Liquidity Management Of Islami Bank Bangladesh Limited

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“Liquidity Management Of Islami Bank Bangladesh Limited”

Chapter One

Introduction of the Report

1.1 Introduction of Report:

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 Background of the Report

Liquidity means the availability of funds, or assurance that funds will be available, to hand on cash outflow commitments. Managing liquidity is a fundamental component in the safe and sound management of all financial institutions. Customer’s confidence is mostly dependent on how efficient a bank to handle any type of liquidity crisis. As a direct link to customers a bank must emphasize on this. IBBL is treated in different way from other conventional banks because of its lucrative contribution in economy. For this, a planned way is necessary to manage the liquidity section. Recent technological and financial innovations have provided banks with new ways of funding their activities and managing their liquidity, but recent turmoil in global financial markets has posed new challenges for liquidity management. IBBL always tries to stand on a standard queue to provide satisfactory services to the customers. But for posing some new challenges it is time to change itself in a competitive structure which will help to sustain in the competitive edge. So IBBL is trying to be customer oriented in every sphere of wing services. Here how IBBL is handling its liquidity management as a part of treasury management is clarified from different perspective. From this report it can be realized about the components of liquidity management and what are the present conditions of the components from year 2005-2009 and also how rules and regulations given by Bangladesh Bank affect the liquidity policy of IBBL is indicated here.

1.3 Objectives

The first objective of writing the report is fulfilling the partial requirements of the BBA program. In this report, we have attempted to give an overview of Liquidity Position of Islami Bank Bangladesh Limited in general . The primary objective of this report is to determine the origin of liquidity in Bangladesh and in IBBL Limited.

To make a bridge between the theories and practices on banking operations

Here are some objectives for preparing the report.

  1. To find out the components of liquidity statement IBBL
  2. To know the details about liquidity of IBBL
  3. To analyze the relation among liquidity, loans and deposits
  4. To know the condition between specialized bank and Islamic bank
  5. To know the impact of Bangladesh Bank regarding liquidity management.

1.4 Scope of the Report

This report provides some important evaluations and present scenario of IBBL. Here some points are given below:

· Evaluation of the different financial performance of IBBL

· Present condition of IBBL in banking sector

· Knowledge of diversified products and services

· Liquidity position of IBBL

· Condition of IBBL regarding Bangladesh Bank rules

· Scenario of IBBL compared to BASIC bank and SIBL

· Different problems and solutions regarding liquidity management

1.5 Methodology:


To conduct the Analysis part I have chosen the most widely used techniques of analysis. These are Least Squares method for Ratio Analysis and Regression Analysis.

Regression Analysis:

The analysis is drawn on total amount of liquidity, total amount of loans & total amount of deposits.

Amount of liquidity = Y; dependent variable,

Total amount of loans= X1; Independent variable,

Total amount of deposits= X2, Independent variable.

So, the regression equation of Y on X1 and X2 for the regression line will be-

Y = a + b1X1 + b2X2


Y = Total amount of liquidity,

a = the intercept (constant),

b1= Slope of line, change liquidity for change in amount of loans,

b2= Slope of line, change in consumer credit for change in deposits

X1= total amount of loans

X2 = total deposits

1.5.2 Collection of data:

Primary data are measurements observed and recorded as part of an original study. When the data required for a particular study can be found neither in the internal records of the enterprise, nor in published sources, it may become necessary to collect original data.

Primary Data:

For the completion of this report, the primary sources of data are-

  • Discussion with officials of the IBBL
  • Experts’ opinion and comments
  • Observations of the officials

Secondary data:

he secondary data, which was used for this research, were the books, working paper, annual report, brochures, and other secondary data which was collected from the web site and also from the Islami Bank Training and Research Association.

1.6 Limitation of the STUDY:

There are some limitations in our study. We faced some problems during the study, which we are mentioning them as below-

1. Lack of time:

The time period of this study is very short. We had only 8 weeks in my hand to complete this report, which was not enough. So I could not go in depth of the study. Most of the times, the officials were busy and were not able to give me much time.

2. Insufficient data:

Some desired information could not be collected due to confidentiality of business.

