Overall Banking Activities of Shahjalal Islami Bank Limited

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Overall Banking Activities of Shahjalal Islami Bank Limited

Chapter # 1

Introduction

The Internship is a four-credit compulsory course for the business students graduating from Bangladesh University of Business & Technology (BUBT). The objective of this component is to provide a hands-on experience to a student graduating under different discipline of Bangladesh University of Business & Technology (BUBT). The Internship takes place in a firm/organization or an institution. After completing one hundred and twenty credit hours, a BBA student have to do an internship in any area of business specialization under the concentration like Marketing, Finance, Management, Human resource etc.

(1.1) Background of the study:

Knowledge and learning become perfect when it is associated with theory and practice. Theoretical knowledge gets its perfection with practical application. As our educational system predominantly text based, inclusion practical orientation program, as an academic component is as exception to the norm. As the parties; educational institution and the organization substantially benefit from such a program, it seems a “win-win situation”. It establishes contracts and networking contracts. Contracts may help to get a job. That is, students can train and prepare themselves for the job market. A poor country like Bangladesh has an overwhelming number of unemployed education graduates. As they have no internship experience they have not been able to gain normal professional experience or establish networking system, which is important in getting a job. So, practical orientation is a positive development in professional area. Recognizing the importance of practical experience, School of Management and Business Administration has introduced a three months practical exposure as a part of the curriculum of Master of Business Administration program. In such state of affairs the present aiming at analyzing the experience of practical orientation related to General Banking activities in the Shahjalal Islami Bank Limited, Banani Branch.

(1.2) Origin of the report:

Internship is a particular course of BBA program. The primary goal of the internship program is to provide the intern with the job experience by orienting the intern with the organization and opportunity for the intern to relate the theoretical conceptions in the real business environment. This program is for three (3) months duration. The period for this program was form July 06 2008 to October 06 2008. During this period I have worked closely with the employee & stuffs of the Bank. I was assigned a topic “Overall Banking activities of Shahjalal Islami Bank Limited” by the supervisor for the program.

(1.3) Scope of the report:

The scope of the organizational part covers the organizational structure, background, objective, function and department and business performance of SJIBL as a whole. The main part covers the operational scenario of advance, foreign exchange, remittance of Banani branch as well as over all of SJIBL. This refers that how the bank help the customers in exporting and importing the goods, providing advance, and how it remits the money of the foreign clients, etc. all are in the project part of the report.

(1.4) Objects of the report:

The primary objective of this report is to achieve practical knowledge about banking to observe; what are the basic services, but the specific objective of this report as follows:

a. To know about the general banking.

b. To know about loans and advances.

c. To know about Foreign Exchange.

d. To analyze the performance of over all Islami banking of SJIBL.

e. To know about the difference between conventional and Islami banking.

f. To identify Marketing mix of SJIBL

g. To identify an understand different product offering of SJIBL.

(1.5) Methodology:

Methods followed to perform a job or conducting activities to complete a task is called methodology. As I was conducted, I concentrate on issues that a directly or indirectly related with marketing practice. Therefore, I have done both ‘qualitative’ and ‘quantitative’ data analysis. Generally the study was ‘descriptive’ in nature.

1.5.1) Types of research: The research was descriptive in nature.

1.5.2) Source of data Collection:

The data collection method of study consists of both of primary and secondary sources. But majority of the information was collected from secondary courses.

A) Primary sources: The primary sources include interviewed with the bankers and my work experience.

B) Secondary sources: The secondary sources are the annual reports of the SJIBL 2006-2007 and other published prospects. Articles, newspaper, Relevant books, journals etc

1.5.3) Data collection procedure:

A) Primary data:

Observation, Focus group, In-depth interview, and survey method are used for primary data collection

B) Secondary data:

Secondary data collect from annual report, articles and Shahjalal Islami Bank Limited website.

1.5.4) Questionnaire design:

Researcher administrated type of well structure questionnaire was used for primary data collection. Both open ended & close-ended questions were included. Average time for conducting individual questionnaire survey was 20 minutes.

1.5.5) Sampling Plan:

A)Target Population: All the officials & clients of at Shahjalal Islami Bank Limited (SJIBL), General Banking and Credit were target population of my study.

B) Sample Unit: For buyer questionnaire, survey sample unit was the individual officials & clients of at Shahjalal Islami Bank Limited (SJIBL) Banani branch, Dhaka.

C) Sample size: Minimum 66 sample size I took. 30 for employee & 36 for customer.

D) Sampling Method: Non probability convenience sampling method (Mall intercept) & non probability judgmental sampling method was used for survey officials & clients of at Shahjalal Islami Bank Limited (SJIBL) Banani branch, Dhaka.

