Financial institutions are investment intermediaries linking the savers and users of fund by lawjuris

Financial institutions are investment intermediaries linking the savers and users of fund.

Executive Summary Now Banking activities are the key factor for the success of throughout the world. In Bangladesh there is no exception. For the banking sector it is very much crucial to make a proper Investment facility strategy as there is hyper competition in the market, especially in private bank. Now there are 4 National Commercial Banks, 5 specialized banks, 30 private commercial banks, 9 foreign commercial banks operating in our country. collect one Islamic bank to evaluate the investment strategy. This bank is Social Islami Bank Ltd.. But what is their investment strategy for single borrower or corporate customer? How does it processed? Throughout this report will try to find out the pattern of types of investment and also focus on the central bank regulation which is followed by this bank.

Introduction: Financial institutions are investment intermediaries linking the savers and users of fund. These intermediaries are interposed between the ultimate borrowers and lenders permitting them efficient transfer of funds. Individuals having surplus funds can finance them for reasonable return to entrepreneurs who need funds to take the advantage of economically and financially viable investment opportunities. The existence of financial institutions facilitates such exchange of resources. As a result, both the borrowers and lenders are better off than they would have been without financial institutions and market intermediaries. Thus, these financial institutions, such as banks, have a positive role in financing and investment which is a multidimensional process involving the complexity of many interrelated and interdependent factors of diversified nature. It is difficult to assess the contribution of each factor independently. Investment facility is one of the most important Departments for a bank. All the Investment is dealt with by the Investment Departments of different banks. The whole world is getting transformed into a big global market and it is getting fiercely competitive. This competitive

market demands the investment procedure to be swifter. That is why the Investment is planning to introduce a new version which would deal with electronic presentation of the documents rather than the traditional system of presenting hard copies of the documents. So, my study is about the electronic presentation for Documentary Investment. goal is to have a clear idea about the operation of investment electronically and at the same time to find out whether this new system is suitable from Bangladesh perspective.

1.1 Objective of the Study: General objective: To have a clear idea about the electronic presentation for Documentary Investment and to identify whether this new system fits for Bangladesh or not. Specific Objective: â&#x20AC;˘

To identify the underlying functions and responsibilities of investment division.

â&#x20AC;˘

To measure the overall managerial performance as a specialized bank in small and medium industries and disbursement of investment in different sectors.

1.2 Significance of the Study: The study is very important because: 1) It will be helpful to reveal all the flaws and opportunities for improvement of the Investment. 2) The study will reveal how this presentation of the investment could be made more efficient.

1.3 Methodology: Descriptive research: The research will be descriptive in nature, and will be used for narration of characteristics, attributes of several aspects of interests. Since prior knowledge about the problem situation is available to the intern, and specific hypothesis is already been formulated by the intern; exploratory research will not be required in completion of the project. Only quantitative research technique will be followed to recommend a final course of action.

Two descriptive research methods - survey method and observation method are available where only the survey method will be followed to gather primary information.

Data Collection Methods (A) Primary Sources: (A) Work experience and direct observation. (B) Face to face conversation of the bankers & the clients. (B) Secondary Sources: 1) Different circulars issued by the Bangladesh Bank & Social Islami Bank Limited Head Office. 2) Annual Reports of Social Islami Bank Ltd. 3) Credit Risk Management Manual - Industry Best Practices by Bangladesh Bank 4) Credit Risk Grading Manual 5) Credit Risk Management – Bangladesh Institute of Bank Management. 6) Publications, Articles obtained from different newspaper, libraries and from internet. 7) Various files and documents of Proposal and industrial Investment Division of Social Islami Bank limited. 8) Investment policy manual of Social Islami Bank Limited.

1.4 Limitations of the Study: The main problem faced in preparing the paper was the inadequacy and lack of availability of required data. But there are some limitations for preparing this report. These barriers, which hinder my work, are as follows: •

Difficulty in accessing latest data of internal operations.

•

Non-availability of some preceding and latest data.

•

Some information was withheld to retain the confidentiality of the bank.

•

The placed to this department for only 3 months of time and working like a regular employee hindered the opportunity to put the better effort for the study.

â&#x20AC;˘

Due to time constraint the report has been focusing on bankersâ&#x20AC;&#x2122; view and perception. There may be some deviation in their view compared to actual position of the bank.

With all of this limitation tried best to make this report as best as possible. So readers are requested to consider these limitations while reading and justifying any part of study.

2.1 AN OVERVIEW OF BANKING SECTOR IN BANGLADESH: This chapter provides an overview of the banking system in Bangladesh and developments & performance of the banking sector. Bangladesh has a mixed banking system comprising nationalized, private and foreign commercial banks. Bangladesh Bank (BB) has been working as the central bank since the country's independence. Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing transaction facilities of all public monetary matters. BB is also responsible for planning the government's monetary policy and implementing it thereby.

2.2 TYPES OF BANK: The banking sector in Bangladesh consists of four types of scheduled banks namely state owned commercial banks (SCBs),

Bank Types

government owned development finance institutions (DFIs), private

SCBs DFIs PCBs FCBs Total

commercial banks (PCBs) and foreign commercial banks (FCBs).

