This report will give a clear idea about activities and operational strategies Isamic Bank Banglsdesh Limited
1.0 INTRODUCTION
Bangladesh is one of the largest Muslim countries in the world. The people of this country are deeply committed to Islamic way of life as enshrined in the Holy Quran and the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their economic lives in accordance with the precepts of Islam. The establishment of Islami Bank Bangladesh Limited on March 13, 1983, is the true reflection of this inner urge of its people, which started functioning with effect from March 30, 1983. This Bank is the first of its kind in Southeast Asia. It is committed to conduct all banking and investment activities on the basis of interest-free profit-loss sharing system. In doing so, it has unveiled a new horizon and ushered in a new silver lining of hope towards materializing a long cherished dream of the people of Bangladesh for doing their banking transactions in line with what is prescribed by Islam. With the active co-operation and participation of Islamic Development Bank (IDB) and some other Islamic banks, financial institutions, government bodies and eminent personalities of the Middle East and the Gulf countries, Islami Bank Bangladesh Limited has by now earned the unique position of a leading private commercial bank in Bangladesh.
1.1 Origin of report
This report is based on an internship program. My University arranges internship program in attachment with students after the completion of theoretical courses of program of BBA. Each intern must carry out a specific project, which is assigned by the concerned organization and approved by the Internship and placement committee of my university, consequently a report based on the project is to be submitted to the committee and IBTRA.
In this particular report, the author is an intern of the previously mentioned program and the concerned organization is IBBL which are a prominent private and the first Bank of Bangladesh that based on Islamic law?
In way of delegation, responsibility of carrying out the study has conferred upon the concerned intern.
1.2 Background of the study:
Banking is one of the most important sectors for a country’s wealth building activities. At present the modern business industrialization, foreign trade, investment almost all dependent on banks. Now a day the Banking sector of Bangladesh is suffering the disease of default culture, which is consequence, or result of bad performance of most of the banks in Bangladesh. IBBL plays an important role towards the growth, economic development and especially RDS of Bangladesh.
1.3 Objectives of the study:
The main objective of education is to acquire knowledge. To acquired knowledge, ultimately must do some practical application in addition to theoretical knowledge. Through this report, tried level best to present my practical knowledge as well as to find out-
- Investment Policy of IBBL
- Investment Modes
- Different investment Schemes
- Differences between Conventional and Islamic banking systems
1.4 Scope of the study:
IBBL, the shariah based commercial bank is under general special guidelines of the central bank framed for the banking system as a whole and for bank of individual sectors. The concept of Private sector bank i.e. IBBL in our country is not so old. IBBL is now giving emphasis to create a constructive and meaningful competition with the private sector banking and NGO (who are trying to develop rural life).
This study makes attempt to cover within its scope all most all the significant aspects of rural development scheme.
1.5 Methodology of the study:
Mainly have collected data from two sources.
These two sources are as following.
· Primary source
· Secondary source
The primary sources of my information are:
· Field observation
· Investment opinion
· Questioning the concerned persons.
The secondary sources of my information are:
1. Annual report of lslami Bank Bangladesh Ltd
2. Desk report of the related department
3. Other manual information
4. Lecture in IBTRA
1.6 Limitations of the study:
There are some limitations in my study. The faced some problems during the study, which mentioning them as below-:
i) Insufficient data: Some desired information could not be collected due to confidentially of business.
ii) Lack of monitory support: Few officers sometime felt disturbed, as they were busy in their job. Sometime they did not want to supervise me out of their official work. Sometimes the officials were busy and were not able to give me much time.
iii) Other limitation: As we are newcomer, there is a lack of previous experience in this concern. And many practical matters have been written from my own observation that may vary from person to person.
2.0. Historical Background
In the early period of Islam, the financial transactions of that period were not at like as today. As such, the very word banking was not used in that period. But all the transactions in early period of Islam had been completed without resorting to interest. The Muslim world has been in a state of degeneration for a number of centuries. The Muslim world has been in a state of degeneration for a number of centuries. The social breakdown and weakness brought about by this degeneration paved the way for foreign domination which led to further disintegration and decline.
This decline is decline reflected in all aspects of Muslim life and has been accompanied by poverty, reflected in all aspects of income and wealth, socioeconomic injustice, social disharmony and loss of creativity. Nevertheless, the undeniable fact is that the Muslim masses are intensely attached to Islam all over the Muslim world and sincerely crave for its revival and supremacy. The intelligentsia has been always for interest-fee economy. But political subjugation defeated them for long to succumb to interest-based economic system. However the struggle for restoration but the early period of the present century received as good manifestation for the cause of Islamic banking i.e. the Islamic economic system.
During the 1930s revival for Islamic banking has been noticed gradually since literatures on the interest-fee economy particularly interest fee banking have been developing. During the 1940s after political independence from the colonial, most of the Muslim countries faced the struggle for revival of Islamic economy particularly Islamic banking. And the 1970s took a new shape for practical materialization of Islamic banks and financial institutions.
