Foreign Exchange Services Of EXIM Bank Ltd
1.1 Introduction
The report is prepared on the basis of 3 months practical experience at EXIM Bank that helps a lot to learn about the practical situation of a financial institution and implement theoretical knowledge in to practical and realistic work environment.
The whole working process of EXIM Bank is divided into 3 sections i.e. general banking section, credit section & foreign exchange section. This report has been presented based on observation from foreign exchange section. Foreign exchange department plays various roles through providing different services for the customers. So this report focuses on the foreign exchange services of EXIM Bank Ltd, Elephant Road branch.
1.3 Objective of the Report:
General Objective
§ To get practical exposure to organizational environment
§ To understand the system and methodology adopted in conducting day to day banking by EXIM Bank
§ To observe the foreign exchange operation of EXIM Bank Ltd and their services.
Specific Objective
§ To get an overall idea of banking from banker’s point of view.
§ To review the techniques used by the bank to make it lucrative.
§ An analysis and discussion of foreign exchange services of the bank.
§ To evaluation of the present performance of the bank regarding foreign exchange.
§ To search the problems of this branch of EXIM Bank Bangladesh Ltd
§ Determining the drawbacks of the existing foreign exchange system.
§ Recommending some guidelines to improve the effectiveness of foreign exchange services.
1.4 Methodology Used:
To meet the objectives of the study I realized that a single method would not be effective. Formal & oral discussion, direct observation, questioning clients & printed papers of the bank were found useful.
1.4.1 Aspects of Analysis
The aspects to analyze the foreign exchange transactions of the bank are
· Export
· Import &
· Remittance.
In this report, different transactions related to export, import and foreign remittance are analyzed in respect of
i. Volume/ Quantity and
ii. Price/Amount.
1.4.2 Criteria for Analysis
The main criteria of this report is
- To find out whether the value of all indicator or variables related to foreign exchange show any increasing or decreasing trend. An increase of these transactions indicates that the bank is expanding its services and performing better.
- To evaluate the present performance of the bank in foreign exchange transactions, comparisons of foreign exchange transactions of the bank with those of other private banks have been made in this report. The banks are
§ South-East Bank Limited
§ NCC Bank Limited
§ City Bank Limited
§ Dutch-Bangla bank Limited
1.4.3 Indicators or Variables of Analysis
Indicators used and variables in the report are
· Number of Letter of Credit opening
· Irrevocable Letter of Credit
· Commission on Foreign Exchange
· Volume of Import
· Back-to-Back L/C
· Foreign documentary Bills for Purchase
· Export Finance
· Volume of Export
· Foreign Currency Deposit etc
· Exchange Gain
· Foreign Remittance.
1.4.4 Framework of Analysis
The evaluation of the EXIM Bank’s performance in foreign exchange transactions has been conducted based on the trend analysis and factor analysis.
q Trend Analysis: It indicates the changes in the level of progress and growth over the last five years starting from 2002.
q Factor analysis: In this report some factors that affect export, import and foreign remittance related transactions have been analyzed
q Comparative Analysis: A comparison of recent performance in foreign exchange transactions of EXIM Bank with those of other private banks have been made in this report.
1.5 Source of Information:
The report was fully investigative in nature. Data have been collected from two sources:
1. Primary sources
2. Secondary sources
1.5.1 Primary Source
q Interview: Face to face conversation with the respective officers and stuffs of the branch and head office help me collect information. Mr Md Rokonuzzaman, Officer in charge-Foreign Exchange Division, was my supervisor in the bank. His delightful co-operation, benevolent patronage, intention to make other knowledgeable, not only fascinated me but also I had had this executive in dream before joining the Bank. Mr. Mumtaz Ahmed, SPO; Mr. Faisal Chowdhury, Officer; Mr. Iqbal Hasan, Officer; Mr. Md. Hasanuzzaman Khan, Junior Officer help me by giving various information through interview.
q Practical work experience: Working in the different desk of the branch I collect some information that make the report informative.
q Case Study: In depth-study of selected cases helps me to collect information.
q Group Discussion: Group discussion with other internee of the branch and my classmates is another way to make me informative.