3. Lack of monitory support

Few officers sometime were busy in their job. Sometime they didn’t want to supervise us out of their official work.

4. Other limitations:

As we are newcomers, there is a lack of previous experience in this concern. And many practical matters have been written from our own observation that may vary from person to person.

Chapter Two

The Organization

Islami Bank Bangladesh Limited (IBBL)

2.1 About Bank

As a Muslim country people of Bangladesh are deeply committed to Islamic way of life and follow the Holy Qur’an and the Sunnah. 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.

Corporate Informatio(As on June 30, 2010 )

Date of Incorporation 13th March 1983
Inauguration of 1st Branch

(Local office, Dhaka)

30th March 1983
Formal Inauguration 12th August 1983
Share of Capital
Local Shareholders 41.77%
Foreign Shareholders 58.23%
Authorized Capital Tk. 10,000.00 million
Paid-up Capital Tk. 7,413.00 million
Deposits Tk. 265,193.00 million
Investments (including Investment in Shares) Tk. 255,178.00 million
Foreign Exchange Business Tk. 277,739.00 million
Number of Branches 212
Number of SME Service Centers 20
Number of Shareholders 52164
Manpower 9588


2.2 Good Performance is Always Rewarded

· The global finance, a reputed USA based quarterly financial magazine, awarded IBBL as the best Islamic Financial Institution for the year 2008.

· Institute of Cost and Management Accountants of Bangladesh (ICMAB) awarded IBBL as the ICMAB National Best Corporate Award 2007 (First Position, Local Bank) and ICMAB Best Corporate Performance Award-2008 (Second Position, Private Commercial Bank).

· Credit Rating Information and Services Ltd. (CRISL) rated IBBL AA (High Safety) for long term for the years 2006, 2007, and 2008 and ST-1 (Highest Grade) for short term for the years 2004, 2005, 2006 2007, and 2008.

· The Institute of Chartered Accountant of Bangladesh (ICAB) awarded IBBL with the Certificate of Appreciation in the best published accounts and reports for the year 2001, and Certificate of Merit for the year 2008.

· Bankers’ Forum awarded IBBL as the Best Bank for Corporate Social Responsibilities for 2008.

2.3 Vision:

Our vision is to always strive to achieve superior financial performance, be considered a leading Islamic Bank by reputation and performance.

· Our goal is to establish and maintain the modern banking techniques, to ensure the 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.

· We will try to encourage savings in the form of direct investment.

· We will also try to encourage investment particularly in projects which are more to lead to higher employment.

2.4 Mission:

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 encourage socio economic uplift and financial services to the low-income community particularly in the rural areas.

2.5 Objectives of IBBL

· To conduct interest-free banking.
· To establish participatory banking instead of banking on debtor-creditor relationship.
· To invest on profit and risk sharing basis.
· To establish a welfare-oriented banking system.
· To contribute towards balanced growth and development of the country through investment operations particularly in the less developed areas.
· To contribute in achieving the ultimate goal of Islamic economic system

2.6 Strategies of IBBL:

The strategies on which IBBL is working are as follows:

  • Broad-based economic well-being with full employment and optimum rate of economic growth
  • Socio-economic justice and equitable distribution of income and wealth
  • Stability in the value of money to enable the medium of exchange to be reliable unit of account, a just standard of deferred payments and a stable store of value
  • Generation of adequate savings and their productive mobilization within a framework which is consistent with the above goals
  • Effective rendering of all services normally expected from the banking system

2.7 The Board of Directors:

The Board of Directors consists of 14 non executive members including 1 Independent Director. The number of Board of members is within the maximum limit set by the central bank. The Board is composed of experienced members with diverse professional experiences such as business, administration, banking & finance, accounting, general management, diplomacy, government services, engineering and fund management which made the Board very efficient and balanced in deciding and directing on the various issues of the bank. The Board members are independent who express their views and opinions free from any influence. The Directors are also independent from management, business/other relationship of the bank that could materially interfere the activities of the bank. There is also a clear demarcation of duties and responsibilities between the Board and management. While the Board is responsible for formulating the board policy framework within which the bank is operating, the management is accountable for the execution of the policies and attainment of the bank’s objectives. The Board exercises independent oversight on the affairs of management.

