1.1 An overview of the
IBBL
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 Qur’an 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
1.2 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 banking 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.
1.3 Definition and
Concept of Islamic Bank
The definition of
“Islamic Banking” and prove whether its activities are unequal to the
conventional banking system & satisfy the principle of Islamic Shari’ah.
Definition given by ‘OIC’ is- “An Islami bank is financial institution whose
statutes, rules and regulations expressly state it’s commitment to the
principle of Islamic shra’ah and to he banning of the receipt and payment of
interest on any of its operation”. This definition indicates that IBBL is more
convenient and acceptable to the Muslim mankind.
Islamic Bank is
committed to conduct all kinds of banking activities on the basis of
profit-loss sharing system. The objective of the Islamic Shari’ah is to promote
the welfare of the people which lies in safeguarding their faith, their life,
their intellect, their posterity and their wealth. The basis of this Shari’ah
is wisdom and welfare of the people in this world as well as the hereafter,
which lies in complete justice, mercy, well-being and wisdom.
1.4 Aims and
Objectives of IBBL
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. Its
objectives are different from conventional banking that is as follows:
v Conducting interest-
free banking
v Establishing
participatory banking instead of banking on debtor- creditor relationship.
v Investing through
different modes permitted under Islamic Shariah.
v Accepting deposits on
profit- loss sharing basis
v Establishing welfare
oriented banking system.
v Extending co-operation
to the poor, the helpless and the low-income group for their economic
enlistment
v Playing a pivotal role
in human development and employment generation.
1.5
Goals of IBBL
v To establish Ihsan
(gracious conduct or kindness) in economic affairs
v Establishment of
Maroof (proper and good acts, institutions) in economic life.
v Elimination of Munker
(Evil, wrong of injurious practices) from economic life.
v To achieve maximum
economic growth
v To maximized
employment to ensure maximum distribution of wealth in society
v To achieve universal
education and to encourage co-operation in society.
1.6
Features of Islamic Bank
1.6.1.
Prohibition of interest
The
traditional capitalist banking system depends on interest. It receives interest
for providing loans and pays interest for taking loans. The spread between
these two interests is the source of its profit. But according to Islamic
Shariah all types of interest is banned. So, Islamic bank does not carry on
business of interest and it completely avoids the transaction of interest.
1.6.2.
Investment Based on Profit
After
departing from interest, the alternate ways of income for Islamic bank is
investment and profit. Thus IBBL gives up any transaction of interest and makes
investments based on profit. Bank distributes its profit to its depositors and
shareholders.
1.6.3.
Investment in Halal Business
Islamic
Shariah has banned the business of haram goods. For example, Islam not only
forbids the drinking of alcohol but also banned any business of alcohol.
Therefore, Islamic bank does not get any haram business and only do halal
business.
1.6.4.
Halal Paths and Procedures
Islamic
Shariah also rejects any haram path or process in case of a halal business.
Therefore, Islamic bank system only allows the halal path procedures of halal
business.
1.7
Mission of IBBL
To establish Islamic
banking through the introduction of a welfare oriented banking system 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 developed areas of the
country. To encourages socio-economic enlistment and financial services to the
low-income community particularly in the rural areas.
1.8 Vision of IBBL
Our vision is to
always strive to achieve superior financial performance, be considered a
leading Islamic bank by reputation and performance.
v Our goal is to
establish and maintain the modern banking techniques, to ensure soundness and
development of the financial system based on Islamic principles and 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 stability of financial systems.
v We will try to
encourage savings in the form of direct investment.
v We will also try to
encourage investment particularly in projects, which are more likely to lead to
higher employment.
1.9 Functions of IBBL
v To maintain all types
of deposit accounts.
v To make investment.
v To conduct foreign
exchange business.
v To extend other
banking services.
To
conduct social welfare activities through Islami Bank Foundation
1.10 Corporate
Information at a Glance
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1.11 Difference
between Conventional Bank and Islamic Bank
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Conventional Banking |
Islamic Banking |
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1. The functions and |
1. The functions and |
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2. The investor is |
2. In contrast, it |
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3. It aims at |
3. It also aims at |
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4. It does not deal |
4. In the modern |
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5. Leading money and |
5. Participation in |
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6. Its scope of |
6. Its scope of |
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7. It can charge |
7. The Islamic banks |
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8. In it very often, |
8. It gives due |
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9. For |
9. For the Islamic |
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10. Since income |
10. Since it shares |
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11. The conventional |
11. The Islamic |
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12. The status of a |
12. The status of |
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13. A conventional |
13. Strictly |
1.12 Hierarchy of
Dhanmondi Branch
Hierarchy
of DhanmondiBranch
Figure
01: Hierarchy of DhanmondiBranch
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Sources: DhanmondiBranch,
local Branch
2.1
Introduction about Investment
Investment
is the action of deploying funds with the intention and expectation that they
will earn a positive return for the owner. Funds may be invested in either real
assets or financial assets. When resources are used for purchasing fixed and
current assets in a production process or for a trading purpose, then it can be
termed as real investment. IBBL, Dhanmondi operates its investment
through mode wise, sector wise and scheme wise.
The author has done
her internship program in Islami Bank Bangladesh Ltd. At Dhanmondi. This is a
branch of one of the leading commercial private banks in our country. This bank
was established in 14th November 2000 based on Islamic sahriah.
There are 33 employees. Their vision is strived to achieve superior financial
performance and be considered a leading Islamic bank by reputation and
performance. This bank internship program duration was for total 60 days that
means 45 working days. It was designed by Islami Bank Training and Research
Academy (IBTRA). First 15 days she had done theoretical class in IBTRA. Then
IBTRA transferred me the Dhanmondi for gather some practical experience and
knowledge with 45 days about Islamic banking and financial system.