1.5.2 Secondary Sources
- Website of the EXIM Bank Ltd
- Several books and periodicals related to the banking sector.
- Bangladesh Bank’s report
- Different circular sent by the head office of EXIM Bank
- Various documentary file and prior research report of EXIM Bank.
- Annual Budget of EXIM Bank
- Annual Report 2006 of EXIM Bank and other private banks.
1.5.3 Data Collecting Method:
The internship report has been prepared all the basis of “on the job” experience with the EXIM Bank Bangladesh limited, Elephant Road branch. In spite of the scarcity of published data, it has been tried to make the report informative and handy. The data used in the report have been complied through different complicated ways- direct questionnaire to executives, continuous search on the ongoing accountants’, and interview with internal auditor and external auditors’ report. Working with the organization for a meager period of two month is the main aspect of acquiring data and information to evaluate the culture, working environment and similar sort of affair of the organization
1.5.4 Reliability of Collecting data:
The data collected are highly reliable in the sense that all data generated in the report are used exclusively by the EXIM Bank. The auditors’ report on the financial statements and the correspondence with different desks generate the reliable information to compose the report successfully.
1.6. Types of Study
There are mainly three different types of researches such as I) Exploratory Research, ii) Descriptive Research, and iii) Causal Research. After doing all the research work and analyze all those I have found that I have done the following type of research.
q Descriptive Research: In this report I tried to identify the real problems, operation and issue that are analyzed in a descriptive manner and also focus on findings and recommendations.
1.7 Limitation of the Study:
The present study was not out of limitations. But as an internee it was a great opportunity for me to know the banking activities in Bangladesh especially of EXIM Bank. Some constraints are appended bellow:
· Lack of Information or Data: Adequate and in-depth well-organized information is not available for access. Though the officials tried to assist, sometimes their working pressure couldn’t give me proper assistance what I needed. There is some information which need special permission from top level is not always achievable.
· Time Constraint: It is something like impossible to cover the entire foreign exchange banking services and performance phenomena exploiting a two month time period while an employee or an officer is awarded with one or two year probationary period to do his or her particular job.
· Secrecy of Information: Some of the information needed to explore the current marker scenario of the company was not disclosed.
· Comparison Status: I have had no opportunity to compare the foreign exchange banking system of the EXIM Bank with that of other contemporary and common size banks. I had compared the banks that information is available. It was mainly because of the shortage of time and internship nature.
· Lack of Experience: Though I have prepared many reports before, I had no experience of internship. So inexperience is one of the main constraints of the study.
1.8 Report Design
The report is mainly consisting of seven parts:
Part 1 Orientation of the report:. The first chapter of the report describes the introductory words of the internship report and methodology used in the preparation of the report.
Part 2 An Overview of Organization: It will describe the historical background of EXIM Bank Ltd; its objectives, mission, company profile, performance etc.
Part 3 Foreign Exchange Services: In this part I have presented the fundamental analysis of bank services in foreign exchange of the EXIM Bank.
Part 4 Performance Evaluation of the Bank: In this chapter I have critically done a comparison between the performance of EXIM Bank Ltd and other private banks.
Part 5 Finding, Conclusion and Recommendation: This part will contain the critics of the foreign exchange services of EXIM Bank Ltd, which I have found in my 8 weeks working experience at bank and findings and recommendations of the problems.
2.1 Incorporation of Organization
EXIM Bank Limited was established in 1999 under the leadership of Late Mr. Shahjahan Kabir, founder chairman who had a long dream of floating a commercial bank that would contribute to the socio-economic development of our country. A group of highly qualified and successful entrepreneurs joined their hands with the founder chairman to materialize his dream. This bank starts functioning from 3rd August 1999 with Mr. Alamgir Kabir, FCA as the Advisor and Mr. Mohammad Lakiotullah as the Managing Director. Both of them have long experience in the financial sector of our country. By their pragmatic decision and management directives in the operational activities, this bank has earned a secured and distinctive position in the banking industry in terms of performance, growth, and excellent management. The bank has migrated all of its conventional banking operation into Shariah based Islami banking since July/2004.
