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Corporate Social Responsibility in the Banking Sector - Case Study Croatia

This paper investigates the controversy and dynamics of corporate social responsibility in the Croatian banking sector. From 1995 onwards Croatia pretty much fully accepted Wall Street-neoliberal global policy experiment which led to loss of local social solidarity. Firstly the banking sectors channeled its domestic savings mostly towards household microloans, while other sectors, those representing the engines of sustainable economic and social development, are therefore denied bank credit. When choosing to channel local savings between very risky and low profit SME projects or high profit and low risk household loans, Croatia’s private commercial banks have chosen the second. Second, the international donor community established a number of microfinance institutions (MFIs) in order to promote very small-scale entrepreneurship among poor individuals and families. Significant numbers of MFI clients ultimately failed and many of these poor individuals ended up in deeper poverty than before they had accepted microloans. As a result, in the period 1999-2008 household loans grew by 584% while enterprise loans grew ‘only’ 278% creating heavily indebted nation with disastrous socioeconomic implications. Therefore, while on one hand banking sector donates funds that generate social and economic benefits to its community, on the other, by enormous household credits expansion, it paves the way toward vicious circle of poverty. Such credit policies produce many negative externalies and represent a burden to sustainable long term social and economic development. This paper also explores and compares how certain practices evolve as a result of various social and economic determinants within the region as well as of global factors such as the international practices of well recognized multinational companies, nongovernmental institutions etc. On the end we stress out some of the experience and expectations evolving from CSR, specifically in the banking sector, and provide some ideas on how to stimulate and apply such cross-border learning. We organize our paper as follows. Section 2 discusses theoretical framework and some facts about CSR practices. Section 3 analyses economic and banking sector development in Croatia. Section 4 stresses out the data on Croatian private banking sector operations and its implication on socio-economic development. Section 5 sets out experiences and expectation evolving from CSR with an emphasis on the banking sector. Section 6 brings concluding remarks.

CSR in Croatia; sponsorships; donations; social innovation; social responsibility; microfinance

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