The first attempt to establish an Islamic financial institution took in Pakistan in the 1 950s. It was a local Islamic bank in a rural area of erstwhile Pakistan (Wilson, 1983) it was an experiment initiated by some pious landlords. They deposited found at no interest on the credit advanced, but they had to pay a small service charge to cover the banks operational expense. The charge was lower than the fate of interest. Although the experience was encouraging but two main factors were responsible for its failure. First the deposits made were regarded by depositors (landlords) as once and for all deposits. With the increasing number of borrowers the gap between capital available and credit demanded was huge. Second, the bank staff did not have complete autonomy over the
Bank’s operation and depositors showed considerable interest in the way their money was lent out (Wilson, 1983).
The second attempt began in Egypt in 1963. It was established in a rural area of Nile Delta and was called Mit Ghamr Saving Bank. This attempt may be called the first modem experiment with Islamic banking without projecting an Islamic image, for fear of being seen as manifestation o Islamic fundamentalism which was anathema to the political regime. The pioneering effort, led by Ahmed El Najjar, took the form of a saving’s bank based on profit sharing in the Egyptian town of Mit Ghamr in 1963. This experiment lasted until 1967 (Ready) 1981), by which time there were nine such banks in the country. These bank which neither charged nor paid interest, invested mostly by engaging in trade and industry, directly or in partnership with others and shared the profits with their deposits (Siddiqi 1988)
Thus they function essentially as saving investment institutions rather than as commercial banks. The experiment suffered by owing to changes the political atmosphere. Nevertheless, the project revived in 1971 under the name of Nasier Social Bank. The Nasir Social Bank was declared an interest-free commercial bank, although its charter made no reference to Islam or shariah (Islamic Law). The bank offered a full range or normal banking services and wide range of investment activities through equity participation (Ashker-1987).
Islamic banking made its debut in Malaysia in 1983, but not without antecedents. The first Islamic financial institution in Malaysia was the Muslim Pilgrims Savings Corporation set in 1963 to help people save for performing hajj. The reason for the establishment of this institution was the contention of the Malaysian Muslims that money spent on pilgrimage must be clean and untainted with Riba. Since this was not possible by putting money with the ordinary banks. And as such, this desire led to the establishment of a special financial institution.
In 1969, this body evolved into the Pilgrims Management and fund Board or the Tabung Hajj as it is now popularly known. The Tabung Hajj has been acting as a finance company that invests the savings of would be pilgnms in accordance with Shariah, but its role is rather limited, as it is a non-bank financial institution. The success of the Tabung l-Iajj, however, provided the main impetus for establishing Bank Islam Malayasia Berhad (BIMB) which represents a full fledged Islamic commercial bank in Malaysia. The Tabung Hajj also contributes 12.8 percent of BIMB’s initial capital of M$80 million. BIMB has a complement of fourteen branches in several parts of the country.
A significant development in Islamic Banking took place when a license for an Islamic bank was issued by the Saudi Arabian government to the fifty-year old ‘Al-Rajhi Banking Investment Corporation” and has since developed active relationships with major manufacturing and trading companies in Europe and several US corporations.
Islamic Development Bank (IDB) was founded in 1975 as a multinational financial instruction by the several Muslim countries. The purpose of this bank is to support social and economic development in Muslim nations within an Islamic framework. The subscribers of the capital are the founder governments and as such it was established on government treaty.
More seven Islamic Bank and Financial institutions had been established within three years of establishment of IDB. These were (a) Dubai Islamic Bank (b) Kuwait Finance house, Kuwait (c) Faisal Islamic Bank, Egypt & (f) Islamic Development Co. Sarjah.
2.1 Islami Bank Bangladesh limited: (IBBL)
Islami Bank Bangladesh limited was incorporation on 13.03.1983 and received its Banking License on 28.03.1983. IBBL started functioning on 30.03.1983. The authorized capital of the Bank is TK. 10000.00 million and paid up capital is TK 4752.00 million.
Inspired by the success of Islami Bank Bangladesh Limited 7 other Islamic Banks namely- Al-Baraka Bank Bangladesh Ltd (Now ICB Islami Bank), Al-Arafa Islami Bank, Social Islami Bank Ltd, Foysal Islami Bank(Now Sahamil Bank of Bahrain),Shajalal Islami Bank Ltd,Export Import Bank of Bangladesh and First Security Islami Bank Ltd have been established in Bangladesh. Prime Bank has established Islamic Branches.
2.2 Business Philosophy of IBBL
The philosophy of IBBL is to the principles of Islamic Shariah. The organization of Islamic conference (OIC) defines an Islamic bank as “A financial institution whose status, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations. The sponsor, perception is that IBBL should be quite different from other privately owned and managed commercial bank operating in Bangladesh, IBBL to grow as a leader in the industry rather than a follower. The leadership will be in the area of service, constant effort being made to add new dimensions so that clients can get “Additional” in the matter of services commensurate with the needs and requirements of the country’ growing society and developing economy.