2.2 Mission and Vision of EXIM Bank
The efforts of EXIM Bank Limited are focused on delivery of quality service in all areas of banking activities with the aim to add to increased value to shareholders investment and offer highest possible benefits to the customers.
Mission:
q To be the most caring and customer friendly and service oriented banks.
q To create a technology based most efficient banking environment for its customers.
q To ensure ethics and transparency in all levels.
q To ensure sustainable growth and establish full value of the honorable shareholders and
q Above all, to add effective contribution to the national economy
Vision:
The gist of the bank’s vision is ‘Together Toward Tomorrow’. Export Import Bank of Bangladesh believes in togetherness with its customers, in its march on the road to growth and progress with services.
2.3 Corporate Information’s at a Glance:
EXIM Bank At A Glance |
|
Name of the Bank: |
EXIM Bank Of Bangladesh Limited |
| Status: | Public Limited Company |
| Date of Incorporation: | 2nd June 1999. |
| Date of Commencement: | August 03, 1999 |
| Listing with Dhaka Stock Exchange: | September 2004. |
| Listing with Chittagong Stock Exchange: | September 2004. |
| Head Office: | Printers Buildings (5th, 6th & 10th floor |
| Telex: | 642527 EXM HO BJ |
| Phone: | 9553872, 9553925 |
| E-mail: | eximho@bdonline.com |
| Website: | www.eximbankbd.com |
| Chairman: | Mr. Md. Nazrul Islam Mazumder. |
| Managing Director: | Mr. Md. Lakiot Ullah. |
| Authorized Capital: | Tk. 1000.00 million |
| Paid-up-Capital: | Tk. 1713..57 million |
| Shareholder’s Equity: | Tk. 3111.68 million |
| Operating Profit: | Tk. 355.02 million |
| Total Asset: | Tk. 38,442.64 million |
| Number of Employees: | 1020 Persons |
| Number of Shareholders: | 15395 no |
| Number of Branches: | 30 |
2.3.1 Corporate culture of EXIM Bank:
EXIM Bank is one of the most disciplined banks with a distinctive corporate culture. The bank believes in shared meaning, shared understanding and shared sense making. People can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the bank and the needs of the customers who are of paramount importance to us. The people in the bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture the bank belongs has not been imposed; it has rather been achieved through its corporate conduct.
2.3.2 Corporate Social Responsibilities (CSR) of EXIM Bank:
The purpose of its banking business is, obviously, to earn profit, but the promoters and the equity holders are aware of their commitment to the society to which they belong. A chunk of the profit is kept aside and/or spent for socio-economic development through trustee and in patronization of art, culture and sports of the country. In past recent years the bank has supported the poor and meritorious students for smoothen their education. In 2007 about 80 students of different institutions like (DU, BUET, DMC, VNC, and NDC) have taken scholarship. The bank sponsored the “Beautification Project” of Dhaka mega city conducted by Dhaka City Corporation.
2.3.3 Achievement:
It is a great pleasure that by the grace of Almighty Allah, The bank has migrated at a time all the branches from its conventional banking operation into Shariah based Islami banking operation without any trouble. The officers and executives of bank motivated the valued customers by counseling and persuasion in light with the spirit of Islam especially for the non-Muslim customers. IT division has done the excellent job of converting and fitting the conventional business processes into the processes based on Shariah. It has been made possible by following a systematic procedure of migration under the leadership of honorable Managing Director.
2.4 Operational Area:
As a commercial bank, EXIM Bank provides all traditional banking services including a wide range of savings and investment scheme products, foreign exchange and ancillary services with the support of modern technology and professional management. But the main stress is, as the name implies, put on export and import trade handling & financing and the bank has become the pioneer in promoting readymade garment industries and one of the largest financiers in this sector. Since inspection, the bank foresighted the bright prospects of this sector and extended finance to the deserving and promising entrepreneurs. It provides this sector with financial support including market information and advice and today the garment sector constitute the lion portion of the total export of the company.