E) Sample Frame: Structured sample frames are follows:

Employee Surveyed Client Surveyed

1.5.6) Data Analysis:

This is descriptive report mainly aiming to depict the Overall Banking Operation and Overview of Shahjalal Islami Bank Ltd. In order to make the study effective and efficient, following tow sources of data and information have been used widely. I have analyzed these reports and document in the light of analytical review. I have used some statistical tools, graphical presentation, and table to find out the different types of analytical result. Those are given the overall picture of the Shahjalal Islami Bank Ltd.

(1.6) Limitations:

There were several constraints while preparing this report; only 12 weeks were not sufficient to visit all the desks of the branch. So some desks were remained unvisited. Moreover, some officers in some desks were found non-cooperative. Such desks were remained unexposed. The branch also refuses to provide data on its performance, especially in loans and advances. It is also not possible to go to the depth of each activities of branch because of time limitation. Therefore, it was very difficult to carry out the whole analysis.

Chapter # 2

Profile of the Organization

(2.1) Profile of the Organization:

Shahjalal Bank Limited was established as a public limited company on April 01, 2001 under company act, 1994. The bank commenced its commercial operation in accordance with Islamic Shahriah on the 10^th May 2001 under the ambit of the bank companies Act, 1991. The name of the bank was changed to Shahjalal islami bank limited w.e.f 10^th May 2004. During Last five years SJIBL has increased its service coverage by opening new branches at different strategically important locations across the country. In order to cover the shortfall in capital adequacy and fulfill other requirements, the paid up capital has been increased to TK. 466.83 million by injecting TK. 236.20 million by the sponsors in 2004. the sponsors again injected additional TK. 469.00 million by 15^th May 2005 to make the sponsors contribution to capital TK. 935.83 million. The bank has the plain to go for initial public offerings (IPO) of share, which will assist the bank to raise its paid up capital to TK. 1871.65 million. The bank was sponsored by the group of local businessmen having exposure in RMG, insurance, electronics and education etc. Alhaj Sajjatuz Jumma is the present and founder chairmen of the bank having business experiences of more than 26 years in the field of electronics, food and education. SJIBL provides a wide range of sharia based commercial banking services.

• Shariah Council of the Bank:

As per Article 30 of the Artic ales of Association of the Bank, Shariah Council for the Bank has been constituted. The Shariah council of the Bank consists of prominent Ulama, Lower and Economist to advice and guide on the implementation of Islamic Shariah in business activities. The council enjoys a special status in the structure of the bank and playing a vital role to make the Bank as shariah compliant. In the year 2007, the total number of meetings of the Shariah Council of the Bank was 3 (three) and subcommittee meeting was 01 (one).

(2.2) Objective:

From time immemorial Banks principally did the functions of moneylenders or “Mohajans” but the functions and scope of modern banking are now-a-days very wide and different. They accept deposits and lend money like their ancestors, nevertheless, their role as catalytic agent of economic development encompassing wide range of services is very important. Business commerce and industries in modern times cannot go without banks. There are people interested to abide by the injunctions of religions in all sphere of life including economic activities. Human being is value oriented and social science is not value-neutral. Shahjalal Islami Bank believes in moral and material development simultaneously. “Interest” or “Usury” has not been appreciated and accepted by “the Tawrat” of Prophet Moses, “the Bible” of Prophet Jesus and “the Quran” of Hazrat Muhammad (sm). Efforts are there to do banking without interest Shahjalal Islami Bank Limited avoids “interest” in all its transactions and provides all available modern banking services to its clients and wants to contribute in both moral and material development of human being. No sustainable material well being is possible without spiritual development of mankind. Only material well-being should not be the objective of development. Socio-economic justice and brotherhood can be implemented better in a God-fearing society.

• Other objectives of Shahjalal Islami Bank include:

• To establish interest-free and welfare oriented banking system
• To help in a poverty alleviation and employment generation
• To contribution on sustainable economic growth of Bangladesh

(2.3) Vision:

To be the unique modern Islami Bank in Bangladesh and to make significant contribution to the national economy and enhance customers’ trust & wealth, quality investment, employees’ value and rapid growth in shareholders’ equity.

