Overview of Islami Bank Bangladesh Ltd
1.1 Historical Background of IBBL
In August 1974, Bangladesh signed the Charter of Islamic Development Bank and committed itself to reorganize its economic and financial system as per Islamic Shariah. In January 1981, Late President Ziaur Rahman while addressing the 3rd Islamic Summit Conference held at Macca and Taif suggested, “The Islamic countries should develop a separate banking system of their own in order to facilitate their trade and commerce.”
This statement of Late President Ziaur Rahman indicated favorable attitude of the Government of the People’s Republic of Bangladesh towards establishing Islamic banks and financial institutions in the country. Earlier in November 1982, Bangladesh Bank, the country’s Central Bank, sent a representative to study the working of several Islamic Banks abroad.
In November 1982, a delegation of IDB visited Bangladesh and showed keen interest to participate in establishing a joint venture Islamic Bank in the private sector. They found a lot of work had already been done and Islamic banking was in a ready form for immediate introduction. Two professional bodies, Islamic Economics Research Bureau (IERB) and Bangladesh Islamic Banker’s Association (BIBA) mode significant contributions towards introduction of Islamic banking in the country.
The came forward to provide training on Islamic banking to top bankers and economists to fill-up the vacuum of leadership for the future Islamic banks in Bangladesh. They also held seminars, symposia and workshops on Islamic economics and banking throughout the country to mobilize public opinion in favor of Islamic banking.
Their professional activities were reinforced by a number of Muslim entrepreneurs working under the aegis of the then Muslim Businessmen society (now reorganized as industrialist & Businessmen Association). The body concentrated mainly in mobilizing equity capital for the emerging Islamic Bank.
At last, the long drawn struggle, to establish an Islamic bank in Bangladesh becomes a reality. Islamic Bank Bangladesh Limited was established in March 1983. In which 19 Bangladeshi nationals, 4 Bangladeshi institutions and 11 banks, financial institutions and government bodies of the Middle East and Europe Including IDB and two eminent personalities of the kingdom of Saudi Arabia joined hands to make the dream a reality.
1.2Business 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.
2.1 Mission and objective
Þ To conduct interest free banking.
Þ To establish participatory banking instead of banking on debtor creditor relationship.
Þ To invest through different modes permitted under Islamic Shariah.
Þ To accept deposits on profit-loss sharing basis.
Þ To establish a welfare-oriented banking system.
Þ To extend co-operation to the poor, the helpless and the low-income group for their economic uplift.
Þ To pay a vital role in human development and employment generation.
Þ To contribute towards balanced growth and development of the country through investment operations particularly in the less developed area.
Þ To contribute in achieving the ultimate goal of Islamic economic system.
The Bank provides all kinds of commercial banking services including deposits taking, extending investment, and al kinds of services relating to foreign exchange business including import, export and remmitance to the customers following the principles of Islamic Shariah, the provisions of the bank company act1991 and Bangladesh Bank’s directives.
The Authorized Capital of the bank is Tk 5000 million. The paid up capital of the bank was raised from Tk2764.80 million to 3456 million during 2006 by way of issuing bonus share at 1:4
2.4 Head office, Zones & Braches Network
For effective monitoring of the braches, two new zones have been credited in 2006 raising the number of zonal office from six to 8. IBBL has also opened seven new branches during the year 206 raising the total number of branches to 176 from a69 of the previous year. The bank plans to open more branches covering important economic & commercial places both in urban & rural areas. Head office and 8 zones are function for effective control, close supervision and proper monitoring of the total operation of the branch as well as assisting them in the development of business.
Particulars of corporate branches and zones are given below:
|Particulars||Number of Branches as on 31.12.2006|
|1. Corporate Branches||4|
|2. Dhaka Central zone||18|
|3. Dhaka South zone||18|
|4. Dhaka North zone||20|
|5. Chitagong zone||22|
|6. Bogora zone||30|
|7. Khulna Zone||29|
|8. Commilla Zone||20|
|9. Sylhet Zone||15|
Branch Expansion: 2002-2006
2.5 Products line:
IBBL has so far introduced the following deposit products:
I. Al Wadeah Current Account
II. Mudaraba Haji Savings Account(1 years to 25 years)
III. Mudaraba special Savings (Pension)[5 years to 10 years]
IV. Mudaraba Muhor Savings Account
V. Mudaraba Savings Bond[5 years and 8 years]
VI. Mudaraba Monthly Profit deposits [3 months, 6 months,12 months, 24 months and 36 months]
VII. Mudaraba Saving Deposit
VIII. Mudaraba Special Notice Deposits
IX. Mudaraba Foreign Currency
2.6 Role and contribution of IBBL
To Bangladesh Economy
Islami Bank Bangladesh Limited has many success stories of achievements. These are summarized below:
p IBBL is the pioneer institution for introduction of Islamic Banking in Bangladesh.