2.5 Divisions of EXIM Bank
EXIM Bank conducts its various activities by its some functional division. The following chart shows the functional division of EXIM Bank.
Figure: 2.1 Functional Structure of EXIM Bank
2.6 Products and Services of EXIM Bank
The following chart shows products and services of different branches of EXIM Bank
| Product and Services |
| Deposit Product |
| Al-Wadia Deposit Account
Mudaraba Term Deposit Mudaraba Savings Scheme Mudaraba Credit Card Foreign Currency Deposit A/c |
| Foreign Exchange service |
| Export Finance |
| Import Finance |
| Inward Remittance |
| Issue L/C |
| Foreign DD |
| Foreign TT |
| Shipping Guarantee |
| Bonded warehouse Service |
| Telex/SWIFT Facility |
| Investment Product |
| Corporate Finance |
| Commercial Finance |
| Industrial Finance |
| Project Finance |
| Lease Finance |
| Syndicate Investment |
| Hire Purchase Finance |
| Real Estate Finance |
Fig: 2.2 Products & Services of EXIM Bank
· Mudaraba Savings Schemes are as follows
Super Savings Monthly Savings Monthly Income Smart Saver Hajj
Deposit
Scheme Scheme Scheme
Islamic banks extend investment (loan) under the principles of the followings:
- Mudaraba: Mudaraba means the hiring of capital. It is a contract in a profit sharing where one party provides capital/funds and the other labor/work. Under this system, banks provide the capital and clients provide expertise and profit is shared according to agreed ratio.
- Musharaka: This mode of finance is represented by two or more financiers in contributions of equal or unequal ratios of capital to establish a new project or to participate in an established one and all partners are entitled to share the total profits of the venture according to ratio as mutually agreed upon allowing for managerial skills to be remunerated.
- Murabaha: About 70 to 80 percent of financial operations of most of the Islamic banks belong to this segment. It enables the investor to obtain finished goods, raw materials, machinery or equipment from the local market or through import by opening letter of credit (L/C). Under this technique, bank buys the goods upon the request of the client and then the customer form the bank purchases these goods with a fixed period of time or by installment with a cost, which includes cost of goods plus mark-up profit.
- Ijarah: Izarah financing under Islamic Shariah is same as the western concept of leasing. In Ijarah financing, the bank finances capital goods to industrial project against payment of a rent by installment.
- Bai-Muajjal: Bai Muajjal means sale for which payment is made at a future fixed date or within a fixed period. Bai-Muajjal is treated as a contract between the bank and the client under which the bank sells to the client certain specified goods at an agreed price payable within a fixed future date in lump sum or by installments. By this credit sell bank possession of the goods also.
- Quard: is interest free loan to the holder of investment accounts of the bank on compassionate ground.
2.7 Management Profile
The bank started functioning with Mr. Alamgir Kabir, FCA as the Advisor and Mr. Mohammad Lakiotullah as the Managing Director. Both of them have long experience in the financial sector. By their pragmatic decision and management directives in the operational activities, this bank has earned a secured and distinctive position in the banking industry in terms of performance, growth, and excellent management.
2.8 Board of Directors:
Board of directors of EXIM bank include Late Shahjahan Kabir, Founder Chairman; Md. Nazrul Islam, Chirman;Alamgir Kabir, Former Advisor; Mohammed Lokiotullah, Managing Director and the following persons in the chart.
| Name of Directors | Name of Sponsors |
| Mr. Md. Nazrul Islam Mazumder | Mr. Md. Nazrul Islam Swapan |
| Mr. Md. Faiz Ullah | Mr. Mohammad Abdullah |
| Mrs. Nasima Akhter | Mr. Md. Altaf Hossain |
| Mr. A.K.M. Nurul Fazal | Mrs. Nasreen Islam |
| Mr. Zubayer Kabir | Mr. Md. Mazakat Harun |
| Mr. Md. Habibullah | Mr. Abdullah Al-Mamun |
| Mr. Md. Abdul Mannan | Mr. Md. Fahim Zaman Pathan |
| Al-haj Md. Nurul Amin | Mrs. Asma Begum |
| Mr. Abdullah Al-Zahir Swapan | Engr. Aminur Rahman Khan |
| Mr. Mohammed Shahidullah | Mrs. Rizwana K. Riza |
| Professor Suraiya Begum | Mr. Md. Nur Hussain |
Table: 2.1 List of directors and sponsors of EXIM Bank Ltd.