(2.4) Mission:

• To provide quality services to customers
• To set high standards of integrity
• To make quality investment
• To ensure sustainable growth in business
• To ensure maximization of Shareholders’ wealth
• To extend customers innovative services acquiring state of the art technology blended with Islamic principals
• To ensure human resource development to meet the challenges of the time

(2.5) Strategies:

• To strive for customers best satisfaction & earn their confidence
• To manage & operate the Bank in the most effective manner
• To identify customers needs & monitor their perception towards meeting those requirements
• To review & update policies, procedures & practices to enhance that ability to extend better services to the customers
• To train & develop all employees & provide them adequate resources so that the customers needs are reasonably addressed
• To promote organizational efficiency by communicating company plans, policies & procedures openly to the employees in a timely fashion
• To cultivate a congenial working environment
• To diversify portfolio both the retail &wholesale markets

(2.6) Business environment:

During 2007, Bangladesh witnessed higher inflation that affected life of common people, labor unrest in garments sector- the highest contributor in export sector affected economic activities and business operations.

Higher import cost of commodity prices, price hike in international oil market as well as money and credit growth resulted in higher inflation. As a result, the economy of the country showed every sign of recession. The efficient workforce of the Bank and the prudent management developed a seamless teamwork which pushed the Bank through all the shadows of uncertainty towards the light of sources. Despite numerous adversities, closed the balance sheet of the Bank with an enormous per-tax profit of TK. 1216 million with excellent growth rate of 54.44%. while the whole financial sector faced a slowdown. This credit worthy achievement has been possible due to our professional smoothness and confidence.

(2.7) Management hierarchy:

Figure: 2-1

(2.8) Social Responsibility:

As an Islamic bank, they are committed to serve the causes of humanities. In this course, they expanded their helping hand to the flood affected; winter distressed and SIDR affected people of various resigns of the country. They awarded scholarships to the poor meritorious students of their country to carry forward their future education. they donated found to Chief Advisor’s Relief Fund to help SIDR affected people as well as the employees of the Bank can avail themselves of the physical aid at a minimum cost.

Having due regard to this, the Bank has already formed Shahjalal Islami Bank Foundation aiming at serving Humanity through different welfare activities giving emphasis on Health, Habitat & Education sector. the Bank has recently taken program to establish Shahjalal Islami Bank Hospital and Shahjalal Islami Bank International School &College. It may further be mentioned here that the Bank has declared Education Award for the students securing first, second & third position in the MBA examination with Islamic Economic and Banking as one of the subjects under the department of Banking of the University of Dhaka on a recurring basis. First two batches of such students having been ceremonially honored with Cash Award, Crest and Certificate of Merit where the honorable Vice Chancellor of the University of Dhaka Mr. S. M. Fayez was present as the chief guest. Beside, the Bank has distributed scholarship in the year 200 to poor but meritorious students with outstanding result in secondary school and higher secondary examinations to facilitate them for pursuing their further studies without hindrance. The program of this education Award will be gradually undertaken in future.

(2.9) Human Resource Development:

Our policy on human resource management is proactive. We believe that investment in human resource development is the key to maintaining sound health of the Bank. The employees of the bank attended training program/ seminar, workshop both at home and abroad. The training center of the Bank has been arranging various courses, workshops seminars on important aspects of Banking. We invite experts of banking sector for imparting training to our employees to meet the above challenges. To keep the employees motivated, incentives, performance reward, promotion and accelerated promotion etc. are giving on a regular basis. Total number of manpower of Bank stood at 555 as on 31^st December 2007 as against 377 of 31^st December 2006. the Bank has introduced a good number of staff welfare scheme to be a part with the banking communities and improve the condition of its employees such as contributory recognized provident fund, gratuity fund, benevolent fund etc.

(2.10) Information Technology:

Main objective of the Bank is to take care of different economic groups of the society and meet their all types of banking requirements stretching its services to the doorstep of the people with the help of information technology gradually. We are providing customers’ service through online facilities. Ultimate aim is to enable their respected and valued clients to shop under the same roof. In line with that SJIBL VISA DEBIT CARD, SMS/ push pull services have already been introduced. Beside, clients are also being facilitated by the service of REUTERS, SWIFT, western Union Money Transfer etc.

(2.11) Marketing mix:

The common strategy to market manufactured goods: marketers usually address four basic strategic elements: Product, price, place (Distribution) and promotion (communication). Collectively these are often referred to as the 4ps of the marketing mix.

To capture the distinctive nature of service performances, it requires to modify the terminology & extending the mix by adding four elements associated with service delivery; Physical environment, Process & People. As Shahjalal Islami Bank Limited is a service firm, the management is sharply concern about all the 7Ps that represents a set of interrelated decision variables.