p The success of IBBL has imbibed other sponsors at home and abroad to establish Islamic Banking in Bangladesh. Four national, one international Islamic banks have since been established in the country. A private sector traditional bank has also established two full-fledged Islamic Banking branches. Several other existing and proposed traditional banks hove also expressed their intention to introduce Islamic Banking.
p An IBBL has successfully mobilized deposits from a section of people who hither-to-before did not make any deposit with interest based banks.
p The Islamic Banking products, which are offered by IBBL through its 118 branches, located at important centers all over the country and spontaneous acceptance of those products by the people proves the superiority of Islamic banking.
p IBBL’s market share of deposit investment and ancillary business is steadily increasing.
p IBBL, though still a tiny bank, handles more than 10% of country’s export and import trade.
p Among the contemporary commercial Banks IBBL’s position is first in respect of mobilization of deposit, deployment of fund and earning profit.
p Investment in industrial sector occupies nearly 33% of IBBL’s investment portfolio. This is a unique example of industrial Finance by a commercial Bank.
p More than 1.15,000 workers are employed in the industrial projects financed by IBBL. IBBL has thus made significant contribution to solving unemployment problem of the country.
p Dhaka- the capital of Bangladesh being a Mega city- has acute transport problem. IBBL has joined hands with an enterprising group to introduce fleet of Premium Bus service, which has attracted the attention of all section of the people and mitigated transportation problem of the city to some extent.
p IBBL has introduced several other welfare oriented Investment schemes, such as Small Transport Investment Scheme, Small Business Investment Scheme, Agriculture Implements Investment Scheme, Poultry Investment Scheme, Household Durable Investment Scheme, Housing Investment Scheme etc.
p IBBL launched a Rural Development Scheme for providing finance to drown-trodden section of the populace- an area where no other Commercial Bank has extended any finance. IBBL’s mission is to reach to all 68,000 villages of the country as early as possible.
p a IBBL has contributed a remarkable amount million Taka as income tax to the Government Exchequer on its net profit over the last 18 years, a At the initiative and drive of IBBL, several Universities in Bangladesh, have introduced Courses on Islamic Banking and finance.
p IBBL has organized a good number of national and international Seminars on Islamic Banking and Economics. Importantly, IBBL sponsored a Seminar at Dhaka with a view to forming an Islamic Common Market.
p Due to constant persuasion of IBBL the Government has granted license for establishment of an Islamic Insurance Company. By now, two (2) Islamic Insurance Companies have started business.
p IBBL has earned reputation in the country as a corruption free institution.
p IBBL is held in high esteem in the banking circle as a good managed bank.
p Under the leadership of IBBL, Bangladesh Association of Banks (BAB) has been formed. This is a platform to ventilate the standpoints on banking issues of the private sector banks. a IBBL has taken initiative to form an Association of Islamic Banks in Bangladesh for furtherance of the causes of Islamic banking.
p IBBL has established a foundation called Islami Bank Foundation1 for carrying out social welfare activities. The foundation has taken up a number of schemes covering the whole of Bangladesh.
2.7 Development of manpower, research, training and motivation
The principles and working procedures of Islamic banks are completely new and different from the conventional banks. There is an inevitable need for training of the employees of the banks to orient and attune them to the new system of Islami banking. To ca-ter to this need, Islami Bank training and Research Academy (IBTRA) was established in 1984, soon after the inception of the Bank.
The activities of IBTRA cover both training and research on various aspects of Islamic banking. The Academy developed a rich library of its own with a treasure of valuable books on different subjects including Islamic economics, banking, comparative philosophies and journals of home and abroad and research articles and documents. Employees of the Bank, learners and researchers have been taking full advantage of the library.
The Academy edited books on “Readings in Islamic Banking” and “Investment Operations”. It also edited and published a brochure on “Investment and Trade Opportunities in Bangladesh.”
Keeping in view the existing and future training requirement of the Bank and also to generally cater such needs of different Islamic banking & financial institutions of the region, the management of Islami Bank Training and Research Academy has been placed at the disposal of an Academic Council consisting of 3 Directors of the Board, Management Executives of the Bank, Shariah scholar, renowned academicians and representatives of reputed institutions engaged in the training of bank officials of the country.
The Academy conducts training courses, and workshops. The courses include Islamic Banking, Banking Law and Practice, Investment Operations and Management, Foreign Trade and Foreign Exchange, Shariah Based Audit and Inspection.
Besides, orientation, induction, foundation and motivation courses on different subjects are also conducted round the year. In addition to conducting regular training courses, it arranges seminar on Islamic economics and banking and such other related topics of current interest.
Apart from this, an “Executive Development Program” has been introduced at the Head Office of the Bank in Dhaka since 1988 for enriching knowledge and thought process and developing professional skill of the Executives. This program has proved to be effective and now being extended outside Dhaka. The Academy conducts internship courses for the students of different Departments of various Universities of the country.
The Bank introduced annual award for the best three students of the Department of Banking and Finance of Dhaka University who secure 1st class 1st, 2nd and 3rd with ‘Islami Banking’ as special subject from the year1994.