2.9 Hierarchy of Corporate Management
Figure: 2.3 Hierarchy of Corporate Management of EXIM Bank Ltd.
2.10 Hierarchy of Branch Management
Figure: 2.4 Hierarchy of Branch Management of EXIM Bank Ltd.
2.11 Functional Organization Chart of EXIM Bank (Head Office)
Figure : 2.5 Functional Chart of EXIM Bank Ltd.
2.12 Strength, Weakness, Opportunities and Threaten (SWOT) Analysis of EXIM Bank:
2.11.1 Strength of the Bank:
The major strength of the bank is the Board of Directors of EXIM bank as they themselves a large financed based, and they invest a lot of capital to the bank and their endeavor.
· Well-capitalized bank with potential to increase capital base.
- Has grown quite rapidly in all spheres of banking services.
- Earned good reputation among customers and regulators within a very short period.
- As Islamic shariah based EXIM bank has a prominent shariah council.
2.11.2 Weakness of the Bank:
· The bank has no ATM (automated teller Machines) and credit card.
· The advertisement activity is not adequate.
· The banking services are not online based.
· Proper islamic rule is absent in the bank.
2.11.3 Opportunities of the Bank:
The EXIM Bank is going to become more popular bank in our country. People feel better about the services of bank. If EXIM Bank can introduce online banking all over the country, the bank will be able to provide effective and very especial service to the clients ultimately it will generate profits. So in future the bank may become one of the best financial institution in the country.
2.11.4 Threaten of the Bank:
- EXIM Bank may suffer in deposit crisis because this bank cannot borrow at short notice (Call money as it is an Islamic bank).
- Another threaten is the technology, the bank must be adjusted with new technologies and information. Otherwise the profitability of the bank may hamper.
2.13 Overall Performance of EXIM Bank
| SL | Particulars | 2002 | 2003 | 2004 | 2005 | 2006 |
| 1. | Paid up capital | 25 | 31 | 63 | 88 | 171 |
| 2 | Total capital | 55 | 75 | 159 | 218 | 347 |
| 3. | Surplus/ shortage of capital | .6 | (21) | 8 | (13) | 55 |
| 4. | Total assets | 1137 | 1789 | 2435 | 3372 | 4179 |
| 5. | Total deposit | |||||
| 6. | Total investment | |||||
| 7. | Total contingent liabilities & commitments | 461 | 790 | 900 | 1594 | 1899 |
| 8. | Ratio on investment & deposit | |||||
| 9. | Ratio on classified investment & total investment | 0.10% | 2.43% | 2.40% | 1.89% | 1.80% |
| 10. | Profit after tax & provision | 20 | 25 | 38 | 55 | 65 |
| 11. | Cost of fund | 9.29% | 9.26% | 8.40% | 8.08% | 9.17% |
| 12. | Profit earning asset | 1009 | 1588 | 1975 | 2874 | 3516 |
| 13 | Non-profit bearing asset | 127 | 201 | 461 | 497 | 663 |
| 14. | Return on investment (share & bonds) | 5.40% | 5.52% | 9.87% | 6.63% | 6.55% |
| 15. | Return on assets (after tax) | 3.40% | 3.15% | 1.57% | 1.65% | 1.73% |
| 16. | Income on investment (share & bonds) | 8 | 13 | 15 | 11 | 12 |
| 17. | EPS | 79.14 | 81.18 | 60.82 | 48.61 | 43.48 |
| 18. | P/E ratio | N/A | N/A | 12.80 | 10.53 | 7.74 |
Table 2.2 Overall Performance of EXIM Bank Ltd.