2.11.1) Product and services of SJIBL

A. Deposit products

Cheque-based Account

• Al-Wadish current Deposits
• Mudaraba Saving Deposits
• Mudaraba Short Notice Deposit

Non-cheque-based Account

• Mudaraba Term Deposits
• Mudaraba Double/Triple Benefit Scheme
• Mudaraba Monthly Deposit Scheme ( 5, 8 , 10 years )
• Mudaraba Millionaire Scheme (12, 15, 25, years terms)
• Mudaraba Hajj Scheme ( 1 to 25 years terms )
• Mudaraba Housing Deposit Scheme
• Mudaraba Cash waqf Deposit Scheme
• Monthly Income

New product for 2007

• Mudaraba marriage Scheme
• Mudaraba Education scheme
• Mudaraba mohor Scheme
• Mudaraba Special term deposits

B. Investment Products

• Profit applies monthly
• Calculations based on simple method
• Calculation mode on annuity method

Markup system

• Total profit is unknown
• Profit kept in profit Receivable A/C (Liability)
• Profit realized from profit Receivable A/C (Liability)
• Rebate allowed
• Compensation may be changed
• Profit may transfer to profit Suspense A/C

Different Modes

• Musharaka
• Mudaraba
• Murabaha
• Bi-Muzzal
• HPSM
• HPSM-HHD Scheme
• HPSM- (staff)
• Ijara
• Bai-Salam
• Istisnaa
• Muqawala
• Quard-e-Hasana
• Inland Doc. Bills Purchased

2.11.2) Price: This component addresses management of all the outlays incurred by customers in obtaining benefits from the service product. SJIBL is not limited to the traditional pricing tasks of determining the selling price to customers, setting margins for any intermediaries and establishing credit terms. SJIBL is trying hard to minimize the cost of taking services because everyone wants best service in a reliable price.Shahjalal Islami bank offers very reasonable price to its customers. For this reason there are huge number of people are very loyal to them. There are plenty of services provided by SJIBL and there are dynamic price list for different service.

Profit Rates (Price) of SJIBL in General Banking

Attractive and competitive interest rate

2.11.3) Place: Delivering product elements to customer involves decisions on the place and time of delivery, as well as on the methods and channels used. IN Shahjalal Islami Bank – delivery of service involves physical & electronic distribution depending on the nature of the service being provided. Shahjalal Islami Bank is the largest private commercial bank in our country. It has 26 branches all over the country. So they are very conscious about delivering service near to customer. The bank has one or more branches in important & lucrative places so that the customer can easily reach to it. Because Shahjalal Islami Bank knows – speed & convenience of place and time for the customer are becoming important determinants in service delivery strategy. Some important location on Shahjalal Islami Bank can represent their sense of place & timing –

2.11.4) Promotion: Effective marketing communication is very important for any kind of organization. This component plays three vital roles: providing needed information & advice, persuading target customers of the merits of a specific product, and encouraging them to take action at specific times.

Integrated Marketing Communication/Promotion Mix of Shahjalal Islami Bank: SJIBL blended its promotional tools as follow

1. Advertising: Advertising is any paid form of nonpersonal communication about an organization, product, service, or idea by an identified sponsor. Shahjalal Islami Bank does not go for massive advertising. This is one major lacking of the bank. Occasionally it appears on television. While opening new branch SJIBL do advertising for letting more people acknowledged.

Advertising platforms of SJIBL:

i. Print & broadcast ads

ii. Brochures & booklets

iii. Directories

iv. Symbols & Logos

v. Billboards

2. Sales promotion: It involves extra value or incentives to the sales force or ultimate customers and can stimulate immediate sales. Shahjalal Islami Bank often go for consumer oriented sales promotion.

Sales promotion of SJIBL:

I. Premiums & gifts

II. Fairs & trade shows

III. Rebates

IV. Low-interest financing

V. Trade in allowance

3. Publicity/Public relations: Publicity usually comes in the form of a news story, editorial or announcement about an organization or its product/service. Credibility is the advantage of this medium. Public relation is the management function which evaluates public attitudes. Shahjalal Islami Bank goes for both publicity & public relation.

I. Press kits

II. Seminars

III. Annual reports

IV. Charitable donations

V. Company magazine

VI. Publications

4.Interactive/Internet marketing: Shahjalal Islami Bank is now paying more concentration on internet marketing. Because it has a he prospect. Interactive media allow for a back and forth flow of information whereby users can participate in and modify the form and content of the information they receive in real time. As internet service is not so much available everywhere in the country the bank cannot spread their interactive marketing in the country. But they can provide online services.