2.2 Functional Department
The Islamic Bank
Bangladesh Limited (IBBL),Dhanmondi is headed by on senior vice president
(SVP). There are several section headed by some most skilled and experienced
person under the SVP. These are:
v Account opening
section.
v P.O, T.D.R, M.S.B,
M.S.S, Haji Section& D.D, T.T section.
v Transaction entry
section.
v Cash section.
v Foreign exchange
section.
v Investment section.
v Clean cash section.
v Clearing house
section.
2.3 Modes of
investment
Credit department of
IBBL actually invests its money in various sectors of the economy through
different modes permitted by shariah and approved by Bangladesh Bank. The modes
of investment are as follows:
- Bai-Mechanism
- Share Mechanism
- Ijara Mechanism
3.4 Bai-Mechanism
Figure-3:
Bai-Mechanism (Trading Mode)
(Trading Mode)
Under Bai Mechanism
banks are invested their money in some different way. Such as:
2.4.1 Bai-Murabaha
(Contract Sale on Profit)
Meaning
The terms “Bai-Murabaha”
have been derived from Arabic words and (Bai and Ribhun). The word means
purchase and sale and the word “Ribhun” means an agreed upon profit
“Bai-Murabaha” means sale for on agreed upon profit.
Definition of
Bai-Murabaha
“Bai-Murabaha” may be
defined as a contract between a buyer and a seller under which the seller sells
certain specific goods permissible under Islamic Shariah and the Law of the
land to the buyer at a cost plus an agreed profit payable today or on same date
in the future in lump-sum or by installment. The profit may be either a fixed
sum or based on a percentage of the price of the good.
2.4.1.1 Steps of
Bai-Murabaha
First Step: The client submits a proposal regarding his requirements of the bank.
The bank responds by sending a counter proposal either accepting the buyer’s
price or stipulating a different price.
Second Step: The client promises to buy the commodity
from the bank on a Bai-Murabaha basis. The bank accepts the order and
establishes the terms and conditions of the transaction.
Third Step: The bank informs the client (ultimate buyer)
of its approval of the agreement to purchase. The bank may pay for the
goods immediately or in accordance with the agreement. The seller expresses
its approval to the sale and sends the invoice(s).
Fourth Step: The two parties (the bank and the client) sign the Bai-Murabaha Sale
contract according to the agreement to purchase.
Fifth Step: The Bank authorizes the client or its nominee to receive the
commodity. The seller sends the commodity to the place of delivery
agreed upon. The client undertakes the receipt of the commodity in its
capacity as legal representative and notifies the bank of the execution of the
proxy.
Types of Bai-Murabaha
In respect of dealing
parties Bai-Murabaha may be of two types:
Ordinary Bai-Murabaha:
Ordinary Bai-Murabaha
is a direct transaction between a buyer and a seller. Here the seller is
ordinary traders who purchase goods from the market in the hopes of selling
these goods to anther party for a profit. In this case, the seller undertakes
the entire risk of his capital investment in the goods purchased. Where or not
he earns a profit depends on his ability to find a buyer for the merchandise he
has acquire
Bai-Murabaha on order and promise:
This transaction
involves three parties the buyer, the seller and Bank. Under this arrangement
the bank acts as an intermediary trader between the buyer and seller. In other
words, upon receipt of an order and arrangement to purchase product from the
buyer, the bank will purchase the product from the seller to fulfill the order.
2.4.2 Bai-Muajjal (Deferred Sale)
Meaning of Bai-Muajjal
The terms
“Bai” and “Muajjal” are derived from the Arabic words ‘Bai’
and ‘Ajal’. The word ‘Bai’ means purchase and sale and the word ‘Ajal’ means a
fixed time or a fixed period. “Bai-Muajjal” is a sale for which
payment is made at a future fixed date or within a fixed period. In short, it
is a sale on credit.
Definition
The
Bai-Muajjal may be defined as a contract between a buyer and a seller under
which the seller sells certain specific goods, permissible under Shariah and
law of the country, to the buyer at an agreed fixed price payable at a certain
fixed future date in lump sum or in fixed installments.
2.4.3
Bai-Salam (Advance payment)
Meaning
of Bai-Salam
The term “Bai” means
sales and purchase and “Salam” means advance.”Bai-Salam” means advance sales
and purchase.
Definition of
Bai-Salam
Bai-Salam may be
defined as a contract between a buyer and a seller under which the seller sells
in advance in the certain commodity (ies)/ products (s) permissible under
Islamic Shariah and the law of the land to the buyer at a agreed price payable
on execution of the said contract and the commodity (ies)/ products (s) to the
buyer at a future time in exchange of an advance price fully paid on the spot.
·
The seller receives
advance payment in exchange for the obligation to deliver the commodity at some
later date. He benefits from the Salam sale by locking in a price for his
commodity, thereby allowing him to cover his financial needs whether they are
personal expenses, family expenses or business expenses.
·
The purchaser
benefits because he receives delivery of the commodity when it is needed to
fulfill some other agreement, without incurring storage costs. Second, a
Bai-Salam sale is usually less expensive than a cash sale. Finally a Bai-Salam
agreement allows the purchase to lock in a price, thus protecting him from
price fluctuation.
2.4.4
Bai-Istisna’a
Meaning
of Bai-Istisna’a
The word
Istisna’a has been derived from the word “sana” which means Industry. Istisna’a
means to purchase specific products by placing order to a manufacturer or to
sale specific products after having the same manufactured against order of a
buyer.
Definition
of Istisna’a Sale
Intishna’a sale is a
contract in which the price is paid in advance at the time of the contract and
the object of sale is manufactured and delivered later. The majority of the
jurist considered Intishna’a as one of the divisions of Salam; therefore, it is
subsumed under the definition of Salam.
