyesight and/or heart operations for the people who are unable to afford the same.

Benefits of Corporate Social Responsibility to the Bank

Even though Corporate Social Responsibility is seen as of great benefit to the communities the banks also benefit from it. Some of the benefits are listed below

• Loyalty by the existing customers due to corporate social responsibility. The existing customers are proud to be associated with the bank that is having a positive impact on the community and are likely to continue banking with them
• Corporate Social Responsibility helps a bank to attract new customers. This is especially true for members of the community targeted by the bank. The new accounts opened lead to business growth and new opportunities.
• Corporate Social Responsibilities boosts the morale of the existing employees as they are proud to be associated with such a bank. This pride in the employer increases employee productivity and reduces staff turnover resulting in reduced costs associated with hiring and training of new staff.
• Corporate Social Responsibilities also singles out the bank as an employer of choice as most potential employees look to them as their ideal employer therefore they are easily able to acquire the best skills in the market.
• Corporate Social Responsibility activities act as advertisement opportunities for the banks’ products. The products sold to the community are seen more than just bank products but as products that result to  Corporate Social Responsibility
• Corporate Social Responsibilities helps in brand reinforcement among the populace. People generally easily associate such a bank and learnt to trust the bank viewing it as the one that cares for the welfare of the community.

Budgets must include the amounts that would be ploughed back to the community banks. Corporate Social Responsibility activities are important and cannot be ignored.

relationship between bank and customer

It is extremely important for both the banks and the general public to be aware of the relationship between bank and customer. Both parties should know what to expect when one walks into a bank and what to expect from the relationship if a contract is signed by the two parties.

Like all relationships, one needs to know their expectations and rights in order to have a mutually working relationship. With this in mind we will look at some of the contractual relationship between bank and customer:

1. Debtor/Creditor Relationship between bank and customer

A debtor is one who owes while a creditor is the one who is owed. When a customer opens a deposit account at the bank, the bank becomes a debtor to the customer as it is holding the customer’s money, which should be repaid when the customer demands it. The customer is therefore the creditor to the bank. In this relationship between bank and customer, it is the customer’s responsibility to ask for their money back and it is not the bank’s job to seek to repay the debt.

However when the customer borrows money from the bank, then they become the debtor to the bank while the bank is a creditor to the customer. In this relationship between the bank and customer, the customer is expected to repay the debt as agreed where the customer defaults; there is a problem with the debt.

2. Principal/ Agent Relationship between bank and customer

When a bank is dealing with a third party on behalf of the customer, the bank is an Agent while the customer is the Principal.

An Agent is one employed to work for a Principal to make contracts on their behalf. A Principal is one who informs the Agent what he wants him/her to do on his behalf.

Other examples of Principal / Agent relationship between bank and customer is when the banks arranges for insurance, sends money either abroad or within the country (generally money transfer) on behalf of the customer. Agency banking is another example of Principal agent relationship between bank and customer

3. Bailor/Bailee Relationship between bank and customer

One of the bank’s services offered to the customer is to receive valuables and documents to hold on their behalf. When this happens the bank has to take reasonable care of the property and this is a Bailor/ Bailee Relationship between bank and customer.

A Bailor is the depositor of the property who is the customer. A Bailee receives the property from the Bailor and must look after it in a professional manner. The bank is then called the ‘Bailee for reward’ since a fee is charged.

There should be complete good faith especially where customers have come to rely on the banks advice which sometimes is called Fiduciary Relationship. The relationship between the Bank and Customer creates an expectation of trust and there should never be undue influence exerted.

 Definition of Customer relationship management in banks

customer relationship management in banks

This can be defined as the degree of happiness or satisfaction a customer realizes with a bank product or service.

Customer Relationship Management in banks can be referred to as the ability to understand, sometimes anticipate and manage the needs of the customer.

Purpose of customer relationship management in banks

Basically the main purpose of customer relationship management in banks or customer satisfaction is to enable banks customer retention and attract new customers to enhancing business growth.

A satisfied customer is a great marketing tool for banks since these customers will help improve the banks business growth through referrals. Satisfied customers also give positive publicity hence leading to banks improved bottom line.

Banks should at all times strive to increase business through speed, agility and real time responses to the existing customer needs. This is because attracting new customers involves huge costs in term of promotional costs, advertising costs and even follow up costs. The longer the relationship a customer has with the bank, the better the returns they bring. This interaction and relationship should result in increased profitability to the banks through revenue growth and operational efficiency. The relationship also leads to customer loyalty.

Organizations caring for their existing customers are almost definitely likely to be winners. There are great benefits to the banks which adopt Customer Relationship Management in banks.

 Benefits of customer relationship management in banks include:

1. The existing customers will make referrals which likely result in business growth.
2. There will be a positive public image resulting in fresh customers being attracted, increasing the bank’s market share.
3. Reduction in cost in attracting new customers and this will result in the banks posting high profits, hence great return to the shareholders.
4. Higher returns from existing customers as long relations will be maintained and boost in the banks profitability.
5. There is loyalty by the existing customers and they will not transfer their business transactions to a competitor. This reduces attrition rate in the bank.
6. Staff morale is boasted as they are proud to be associated with a bank with a great reputation. This reduces staff turnover and costs associated with hiring new staff and training.

The current advancement in technology actually makes it easier for banks to adopt the Customer Relationship Management in banks as information is readily available.