The Bank is also providing financial assistance for publication of a textbook on ‘Islamic economics and banking’ for the university students.
Besides, a motivational program has been introduced since 1987 for the clients of the Bank. Client-orientation program are arranged at different branches for disseminating the concept of Islamic economics and banking and to acquaint the :clients with the operations of Islamic banking system, ‘he Bank, in 1993, co-sponsored a 3-day international Seminar on ‘Islamic Common Market’ n which scholars, economists, bankers, industrialists’ 2nd representatives of trade bodies of 15 ;countries participated. The Bank, with the: collaboration of International Association of Islamic Banks (IAIB), organized an International Seminar on Islamic Banking in 1985 and another international Seminar on Islamic Banking and insurance in 1989.
Islami Bank Training and Research Academy has introduced Diploma in Islamic Banking since 1998.
Manpower Position: 2002-2006
2.8 Publicity and public relations
The Bank, since its birth, has been relentlessly working to project and promote the lofty ideals of Islam in the fields of economics and banking and to reach the people of all walks of life and bring home to them the concept of Islamic banking.
Thus, it has been able to create a favorable image about Islamic banking among the people. The Bank releases advertisements through radio, television, magazines and newspapers to make urban and rural masses aware of the ever growing concept, modes of operation, schemes and services of the Bank and to focus on its progress and motivate traders, businessmen and industrialists to establish and broaden their business links with the Bank. To promote healthy growth of art and literature in the country, literary magazines are patronized.
The Bank has so far published a number of books, booklets, souvenirs and folders on different aspects of Islamic banking and Islamic economics. Attractive multi-colored posters were also published depicting the aims and objectives, people-oriented special investment schemes of the Bank.
National and international newspapers and magazines published features and in-depth reports on the progress of the Bank and made editorial comments praising the welfare activities of the Bank.
Bank’s quarterly research journal Islami Banking’ highlighting the concept of Islamic economy, banking, insurance, prospect of economic collaboration among the Muslim countries etc. started its publication in 1992 which has been widely acclaimed by all sections of people including academicians, economists, bankers, journalists, judges, intellectuals etc. A periodical house magazine named ‘Islami Bank Parikrama’ is being published regularly as the mouthpiece of the Bank. Discussion meetings, seminars, Symposia, workshops are also being arranged to apprise the people of the Islamic banking system. Stalls and booths were opened in different national and international fairs for projecting the activities of the Bank.
2.9 SHARIAH COUNCIL: SHARIAH SUPERVISION
Shariah Council of the Bank is playing a vital role in guiding and supervising the implementation and compliance of Islamic Shariah principles in all activities of the Bank since its very inception. The Council, which enjoys a high status in the structure of the Bank, consists of prominent ulema, reputed banker, renowned lawyer and eminent economist. Members of the Shariah Council meet frequently and deliberate on different issues confronting the Bank on Shariah matters. They also conduct Shariah inspection of branches regularly to-ensure that the Shariah principles are implemented and complied with meticulously by the branches of the Bank.
|Established on||13th march 1983|
|Inauguration of 1st Branch||30th march 1983|
|Formal Inauguration||12th August 1083|
|Listing in Dhaka stock exchange ltd||1985|
|Listing in Chittagong stock exchange ltd||1996|
|1st Rights Share issue||1989|
|2nd Rights Share issue||1996|
|3rd Rights Share issue||2000|
|4th Rights Share issue||2003|
|Opening of 50th Branch||26th November 1991|
|Opening of 50th Branch||12th June 1997|
|Opening of 50th Branch||30th November 2004|
|Joining/Agreement with CDBL||29th December 2004|
Social Welfare Activities of Ibbl
3.1Social-welfare activities of Islam bank foundation
One of the distinguishing features of Islami Bank is that its overall activities are directed towards the welfare of the society. The Bank, since its inception, has dedicated itself for the enlistment and emancipation of the helpless and downtrodden people of the society. With this end in view, the Bank has created a separate fund, which was earlier known as Sad aqua Tahbil. In 1991, the Sadaqua Tahbil was reorganized and enlarged-under the new name of ‘Islami Bank Foundation’ with a fund of Taka 38.00 million in order to conduct social-welfare activities on a wider scale. As one of the leading non-government voluntary organizations of the country, the Foundation has been working with unique and special programs for the welfare of distressed humanity and to make poor, downtrodden, landless and asset less people self-reliant.
The aims and objectives of the Foundation are to serve distressed humanity, promote people oriented mass education, extend health and Medicare facilities to the poverty-stricken people in urban and rural areas, create facilities for productive self-employment and develop human resources for improving economic condition and quality of life, assist healthy growth of art, culture and literature, science and technology, sports, research and propagation of Islamic teachings. The Foundation has taken up a number of schemes covering the whole of Bangladesh.