2.11.5) Physical Environment: The appearance of SJIBL’s building, landscaping, vehicles, interior furnishing, equipment, staff members, signs, printed materials, and other visible cues all provide tangible avidence of the banks service quality. Shahjalal Islami Bank manages its physical evidence very carefully, as it can have a profound impact on customers’ impression. They have:

1. Well decorated office space.

2. Prayer time & space.

3. Necessary furniture & electric equipment

4. Seating arrangement for customers

5. Car parking facility

6. Printed materials

7. Skilled manpower etc.

2.11.6) Process: Shahjalal Islami Bank creates and deliver product elements to customers require the design and implementation by effective process. A process is the method and sequence of actions in the service performance. Shahjalal Islami Bank designs its process in such a way that lead to fast, dynamic and very effective service delivery and result in satisfied customers. As the process of the bank is very well designed it helps a lot to the front line staffs to do their jobs well, resulting in high productivity and decrease likelihood of service failure. In the bank most of the directions comes from head office but there are different culture in different branch based on location but every where a specific process is highly maintained.

2.11.7) People: Banking service usually depends on direct interaction between customers and a firm’s employees. Shahjalal Islami Bank maintains a good relationship with its customers. Service quality is often assessed based on customers’ interactions with front line staff and Shahjalal Islami Bank Bangladesh Ltd, devotes significant effort to recruiting, training, and motivating these employees. They placed a separate institute for making the staffs up to the mark. Because the bank believes that employees represents the image of the bank in front of customers

(2.12) SWOT ANALYSIS:

Figure: 2-2SWOT analysis

STRENGTHS:

• Good asset quality

• Satisfactory business growth

• Diversified product lines

• Good profitability

• Experienced top management

• Good operating efficiency

WEAKNESS:

• Negative related earnings

• Dependent on fixed deposit

• Moderate risk management system
• Limited delegation of power

• MIS at primary stage

• Weak in shariah compliance

• Limited branch network

• Limited Market share

OPPORTUNITIES:

• SME and Agro based business

• Real time online banking

• Credit card in dual currency

• Basel-II compliance to tap advantage from RM system

THREATS:

• Increased competition in the market
• Market pressure for increasing the SLR
• Market pressure for dollar crisis

Chapter # 3

Theoretical Aspects

(3.1) Theoretical Background and Business Practice of Islamic Banking:

From the viewpoint of Islamic Shariah, the banking system has to avoid interest. Consequently, financial intermediation in Islamic banking between the bank and the client takes place as a partner rather than a debtor-creditor. The financial activities of modern conventional banks are based on a creditor-debtor relationship between depositors and bank on the one hand and between the borrower and the bank on the other. Interest is regarded by conventional banks as the price of credit reflecting the opportunity cost of money. As interest is prohibited in Islam, commercial banking in an Islamic framework could not be based on the creditor debtor relationship. The other aspect of the theoretical basis of Islamic banking is that the interest free bank is not risk free. This principle is applicable to two main factors of production, i.e. labor and capital. According to this principle, as no payment is allowed to labor, unless it is applied to work, no reward for capital should be allowed, unless it is exposed to business risk. From these two principles of the theoretical basis of Islamic banking, it may be said that Islamic financial relationships are of a participatory nature (Ahmad, 1993). Based on the theoretical background, business practices of Islamic bank, especially sources and uses of bank’s funds, are characterized by the following modes or techniques.

(3.2) DEFINATION OF ISLAMIC BANKING:

The General secretariat of the Organization of Islamic Conference ( OIC) defines an Islamic bank as a financial institution whose statuses, rules and procedures expressly state its commitment to the principles of Islamic Sharish and to the banning of the receipt and payment of riba ( interest ) on any of its operation. Islamic Banking Act of Malaysia (Act No.273a) has given the following definition.

Islamic banking means any company which carries on Islamic banking business and hold a valid license; and all the offices and branches in Malaysia of such a bank shall be deemed to be one bank

Islamic banking business means banking business whose aims and operations do not involve any element which is not approved by the Religion of Islam.

Therefore, if a bank by definition, avoids interest on its all transactions, but dose not keep itself away from other Haram (forbidden) transactions, like investment to pork meat industry, alcoholic beverage industry, gambling, etc. is not an Islamic, but all Islamic banks must be interest free.

Islamic bank, thus, can also be defined as a financial institution which dose not pay or receive interest on any of its operations in any form and its all activities conform to the principles of Islamic Shariah.

(3.3) THE MAIN OBJECTTIVES OF ISLAMIC BANKING:

Common objectives of all Islamic Banks are said to be as follows:

• To abolish Riba
• To establish Baiya (trad, commerce and industry)
• To mobilize savings for productive purpose
• To earn reasonable profit through Halal (permissible) transactions
• To establish Maruf (good) and Ihsan (kindness)
• To create more employment opportunities by increasing economic activities
• To distribute income and wealth equitably
• Not to allow concentration of wealth
• Generally to serve all classes of people, especially to favors the weaker sectors.
• To establish a balanced and welfare society

The above objectives are also the objectives of Islamic economics, so, hundred percent of these objectives cannot be achieved by Islamic banking operations alone. Islamic banking can play an important role to achieve these objectives for the establishment of a welfare economy.