Steps of Istisna’a
Sale
·
Istisna’a Sale
Contract: The Buyer
expresses his desire to buy a commodity and brings a request to purchase the
commodity to the bank. The method of payment, whether cash or deferred is set
forth in the agreement. The bank agrees to deliver the commodity to the buyer
at some agreed upon time in the future.
·
Delivery and Receipt
of the Commodity: The seller in the
parallel Istisna’a agreement, delivers the commodity to the bank on the agreed
upon date. The bank, in turn, delivers the product to the buyer of the original
Istisna’a contract, in accordance with the original agreement. In this way, all
parties fulfill their obligations to the contract.
2.4.5 Quard
The word “Quard” is an
Arabic word” which means loan or credit on advance. The literal meaning of
Quard is giving “Fungible goods” for use without any extra value returning
those goods. It must follow the principle of equal for equal return with
homogeneous goods. Fungible goods may be rice, oil, salt, money etc. In banking
sector, money is used as quard. Quard is HaIaI by Islam for not to pay any
extra or interest in return.
Characteristics of
Fungible goods-
1. Goods which are
vanished /converted for one time use.
2. No flow of service.
3. Service can’t be
separated from the actual goods.
Characteristics of
Quard-
v There should have
fungible goods.
v Goods must be returned
equally.
v There is no extra
payment.
v To specific period for
returning goods.
Quard-e-Hasana:
Quard-E-Hasana is also one kind of Quard which is given with the expectation of
return or not.
2.5 Share Mechanism
Figure 04: Share
Mechanism
2.5.1 Mudaraba (Share
Mechanism)
Meaning
of Mudaraba
The term
Mudaraba come from Arabic word “Travel” means for undertaking business.
Definition
of Mudaraba
It is a form of
partnership where one party provides the funds while the other provides the
expertise and management. The first party is called the Sahib-Al-Maal and the
latter is referred to as the Mudarib. Any profits accrued are shared between
the two parties on a pre-agreed basis, while capital loss is exclusively borne
by the partner providing the capital.
Important features
v Bank supplies capital
as Sahib-Al-Mall and the client invest if in the business with his experience.
v Administration and
management is maintained by the client. Profit is divided as per management.
v Bank bears the actual
loss alone.
v Client cannot take
another investment for that specific business without the permission of the
Bank.
2.5.2 Musharaka
(Partnership)
Meaning of Musharaka
The word Musharaka is
derived from the Arabic word Shirkat meaning partnership or sharing.
Definition of
Musharaka
It’s An Islamic
financial technique that involves different types of profit and loss sharing
partnership. Share both in the capital and management of a project so that
profits will be distributed among them as per rations, where loss is shared
according to ratios of their equity participation. In this case both the bank
and the client provide capital at an agreed upon ratio and manage the business
jointly. Share the cent as per agreed upon ratio and bear the loss, If any, in
proportion to their respective equity.
Bank may move itself
with the selected client for conducting any shariah permissible business under
Musharaka mode.
Important feature:
v The investment client
will normally run and manage the business.
v The Bank shall take
part in the policy and decision making as well as overseeing (supervision and
monitoring) the operations of the business of the client. The Bank may appoint
suitable person(s) to manage the business and to maintain books of accounts of
the business property.
v As the investment
client shall manage the enterprise, the Bank may pay more share of profit to
him than that of his proportionate capital contribution.
v Loss, if any, shall be
shared on the basis of capital ratio
Financing
through a Musharaka partnership is investment-based. The capital provider has
full control in the management of the business. In addition, he shares proportionately
in both the profits and losses of the business. Therefore, the rate of return
is uncertain and can be either positive or negative. The cost of capital is
also uncertain and there exists perfect correlation between the relationship of
cost of capital and rate of return on capital.
2.6 Ijara mechanism
(Leasing Mode)
Figure 05: Ijara
mechanism (Leasing Mode)
Higher purchase under
Sirkatul Melk (HPSM)
Under this mode the
Bank may supply implements/equipments/goods on rental basis. The ownership of
the implements/equipments/goods will be with the Bank and the client jointly
and the portion of the client will remain to the Bank as mortgage until the
closer of the investment account, but the client will be authorized to possess
the equipment for certain period. The client, after completion of the
installment, will be the owner of the implements/equipments/goods.
Meaning and Definition
Hire purchase under
Sirkatul Meelk is a special type of contract, which has been developed through
practices. Actually, it is a synthesis of three contracts:
§ Sirkatul Melk
§ Ijarah
§ Sale
These may be defined
as follows
2.6.1 Sirkatul Melk
Sirkatul means
partnership. Sirkatul Meelk means share in ownership. When two or more person
supply equity, purchase an asset, own the same jointly, and share the benefits
as per agreement and bear the loss in proportion to their respective equity,
the contract is called Sirkatul Meelk contract.
2.6.2 Ijarah
The term Ijarah has
been divided from the Arabic word (Air) and (Ujrat) which means consideration,
return, and wages, rent. This is really the exchange value or consideration,
return, wage, rent of service of an ASSET. Ijarah has been defining as a
contract between two parties, the Hire and Hire where the Hire enjoys or reaps
a specific service or benefit against a specified consideration or rent from
the asset owned by the Hire. It is Hire agreement under which a certain asset
is hired out by the Hire to a Hirer against fixed rent or rentals for a specified
period.
2.6.3
Sale
This is a sale
contract between a buyer and a seller under which the ownership of certain
goods or asset is transferred by seller to the buyer against agreed upon price
to be paid by the buyer.