At the moment IBBL has around 950 different kinds of running projects divided into 22 different industrial sectors. IBBL believes in green Industrialization. It is a common practice of our bank to take clearance from all the concerned Government Authorities to establish each project including the clearance for any kind of environmental hazards created by the specific project. IBBL takes maximum possible care to protect the environmental pollution by its projects. In this regard, IBBL encourages its Dyeing & Printing Projects to establish Effluent Treatment Plants (ETP) to protect water and soil from pollution. All the Brick Fields financed by IBBL has at least 120 feet chimney to minimize the air pollution. IBBL assures obtaining NOG of various Authorities such as Explosive Department, fire services department, Rupantorito Prakitic Gas Company etc. for setting up gasoline/CNG filling station.
Under the beautification program of Dhaka City Corporation, Islami Bank Bangladesh Limited is doing the work to enhance the beauty of the road of Dhaka City Corporation starting from Rajarbag traffic Signal to Kamalapur Railway Station by plantation of beautiful plants and trees on Road Island
Income Generating Programs
Access to required finance and other related inputs may help many to become self employed. In absence of such opportunity, the unemployed youths entangle themselves in various anti-social activities. Islami Bank Foundation has, therefore, taken up the following Self-employment projects:
3. Poultry Keeping
4. Rural Health Work
5. Milk Cow/Goat rearing
6. Small Trade
Education is the backbone of a nation. Awareness building, skill training, access to information-all depends on education. But it is regrettable that the rate of literacy is still very low in Bangladesh. Most of the children are deprived of the light of education due to poverty, lack of sufficient educational institutions, non-availability of textbooks etc. In a ward, the unfavorable socio-economic conditions are responsible for this chaotic situation.
The Foundation has, therefore, taken up the following programs to improve the country’s educational scenario:
a) Support to Model Forqania Maktab
b) Scholarship/lump grant for poor and Meritorious Students
c) Financial support to Educational Institutions
Health and Medicare Programs
Health and Medicare facilities are the basic and fundamental rights of each individual but most of the people of our country are still deprived of it. The Foundation has, therefore, taken up the following:
Programs to extend health, Medicare and sanitation facilities to the urban and rural areas:-
a) Establishment of Medical Centers
b) Supporting charitable dispensaries
c) Lump-sum help for medical treatment
d) Tube well Installation
e) Sanitary Latrine construction etc.
Such Assistance is also extended to the members of Rural Development Scheme (RDS) of IBBL. Under Health and Medicare programs, preventive measures have also been taken. Special steps have been taken for construction of sanitary latrines and installation of tube wells in the villages covered under to whom Islami Bank Bangladesh Ltd. is providing finance for income generation activities.
Humanitarian Help Programs
These program aims at providing help to distressed people who are unable to meet their basic needs like food, clothing, shelter and medicine. The old widow and children without guardians get preference. Besides, the program extends assistance to orphanages, provide fund for the marriage of poor girls, assist indebted people, help distressed wayfarers etc.
Relief and Rehabilitation Programs
Participation in relief and rehabilitation activities in natural disasters and in emergency forms an important program of Islami Bank Foundation. During calamities like flood, tornado, tidal surge etc. the Foundation mobilizes its own people as well as donates to the relief fund opened at the government level. The Foundation also tries its best to extend hands of assistance and co-operation to the Muslim brethren elsewhere in the world.
One important objective of Islami Bank Foundation is to disseminate the true knowledge and teachings of Islam. The Foundation has, therefore, taken up various schemes to enlighten the common people as well as the elite and make them familiar with the concept of Islam. Islamic research magazines and other Islamic Literatures are being distributed among the Academicians, Journalists, Justices, Lawyers, High Officials, Bankers, Literatures and important Libraries and Institutions of the country. The Foundation is also working among the prisoners for their moral reforms.
Welfare Oriented Investment Schemes
A. Islami Bank Hospital
With the objective of providing low-cost curative services to the less affluent segment of the society, the Foundation has so far set up Hospitals at three Divisional Headquarters in Dhaka, Rajshahi and Khulna. Services of eminent general practitioners and specialists in various fields of treatment like Medicine, Surgery, Gynae, Paediatric, E.N.T. Urology, Neuro-surgery, Skin, Orthopaedic etc. are harnessed in these hospitals. Standard diagnostic, medical and surgical equipments are in used in these hospitals. The Foundation plans to establish Hospitals at each Divisional Headquarters of the country.
B. Community Hospital
Besides establishing Hospitals at the Divisional Headquarters, IBF has a plan to assist local initiatives in setting up Hospitals at District level. Establishment of Four such Hospitals is planned during 1999,
C. Monoram: Islami Bank Crafts & Fashion
The project has been taken up as a sales outlet of homemade garments, handicrafts and other items produced by the distressed women. The main objective of the project is to create conducive and healthy atmosphere in which women can contribute to the family income by working within the limits of Shariah. The other objective of this project is to develop designs of women-wear, which will conform, to the principles of decency and modesty as laid down by Islam and at same time compare well with the modern-day-fashions.
D. Service Centre
To save the people of coastal and river belt from natural disaster, erosion etc. a special project has been taken in the name and style of Service Centre” Under this programme pucca structure constructed in coastal areas, river belts and off shore islands would be used for integrated social development of the people as well as provide safe.
shelters during natural calamities. Two such Service centers (in Noakhali and Manikgonj) have already been established.
