THE EFFECTS OF CORPORATE SOCIAL RESPONSIBILITY ON

PERFORMANCE OF BANKING SECTOR. A CASE STUDY OF EQUITY

BANK HOLDING GROUP.

BY

KIBATIO LISPER MAKENA

14/03065

CHAPTER ONE RESEARCH PROPOSAL

SUBMITTED IN THE FULFILLMENT OF THE REQUIREMENT FOR

THE AWARD OF THE BACHELOR OF COMMERCE DEGREE IN KCA
UNIVERSITY

JUNE, 2020

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Contents
CHAPTER ONE..............................................................................................................................2

1.0 Introduction............................................................................................................................2

1.1 Background of the study........................................................................................................2

1.1.1 Equity Bank.........................................................................................................................4

1.2 Statement of the Problem.......................................................................................................5

1.3 Objectives of the Study..........................................................................................................6

1.3.1 General Objective............................................................................................................6

1.3.2 Specific objectives...........................................................................................................6

1.4 Research Questions................................................................................................................6

1.5 Justification of the study........................................................................................................6

1.6 Significance of the study........................................................................................................6

1.7 Scope of the study..................................................................................................................7

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 CHAPTER ONE
1.0 Introduction
1.1 Background of the study
Social responsibility is subjectively firm’s obligation for the effects of its activities or rather
decisions on general environment and society through ethical and transparent conduct which is
consistent welfare and sustainable development of the society (Mutuku, 2015). It is through
social responsibility, the company takes into consideration the stakeholders’ expectations,
complies with international conduct as well as applicable laws, and integrating throughout the
firm. The concept of corporate social responsibility progressively integrated in contemporary
practices of business. It has largely been referred to as corporate sustainability or responsible
competitiveness.
The concept of corporate social responsibility, CSR dates back in the 1950’s and was introduced
by Carroll and Bowen when they published “Social responsibilities of a Businessman” seminal
book. Up to today, CSR notion has dominated the interface of society-business besides
proposition of various theories which explain various concept of CSR. Despite dominating the
interface of business-society, academic literature has been infiltrated with alternative concepts
studying the same topic as CSR. This includes corporate governance, corporate citizenship,
corporate social performance and corporate social responsiveness (Peters & Mullen, 2019).
Corporate social responsibility approach has changed various theories including stakeholder and
Agency theory. CSR concept has strongest indication and normative altruistic coming from its
terminology. Since its development, CSR concept has gained significant acceptance besides
broadening its meaning thus accommodating additional elements. Business for Social
responsibility defines CSR as achievement of business success in ethical manner and in ways
which respect natural environment, people and the communities in which they operate in.
Muthuri and Gilbert (2014) agrees that corporate social responsibility ideas range from simple
programmes such as organizing and engaging in cleaning services in prisons, education
initiatives, planting trees, organizing financial programmes and the likes. According to Rocco,
Leonardo and Hassan (2016) corporate social responsibility plays a very critical role in efficient
use of natural resources and creation of wealth and jobs in society.
The concept of CSR helps organizations in managing risks while taking advantage of
opportunities which exist in the market. This enables a firm to gain corporate reputation which

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broadens its engagements with key stakeholders including employees, shareholders, suppliers,
and customers, governmental and non-governmental organization in addition to all other stakes
which are directly or indirectly affected by the activities of the company. Recognition of CSR as
important concept by many corporations in developing countries has ensured long-term
commercial success. Adoption of CSR can be done within the commitments, programmes,
policies and strategies of the company toward the environment and society in which they
operate. Firms need to examine the viability of corporate social responsibility projects without
merely considering the how it benefits society but also the result economic benefits as this will
ensure the shareholders also benefit. Adoption of CSR increases sales and profitability in the
sense that, customers, suppliers and other business associates have confidence in the firm.
Corporate responsibility power in Kenya shone during the period when citizens were
experiencing starvation, especially in Northern Kenya. Commercial companies formed groups
which launched Kenyans for Kenya initiative. The fundraiser collected more than Ksh 500
million from 250,000 individuals and scores of firms to purchase food and relief suppliers for
people who were faced with starvation in Northern Kenya. This initiative highlighted what
giving back to society alias CSR can achieve. As a consequence, companies involved gained
market visibility not only in Northern Kenya but also in other regions. Many companies continue
to acknowledge the impact that CSR has in improving the company’s brand relevance and
meeting the customers’ expectations.
Banking sector has lately realized that corporate social responsibility help in contributing to
sustainable development. In this way their operations will be managed in a way which increases
their competitive edge besides enhancing economic growth (Johnson & Greening, 2017).
Financial sector have acknowledged that business sustainability could be achieved through
maximization of profit only, rather they needed to embrace market orientation and conduct
themselves in responsible manner. Either way, adoption of CSR involve various costs which may
be short or long-term in nature. In order to be sustainable, being socially responsible should in
turn benefit the businesses since it is difficult for firms to embrace a policy which always
generates negative cash flows.
1.1.1 Equity Bank
Equity bank holding is practically the largest banking institution in the Kenya as far as customer
base is concerned. Equity bank serves more than Ten million people in Kenya and its vision is