2.7.1 Induction of
Client
Generally banks analysis the five C’s of the
clients:
ü
Character
ü
Capacity
ü
Capital
ü
Collateral,
and
ü
Condition
2.7.2
Application
a) All columns are
properly field in;
b) Particulars and
information given therein are complete and correct in all respects;
c) All required
Documents/papers as listed in the footnote for the application is submitted;
d) It is signed by
the client as per specimen signature with the bank and duly verified by the
authorized official of the bank.
2.7.3 Categorization
Categories the
proposal as under:
- Hire Purchase
under Shirkatul Melk Commercial - Hire Purchase
under Shirkatul Melk Industrial - Hire Purchase
under Shirkatul Melk Real Estate: - Hire Purchase
under Shirkatul Melk Transport: - Hire Purchase
under Shirkatul Melk Agriculture
2.7.4
Processing and Appraisal
Enter the Application in the “Investment
Proposal Received and Disposal Register (B-53) and allot a Serial Number to it.
v Examine shariah
permissibility of the goods. Reject the proposal outright, if not permitted by
Islamic Shariah.
v Check-up Credit
Restriction Schedule of Bangladesh Bank and Head Office Current Investment
Policy Guidelines.
v Visit the Business
establishment of the Client. Talk to the business and important personalities
of the locality to ascertain the Honesty, Integrity and Business dealings of
the Client.
v Request for
confidential report of the client from local Bank Branches. Confident Report
from Credit Information Bureau (CIB) of Bangladesh Bank through Head Office
Investment Division as per Instruction Circular of Head Office in this Regard.
v Effective demand,
price of the goods, short or long-term duration, quality and other
specifications of the goods, availability, etc. of the said or projected goods.
2.7.5 Sanction
v On completion of
Appraisal as provided herein above, of the Proposal is found viable, issue
Sanction Advice (F-188) if it is within the business power of the Branch
mentioning all the terms and condition is duplicate to the Client and endorse
copies to Zonal and Head Offices retaining one copy in the Client’s file duly
accepted by the Client.
v If the proposal is not
within the Discretionary Power of the Branch, the Branch shall with Appraisal
Report on F-167A and F-167B to Zonal Office/Head Office.
v If the proposal is
within the Business Power of the Zonal Office, Zonal Office shall accord
Approval /Regret the Proposal.
v If the proposal is not
within the Business of the Zonal Office shall forward the proposal to Head
Office with their views and recommendations.
v On receiving the
proposal and the Appraisal Report along with supporting papers Head Office will
either approve or Regret.
v If the Branch/the
Zonal Office /Head Office, the branch will issue the Sanction advice (F-188)
with a copy to Zo/HO duly recorded in /Facility Sanctioned Register (B-119)
with authority to the investment Client for the limit.
v In case of investment
to the existing Client, obtain required papers, document with the past
performance and outstanding liabilities of the Client, if any and process of
sanction the propsal as per instruction laid down here-in-above after due
evaluation or study.
2.7.6 Documentation
stage
At this stage, usually
the bank analysis whether required documents are in order. In the documentation
stage, Islami Bank Bangladesh Limited (IBBL) checks the following documents of
the clients.
v Tax payment
Certificate.
v Stock report.
v Trade license
(renewal).
v VAT certificate.
v Liability Statement
for different parties.
v Receivable from
different clients.
v Other assets
statements.
v Commitment deed.
v Declaration letter.
v Three years net income
business transaction.
v Performance report
with the bank.
v Account Statement from
of the bank.
v Valuation certificate.
v Particulars of the
proposal.
v Particulars of the
mortgagors.
v Particulars of the
properties.
v Outstanding liability
position of the bank.
v Credit information
bureau report (CIB).
2.7.7 Disbursement
Stage
At this stage bank
decides to pay out money. Here the clients get his/her desired fund or goods.
It is to be noted that before disbursement a “site plan” showing the exact
location of each mortgage property needs to be physically verified.
2.7.8 Monitoring and
Recovery Stage
At the final stage of
investment processing of the Islami Bank Bangladesh Limited (IBBL), bank will
contract with the client continually; for example-bank can obtain monthly stock
report from the client in case of macro investment. Here the bank will keep his
eye on over the investment taker .if needed bank will physically verify the
clients operations. Also if bank feels anything is going wrong then it tries to
recover its investment by some way.
Example:
v Telephonic
communication
v Issuing letter.
v Final notice
v Legal notice.
v Suit filing.
2.8
Some Special Investment Schemes
The
Bank, since its inception, has been working for the uplift and emancipation of
the underprivileged, downtrodden and neglected sections of the populace and has
taken up various schemes for their well being. The objectives of these schemes
are to raise the standard of living of low-income group, development of human
resources and creation of avenues for self-employment.
|
SLNo. |
Schemes Name |
Implemented |
|
01 |
Household |
27.01.1993 |
|
02 |
Investment schemes |
11.07.1990 |
|
03 |
Small Business |
06.03.1991 |
|
04 |
Agricultural |
02.12.1992 |
|
05 |
Housing Investment |
30.11.1994 |
|
06 |
Real Estate |
24.08.1991 |
|
07 |
Rural Development |
31.08.1995 |
|
08 |
Transport |
21.05.1995 |
|
09 |
Car Investment |
14.11.1995 |
|
10 |
Mirpur Weavers |
09.10.1999 |
|
11 |
Micro Industries |
18.07.2000 |
|
12 |
Palli Griha Nirman |
30.01.2011 |
2.8.1
Household Durables Scheme
The
objective of the scheme is to increase standard of filing and quality of life
of the fixed income group by extending them investment facilities to purchase
household articles such as furniture like Almirah, sofa set, wardrobe; electric
and electronic equipment like television, refrigerator, gas cooker; air
conditioner, PC, washing machine; electric generator-IPS, UPS; motor cycle;
corrugated iron sheet, cement, rod, wood etc, for construction of dwelling
house; gold ornaments, tube-well, mobile telephone set etc; medical/
engineering instruments/equipment, computer, books etc for students.