2.8 Committees:

The Board has two standing committees viz. Executive Committee and Audit Committee. These Committees operate within clear terms of reference.

2.8.1 The Executive Committee

The executive Committee consists of 6 members and entrusted with the task of policy making and taking important and strategic decisions as authorized by the Board within the norms set by the Bangladesh Bank.

2.8.2 The Audit Committee

The Audit Committee formed by the Board of Directors as per instruction of Bangladesh Bank consists of 3 members and is entrusted with, among others, the task of exercising their duties & responsibilities with regard to:

· Internal Control

· Disclosure of Financial Report

· Internal Audit

· External Audit and

· Compliance of existing laws and regulations

2.8.3 The Management Committee

The Management Committee of the bank comprises of 17 top level executives, headed by the Managing Director (CEO) of the bank. The Committee with financial, administrative and business discretionary power delegated by the Board is mainly responsible for implementation of the policies and guidelines approved by the Board. The Management Committee thoroughly scrutinizes the issues before placing to the Executive Committee/Board. The Management Committee thoroughly evaluates the performance of the bank, takes strategic action plan to achieve various targets of the bank set by the Board of Directors.

2.8.4 Asset-Liability Committee (ALCO)

The asset liability management (ALCO) of IBBL is comprised of 18 members from the top management which meets once in a month to review the liquidity position of the bank, maturity grouping of assets and liabilities, Deposits and Investment pricing and liquidity contingency plan in order to manage the balance sheet risk in a better way. The ALCO is entrusted with the responsibility of ensuring the bank’s sufficient liquidity at all times to meet its obligations when becomes due without compromising the earning potential of the bank. In every ALCO meeting, the Committee reviews actions taken in previous ALCO meeting, economic and market status and outlook, liquidity risk related to balance sheet, profit rate structure etc. Special ALCO meeting is arranged as and when any contingent situation arises.

2.9 Shari’ah Council:

The Shari’ah Council of the bank plays a very important role in framing and exerting policy for strict adherence to Shari’ah Principles in the bank. The council is represented by 14 members consisting of prominent Ulama having adequate knowledge in Fiqhul Moamalat, renowned lawyers and eminent economists to advise and guide on the implementation and compliance of Shari’ah principles in all activities of the bank particularly on the modes of investment. The representative of the Council attends in the meetings of the board of Directors, Executive Committee, Audit Committee and other relevant committees and Annual Development Conferences too give opinions and oversee the activities of the bank from the view point of Shari’ah. At present two members of the Council are also the members of Academic Council of IBTRA. The Council also evaluates the performance of the officials in terms of Shari’ah compliance.

2.10 Branches:

Till 2009, out of total 231 branches (including 20 SME/Agricultural Branches), 114 are Urban Branches and 117 are Rural Branches which are the highest number of rural branches among the first generation Commercial Banks.