2.2 Islami Bank Vision:
Islamic bank vision to always strive to achieve superior financial performance is considered a leading Islamic bank by reputation and performance. They are:
· To establish and maintain the modern banking technology,
· To ensure the soundness and development of the financial system based on Islamic principles
· To become the strong and efficient organization with highly motivated professionals, working for the benefit of people, based upon accountability, transparency and integrity in order to ensure the stability of finical systems.
· Try to encourage savings in the form of direct investment.
· Try to encourage investment particularly in project, which are more likely to lead to higher employment.
2.3 Islami Bank Mission:
· To establish Islamic banking through the introduction of welfare oriented banking and also ensure equity and justice in the field of all economic activities,
· Achieve balanced growth and equitable development through diversified investment operations particularly in the priority sectors and less development areas of the country.
· Its main concern is to encourage social-economic up liftman and financial services to the low -income community particularly in the rural areas.
· 2.5 Objectives of Islamic Bank:
The primary objective of establishing Islamic banks all over the world is to promote, foster and develop the application of Islamic principles in the business sector. More specifically, the objectives of Islamic banking when viewed in the context of its role in the economy are listed as following:
· To offer contemporary financial services in conformity with Islamic Shariah:
· To contribute towards economic development and prosperity within the
· Principles of Islamic justice;
· Optimum allocation of scarce financial resources; and
· Help to ensure equitable distribution of income.
These objectives are discussed below:
Offer Financial Services:
Interest-based banking, which is considered a practice of Riba in financial transactions, is unanimously identified as anti-Islamic. That means all transactions made under conventional banking are unlawful according to Islamic Shariah. Thus, the emergence of Islamic banking is clearly intended to provide for Shariah approved financial transactions.
Islamic Banking for Development:
Islamic banking is claimed to be more development- oriented than its conventional counterpart. The concept of profit sharing is a built-in development promoter since it establishes a direct relationship between the bank’s return on investment and the successful operation of the business by the entrepreneurs.
Optimum Allocation of Resources:
Another important objective of Islamic banking is the optimum allocation of scarce resources. The foundation of the Islamic banking system is that it promotes the investment of financial resources into those projects that are considered to be the most profitable and beneficial to the economy.
Islamic Banking for Equitable Distribution of Resources:
Perhaps the most important objective of Islamic banking is to ensure equitable distribution of income and resources among the participating parties: the bank, the depositors and the entrepreneurs.
2.6 Role and contribution of IBBL to Bangladesh Economy
Islami Bank Bangladesh Limited has many success stories of achievements. These are summarized below:
· IBBL is the pioneer institution for introduction of Islamic Banking in Bangladesh.
· The success of IBBL has imbibed other sponsors at home and abroad to establish Islamic Banking in Bangladesh. Four national, one international Islamic banks have since been established in the country. A private sector traditional bank has also established two full fledged Islamic Banking branches. Several other existing and proposed traditional banks hove also expressed their intention to introduce Islamic Banking.
· An IBBL has successfully mobilized deposits from a section of people who hither-to-before did not make any deposit with interest based banks.
· The Islamic Banking products which are offered by IBBL through its 200 branches located at important centers all over the country and spontaneous acceptance of those products by the people proves the superiority of Islamic banking.
· IBBL’s market share of deposit investment and ancillary business is steadily increasing.
· IBBL, though still a tiny bank, handles more than 10% of country’s export and import trade
· Among the contemporary commercial Banks IBBL’s position is first in respect of mobilization of deposit, deployment of fund, earning profit and foreign remittance.
· Investment in industrial sector occupies nearly 33% of IBBL’s investment portfolio. This is a unique example of industrial finance by a commercial Bank.
· More than 1.15,000 workers are employed in the industrial projects financed by IBBL. IBBL has thus made significant contribution to solving unemployment problem of the country.
· Dhaka- the capital of Bangladesh being a Mega city- has acute transport problem. IBBL has joined hands with an enterprising group to introduce a fleet of Premium Bus service, which has attracted the attention of all section of the people and mitigated transportation problem of the city to some extent.
· IBBL has introduced several other welfare oriented Investment schemes, such as Small Transport Investment Scheme, Small Business Investment Scheme, Agriculture Implements Investment Scheme, Poultry Investment Scheme, Household Durable Investment Scheme, Housing Investment Scheme etc.
· IBBL launched a Rural Development Scheme for providing finance to drown-trodden section of the populace- an area where no other Commercial Bank has extended any finance. 1881’s mission is to reach to all 68,000 villages of the country as early as possible.
2.7 Shariah Council: Shariah Supervision
Shariah Council of the Bank is playing a vital role in guiding and supervising the implementation and compliance of Islamic Shariah principles in all activities of the Bank since its very inception. The Council, which enjoys a high status in the structure of the Bank, consists of prominent Ulema, reputed banker, renowned lawyer and eminent economist.
Members of the Shariah Council meet frequently and deliberate on different issues confronting the Bank on Shariah matters. They also conduct Shariah inspection of branches regularly so as to-ensure that the Shariah principles are implemented and complied with meticulously by the branches of the Bank.