E. Islami Bank Institute of Technology
The large number of unemployed youth of, the country may be turned as assets through taking up Human Resource Development (HRD) Programme.
The youths with skills in various sectors of technology may become self-employed in the land and can also get employment opportunities abroad. Islami Bank Foundation has, therefore, established 3 Technical Institutes, two in Dhaka and another in Bogra, which are rendering training facilities in Computer, Secretarial Science, Driving, Electrical, Refrigeration and Air Conditioning, Radio & T.V, Tailoring and Garments etc.
F. Islami Bank Model School and College
As Dhaka, the capital of Bangladesh, is turning to be a Mega City, a large number of English Medium Schools are creeping up which follows curriculum not conforming fully to the need of the country. As an attempt to combine modern education (which are secular) with religious education for a total development of the children, Islami Bank Foundation has established an English medium Model School and College in Dhaka. Establishment of a Bangla medium school affordable by lower and middle class economic strata of the society is also being envisaged.
G. Islami Bank Physiotherapy and Disabled Rehabilitation Centre
In Bangladesh there ore a great number of unfortunate disabled persons who have no other means to maintain themselves. Without resorting to beggary. The burden of the society might be lessened and these people can be helped to become self-reliant through imparting special skills. Keeping this in view, Islarni Bank Foundation has decided to rehabilitate these unfortunate disabled persons through establishing a centre named “Islami Bank Physiotherapy and Disabled Rehabilitation Centre” This Centre while making temporary arrangement for food and shelter for the disabled, will arrange for health check up, physiotherapy and occupational therapy and look for job placement through internship in various factories and trading houses.
H. Centre for Development Dialogue
Alongside with the governmental efforts at National level and multilateral and bi-lateral institutions at the international level, Non Govt. Organizations (NGOs) in different parts of the world especially in the developing countries are playing increasing role in experimentation with Development models.
Most of the organizations unfortunately, fry with development techniques from a standpoint, which often turn antagonistic to the belief and social norms of the people. The renowned foreign and national NGOs have their established training centre(s) where they train their own people and rent out the facilities to others. Islami Bank Foundation has decided to establish a training centre of its own named Centre for Development Dialogue” which will create opportunity for imparting training facilities for its own staff members as well as the staff members of other development organizations.
Besides the above-mentioned project, the Foundation runs projects like: (i) Legal Aid Project for the welfare and Legal support to victims and their family members, holding of seminars and symposium on the rights of the vulnerable (women, children, disabled etc.), opinion mobilization against various forms of social ills etc. (ii) Talimul Quran Project for propagating the teaching of the Holy Qur’an. (iii) Bangladesh Sangskritic Kendro projects for upholding and promoting the culture of the land.
I. Midwifery training Program
In the rural areas, the traditional birth attendants conduct the normal delivery. They do not have any formal training in this regard and therefore, a good number of mothers and babies die during the delivery. Many of them, though do not die suffer even whole the life due to wrong handling of the traditional birth attendants. Considering the above situation Islami Bank Foundation has taken Midwifery Training Program with the help of Islami Bank Hospitals and Bank Community Hospitals. In the year 2006, a total number of 275 traditional birth attendants received midwifery training
GENERAL BANKING ACTIVITIES OF ISLAMI BANK BANGLADESH LTD
GENERAL BANKING ACTIVITIES
To Open A New Account:
This is an era of keen competition among banks. Most of the commercial banks vie with one another in tapping the savings of the public by means of purchasing of different types of financial product. These products are known as secondary securities, which shows claim against the financial institutions. Popularly these products are known as deposit; of different kinds and of various maturate. The most popular products are current-deposit (CD), savings bank deposit (SB), fixed deposit, short-term deposit etc.
General Practice at Regarding Accounts:
Account Opening Registering;
After fulfilling all the requirements for opening account necessary entries are given in the account opening register. There are several registers for several accounts as MSA, AWCA, and TDR etc. Date of opening name of the account holder, nature of business, address, initial deposit, and various information are recorded in that register. New accounts number is given from the list of new numbers provided by the computer department.
Checkbook is issued to the new customer after opening account. Two separate checkbooks are given for current and saving accounts. AWCA accounts Checkbook consists 25 and 50 leafs, while MCA account Checkbook has 10 leafs. There is a check book issue register in this regard; where Check book number, leaf number, date of issue etc. information are kept. All the necessary numbers are the sent to the computer department to give entry in the program.
Taka 10 or 50 = each for twice a year is debited from customers AWCA account for rendering service to him. Tk. 50 = each is debited from customers account for providing him solvency certificate.
Profit is the price of product, which is determined by the market forces. Every bank offers a competitive price to attract deposit.
General Characteristics of Deposit Account
Al-Wayadea Current A/C (AWCA)
AWCA accounts are unproductive in nature as far as banks loan able investment fund is concerned sufficient fund has to be kept in liquid form, as current deposits are demand liabilities. Thus huge portion of his fund becomes no performing. For this reason, banks do not pay any of AWCA CD account holder. Businesspersons and companies are the main customers of this product.