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“to be the champion of the socio-economic prosperity of people of Africa” (Okuthe, 2010).
While the company anticipates for profit, Equity bank has retained its commitment in
empowering less privileged people within the Africa thus improving their prospects for self-
sufficiency as well as their living standards. The bank operates more than 7800 agents and
thousands of Automatic Teller Machines with the country.
With reference to Equity Group Foundation website, in 2011, the bank launched its wings to fly
programme which offered 2140 scholarships to children from less privileged families who
attained a minimum of 350 marks in their Kenya Certificate of Primary Education, KCPE. The
chairman of Equity group, Dr. James Mwangi announced that “This is part of our scholarship
initiative to assist 10,000 deserving students to go through secondary school education.” Wings
to fly programme runs through master card foundation and Equity group in conjunction with
support obtained from USAid and UKAid.
1.2 Statement of the Problem
Ideally, corporate social responsibility has been viewed to a have a tremendous impact if
corporate sustainability of businesses (Mohr & Webb, 2015). In commercial perspective, the
concept has erupted as a sustainability governance approach which equally benefits society,
environment and has substantial impact of economic prosperity of a company. Effective
executive who have implemented CSR acknowledge that ever-lasting success is pegged on
continuous excellent relations with various stakeholders. Keen organization acknowledge that
their commercial undertakings cannot prosper in a community they are worsening regardless of
whether it is governance or environmental challenges. Additionally, public members tend to hold
irreducible expectations on the firms which operate in their midst, especially in conducting
themselves in a responsible manner. Clients prospect company goods or rather services to be
reflection of environmentally and socially upright business. Most recently, firms used to have a
choice whether or not to give back to society, however, as competition increases, companies
have a responsibility to act responsibly through giving back to community to enhance their
reputation in the public eyes. In return, companies earn enormous benefits from this investment
via enhancement of market share, satisfaction and retention of customers which consequently
increase firms’ profits.
Corporate social responsibility is one of widely researched topic with various scholars revealing
almost similar outcomes with respect to the concept. Manyasi and Masinde (2014) investigated

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the stakeholder approach to corporate social responsibility. His study found that CSR has
significant impact on wide range of stakeholders who in turn benefit the business via publicity of
the company. Baron (2015) studied the impact of social responsibility on integrated strategy. His
findings revealed that there was a positive correlation between formulation of effective strategies
and CSR. Despite those studies, little is known specifically on impact of Corporate Social
Responsibility on Financial performance of Banks. This research will seek to fulfil the research
gap by investigating the effects of CSR on performance of banking sector in Kenya.
1.3 Objectives of the Study
1.3.1 General Objective
The general objective of the study is to determine the effects of corporate social responsibility on
performance of Equity bank.
1.3.2 Specific objectives
I. To determine the impact of Corporate Social Responsibility on profitability of Equity Bank.
II. To determine the effects of Corporate Social Responsibility on customer satisfaction at Equity
Bank.
III. To establish the impact of Corporate Social Responsibility on employee retention at Equity
Bank.
1.4 Research Questions

I. What is the effect of Corporate Social Responsibility on profitability of equity bank?

II. What is the effects of Corporate Social Responsibility customers’ retention at Equity bank?
III. How does Corporate Social Responsibility affect employees’ retention at Equity Bank?
1.5 Justification of the study
Due to growth and increased competition in the financial sector over the past two decades, active
participation of companies in corporate social responsibility is necessary (Manyasi & Masinde,
2014). This will enable the firms to broaden their profit margins. Despite that aspirations,
companies are faced with challenges which may affect the company’s efforts towards CSR. In as
much corporate social responsibility affects financial performance of banking sector, boosting
the living standards of individuals especially is important role which many banks have played.
As such, this proposal was intended to investigate the effects of CSR on performance of
companies in Kenya.

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1.6 Significance of the study
This study will be significant to financial institutions because they will be able to acknowledge
the importance of embracing Corporate Social Responsibility in improving their brand
recognition among the publics. This study will provide insightful knowledge towards
understanding various feasible activities financial institutions can engage in to remain
competitive in ever-changing business environment.
Regulatory bodies- a sound economy is based on performance of regulating institutions. This
study will offer insightful information to industry regulators in establishing their irreducible
minimum CSR activities which ought to be undertaken by the firms. It will help regulating
bodies in ensuring the customers and the other stakeholders are served with utmost integrity and
in ethically acceptable manner.
Researchers and academicians will be provided with background information as they wish to
explore the field further. This study will guide the future researchers by helping them in
identification of research gaps in the current study and conduct research on those areas.
1.7 Scope of the study
This research will be limited to examination of effect of Corporate Social Responsibility on
performance of banking sector in Kenya with specific reference to Equity Bank Group. The
study is conducted on a fairly small sample size to represent the entire sector due to constraints
of time and resources. The target population will be categorized into management, sales and
marketing department staff and some selected customers. This research will be carried out within
a period of three months.

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 References
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Manyasi, J. N., & Masinde, S. W. (2014). Effect of employee focused corporate social
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