2.8 SWOT analysis of IBBL
Strengths
- Sound profitability growth and high asset quality
- Experienced Management
- Honest, sincere and dedicated employee competency
- Wide market share and stable source of fund
- Largest network among PCBs
- High attention on recovery of overdue and classified investment and pre-overdue situation
- Close monitoring on investment clients
- High attention on individual’s performance
- High attention on making quality investment and quick disposal of proposal
- All the officials/manpower are dedicated and honest to serve its own duty
- As a whole the human resource is our main capital/assets of the wing
- Business Ethics of the wing is similar to the ethics and values of mass people of our county
Weakness
- Traditional network system and lack of full-scale automation
- Lack of latest information system
- Lack of required ideas on Modern investment products
- Poor marketing of investments product
- Lack of required information specially on SME
Opportunity:
- Scope of market penetration through diversified investment products
- Increase awareness of Islamic banking among the clients
- Scope to develop new committed Entrepreneur
- Countrywide Branches having wide opportunities to access in different kinds of Business.
Challenges/Threats:
- Market pressure for lowering of lending rate
- Challenges of new entries
- Challenges related to substitute organization
- Entrepreneurship development
2.9 Problems and prospects of Islamic banking in Bangladesh
Despite tremendous popular support spectacular success in terms of mobilization of deposit and distribution of profit Islamic banking in Bangladeshi yet to achieve the desired level of success due to the absence of appropriate legal framework for carrying
out Islamic Banking operations in the country. All the government-approved securities in Bangladesh are interest bearing. Besides, Islamic Money Market in Bangladesh is yet to develop. As a result the Islamic banks, which are committed to avoid interest, cannot invest the permissible part of their Statutory Liquidity Reserve and Short Term Liquidity in those securities.
Inspire of the present limitations, Islamic-banking system has tremendous potentiality and prospect in Bangladesh. Firstly, the successful launching and needs to an Islamic Money Market in the country. Thirdly Islamic banks have brought together many depositors and entrepreneurs under their fold and coverage. These depositors and entrepreneurs so long avoided interest- based banking on grounds of religious injunctions. The gradual and successful globalization of Islamic banking coupled with growing awareness of the people about its financial and social benefits makes it clear that the next century is going to be the century of Islamic banking.
2.10 Corporate Information of IBBL in different years
| Particulars | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 |
| Authorized Capital | 3,000.00 | 3,000.00 | 5,000.00 | 5,000.00 | 5,000.00 | 10,000.00 | 10,000.00 |
| Paid-up Capital | 1,920.00 | 2,304.00 | 2,764.80 | 3,456.00 | 3,801.60 | 4,752.00 | 6,177.60 |
| Reserves Fund | 3,280.37 | 4,329.92 | 5,450.94 | 6,551.23 | 7,418.04 | 9,308.00 | 13,927.94 |
| Total Equity | 5,266.47 | 6,691.12 | 8,331.14 | 10,435.96 | 14,957.74 | 18,572.00 | 23,619.81 |
| Total Deposits
(Including bills payable) Gross |
70,552.65 | 88,452.18 | 108,261 | 132,814.00 | 166,812.78 | 200,725.00 | 244,292.14 |
| Total Investments (Including Inv in Share) Gross | 62,755.90 | 83,893.63 | 102,145 | 123,959.00 | 174,365.55 | 198,763.00 | 255,272.41 |
| Import Business | 46,237.00 | 59,804.00 | 74,525.00 | 96,870.00 | 137,086.00 | 168,329.00 | 161,230.00 |
| Export Business | 21,738.00 | 29,151.00 | 36,169.00 | 51,133.00 | 66,690.00 | 93,962.00 | 106,424.00 |
| Remittance | 16,668.00 | 23,669.00 | 36,948.00 | 53,819.00 | 84,143.00 | 140,404.00 | 194,716.00 |
| Total Foreign Exchange Business | 84,643.00 | 112,624.00 | 147,642.00 | 201,822.00 | 287,919.00 | 402,695.00 | 462,370.00 |
| Total Income | 6,710.44 | 8,262.73 | 10,586.78 | 14,038.30 | 17,699.51 | 23,454.00 | 25,403.86 |
| Total Expenditure | 5,908.42 | 6,419.74 | 8,424.36 | 11,129.63 | 13,918.70 | 15,151.00 | 18,886.20 |
| Net Profit before Tax | 802.02 | 1,842.99 | 2,162.42 | 2,908.67 | 3,780.82 | 6.348.00 | 6,517.66 |