Mudaraba Savings Account (MSA)
As per Bangladesh Bank instruction, 90% of SB deposits are treated as time liability and 10% of it as demand liability. In EBL, there is a restriction about drawing money from SB account but anytime holder may draw money of any amount with prior notice. Generally, householder and individuals are the clients of this account.
Mudaraba Savings Notice (MSNA) A/C
MSA accounts can be treated as semi term deposit. Deposit should be kept in these accounts for at least seven days to get interest of MSA accounts is less then SB accounts. (5.50%) generally profit, but may increase to 6% or more depending on the fund. Check book is issued them but frequent use of checkbook is discouraged. Government organization, big corporate house and banks are generally the clients of this account. The volume of this account is generally large and notice has to be given to draw money.
Mudaraba Term Deposit Receipt (MTDR)
Fixed deposit are of two kind midterm deposit (MTD) and term deposit (TD) instrument whose maturity period is within one year are known as MTD and those above one year are considered as term deposit (TD). Calculation of profit TDR and provisioning regarding this is quite complicated issue. Profit is calculation at each maturity date and provision is made on that. Also at the month and provision of profit is mode.
IBBL sells and purchases P.O. DD and T.T. to its customers only. IT does not offer remittance service frequently to those other than its customer.
Pay Order (PO)
Pay order an instrument which is used to remit money within a city through banking channel the instruments are generally safe as most of them are crossed.
Issuing of a pay order (PO)
A customer can purchase pay order in different ways:
By Cash A/C ………………………………………………………………….Dr
Bills Payable (PO) A/C …………………………………………………………CR
Income A/C commission on Remittance………………………………… CR
By account Client A/C…………………………………………………….. DR
By transfer head office/other department’s client A/C….. ……….. DR
Tk 1 to Tk 10000 =tk10/-
Tk 10001 to 500000 =tk20/-
Tk500001 to 1000000 =tk30/-
Tk 1000001 and above=tk50/-
VAT: 15% of principle Amount
Demand Draft (DD)
Demands Draft is a very much popular instrument for remitting money from one corners of a country another. The instrument is used for transfer and payment. Difference between pay order and demand draft is in terms of place only P.O. is used for remitting money within the city whereas DD is used for within the country. DD too, constitutes current liability on the part of a bank. At IBBL DD is not sold to people other than its customer.
Tk 1 to 10000 =Tk 10/-
Above Tk 10000 =1 Tk for every 1000
VAT: 15% of principle Amount
Telegraphic Transfer (TT)
Telegraph transfer is one of the fastest means of transferring money from one branch to another or from one to another. The TT issuing bank instructs its counterpart by tested telex message regarding remittance of money. No instrument is given for T.T. both parties should have account, as money is transferred.
Tk 1 to 10000 =Tk 10/-
Above Tk 10000 =1 Tk for every 1000
VAT: 15% of principle Amount
As far safety is concerned customers get crossed check for the transaction. As we known crossed check cannot be encashed from the counter, rather it has though been collected through banking channel i.e. clearing. A client of IBBL received a check of another bank, which is located within the clearing rage; deposit the check in the account at IBBL. Now IBBL will he will not the money until the check is honored.
Outward Bills for Collection (OBC)
Customers deposit check, drafts etc. for collection, attaching with their deposit sleep. Instrument within the range of clearing are collected through local clearing house, but the other, which are outside the clearing range are collected through OBC mechanism. A customer of IBBL principal branch Local Office Dhaka is depositing a check, of Sonali Bank, Cox’s Bazar. Now as a collecting bank IBBL, principal branch will perform the following task;
1. Received seal on deposit slip.
2. IBBL Local Office Principal Branch crossing indicating them as collecting banks.
3. Endorsement given “Payees A/C will be credited on realization.
4. Entry on register, from where a controlling number is given.
Collecting bank can collect it either by its branch of by the drawer’s bank. They will forward the bill then to that particular branch. OBC number will be given on the forwarding letter.
Now following procedures will take place in case of the following two cases.
Bills Collected Through Branch
If the bill is forwarded to a branch, they will collect it through IBC procedure. Collecting branch will receive and IBCA from that particular agent branch according treatment from the angle of collecting branch will be.
H.O> A/C concerned branch…………………………………………….. Dr
Customer A/C………………………………………………………………… Cr
Income A/C commission; postage…………………………………….. Cr
In this case commission will be charged by the collecting branch, not the agent branch.
Bills collected through drawer’s bank:
Accounting treatment for the collecting branch will be
a. Clearing……………………………………………………………………. Dr
b. Customers A/CC……………………………………………………….. Cr
Inward Bills for Collection (IBC)
In this case, bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill. Next steps are.