2.11 Products and Services

Local currency Deposit Accounts

1. Al-Wadeeah Current Account

2. Mudaraba Savings Account

3. Mudaraba Term Deposit Account

4. Mudaraba Special Notice Account

5. Mudaraba Special Savings (Pension) Account

6. Mudaraba Hajj Savings Account

7. Mudaraba Savings Bond

8. Mudaraba Waqf Cash Deposit Account

9. Mudaraba Monthly Profit Deposit Account

10. Mudaraba Muhar Savings Deposit Account

Foreign Currecny Deposit Accounts

1. Mudaraba Foreign Currency Deposit

2. Foreign Currency Deposit (USD,EURO,GPB)

3. FC Deposit ERQ

Investment Modes

1. Bai-Muajjal

2. Bai-Murabaha

3. Hire Purchase under Shirkatul Melk

4. Mudarabah

5. Musharaka

6. Musharaka Documentary Bills (MDB)

7. Bai-Salam

8. Bai-As-Sarf

Welfare Oriented Special Investment Schemes

1. Household Durables Scheme

2. Housing Investment Scheme

3. Real Estate Investment Scheme

4. Transport Investment Scheme

5. Car Investment Scheme

6. Investment Scheme for Doctors

7. Small Business Investment Scheme

8. Agriculture Implements Investment Scheme

9. Rural Development Scheme

10. Micro Industries Investment Scheme

11. Women Entrepreneurs Investment Scheme

12. Mirpur Silk Weavers Investment Scheme

13. Equity and Entrepreneurship Fund of Bangladesh Bank

Sectors under SME Investments

1. Manufacturing

2. Trading

3. Service

ATM Services

1. Cash Withdrawal

2. Fund Transfer

3. Mini Statement of Accounts

4. Balance Enquiry

5. Payment of Utility Bills (Electricity, Water, Phone and Gas etc.)

Other Banking Value Added Services

1. The Bank issues Payment Orders

2. The Bank co-operates to remit money from one place to another on the basis of commission within the country through Demand Draft (DD) and Telegraphic Transfer (TT).

3. ATM Service has been introduced in selected Branches

4. Locker Service is available in selected Branches to preserve valuable documents and materials

5. The Bank gives counseling on different issues

6. Online Banking

7. SMS Banking


9. REUTER, etc.

Foreign Remittance

There are 16 (sixteen) Foreign Representatives of IBBL in 5 (five) Countries to serve expatriate customers to encourage and enhance Foreign Remittance.

Treasury Activities

Dealing Room Operation.

Special Services through Islami Bank Foundation

1. Islami Bank Hospital

2. Islami Bank Medical College

3. Islami Bank Community Hospital

4. Islami Bank Nursing Training Institute

5. Islami Bank Institute of Health Technology

6. Islami Bank Homeopathic Clinic

7. Monorom: Islami Bank Crafts & Fashion

8. Islami Bank Service Centre

9. Islami Bank Institute of Technology

10. Islami Bank International School and College

11. Islami Bank Model School

12. Islami Bank Mohila Madrasah

13. Bangladesh Sangskritic Kendra

14. Distressed Women Rehabilitation Centre

Training Services

1. International: Training to Foreigners on Islamic Banking

2. National: Training to others on Islamic Banking

3. Islami Banking Deploma

2.12 Major CSR practices of IBBL

IBBL being one of the most important corporate citizen of the country, has been discharging its responsibilities to the society in general, both directly through its mainstream operations as well as directly through its fully owned subsidiary “Islami Bank Foundation” since inception.

· IBBL provides low cost medical treatment for the poor people who are suffering from various eye diseases. In the year 2009 and 2008, a total number of 2,500 and 3,000 patients respectively received eye treatment through low cost eye treatment project.

· IBBL provides scholarships to the students of colleges, madrasas, and universities at home and abroad. Moreover, scholarship is being offered to the researchers to obtain M.Phil and Phd degrees.

· As part of the service to the distressed humanity, Islami Bank Foundation has established a center for shelter, training and rehabilitation of the unfortunate, shelterless widows.

· IBBL observes “Plantation Week” every year during the rainy season to encourage the people planting more by providing saplings free of cost to the beneficiaries of Rural Development Scheme, the micro-investment scheme of the bank.

· IBBL awards scholarship among the meritorious wards of the bank officials and the meritorious students of Banking & Finance Department of University of Dhaka, University of Chittagong and Manarat International University.

2.13 IBBL’s World Rating:

As per Banker’s Almanac (January 2006 edition) published by the Reed Business information, Windsor Court, England, IBBL’s world rank is 1591 among 4500 banks selected by them. World ranking of IBBL amongst top 3000 International Banks:

IBBL’s World Rating


Serial No. Year World rating
01. 1995 2314
02. 1996 2303
03. 1997 2262
04. 1998 2119
05. 1999 2100
06. 2000 1999
07. 2001 1902
08. 2002 1771
09. 2003 1755
10. 2004 1581
11. 2005 1658
12. 2006 1620
13. 2007 1490
14. 2008 1591

Source: The Bankers Almanac: World Ranking, 2008, Reed Business Information, U.K.

Chapter Three

Overall Financial Performance of IBBL

To judge and evaluate the performance of the financial institutions, the best way is to evaluate them by their financial and operational activities. There are several ratio analyses which show the operating trends of these banks. Based on this evaluation and examination I have interpreted the results and find out the actual condition IBBL.