| Payment to Government (Income Tax) | 426.61 | 829.35 | 973.09 | 1,490.12 | 2,322.46 | 3,647.00 | 3,253.23 |
| Dividend | 20% (Stock) | 20% (Stock) | 25% (Stock) | 15% (Cash) 10% (Stock) | 25% (Stock) | 30% (Stock) | 10%(Cash)
20%(Stock) |
| Total Assets (including Contra) | 98,046.85 | 125,776.94 | 150,959.66 | 188,115.27 | 250,012.79 | 288,017.19 | 340,638.49 |
| Total Assets (Excluding Contra) | 81,704.75 | 102,149.28 | 122,880.35 | 150,252.82 | 191,362.35 | 230,879.14 | 278,302.84 |
| Fixed Assets | 2,036.66 | 2,552.70 | 3,067.99 | 3,724.69 | 3,987.23 | 4,407.00 | 6,512.36 |
| No. of deposit account holder | 1,994,266 | 2,291,269 | 2,705,180 | 3,207,131 | 3,802,709 | 4,361,896 | 42,72,123 |
| No. of investment account holder | 223,954 | 264,863 | 297,943 | 421,751 | 508,758 | 498,362 | 1,62,736 |
| Cumulative amount of disbursement from RDS | 2,923.60 | 4,216.77 | 6,033.36 | 9,303.12 | 13,969.01 | 18,768 | 24,239.00 |
| Outstanding Investment of RDS | 570.90 | 789.97 | 1,106.00 | 2,242.00 | 2,885.00 | 3,012 | 3,752.00 |
| RDS no. of A / C holder | 130,465 | 163,465 | 164,116 | 295,012 | 350,278 | 321,484 | 492,475.00 |
| RDS no. of village | 3,700 | 4,230 | 4,560 | 8,057 | 10,023 | 10,763 | 10,751.00 |
| Number of Foreign Correspondents | 840 | 850 | 860 | 870 | 884 | 906 | 919 |
| Number of Shareholders | 14,196 | 15,892 | 17,201 | 20,960 | 26,488 | 33,686 | 52,164.00 |
| Number of Employees | 4,673 | 5,306 | 6,202 | 7,459 | 8,426 | 9,397 | 9,588 |
| Number of Branches | 141 | 151 | 169 | 176 | 186 | 196 | 231 |
| Book value per Share ( Taka) | 2,743 | 2,904 | 3,013 | 3,020 | 4,147 | 238 | 325 |
| Earning per Share (Taka) | 195.52 | 518.59 | 487.57 | 368.42 | 375.46 | 56.29 | 55.10 |
| Market Value per Share (Taka) (Highest) | 4,548.00 | 5,110.00 | 5,580.00 | 4,749.00 | 6,986.00 | 830 | 890.00 |
| Capital Adequacy Ratio | 9.43% | 9.21% | 9.44% | 9.43% | 10.61% | 10.72% | 11.65% |
(Note : One Million = Ten Lac )
2.11 Price Sensitive Disclosure of IBBL:
Price Sensitive Disclosure of IBBL:
| This is for kind information of the valued Shareholders of Islami Bank Bangladesh Limited & others concerned that the Board of Directors of the Bank in its 182nd Meeting held on 24th December, 2010 took the following Price Sensitive decisions :- | |||||||||
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| This is for kind information of the valued Shareholders of Islami Bank Bangladesh Limited & others concerned that the Board of Directors of the Bank in its 182nd Meeting held on 24th December, 2010 took the following Price Sensitive decisions :- | |||||||||
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2.12 SPONSORS OF IBBL
Sponsors of IBBL
Price Sensitive Disclosure of IBBL:
Bangladeshi Sponsors:
| Mofizur Rahman (Late) |
| Barrister Tamizul Haque |
| Mohammad Younus (Late) |
| Mohammad Shafiuddin Dewan (Late) |
| Mohammad Bashiruddin |
| Mohammad Hussain (Late) |
| Nashiruddin Ahmed (Late) |
| Mohammad Mosharraf Hossain |
| Mohammad Malek Minar (Late) |
| Zakiuddin Ahmed |
| M. A. Rashid Chowdhury |
| Engr. Mustafa Anwar |
| Mohammad Abdullah |
| Sirajuddowla |
| Mohammad Nuruzzaman (Late) |
| Abul Quasem |
| A. K. Fazlul Huq |
| Engr. Muhammad Dawood Khan |
| Baitush Sharaf Foundation Ltd. |
| Ibn Sina Trust |
| Bangladesh Islamic Centre |
| Bangladesh Islamic Economics |
FOREIGN SPONSORS
| Kuwait Finance House (K.S.C.), Kuwait |
| Jordan Islamic Bank, Jordan |
| Islamic Investment & Exchange Corporation, Doha, Q |
| Bahrain Islamic Bank, Bahrain |
| Islamic Banking System International Holding S. A. |
| Al-Rajhi Company For Currency Exchange & Commerce, |
| Sheikh Ahmed Salah Jamjoom, Jeddah, K.S.A |
| Sheikh Fouad Abdul Hameed Al-Khateeb (Late), K.S.A |
| Dubai Islamic Bank, Dubai, U.A.E. |
| The Public Institution For Social Security, Safat, |
| Ministry of Awqaf And Islamic Affairs Kuwait |
| Ministry of Justice, Department of Minors Affairs, |
Board of Directors
| Prof. Abu Nasser Muhammad Abduz Zaher |
| Janab Yousif Abdullah Al-Rajhi |
| Engr. Mustafa Anwar |
| Engr. Md. Eskander Ali Khan |
| Janab Md. Khurshed Hossain |
| Dr. Abdulhameed Fouad Al Khateeb |
| Dr. Md. Shafiqur Rahman |
| Janab Mohammad Adnan Midani |
| Janab Mohammad Abdullah AlJalahma |
| Janab Hafizul Islam Mian |
| Janab Md. Shahidul Islam |
| Engr. Muhammad Dawood Khan |
| Janab Mohammed Nazrul Islam |
| Janab Md. Abdus Salam, FCA, FCS |
| Janab Humayun Bokhteyar |