(3.4) Banking System of Bangladesh:

The banking system of Bangladesh is composed of a variety of banks working as Nationalized Commercial Banks (NCBs), Private Banks, Foreign Banks, Specialised Banks and Development Banks. However, 28 out of 50 banks in Bangladesh are private, of which only 5, namely Islami Bank Bangladesh Limited, Exim Bank Limited,

Al-rafah Islami Bank Limited, Social Investment Bank Limited, and The Oriental Bank Ltd have been operating as Islamic banks. Besides these full-fledged Islamic banks, some conventional banks in the private sector have opened full-fledged Islamic banking branches and Islamic Banking Counter respectively to deal with the Islamic banking business parallel to their conventional operations.

(3.5) Banking Environment in Bangladesh:

Bangladesh appeared as a new nation on the world map in the year 1971. After independence financial institutions, especially banks played a vital role in re-constructing the war-torn economy of Bangladesh. As reported by BSB (P. 29, 1993), “the banking system of Bangladesh is a mixed one comprising nationalized, private and foreign commercial banks. Bangladesh Bank is the central bank of the country and is in charge of monetary policies of the Government and controls all commercial banks.” Immediately after independence the government of Bangladesh nationalized most of the banking institutions, though, within a short period, due to the failure in administering them properly, many of them were returned to their owners. The banking sector is one of the fast growing sectors of economy in Bangladesh. At present there are 34 banks working in the financial market of the country, including five Islamic banks and a number of foreign banks.

Central Banks and the Islamic Banks and submitted a report in 1981 on the “Promotion, Regulation and Supervision of Islamic Banks”. The report highlighted the need to provide for central bank assistance to the Islamic banks on a basis compatible with the Shariah. The report also discussed many monetary aspects such as liquidity requirements, reserve requirements, supervision of Islamic banking activities, and fiscal treatment of income from participation, ownership, capital requirements, and the maintenance of sound relationships between capital, reserves and total assets. The report recommended the fostering of interest-free financial instruments to enable the Islamic banks to meet the statutory liquidity requirements of the central banks. A study regarding “The Relationship between Central Banks and Islamic Banks” prepared by IAIB was submitted to the third Expert Level Meeting on Islamic Banking Studies (Dhaka, 1989).

(3.6) Role of Bangladesh Bank in Promoting Islamic Banking in Bangladesh:

Though there is no complete Islamic Banking Act for controlling, guiding and supervising the Islamic banks in Bangladesh, some Islamic banking provisions have already been incorporated in the amended Banking Companies Act, 1991 (Act No. 14 of 1991). Bangladesh Bank did not set up any separate Department at its Head Office to control, guide and supervise the operation of the Islamic banks. Inspection and supervision of the Islamic banking operations are conducted by the Bangladesh Bank as per the general guidelines framed for the conventional banks. So, ensuring implementation of Shariah principles in the Islamic banks are being conducted by their own Shariah Councils. The role of Bangladesh Bank in controlling, guiding and supervising the Islamic Banks in Bangladesh in accordance with Islamic Shariah is very minimal. In observing the Shariah implementation status of the Islamic banks, Bangladesh Bank examines only the report of the respective banks’ Shariah Councils. However, the inspectors and supervisors of Bangladesh Bank are not equally familiar with the technicalities of the different operational methodologies of the Islamic banking. This is because of the fact that there is no separate Department to look into this important matter. A committee of experts set up by the Governors of Central Banks and Monetary Authorities of the OIC countries examined the whole range of relationships between the

(3.7) Difference between Islamic Banking and Conventional Banking:

In Islamic Banking accounting the main difference with conventional Banking is that Islamic Banking can not deal with interest transaction and also con not deal with Haram Business.

Point wise differences between Islamic Banking and conventional Banking Particularly in Accounting Transactions are Summarized below:-

Islamic Banking Conventional Banking

(3.8) 7P’s of marketing mix:

7P’s is a framework which acts as a guideline for marketers to implement a marketing concept. It consists of a set of major decision areas that a company needs to manage in order to at least satisfy consumer needs.

The traditional marketing mix contains of four major elements, the “4-Ps of marketing”. As defined by Kotler et al. (1999):

1. Product: “Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. In includes physical ob-jects, services, persons, places, organizations and ideas.”
2. Price: “The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.”
3. Promotion: “Activities that communicate the product or service and its merits to target customers and persuade them to buy.”
4. Place: “All the company activities that make the product or service available to target customers.”