2.8.2
Housing Investment Scheme
The
Bank has introduced this scheme recently to ease the serious housing problem in
the urban areas and to make arrangement for comfortable accommodation of the
fixed income group.
2.8.3
Officials of the Defense Forces
Permanent Officials of Government,
Semi-Government and Autonomous Organizations; Teachers of the
established Universities, University Colleges & Medical College: Graduate
Engineers, Doctors and Established professionals; Bangladeshi Officials of
reputed Multinational Companies, International Financial Organizations, Donor
Agencies, Foreign Embassies etc. Officials of local established & reputed
public Limited Companies; Wage Earner professionals like Doctors, Engineers,
Accountants, Teachers and other profession doing good job abroad with hand-some
pay-package shall be eligible to apply for availing investment facilities under
the Scheme.
2.8.4.
Real Estate Investment Program
Professionals,
Service-holders, Businessmen, Real Estate Developer and other categories of
people who are not entitled for availing investment facilities under Housing
investment Scheme, shall be eligible under this program. Investment is to be
extension/ completion of the house already constructed, commercial building, shopping
complex, flat/ apartment etc.
2.8.5.
Transport Investment Scheme
To
ease the existing transportation problem and ensure speedy economic growth and
development of the country particularly the expansion of trade, commerce and
industry, the Bank has taken up this Scheme. Under this Scheme investment is
being allowed to the existing successful businessmen and potential
entrepreneurs in this sector for all types of road and water transport like
bus, mini-bus, truck, launch, cargo-vessel, transport for rent-a-car service;
and baby taxi, tempo, pick-up van for self-employment; and ambulance for clinic
& hospital. The Bank is also extending investment facilities to
multinational companies, established business houses and well to do officials
and professionals for acquisition of private cars, microbus and jeeps.
2.8.6.
Car Investment Scheme
Car
is considered as an essential mode of transport in the modern society,
particularly by a section of the officials, business houses and business
executives and established professionals for movement in discharging their
duties and responsibilities punctually and efficiently. To meet this need,
Islami Bank has introduced the “Car investment Scheme” for the mid
and high ranking officials of government and semi-government organizations,
corporations, executives and directors of big business houses and companies and
also for persons of different professional groups on easy payment terms and
conditions.
2.8.7.
Investment Scheme for Doctors
The
Bank has taken up this Scheme to help unemployed qualified doctors to go for
self- employment and to provide latest medical equipments to specialist doctors
to extend modern Medicare facilities throughout the country.
2.8.8.
Small Business Investment Scheme
This
Scheme has been taken up for self-employment of educated unemployed youths of
rural and urban areas and to provide investment to small businessmen and
entrepreneurs. Investment is extended for about 200 economic activities in
sectors as live-stock, fishery, agro-trading/shop-keeping, transportation,
agricultural implements, forestry and service viz. laundry, signboard painting
etc.
2.8.9.
Agriculture Implements Investment Scheme
In
keeping with view of the people-oriented and welfare objectives of the Bank,
this scheme has been introduced to provide power tillers, power pumps, shallow
tube wells, thresher machines etc. on easy terms to unemployed rural youths for
self-employment and to the farmers to help augment production in agricultural
sector.
2.8.10.
Micro-Industries Investment Scheme
To
create wider base for industries as well as to encourage establishment of
micro-industries in different areas of the country by the potential
entrepreneurs and for diversification of the Bank’s investment port-folio, the
Bank introduced ‘Micro industries Investment Scheme’. Different sectors
including food and agriculture based industries, plastic & rubber
industries, forestry and forestry and furniture industries, engineering
industries, leather industries, chemical industries, textile industries,
recycling industries, service industries, electrical accessories industries,
computer technology industries, paper products industries, handicrafts
industries, fishery & live stock farming, hollow bricks, roof tiles and any
other viable micro-industries have been identified for financing under the Scheme.
2.8.11
Rural Development Scheme
Bangladesh is
predominantly an agricultural country with vast majority living in rural areas.
Near than 60% of the people live below the poverty line. Seasonal unemployment
and under idle and without job in most of the time of the year. As a result
people in large number are migrating to urban areas, particularly in metro
polish in search of employment thereby creating social and environment hazards.
Islami Bank has, therefore, taken up a Scheme to reactive the rural economy and
develops model villages through integrated rural development approach. The
objective of the Scheme is to create income generating and productive
self-employment opportunities through extension of investment for the
development of rural areas and thereby contribute in alleviating rural poverty.
Investment will be allowed for the purpose of, amongst others, production of 21
types of main crops viz. food, cereals and cash crops, off-farm activities like
dairy, beef fattening, goat rearing, poultry, shop keeping, peddling etc, rural
transport like rickshaw, rickshaw-van, cart etc; irrigation equipment, hand
tube-well, housing materials. in all covering about 343 types of economic
activities, Islami Bank Foundation, a subsidiary of the Bank, engaged in social
welfare activities shall, side by side, take care of the requirement of
sanitation, Medicare and education of the villages through integrated area
development approach under Islamic model
2.9 Some Islamic New
Investment Products
1)
Ijara Muntahin Bittamleek (Financial Lease)
Ijara is a form of
leasing where a property is leased by the lessor to the lessee in a way that at
the end of an agreed lease period, the lessees become the owner of the property
by purchasing it from the lessor during or at the end of the lease period at an
agreed sale price.
2)
Mudaraba on Lands
Literally, Mudaraba
means selling on profit. The Shari’ah application of this term is as follows:
A purchaser approaches
a seller, provides the details of goods he wants to purchase from a seller
& gives promise to the seller that he will purchase the goods from him at a
price, which percentage of profit. Applying this mechanism, the bank purchases
a plot of land as per clients’ specifications & their promise to purchase
it from the bank on deferred basis.