In Million

Net Profit Before Tax


Year 2005 2006 2007 2008 2009
Net Profit Before Tax 2162.42 2908.67 3780.82 6347.83 6517.66


IBBL maintains the increasing trend in profit before tax. Its profit before tax position is impressive. It was in increasing trend from 2005 to 2009. The graph showed that the amount increased dramatically than the previous year because of maximum profit generation by the bank. In 2005 it was TK. 2162.42 million and in 2009 it goes 6517.66 million. That means this bank’s operating income is increasing.

Net Profit After Tax

In Million


Year 2005 2006 2007 2008 2009
Net Profit After Tax 2162.42 2908.67 3780.82 6347.83 6517.66


Profit after tax shows the net income of any organization, we will get it after deducting all expenses such as interest and tax expenses. This is also called common shareholders income. In case of profit after tax IBBL shows increasing trend, which is very positive side for the organization. Profit after tax of IBBL is increasing that means bank profitability position is good. Year 2005 profit after tax was Tk 2162.42 million and in 2009 it was Tk 6517.66 million. The total amount of profit is growing every year. The profit was almost doubled in 2008 than that of 2007.

In Million

Export and Import and Remittance


Year 2005 2006 2007 2008 2009
Import 74525 96870 137086 168329 161230
Export 36169 51133 66690 93962 106424
Remittance 36948 53819 84143 140404 194716


In 2009 remittance collection has reached the peak. Every year the remittance collection is growing at an increasing rate. And in every sector IBBL is now in the first position. Compared to any other banks IBBL contributes a lot in enriching foreign currency reserve.

Classified Investment to General Investment

In Million


Year 2005 2006 2007 2008 2009
Classified Investment to General Investment 3.25% 3.43% 2.93% 2.39% 2.36%


Classified investment to general investment should be lower which shows good sign for the bank. This means the bank adopts better credit policy and its earning trend will increase. In IBBL this ratio is significantly lower which is positive. The trend of the ratio shows decreasing movement. Specially after 2006 the ratio is decreasing.

Return on Equity


Year 2005 2006 2007 2008 2009
Return on Equity 13.51% 13.42% 13.00% 19.02% 16.93%


This ratio tells us the earning power on shareholders book value invested and is frequently used in comparing two or more firms in an industry. A high return on equity often reflects the firm’s acceptances of strong investment opportunities and effective expense management. However if the firm has chosen to employ a level of debt that is high by industry standard, a high ROE might simply be the result of assuming excusive financial risk. The ROE performance of IBBL maintained decreasing trend from 2005 to 2007. In 2008 it increased to 19.02% which is pretty higher than the previous year. And again in 2009 the ratio becomes lower which is 16.93%.

Return on Assets


Year 2005 2006 2007 2008 2009
Return on Assets 1.00% 1.03% 0.84% 1.27% 1.34%


ROA indicates a firm’s ability to efficiently allocate and manage its resources but (unlike return on equity) ignores the firm’s liabilities. An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Sometimes this is referred to as “return on investment”. The ROA position of the bank is close to industry avg. and in 2009 it is 1.34% and always shows consistency.

Earning Per Share


Year 2005 2006 2007 2008 2009
Earning Per Share 48.76 36.84 30.04 43.30 55.10


The term earnings per share (EPS) represents the portion of a company’s earnings, net of taxes and preferred stock dividends, that is allocated to each share of common stock. The formula of earning per share is total earnings divided by the number of shares outstanding. Companies often use a weighted average of shares outstanding over the reporting term. The graphical analysis stated that Earning per share of IBBL declined significantly in year 2006 and 2007. In 2005 it was TK. 48.76 and in 2009 it is 55.10 which is god enough.

Price Earning Ratio


Year 2005 2006 2007 2008 2009
Price Earning Ratio 9.24% 10.97% 17.88% 10.78% 10.73%


P/E ratio is most valuable for companies within the same industry. Value investors have long considered the price earnings ratio [p/e ratio] one of the single most important numbers available when evaluating a company’s stock price. The p/e ratio is how much money you are paying for TK. 1 of the company’s earnings. For this bank the results are in increasing trend though it dropped in 2008 because of unstable share market. Price earning ratio should not increase more than 20%.