1. Entry in the IBC register, I.B.C number given.
2. Endorsement given – “Our branch endorsement confirmed”
3. The instrument is sent to clearing for collection………………. Dr
4. Miscellaneous Creditor A/C OBC………………………………….. Cr
Endorsement – Various Types
|Endorsements||In case of|
|Payees A/C Created||Pay to Mr. X|
|Received payment payees A/C Credited||Pay to IBBL Mr. X|
|Payees A/C Credited||Pay to Mr. X. EBL|
|Payees A/C will be credited on realization||Bills for collection|
|Our banks endorsement confirmed|
|Received Payment||EBL or Cash|
|First Payees endorsement confirmed second payees|
|Our collecting agents endorsement
Cash section demonstrates liquidity strength of a bank. It also sensitive as it deals with liquid money. Maximum concentration is given while working on this section. As far as safety is concerned special precaution is also taken. Tense situation prevails if there is any imbalance in the case account.
All cash, instruments (P.O.D.D. check) and other valuables are kept in the vault is insured up to Tk. 4 crore with a local insurance company. If cash stock goes beyond its limit of Tk. 4 crore, the excess money is transferred to Bangladesh Bank if there is shortage of cash during transaction period money is transferred to drawn from the central
bank. There are three keys of the vault, which are given to three seniors most officers. Daily, an estimated amount of cash is brought out from the vault, for transaction purpose. No more than Tk. 4 Crore brought at once from the vault, on a single day.
Teller Customer Relationship
In a bank a person who delivers and receives cash from the cash counter is known as teller, a customer meets most of the time in a bank with a teller on the counter. So teller should hold certain quality.
> Should be friendly.
> Provide prompt service.
> Be accurate in his task.
In short, a teller should be efficient, otherwise he has to pay.
Cash Packing and Handling
Cash packing and handling needs a lot of care as any mistake may lead to disaster. Packing after banking hour when the counter is closed, cash are packed according to denomination. Notes are counted several times and packed in bundle, stetted and stumped with initial.
After the banking hour, the cash counter is closed. But sometimes customers come to draw or deposit money after the service hour. However, their money is received or aid recorded in the next daybook. This is known as evening.
(a) Principles of Distribution of Profit to Mudaraba Depositors
The principles of calculation and distribution of profit to Mudaraba Depositors generally followed by different Islami Banks are as under:
1. Mudaraba Depositors share income derived from investment activities i.e. from the use of fund.
2. Mudaraba Depositors do not share any income derived from miscellaneous banking services where the use of fund is not involved, such as commission, exchange, service charges and other fees realized by the Bank in connection with sale and purchase of Demand Drafts, Telegraphic Transfers and Mail Transfers etc.
3. Profit and loss resulting from the use of funds is separately maintained in the accounts from other income and expenditure relating to other activities and
4. services offered by the Bank.
5. Mudaraba Deposits get priority in the matters of investment over Bank’s equity and other cost free funds.
6. Mudaraba Depositors do not share any income derived from investing Bank’s equity and other cost free fund.
7. The amount of the statutory cash reserve and the liquidity reserve, which are required to be maintained with Bangladesh Bank, is deducted from the aggregate balance of Mudaraba Deposits to arrive at the net balance of profit sharing deposit.
8. The gross income derived from investments during the accounting year is, at first, allocated to Mudaraba Deposits and cost-free-funds according to their proportion in the total investment.
9. The share of gross investment income of Mudaraba Deposits as worked out in terms of principle shown against serial No 7 above is distributed as under:
a) Minimum sixty-five (65) percent is distributed to Mudaraba Depositors applying the rates of weight age shown below. Mudaraba Depositors’ share of sixty-five (65) percent of gross investment income might further be raised by the Bank’s Management at its discretion to rationalize the Rates of profit to Mudaraba Depositors but it would not be reduced during any accounting year without giving prior declaration.
b) The rest amount of gross investment income is retained by the Bank as management fee for managing the investment & for making reserve for Bad & doubtful investments.
9. Islami Bank Bangladesh Ltd, at present, applies the following weight ages to Mudaraba Deposits.
10. Differential rates of weight ages have been assigned to Mudaraba Depositors on account of the following factors:
a) Period of Deposits
The longer the period of deposit, the greater the risk they bear with regard to fluctuation of the rates of profit and erosion of the value of deposit due to inflation. The Term Depositors have also to forgo profit in case of premature encashment.
b) Banking Facilities
The Term Depositors do not enjoy any banking facility such as, operating accounts by cheques, transfer of account from one branch to another, collection of cheques and other instruments, executing standing instructions through their accounts and so on and so forth. On the other hand, the PLS Savings Depositors have freedom to get the above services through their accounts. PLS Short Notice Depositors enjoy still greater facilities in regard to making deposits in and withdrawal from their accounts.
c) The pattern of Rates of Return on various types of cost bearing deposits of the traditional Banks in our Money Market have also an important bearing on allocation of weight age at different rates.
d) In consideration of the above factors, full weight age has been assigned to our Mudaraba Deposits of 36 months and relatively lower Weight ages have been given to Mudaraba Deposits of lower periods, Mudaraba Savings and Mudaraba Short Notice Deposits.