The set of controllable tactical marketing tools – product, price, place and promotion – that firm blends to produce the response it wants in the target market.The four P’s are very crucial in the decision making areas for goods oriented .

organizations. Because success depends on the proper implementation of these P’s along with their associated variables. Thus it is for this reason that the marketers converted the four P’s into four C’s.

Consumer wants and needs (vs. Products)

You can’t develop products and then try to sell them to a mass market. You have to study consumer wants and needs and then attract consumers one by one with something each one wants.

Cost to satisfy (vs. Price)

You have to realize that price – what you sell the product for – is only one part of the cost to satisfy. If you sell meals, for example, you have to consider the cost of driving to your restaurant what if you provided a delivery service? Pricing is one of the most difficult decisions to make – selling at the lowest price is not always the best option. If you rely strictly on price to compete you are more vulnerable to competition.

Convenience to buy (vs. Place)

You must think of convenience to buy instead of place. You have to know how each subset of the market prefers to buy – on the Internet, from a catalogue, on the phone, using credit cards, etc.

Communication (vs. Promotion)

You have to consider communication instead of promotion. Promotion is manipulative – it’s a statement from the seller. Communication requires a give and take between the buyer and seller – This is much more subtle. Be creative and you can make any advertising “interactive”. Use phone numbers, your web site address, etc. to help here. “Orange Wednesday” is a good example.

Developing a brand takes into account these considerations. Developing a brand is developing a promise. When you take into consideration the “4 C’s” noted above you begin the process of developing a brand!

The marketing mix is probably the most famous phrase in marketing. The elements are the marketing ‘tactics’. Also known as the ‘four Ps’, Marketing decisions generally fall into the following four controllable categories:

• Product
• Price
• Place (distribution)
• Promotion

Figure-3.1

Product: The product is the most important aspect of the marketing mix. The product can be a service or even a holiday destination. Products have both tangible and intangible benefits. Tangible benefits include benefits which can be measured such as the top speed of a car. Intangible benefits are benefits that cannot be measured such as the enjoyment the customer will get from the product. It is important that the product is changed as necessary to bring it up to date and prevent it from being overtaken by competitors.

Figure: 3-2

Exactly what product or service are you going to sell to this market? Define it in terms of what it does for your customer. How does it help your customer to achieve, avoid or preserve something?

You must be clear about the benefit you offer and how the customer’s life or work will be improved if he or she buys what you sell

The term “product” refers to tangible, physical products as well as services. Here are some examples of the product decisions to be made:

• Branding
• Functionality
• Quality level
• Products line
• Packaging
• Repairs and Support
• Securities

Price:

It is very important that the correct price is charged for a product. If the price is too high consumers will avoid the product as they will believe it to be too expensive yet if the product is priced too low they may believe that there is something wrong with the product for it to be so cheap. Also if the company charges too low a price, it may not cover its costs. There are many different pricing strategies that companies can use to decide on a price for their product including market and psychological pricing methods.

Exactly how much are you going to charge for your product or service, and on what basis? How are you going to price it to sell at retail? How are you going to sell it at wholesale? How are you going to charge for volume discounts? Is your price correct based on your costs and the prices of your competitors?

Some examples of pricing decisions to be made include:

• Pricing strategy (scheme, penetration, etc.)
• Suggested retail price
• Volume discounts and wholesale pricing
• Cash and early payment discounts/ bonus
• Seasonal pricing
• Bundling
• Price flexibility
• Price discrimination

Place:

The place is where you can expect to find your customer and consequently, where the sale is realized. Knowing this place, you have to look for a distribution channel in order to reach your customer.

The place is not where is located your business but where our customers are. For a retailer it is the same but for a boat producer located in Philippines the real place is the entire world. Do not confuse positioning and place. Here place means the real physical position of the customer in a geographic area or along a distribution channel.

Distribution is about getting the products to the customer. Some examples of distribution decisions include:

• Distribution channels
• Market coverage (inclusive, selective, or exclusive distribution)
• Specific channel members
• Inventory management
• Intermediaries
• Distribution centers
• Order processing
• Transactions
• Reverse logistics

Promotion:

In the context of the marketing mix, promotion represents the various aspects of marketing communication, that is, the communication of information about the product with the goal of generating a positive customer response. Marketing communication decisions include:

• Promotional strategy (push, pull, etc.)
• Advertising
• Personal selling & sales force
• Sales promotions
• Public relations & publicity
• Marketing communications budget

However, the strategies for the four P’s require some modifications when applied to services. For example, traditionally promotion is thought of as involving decisions related to sales, advertising, sales promotions and publicity. In services these factors are also important, but because services are produced and consumed simultaneously, service delivery people are involved in real-time promotion of the service even if their jobs are typically defined in terms of the operational function they perform. That is why, in case of service oriented organizations, marketers have to think and emphasize on three additional P’s known as the extended three P’s. They are:

a) People

b) Process

c) Physical Evidence

People:

All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer and other customers in the service environment. Teamwork, training, recruiting and motivating employees are the associated variables. How people are dressed, their personal appearance, their attitudes and behaviors all influence the customer’s perceptions of the service. In many service situations, customers themselves can also

influence service delivery, thus affecting service quality and their own satisfaction. For example, the customer greatly affects the quality of service they receive when they either comply or don’t comply with the service by the service provider.