Capital Adequacy Ratio


Year 2005 2006 2007 2008 2009
Capital Adequacy Ratio 9.44% 9.43% 10.61% 10.72% 11.65%


It is a measurement of a bank’s capital adequacy against its requirement. It is expressed as a percentage of a bank’s risk weighted credit exposures. This ratio is used to protect depositors and promote the stability and efficiency of financial systems in the banking sector around the world. The good news for the depositors is that the capital adequacy ratio of IBBL is in increasing trend. It was slightly dropped in 2006 but that was insignificant. In fact the bank is maintaining its trend of increasing capital and reducing depositors’ risks.

Chapter Four



Investment of the Bank increased to Tk.180054.00 million as on 31.12.2008 from Tk. 214616.00 million as on 31.12.2009 showing an increase of Tk.34562 million i.e.19.20% growths as against 18.57% growth of investment in banking sectors. This increased investment growth of the Bank in 2009 is due to the thrust given to promote investment for effective utilization of depositors’ fund. The percentage of increase of Investment of IBBL in 2008 was 24.24%. The share of Investment of IBBL in banking sector as on 31.12.2009 was 7.11%.

Composition of the investment portfolio:

Sectors Proportion in %
Agriculture and Rural Investment 2%
Industrial Term Investment 18%
Industrial Working Capital 15%
Housing and Real Estate 10%
Electricity, Gas, Water & Sanitation 0.5%
Transaction & Communication Storage 5%
Import, Export & Local & Trade Selected Activities 40%
Household Durable Schemes 1.50%
About Storage 1%
Investment Schemes for Small Business 1.50%
Investment Schemes for Doctors 0.50%
Poultry & Dairy 0.50%
Rural Development Schemes 2%
Micro Industry Schemes 0.50%
Others Special Schemes 1%
Other productive Purpose 1%
Total 100%

Table No. 4.1

From the table we find that the IBBL focuses more on import, export investment that play a vital role for the development of national growth. It also provides facilities to industrial sectors more than other sectors.

4.2 Five years investment perspective plan

In accordance with the investment Policy, 5 year Perspective Plan from 2008 to 2012 is formulated. Size-wise and sector-wise, allocation of estimated investable funds is made in accordance with the weight age given in the investment:

Year Trade(1) Special scheme(2) Agro base industry(3) Project investment(4) Construction(5) Transport(6)
2008 33% 3% 6% 47% 7% 2%
2009 33% 4% 5% 45% 8% 3%
2010 33% 5% 6% 42% 9% 3%
2011 35% 5% 6% 39% 9% 4%
2012 35% 5% 7% 36% 10% 5%

Table No. 4.2

Chart No. 4.1

4.3 Diversification of Investment

This is one of the motto so Islami Bank to invest their deployable fund in a diversified way i.e. diversification by size, sector, purpose and geographical area in order to ensure balanced growth of the society equity and justice. With this view the Management has adopted the slogan for the year 2009 as “Diversification of Investment”

Why and where to Diversify

  • 70% of the total investment is concentrated to 0.36% clients which is not acceptable for a Shariah compliant Bank. Moreover, it is alarming for an Bank from the risk point of view.
  • 32% of total investment is concentrated in only Textile and RMG sectors.Such concentration in limited is not desirable from the risk point of view
  • Only 6.02% of the investment is made in the Rural Area which is contrary of equity justice

Sidewise investment Position (Considering number of client)

Chart No. 4.2

Size wise investment Position (Considering number of client)


Economic Purpose:

(Amount in Million as on 30.12.2009)

Sl NO Name of the Sector Amount outstanding % of share
01 Agriculture 6915 3.33
02 Industrial working capital + project 99074 47.67
03 construction and real state 7968 3.83
04 Transport 3508 1.69
05 trade of commodity 59245 28.51
06 special investment 4526 2.18
07 staff and others 16022 7.71
08 share and security 10578 5.09
Total 207836 100

Table No. 4.3

Chart No. 4.4

Industry wise Investment growth: 2005-2009

(TK in million)

Year Textile Garments Others
2005 12896.57 4064.67 18632
2006 17408.74 3959.42 24695
2007 24337.82 5019.05 33285
2008 35414.97 8694.3 34679
2009 52388.73 10341.21 44344

Table No. 4.4

Figure No-4.5

As per Investment policy of the bank top priority has been given towards the industrial development of the country. Bank’s investment in industrial sectors is substantially higher compared with those of other Commercial banks. The Bank’s investment portfolio is gradually being increased towards industrial finance along with commercial investment.