3)
Istissnaa (Manufacturing sale)
It is contract by a
spot purchase of a non available commodity or equipment is affected. The
manufacturer is committed to deliver the commodity or the equipment as per the
agreed upon specifications, price & date. Spot payment is not required as
the case with Salam sale.
The agreed commodity
upon manufacturing is delivered to the bank on a forward date along with
payment of the price subject to the terms of a contract. After delivery, the
bank sells the commodity in the market or to clients that have applied for the
purchase previously.
4)
Istizrar
Istizrar is type of
business permissible under Islamic Shariah. Under this mode, the buyer
purchases the goods in different quantities time to time from a specific seller
as per his requirement. Late of the total cost of the goods, taken by the buyer
in different times is calculated at the market price.
Shari’ah Council of
IBBL in its 15th meeting (dated 08.07.2009) approved this mode of
investment to introduce in IBBL.
5)
Juwala
Jueala is a specific
mechanism where the bank will make an agreement with the intending client, to
accomplish a specific work. Bank will realize commission or service charge
against the services rendered.
Bank can also use this
mechanism by providing financial services to the students for completion of
higher study & those who intends to perform Holy Hajj & Umrah & the
clients who intends to go abroad for job etc.
It is mentionable here
that, The Shari’ah council of IBBL include it as an agenda for studying
examining the feasibilities & Shari’ah permissibility of the product.
6)
Tawarruk
Tawarruk is special
types of investment. It means buying a commodity with deferred payment &
selling it to a person other than the seller for a lower price with immediate
payment. The cash requirement of the clients can be met by practicing this
mode.
7)
Islamic Pawning
Under this mode, Bank
provides a certain amount in client’s under Quard al Hasan mode. They pawn the
gold or other valuable assets against the Quard. The Bank takes safe keeping
charge from the client for safe keeping that asst on basis of Al Wadiah Ad
Damanah.This mode may be exercised to meet the cash requirement of entrepreneur
of Small & Medium size enterprise.
3.1 Summary of
Findings
Findings on the basis
of previous analysis and practical experience of 45 days internship program,
the following findings are observed during the internship period.
v Investment position of
this bank is in moderate level. The bank situated in Commercial place that is
why it’s commercial investment is very high in every mode Bi-Mechanism, Share
Mechanism, Ijara Mechanism.
v Investment
recollection position of this branch is increases day by day. Some clients are
in overdue position but maximum clients are paid their installment regularly.
v Bai Murabaha investment position
is slightly lower in previous years because of some lacking norms, values in
the investment clients and Bank bears the actual loss alone but Bai Muajjal &
HPSM investment is increasing rapidly.
3.2 Analysis & Major Findings
|
Year |
2007 |
2008 |
2009 |
2010 |
2011 |
|
Total Investments |
144980.61 |
180053.94 |
214615.80 |
263225.13 |
305840.56 |
|
Investment Ratio (%) |
87.13% |
89.08% |
87.85% |
90.17% |
89.47% |
Figure in Total
Investment
3.2.1 Year to year
Investment Position of Bai Murabaha in Dhanmondi
(Amount in Lac Taka)
|
Mode |
2007 |
2008 |
2009 |
2010 |
2011 |
|
Bai-Murabaha |
1531 |
533 |
480 |
382 |
420 |
|
% to Total |
4.32% |
37.18% |
47.72% |
68.31% |
70.82% |
Source: Appendix
Table 01: Bai Murabaha
Figure 06: Investment
Position of Bai murabaha inDhanmondi.
3.2.2 Year to Year
Ivestment position of Bai Muajjal in Dhanmondi
Table 02: Bai muajjal
(Amount in Lac Taka)
|
Mode |
2007 |
2008 |
2009 |
2010 |
2011 |
|
Bai-Mujjal |
27 |
51 |
50 |
45 |
47 |
|
% of total |
245.07% |
990.00% |
451.40% |
6524.00% |
632.89% |
Source: Appendix
Figure 07: Ivestment
position of Bai Muajjal inDhanmondi
From the figure-07,it is observed that investment
position is in the upward trends and downward trends for IBBL,Dhanmondi
investment, from 2006 to 2011 under Bai-Muajjal modes of investment. Investment
in 2006 was TK 27 lac and increased growth was 245.07%. The height investment
in this mode of investment and in 2007was Tk 51 lac and increased growth was
990.00%, and in 2011 was TK 47 lac and increased growth was 632.89%.
3.2.3 Year to Year
Ivestment position of Bai Salam I n Dhanmondi
(Amount in Lac Taka)
|
Mode |
2008 |
2009 |
2010 |
2011 |
|
Bai Salam |
41 |
66 |
69 |
47 |
|
% 0f total |
483.34% |
341.96% |
378.21% |
632.89% |
Source: Appendix
Table 03: Bai Salam
Figure 08: Ivestment
position of Bai Salam inDhanmondi
In this figure shows
the upward trends and downward trends for IBBL,Dhanmondi investment, from 2007
to 2011 under Bai-Salam modes of investment. Investment in 2007 was TK 41 lac
and increased growth was 483.34%. The height investment in this mode of
investment and in 2008 was Tk 66 lac and increased growth was 341.96%, and in
2011 was TK 47 lac and increased growth was 632.89%.