Process:

The actual procedures, mechanisms and flow of activities by which the service is delivered. In other words, it is the service delivery and operating system which also give customers evidence on which to judge the service. Customers can judge from a variety of standardized and customized as well as simple and complex processes of various service organizations.The success of a service organization depends heavily on the nature of the service which it provides. Thus the additional three P’s are extremely important. In our report we will represent how a service organization can perform better than its competitors by utilizing the extended three P’s. We will demonstrate MTBL rising up to the dominant position that it is in now by aligning with the extended P’s and hence, strongly reinforcing its value image in the minds of its customers.

Physical Evidence:

The environment in which the service is delivered and where the firm and customer interact and any tangible representations that facilitate performance or communication of the service such as brochures, business cards, facility design and equipments. When customers have little on which to judge the actual quality of service they will rely on these cues, just as they rely on the cues provided by the people and the service process. Physical evidence cues provide excellent opportunities for the firm to send consistent and strong regarding the organization’s purpose, the intended market segments and the nature of the service

Chapter # 4

Analysis and Findings

(4.1) Types of Accounts of SJIBL:

A bank is essentially an intermediary of short-term investment/funds. It can carry out extensive lending/investment operations only when it can effectively mobilize the savings of the community. A good banker is one who effectively mobilizes the savings of the community as well as makes such use of savings by making it available to productive and priority sectors of the economy thereby fostering the growth and development of the nations’ economy.

Accounts are opened under the following two modes:

1. Al-Wadeeah ( Current Account)

2. Al-Mudaraba (Deposit Account)

1. Al-Wadeeah (Current Account): The word ‘Al-Wadeeah’ has been derived from the Arabic word ‘Wada’yn which means to keep/to deposit/to give up/Amanat. As per Shariah , Amanat means to keep something (goods/money/others) to any reliable person/institution for safe and secured preservation of the same keeping its ownership unchanged and which will be returned to the owner of the fund on demand as it is/in original shape. In case of Amanat Bank/any other institution cannot use, invest and amalgamate the funds without the prior permission of the owner of the Amanat.

· The depositor can deposit any amount in this account

· The depositor can withdraw any amount by cheque

· No profit is allowed in this account

· The depositor shall also not bear any loss

· Cheques, bills etc collected in this account against commission

· Govt. excise and incidental charge realize from this a/c as per rule.

2. Al-Mudaraba (Deposit Account): The word Mudaraba derived from the Arabic word ‘Darb/Darabun’. Literally it means movement to earn profit (munafa). It is a form of partnership where one of the parties called the ‘Shahib-al-mal’ provides a specified amount of capital and acts like a sleeping or dormant partner, while the other party called the Mudarib (entrepreneur), provides the entrepreneurship and management for carrying on any venture, trade, industry or service with the objective of earning profit. The Mudarib is required to work with honesty and sincerity and to exert the maximum possible care and precaution in the exercise of the functions.

(4.2) Mudaraba Deposit Products:

· Mudaraba Savings Account (MS)

· Mudaraba MonthlyTerm Deposit Receipt (MTDR)

· Mudaraba special Term Deposit Receipt (MTDR)

· Mudaraba Doubl /Tripol Benefit Scheme

· Mudaraba milliner Deposit Scheme

· Mudaraba Monthly income Scheme

· Mudaraba Mohor Deposit Scheme(new)

· Mudaraba Waqf Cash Account (MWCA)

· Mudaraba Hajj Deposit Scheme

· Mudaraba Bibaho Deposit Scheme(new)

· Mudaraba Lac potty Deposit Scheme(new)

(4.3) Different Types of Account Holders:

Anyone can open an account with the banker if he is not incapable of entering into a valid contract and the banker is satisfied of his bonafide and is willing to enter into the business relations with him. There are certain types of accounts in regard to which the banker should take note of the relative laws and exercise pre-cautions in order to safeguard its interest. Some types are:

· A/c opened by minors

· Joint (two or more persons)

· Firms