Investment by Geographic Area:

(Fig in Million as on 30.12.2009)

Area/Zone Amount of investment % of share
Dhaka base branches 112550 58.83
Chittagong Zone 28845 15.08
Khulna Zone 13425 7.02
Bogra Zone 5943 3.11
Comilla Zone 5755 3.01
Sylhet Zone 2916 1.52
Rajshahi Zone 15148 7.92
Barishal Zone 2106 1.10
Mymenshing Zone 4615 2.41
Total 191303 100

Table No – 4.5

Chart No.4.6

The Bank focuses most on Dhaka zone as well as Chittagong zone as these two areas are the center of industrialization. Later it plans to diversify it investment in other under developing areas too.

Investment by Areas (Urban and Rural):

(Figure in Million as on 30.12.2009)

Sl No Area No of Clients Amount Outstanding %
1 Rural area 35,365 11785.55 6.02
2 Urban area 9,3612 184132.20 93.98
Total 447264 195917.75 100

Table No – 4.6

Chart NO. 4.7

As the amount of investment in urban areas is higher than rural areas, the number of client is also higher. Recently the IBBL introduced RDS (Rural Development Scheme) for those who are deprived of modern banking facilities.

Investment in special scheme:

Table No 4.7 (Figure in Million as on 31.12.2009)

Name of scheme 2005 2006 2007 2008 2009 % of growth
RDS 1106 2242 2885 3060 3752 23%
HDS 782 700 743 639 686 7.35%
For Doctors 64 33 24 16 17 6.25%
Transport 2947 2699 2624 3087 3630 17.58%
Car 28 24 31 42 54 28.5%
Small Business 630 768 876 1104 1160 5.08%
Micro industries 10 6 36 32 50 56.25%
Agriculture 13 12 14 27 77 185%
Housing 610 507 485 429 453 5.6%
Real state 5860 6583 6903 7183 7933 10.44%


Investment in Special Scheme

In addition to the normal commercial and industrial investment, special schemes are developing on an ongoing basis for the implementation of specific and welfare oriented needs of the different segments of the country.

4.4 Growth of Investment:

The investment of the Bank demonstrated steady growth over the years. The total investment to the Bank stood at TK.180054.40 million in 2008. It was TK.214616 million in 2009.

Year 2005 2006 2007 2008 2009
investment 93644 113575 144921 180054 214616

Table No 4.8

Graph No 4.9

It shows that the amount of investment is increasing year to year. It is in upward trend. In 2008 the Bank’s total investment was Tk. 180,054 million and in 2009 it was TK. 214,616 million while in 2005 the investment was only TK.93,644 million.

Sector wise investment:

Table No – 4.9

Sectors Industrial Commercial Real estate Agricultures Transport
% 0f total investment 53.53 33.26 4.03 6.55 1.64

Chart No: 4.10

Among different sectors of investment industrial sector is more preferable to other sectors. In accordance with the principles of investment policy as well as to foster rapid economic development, Bank makes this type of investment.

Mode-wise Investment

Mode Murabaha HPSM Muajjal Purchase & negotiation Quard Salam Musharaka
%of to total investment 54.60% 34.42% 3.41% 5.26% 1.32% 0.97% 0.02%

Table No. 4.10

Chart No 9.11

In Bangladesh perspective Bai- Murabaha mode is most popular mode. Bank makes investment against it by taking charge and mortgage documents. HPSM is proanother important mode of investment. After the patment here customer gets the right to be the owner of the property.

Welfare scheme as a percentage of total investment (Tk. in Million)

Year 2005 2006 2007 2008 2009
Welfare scheme 12050.1 13574.2 14620.92 15570.03 17812.57
Total investment 93644.15 113575.07 144920.61 180053.94 214616

Table No 4.11

Graph No.4.12

Trend of investment in industry: (TK in Million)