3.3 Year to Year
Ivestment position of Hire Purchase under Serkatul Melk in Dhanmondi
(Amount in Lac Taka)
|
Year |
2007 |
2008 |
2009 |
2010 |
2011 |
|
HPSM |
3994 |
10456 |
15445 |
14919 |
13795 |
|
% to Total |
1.65% |
1.89% |
1.46% |
0.18% |
2.15% |
Source: Appendix
Table 04: HPSM
Figure
09: Investment position of HPSM in Dhanmondi
In this figure shows
the upward trends and downward trends for IBBL,Dhanmondi investment, from 2006
to 2011 under HPSM modes of investment. Investment in 2006 was TK 3994 lac and
increased growth was 1.65%. The height investment in the HPSM In 2008 was Tk
15445 lac and increased growth was 1.46%, and in 2011 was TK 13795 lac and increased
growth was 2.15%.
3.4 Year to Year
Ivestment position of Murabaha TR in Dhanmondi
(Amount in Lac Taka)
|
Mode |
2007 |
2008 |
2009 |
2010 |
2011 |
|
Murabaha TR |
455 |
1377 |
1522 |
1670 |
2240 |
|
% to Total |
14.54% |
14.39% |
14.82% |
15.62% |
13.27% |
Source: Appendix
Table 05: Murabaha TR
Figure
10: Investment position of Murabaha TR inDhanmondi
In this figure shows
the upward trends for IBBL,Dhanmondi investment, from 2006 to 2011 under modes
of Murabaha TR investment. Investment in 2006 was TK 455 lac and increased growth
was 15.54%. The highest investment in the Murabaha TR In june 2011 was Tk 2240
lac and increased growth was 13.27%.
3.5 Year to Year
Ivestment position of Special scheme in Dhanmondi
(Amount in Lac Taka)
|
Name of schemes |
2007 |
2008 |
2009 |
2010 |
2011 |
|
HDS |
15.67 |
30.5 |
30.05 |
25.31 |
25.71 |
|
ISD |
1.7 |
2.22 |
2.75 |
2.55 |
0.05 |
|
TIS |
23.44 |
55.67 |
37.21 |
257.41 |
622.58 |
|
CIS |
17.12 |
22.11 |
37.50 |
22.19 |
18.44 |
|
SHDS |
3.1 |
4.62 |
7.11 |
6.21 |
5.52 |
|
HIS |
299.11 |
320.78 |
367.5 |
410.12 |
323.98 |
|
REIS |
2612.05 |
3025.5 |
3420.1 |
3820.47 |
3964.09 |
|
SHBIS |
178.56 |
197.87 |
222.48 |
225.52 |
245.07 |
|
Sub-Total Investment under Scheme) |
3150.75 |
3659.27 |
4124.7 |
4769.78 |
5205.44 |
|
Total Investment |
8845 |
14094 |
8141.9 |
13203 |
13538 |
|
% to total |
35.63% |
25.97% |
50.66% |
36.12% |
38.45% |
Source: Appendix
Growth
|
Year |
Growth |
|
2007 |
35.63% |
|
2008 |
25.97% |
|
2009 |
50.66% |
|
2011 |
36.12% |
|
2011 |
38.45% |
Table
06: Investment position of Special scheme
Figure 11: Investment
positions of Special schemes in Dhanmondi
In this figure shows
the upward trends and downward trends for IBBL, Dhanmondi investment, from 2005
to 2009 under special scheme of investment. In 2005, the investment growth was
35.63%, in 2006, the investment growth was 25.97% and it was the lowest
investment growth. In 2007, the investment growth was 25.97% and it was the
highest investment growth. In 2009, the investment growth was 38.45%.
4.1 Major Findings
Findings on the basis
of previous analysis and practical experience of 45 days internship program,
the following findings are observed during the internship period.
v Investment position of
this bank is in moderate level. The bank situated in Commercial place that is
why it’s commercial investment is very high in every mode Bi-Mechanism, Share
Mechanism, Ijara Mechanism.
v Investment recollection
position of this branch is increases day by day. Some clients are in overdue
position but maximum clients are paid their installment regularly.
v Bai Murabaha investment position
is slightly lower in previous years because of some lacking norms, values in
the investment clients and Bank bears the actual loss alone but Bai Muajjal &
HPSM investment is increasing rapidly.
4.2 Recommendations
It is not unexpected
to have many problems in any organization. We have found some of the problems
of general banking and investment section of IBBL. To solve these problems, we
can suggest following recommendations
v Commercial sector
under bai-muajjal mode of investment decreased by 88.63%, bank should increase
this type of investment.
v Bank should more
concentrate on commercial sector under bai-murabaha mode of investment because
the amount in 2006 was 1571 lac but in 2009 the amount was 382 lac. This is
really treatable for bank.
v House building
investment sector under bai-muajjal mode of investment; bank should proper step
to increase the investment; because in this sector investment decrease by
29.02%.
v Bank should invest
quard-e-hasna not only their staff but also to the client because this type of
investment client can more satisfied to bank.
v In opening an account
customer facing some employ harassments it should be redeemable, because of
satisfies of the client.
v Bank should develop
their internet facilities very well.
We believe that if the
bank authority accepted the above mentioned recommendations. That would be better
for their bank and betterment for establishing a well reputed modern bank in
Bangladesh.
4.3 Conclusion
Islami Bank Bangladesh
Ltd. is a new generation bank. This bank is committed to provide high quality
financial service / product to contribute to the growth of GDP of the country
through stimulating accelerating the place of industrialization, creating
employment opportunity for the youth, poverty alleviation, raising standard of
living of limited of income group and overall sustainable socio economic development
of the country.
IBBL invests
comparatively more fund in the development of the society. It has also
operating its general banking operation with great success and been able to
make positive image in the customer mind by virtue of its devoted and expert
personnel.
Customers are more or
less satisfied with the present services of the bank. Management should think
to start new services take different types of marketing strategy to get more
customers in this competitive market of the bank.
Although it is a new
bank, IBBL makes a strong position through its varies activities. Its number of
clients, volume of deposit and investment increase day by day. This bank
already has shown impressive performance investment, operating profit and
return on assets.