ACCOUNT NAMES AND PROFIT RATE
|SI. No.||Particulars of Deposits||Final rate of profit for 2006|
|a)||Mudaraba Hajj Savings|
|i)||From 11years to 25 years Term||11.69%|
|ii)||From 1 year to 10 years Term||11.26%|
|b)||Mudaraba Waqf Cash Deposit Account||11.69%|
|c)||Mudaraba Special Savings (Pension)|
|i)||Above 10 Years Term||11.26%|
|ii)||Upto 10 Years Term||10.30%|
|d)||Mudaraba Muhor Savings Account|
|i)||10 Years Term||11.26%|
|Ii)||5 Years Term||10.30%|
|e)||Mudaraba Savings Bond (MSB)|
|i)||8 Years Term||10.85%|
|ii)||5 Years Term||10.30%|
|f)||Mudaraba Monthly Profit Deposit (MMPDS)||10.58%|
|g)||Mudaraba Term Deposits|
|i)||Mudaraba Special Notice Deposit||4.76%|
|i)||Mudaraba Foreign Currency Deposit||4.60%|
DIFFERENT INVESTMENT SCHEME
The special feature of the investment policy of the bank is to invest on the basis of profit loss sharing system in accordance with the tents and principles of Islamic Shariah. Earning profit is not the only motive and objective of the Banks investment policy rather emphasis is given is attaining social good and in crating employment opportunities.
Pursuant to the investment, policy adopted by the bank a 7 years perspective investment plan has been drawn up and put into implementation. The plan aims at diversification of the investment portfolio by size, sector, geographical area, economic purpose and securities to bring in phases all sectors of the economy and all types of economic groups of the society within the fold of banks investment operations.Accordingly the plan envisages composition of the investment profit-folio with for agriculture and rural investment, 16% for industrial term investment, 14% for industrial working capital, 6% for housing and real estate, 6% for transport arid cornmunication, 2% for electricity, gas, water and sanitation services, 2% for storage’s 40% for import, export and local trade and trade related activities and % for other productive purposes by the end of the plan period, i.e. the year 2002.Further, in order to diversify investment profit-folio, the bank engaged itself in investment operations through special schemes introduced during the years.
The Hank is planning to introduce yet other new investment schemes in addition to welfare oriented investment schemes viz-Rural Development scheme. Transport investment schemes, car investment scheme, small business investment schemes, Doctors investment scheme, Household Durables investment scheme, Housing investment scheme and agricultural implements investment scheme etc. Besides the bank is financing various economic groups in different sectors in both urban and rural areas for enlistment of their economic condition.
Objective and Principles:
The objectives and principles of investment operations of the Banks are:
The investment fund strictly in accordance with the principles of Islamic Shariah. To diversifies its portfolio by size of investment, by sectors (public and private), by economic purpose, by securities and by geographical area including industrial, commercial and agricultural.
] To ensure mutual benefit both for the Bank and the investment client by professional appraisal of investment proposals, judicious sanction of investment, close and constant supervision and monitoring therefore.
] To make investment keeping the socio-economic requirement of the country in view.
] To increase the number of potential investors by making participatory and productive investment.
] To finance various developments schemes for poverty alleviation, income and employment generation with a view to accelerating sustainable socio-economic growth and upliftment of the society.
] To invest in the form of goods and commodities rather than give out cash money to the investment clients.
] To encourage social upliftment enterprises.
] To shun even highly profitable investment in fields forbidden under Islamic Shariah and is harmful for the society.
The Bank extends investments under the principles of Bai-Marabaha,’Bai-Muazzal Hire purchase under Shairkatul Mcilk and Musharaka. The Bank is making sincere efforts to go for investment under Mudaraba principle in near future.
Investment Policy of IBBL
Investment operation of the Bank is of vital importance as the greatest share of total revenue is generated from it. Maximum risk is centered in it and the very existence of a Bank mostly depends on prudent mgt. Of its investment policy.A sound well defined, well planned and appropriate investment policy frame work is a pre-requisite for achieving the goal of the Bank i.e. implementation and materialization of the economic and financial principles of Islam in the Banking area and justice in trade, commerce and industry and to build socio-economic infrastructure, create opportunity for income and sustained economic growth of the country.
Investment perspective plan of IBBL.
a) 7 – years perspective plan (1996-2002).
b) 5 – Years perspective plan (2003-2007).
5 -years perspective Investment Finn (2003-2007).
a) By size of Accounts, (3000-250 crore)
b) By Sector (Public & Private) 5% (Rural) & 95% (Urban)
c) By Areas (Urban & Rural) (6to 10%- 94 to 90%)
d) By Economic purpose (2% to 40%).
c) By Securities (2%-70%)
d) By mode (7.5% to 65.50%).
Investment portfolio of Islamic Bank Bangladesh ltd.
1. Port-folio Management
a) Port-folio Management of a Bank
i) Linear Programming (Maturity of Liability with the Asset).
ii) Pull of fund approach.