| Janab Professor NRM Borhan Uddin, PhD |
2.13 ACHIEVEMENTS OF IBBL
| National and international ratings of IBBL:
IBBL’s past performances have been evaluated by Bangladesh Bank, several credit rating agencies home & abroad and by the local press. “In the midst of a difficult Banking system known to be plagued by high non-performing loans (NPLs), one could easily conclude that it would be difficult to find a bank that is different from norm. However, IBBL provides a refreshing change and is, thus, a pleasant surprise. Although it does not command the market share as the 4 public sector banks, IBBL, which claims to have little interference in lending from the government, has nonetheless, managed to find a niche market of its own-says the ‘BANK ATCH’ a New York based international Credit Rating Agency in its January 30, 1998 issue. “As a market leader offering banking services based on the Islamic rule of Shariah, IBBL’s profitability trend has been quite impressive. The Bank’s ability to keep its return on asset (ROA) well above the industry’s average, reflected its resilience to possible shocks in the banking system. Concerns over massive NPLs and under provisioning are common amongst local banks. But this seems well resolved in IBBL. IBBL’s good performance and solid capital base have indeed provided refreshing change found within a banking system saddled and held back by huge NPLs” the above agency continued to comment in the same issue. “It is one of a few local banks according to CAMEL (Capital, Assets, Management, Earnings & Liquidity) rating made by the Bangladesh Bank. It holds the highest amount of liquidity among all banks and its ability to keep return on assets at 1.07 percent is well above the banking sector’s average of 0.33 percent”- The Financial Express, Dhaka commented in its issue of May 28, 1998. “The Holiday” in its 29th August, 1997 issue carried out a report under the heading “Setting a precedence of sound banking” and commented “While the country’s banking system is burdened with bad debt portfolios and also suffers from a liquidity shortage, the Islami Bank Bangladesh Ltd. (IBBL) has created a unique precedence by improving its reserve and deposit positions substantially, making handsome profits, and offering attractive dividends to its share holders and depositors.” As per Bankers’ Almanac (January 2001 edition) published by the Reed Business Information, Windsor Court, England, IBBL’s world Rank is 1771 among 3000 banks selected by them. This position was 1902 among 4500 selected banks as on January 1999 edition. IBBL’s country Rank is 5 among 39 banks as per ratings made by the above Almanac on the basis of IBBL’s Financial Statements of the year 2001. Award and Prizes: International & National Perspective: IBBL was awarded for several times by international & national organisations. The Global Finance, a reputed London based quarterly magazine, awarded IBBL as the best bank of the country for the year 1999 and 2000. IBBL has got the 2nd prize of National Export Fare for its pavilion of Service Organisation in 1985. 1. Bangladesh Institution of Bank Management (BIBM) 2. The Institution of Bankers Bangladesh (IBB) 3. Bangladesh Association of Banks (BAB) 4. Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) 5. Central Shariah Board for Islamic Banks of Bangladesh 6. International Chamber of Commerce- Bangladesh Foreign: 1. International Association of Islamic Banks (IAIB), Jeddah, K.S.A. 2. Accounting and Auditing Organizations for Islamic Financial Institutions (AAOIFI), Manama, Bahrain. 3. General Council of Islamic Banks & Financial Institutions (GCIBFI), Manama, Bahrain (IBBL is a member of its Executive Council) 4. Society for Worldwide Inter-bank Financial Telecommunication (SWIFT) |
General Banking
General Banking is the heart of Banking. Here money collection procedure occurs. Other services, like cheque encashment, account transfer; account closing, bills and remittance are given here. So general banking is the most important thing in banking service.
Procedures
1. Issuance of token, Maintenance of subsidiary day Book, writing of day Book, balancing of Ledger.
2. Opening of A/c Mudaraba Savings A/c Mudaraba term deposit A/c Al?Wadiah current A/cs, Mudaraba Hajj saving A/cs, writing of A/c opening registers and issuance of pass book and cheque Book.