At last it can be said
that, IBBL is growing fast contribution in our economy is also considerable. We
hope that IBBL will widen its services by expanding its branch all over the
country.
4.4 References & Books:
Brigham,
Eugene F, Houston, Joel F. (2004), “Fundamentals of Financial Management,”
10th edition, Ohio, Thomson, South Western, P-5.
Gitman, Lawrence J. (2004), “Principals
of Managerial Finance,” (Singapore: Pearson Education), 10th ed,
P-4.
Hossain Mr. Kabir, (2003).ISLAMC BANKING,
Chapter-7. Management of funds by Islamic Banking: Islamic Modes of
Investment, Dhaka, Chowkash Printers Ltd.Pp. 123-142.
Kabir at el, Text Book on Islamic
Banking, Islamic Economics Research Bearue, Dhaka, 2004.Pp. 278-287.
Khan. A.R. “Investment of
Islami Banking System” Dhaka University Journal of Business Studies, Vol 12
(2), 1993.
Websites
http://www.thefreedictionary.com/finance,
retrieved at 11.50 AM on 30.05.12
http://www.investorglossary.com/investment.htm,retrieved
at 11.53 AM on 19.05.12
http://www.answers.com/topic/financeretrieved
at 11.30 AM, on 01.06.11
http://www.islamibankbd.com. At 12.00 AM on 5.06.11
4.5 APPENDIX
TABLE 2.15. Financial
Highlights of IBBL from FY2007 to FY2011
Taka
in Million (Where applicable)
|
Particulars |
2007 |
2008 |
2009 |
2010 |
2011 |
|
Authorized Capital |
5,000.00 |
10,000.00 |
10,000 |
10,000.00 |
20000.00 |
|
Paid-up Capital |
3801.60 |
4752.00 |
6177.60 |
7,413.12 |
10007.71 |
|
Share Money Deposit |
1.99 |
1.99 |
1.99 |
1.99 |
1.99 |
|
Reserves Fund |
7418.05 |
9308.49 |
13927.94 |
16,081.14 |
17792.50 |
|
Retained Earnings |
950.40 |
1425.60 |
1853.28 |
2,594.59 |
3202.47 |
|
Total Equity |
14957.74 |
18572.08 |
23619.81 |
28,400.03 |
33716.73 |
|
Equity /Capital |
860.58 |
1243.14 |
3344.16 |
5287.58 |
796024 |
|
Total Deposits (Including bills payable) Gross |
166325.29 |
202115.45 |
244292.14 |
291,934.60 |
341853.67 |
|
Total Investments |
165286.32 |
187586.55 |
225752.41 |
275,493.94 |
322772.83 |
|
Total Investments |
144920.61 |
180053.94 |
214615.80 |
263225.13 |
305840.56 |
|
Import Business |
137086.00 |
168329.00 |
161230.00 |
246,281.00 |
301207.00 |
|
Export Business |
66690.00 |
93962.00 |
106424.00 |
148,421.00 |
178244.00 |
|
Remittance |
84143.00 |
140404.00 |
194716.00 |
214,629.00 |
236607.00 |
|
Total Foreign |
287919.00 |
402695.00 |
462370.00 |
609,331.00 |
716058.00 |
|
Total Income |
17699.52 |
23756.33 |
25403.86 |
30,128.90 |
38401 |
|
Total Expenditure |
13918.70 |
17408.50 |
188886.20 |
21674.20 |
28053.98 |
|
Net Profit before |
3780.82 |
6347.83 |
6517.66 |
8,454.70 |
10347.30 |
|
Net Profit after Tax |
1427.36 |
2674.80 |
3403.55 |
4463.47 |
4814.45 |
|
Payment to |
2322.46 |
3245.08 |
3253.23 |
4,108.98 |
5515.56 |
|
Dividend |
25%( Stock) |
30% (Stock) |
Cash 10% 20% (Stock) |
35% (Stock) |
Cash 7% 25% stock |
|
Total Assets |
250012.79 |
288017.19 |
340638.49 |
443,684.79 |
502613.05 |
|
Total Assets |
191362.35 |
230879.14 |
278302.84 |
330,586.12 |
389192.12 |
|
Fixed Assets |
3987.23 |
4407.22 |
6512.36 |
6,748.44 |
7100.19 |
|
Number of Foreign |
265 |
275 |
295 |
295 |
313 |
|
Number of |
26488 |
33686 |
52164 |
58,923 |
60550 |
|
Number of Employees |
8426 |
9397 |
9588 |
10,349 |
11465 |
|
Number of Branches |
*186 |
*206 |
*231 |
*251 |
*266 |
|
Market value per |
70.00 |
83.00 |
89.00 |
90.00 |
83.98 |
|
Book value per Share |
236 |
228 |
271.22 |
316.93 |
320 |
|
Cost of fund % |
9.06% |
9.56% |
8.76% |
8.65% |
8.86% |
|
Cost income ratio |
0.79 |
0.72 |
0.74 |
0.68 |
0.73 |
|
Return on Equity |
13.00% |
19.02% |
16.93% |
19.00% |
17.42 |
|
Return on Assets |
0.84% |
1.27% |
1.34% |
1.47% |
1.35% |
|
Price earnings ratio |
17.88 |
10.78 |
12.87 |
13.29 |
11.27 |
|
Earnings per Share |
3.00 |
4.33 |
4.59 |
4.46 |
4.84 |
|
Price equity Ratio |
1.69 |
2.05 |
2.18 |
2.52 |
1.96 |
|
Market Value per Share |
700.00 |
830.00 |
890.00 |
879.00 |
83.98 |
|
Capital Adequacy |
10.61% |
10.72% |
11.65% |
**11.06% |
13.09% |
Note: One Million = Ten Lac