3. Maintenance of current A/c ledgers, deposit ledger and TDR ledger and operation of computer.
4. Writing of transfer scroll, statement of current A/cs and deposit A/c and Hajj deposit A/c pass book.
5. Bills: Outward & inward Bills (OBC & IBC) and clearing.
6. Remittance: Issuance and payment of DD, TT, PO etc.
7. Writing of clean cash Book and posting of General Ledger and checking of computer final sheets with General Ledger.
8. Maintenance of charges, suspense and sundry deposit A/c, maintenance of dead stock and stationery articles registers.
9. Schedule Telegram and preparation of General ledger A/c statement.
10. Establishment: Preparation of Salary, pay sheet, LPC, maintenance leave register, personal files and method of correspondence and payment of income tax.
11. Reconciliation of General A/c.
DISPATCH
Inward
1. Inward mail, other than those which are registered, marked confidential and addressed personally to same official, may be opened by an authorized member of staff who should enter in the inward mail register and mention serial number of the mail register on the letter/ paper received, affix “Received” date stamp on it and delivery the same to the concerned officials against acknowledgment.
2. Letters addressed personally to any official shall be opened by the address only.
3. Registered mails and mails marked confidential will be opened by an officer or management in small branches. All these letters shall however entered in the inward mails registers.
4. Stop payment instructions and court orders shall be received authorized officials who will immediately note date & time on it and take necessary steps.
- OUTWARD
1. Outward letters must bear serial number and entry in the register with name and address.
2. Each typist will maintain a typist master file and dispatch Clark also maintain a separate master file for future record.
3. Local letters may be delivered through peon book. If the area is large and letters are many in number service of post-office may be utilized.
4. Letters dispatched must be entered in the outward mail register and bear proper postal stamps, if sent through post office.
5. Remarks such as ‘Urgent’ ‘By Airmail’ ‘Register’ ‘Registered with A/D’ ‘Confidential’ etc. must appear on top of the letter as well as envelop.
6. If the letters are sent by registered post or courier service, postal receipt/ courier receipt must be maintained by the dispatch department in a file. Similarly acknowledgments received back should be maintained in the file.
7. If any telegram is sent by any branch, a copy of the message duly signed by authorized officer must be sent by post to the address as confirmation.
8. Similarly when the branch receives any inward telegram, they must compare it with the confirmatory copy when received.
9. Receipt for telegraphic message issued by telegraph office should be maintained in a file and authorized officer must check them at the time of passing expenses voucher.
10. If any telegram is sent relating to services given to a customer. Charges should be recovered from the customer concerned.
11. Manager and other officers of the bank must ensure economic use of telephone. Trunk call & STD conversation must be short. If telephone is used on account if customers, charges must be recovered.
12. Trunk calls & STD calls must be recovered in the trunk call register and verified with the telephone bill when received from T&T office.
- General Characteristics of Deposit Account
Bank receives deposit by different accounts. Those are two types:
i) Al Wadiah -?? Client A/C is conducted under Al ? Wadiah system
ii) Mudaraba Mode ??? Client? Sahib Al Mal
Bank? Mudarib
Under this arrangement ? profit distribution under agreed ratio and loss (if any) will be borne by Sahib Al Mal
Under Mudaraba mode there are many accounts as under:
i) MSA – Mudaraba Savings Account
ii) MHSA ? Mudaraba Hajj Savings Account
iii) MSB ? Mudaraba Savings Bond
iv) MSS ? Mudaraba Special Scheme
v) MTDR ? Mudaraba Term Deposit Account
vi) MMPDS ? Mudaraba Monthly Profit Deposit Scheme
vii) MMS ? Mudaraba Mahor Savings A/C
viii) MSNA ? Mudaraba Short Notice A/C
- Al?Wadiah Current A/C (AWCA)
AWCA accounts are unproductive in nature, is nature, as banks lovable investment fund is concerned sufficient fund has to be kept in liquid from, as current deposits are demands liabilities. Thus huge portion of his fund becomes on performing for this reason banks do not pay any of AWCA – CD account holder. Businessmen and companies are the customers of this product.
- Mudaraba Saving Account (MSA)
As per Bangladesh bank instruction 90% of SB deposit are treated as time liability and 10% of it as demand liability. In IBL there is a restriction about drawing money from SB account but any time holder may draw money of any amount with prior motive. General house holder and individuals are the clients of this account
- Mudaraba Term Deposit (MTDR)
Fixed deposits are of two kinds midterm deposit (MTD) and term deposit (TD) instrument whose maturity period is within one year are known as MTD and those above one year are considered as term deposit. Calculation of profit TDR and provisioning regarding this is quite complicated issue. Profit is calculation at each maturity date and provision is made on that. Also at the month and provision of profit is made.
- Mudaraba saving Account (MSNA) A/C
MSA account can be treated can be treated as semi term deposit. Deposit should be kept in these accounts for at least seven days to get interest of MSA accounts is less then SB accounts. (5.5%) Generally profit but may increase to 6% or more depending on the fund Checkbook is issued them but frequent use of checkbook is discouraged. Governmentally organization big corporate house and banks are generally the clients of this account.
- Account Opening Eligibility
a) Persons over 18 years (except some restricted persons)
b) Account of Club
c) Association
d) Agent
e) Govt.
f) Semi Govt.
g) Organization
h) Liquidators
i) Minor
j) Married Women
k) Pordanshil Women
l) Illiterate Persons
- Account Closing
First a customer has to submit an application with his/her signature mentioning that he/she wants to close his/her A/C. Then the signature will be verified by the officer. Customer has to certify by different department (Advance, Foreign Exchange department) of Bank that he/she has no liabilities to the Bank. After that the Customer’s A/C is debited and then Bank issue a Pay Order in the name of A/C holder.
· Account Transfer
Customer has to submit an application mentioning that he/she wants to transfer his/her A/C to his desired Branch and the officer will verify the signature, Customer has to be certified by different department of Bank that he/she has no liabilities to the bank. Then total particulars of A/C holder will prepare and sent to the Customer’s desired branch. Liability of Recognizer is secondary and account holder is Primary.
- General Practice at Regarding Accounts, in Account Opening Register
After fulfilling all the requirements for opening account necessary entries are given in the account opening register. There are several registers for several accounts as MSA, AWCA, TDR etc. Date of opening name of the account holder, nature of business, address, initial deposit, and introduction various information are recorded in that register. New accounts number is given from the list of new numbers provided by the computer department.3.7.1
The principles of calculation and distribution of profit to Mudaraba Depositors generally followed by different Islami Banks are :
· Mudaraba Depositors share income derived from investment activities i.e. from the use of fund.
· Mudaraba Depositors do not share any income derived from miscellaneous banking services where the use of fund is not involved, such as commission, exchange, service charges and other fees realized by the Bank.
· Profit and loss resulting from the use of funds are separately maintained in the accounts from other income and expenditure relating to other activities and services offered by the Bank.
· Mudaraba Deposits get priority in the matters of investment over Bank’s equity and other cost free funds.
· Mudaraba Depositors do not share any income derived from investing Bank’s equity and other cost free fund.
· The amount of the statutory cash reserve and the liquidity reserve, which are required to be maintained with Bangladesh Bank, is deducted from the aggregate balance of Mudaraba Deposits to arrive at the net balance of profit sharing deposit.
· The gross income derived from investments during the accounting year is, at first, allocated to Mudaraba Deposits and cost-free-funds according to their proportion in the total investment.
· The share of gross investment income of Mudaraba Deposits as worked out in terms of principle shown against serial No 7 above is distributed as under:
· The Bank’s Management at its discretion to rationalise the Rates of profit to Mudaraba Depositors might further raise Mudaraba Depositors’ share of 65% of gross investment income but it would not be reduced during any accounting year without giving prior declaration
· The rest amount of gross investment income is retained by the Bank as management fee for managing the investment & for making reserve for Bad & doubtful investments.
· Islami Bank Bangladesh Ltd, at present, applies the following weightages to Mudaraba Deposits:
| Sl. no. | Particulars of Deposits | Weightages |
| 1. | Mudaraba Hajj Savings A/C : 11 to 12 years | 1.35 |
| 2. | Mudaraba Hajj Savings A/C : Upto 10 years | 1.30 |
| 3. | Mudaraba Special Savings (Pension) A/C (MSS): 10 years | 1.30 |
| 4. | Mudaraba Special Savings (Pension) A/C (MSS) : 5 years | 1.10 |
| 5. | Mudaraba Muhur Savings Account (MMSA) : 10 years | 1.30 |
| 6. | Mudaraba Muhur Savings Account (MMSA) : 5 years | 1.10 |
| 7. | Mudaraba Savings Bond (MSB) : 8 years | 1.25 |
| 8. | Mudaraba Savings Bond (MSB) : 5 years | 1.10 |
| 9 | Mudaraba Monthly Profit Deposit A/C (MMPDS) | 1.20 |
| 10. | Mudaraba Term Deposit Account (MTDA) : 36 months | 1.00 |
| 11. | Mudaraba Term Deposit Account (MTDA) : 24 months | 0.98 |
| 12. | Mudaraba Term Deposit Account (MTDA) : 12 months | 0.96 |
| 13. | Mudaraba Term Deposit Account (MTDA) : 6 months | 0.92 |
| 14. | Mudaraba Term Deposit Account (MTDA) : 3 months | 0.88 |
| 15. | Mudaraba Savings A/C (MSA) | 0.75 |
| 16. | Mudaraba Foreign Currency Deposit A/C (MFCDA) | 0.75 |
| 17. | Mudaraba Special Notice A/C | 0.55 |
Source : Diary 2005, IBBL, Page 13-14.
- Differential rates of weight ages have been assigned to Mudaraba Depositors on account of the following factors:
a) Period of Deposits
The longer the period of deposit, the greater the risk they bear with regard to fluctuation of the rates of profit and erosion of the value of deposit due to inflation. The Term Depositors have also to forgo profit in case of premature encashment.
b) Banking Facilities
The Term Depositors do not enjoy any banking facility such as, operating accounts by cheques, transfer of account from one branch to another, collection of cheques and other instruments, executing standing instructions th