No. of

Banks 4 5 30 09 52

Branches 3384 1354 1776 48 6562

Source: Bangladesh Bank database At present there are four state-owned commercial banks (SCBs) operating in Bangladesh. The second type-development finance institutions that derive their funds mainly from the government, other financial institutions and supranational organizations. Development banks have taken a variety of specific forms, but most of them are oriented toward specific economic activity or toward a region. There are five development finance institution s (DFIs) in Bangladesh. The third category, i.e. private banks financed the development of the currently industrialized countries. Frequently they were instrumental in identifying investment possibilities: arranging

for the importation of skilled managers, workers and raw materials; and taking initial steps toward assuring markets for output. The profit motive stipulated financing to enterprises to promising sectors. In this category there are thirty local private commercial banks and nine foreign commercial banks.

2.3 BANKING SECTOR PERFORMANCE, REGULATION AND SUPERVISION: The major data sources for this study are Bangladesh Bank Annual Report. In this regard banks are categorized broadly into four categories:

State-owned commercial banks

(SCBs), government owned Development Finance Institutions (DFIs), Private Commercial Banks (PCBs) and Foreign Commercial Banks (FCBs). The time period covered is basically from 2007 to 2008 2.3.1 ASSETS AND DEPOSITS OF BANKING SECTOR IN BANGLADESH: 2007

2008 %

Bank

Num

Type

ber

Total

Asset

Bank

Bran

ches

3384

786.7

32.7

654.1

35.2

3383

1354

187.2

7.8

100.2

5.4

1359

1776

47.7

955.5

51.3

1922

284.9

11.8

150.8

8.1

6562

2406.

100.

1860.

100.0

6717

SCB s DFIs PCB s FCB s Tota l

Num

of indu Depo stry

sits

asse

% of

ber

Depo

sits

Ban ks

1147. 8

7 0 6 (SOURCE: Bangladesh Bank Database)

Num

Tota

% of

ber of

indus

Dep

Bran

Asse

try

osits

ches

assets

917. 9 201. 7 1426 .6 227. 7 2773 .9

33.1 7.3 51.4 8.2 100.0

699. 7 115. 6 1150 .2 183.

% of Depo sits

32.6 5.4 53.5 8.5

4 2148

100.

In 2008, the state-owned commercial banks (SCBs) held 33.1 percent of the total industry assets as against 32.7 % in 2007. PCBs’ share rose to 51.4 percent in 2008 as against 47.7 percent in 2007. The foreign commercial banks held 8.2 percent of the industry assets in 2008, showing a declining trend by 3.6 percentage point over the previous year. The DFIs' share of assets was 7.3 percent in 2008 against 7.8 percent in 2007. Total deposits of the banks in 2008 are increased by 15.5 percent to Taka 2148.9 billion from Taka 1860.6 billion in 2007. The SCBs' (comprising largest 4 banks) share in deposits decreased from 35.2 % in 2007 to 32.6 % in 2008. On the other hand, PCBs’ deposits in 2008 amounted to Taka 1150.2 billion or 53.5 % of the total industry deposit against Taka 955.5 billion or 51.3 percent in 2007. FCBs' deposits in 2008 rose by Taka 32.6 billion or 21.6 percent over the previous year. The DFIs' deposits in 2008 were Taka 115.6 billion against Taka 100.2 billion in 2007 showing an increase of 15.4 percent over the year. 2.3.2 GUIDELINES FOR MANAGING CORE RISKS IN BANKING: Due to deregulation and globalization of banking business, banks are now exposed to BE diversified and complex nature of risks. As a result, effective management of such risks has been core aspects of establishing good governance in banking business in order to ensure good performance. In recognition of the importance of an effective risk management system, Bangladesh Bank has issued guidelines on Managing Core Risks in Banking in October 2003. The five core risks that have been advised to manage in these guidelines are, Investment Risks, Asset and Liability/Balance Sheet Risks, Foreign Exchange Risks, Internal Control and Compliance Risks and Money Laundering Risks. Banks have been advised to put in place an effective risk management system based on the above guidelines by June 2004. Bangladesh Bank also arranges program was to train the trainers of the banks on each of these risk management manuals. Besides, the progress of implementation of these guidelines is regularly monitored by the Bangladesh Bank.

3. Overview of the Bank: "Working Together for a Caring Society" by this eism “Social Ivestment Bank Ltd.” was established at 1995. After that, in April, 2009 “Social Investment Bank Ltd.” was changed name by “Social Islami Bank Ltd.”. The bank provides many services for the client. There are three types of sectors. By those sectors bank provide services. The formal corporate sector, this Bank would, among others, offer the most up-to date banking services through

opening of various types of deposit and investment accounts, financing trade, providing letters of guarantee, opening letters of credit, collection of bills effecting domestic and international transfer, leasing of equipment and consumer durables, hire purchase and installment sale for capital goods, investment in low-cost housing and management of real estates, participatory investment in various industrial, agricultural , transport, educational and health projects and so on. In the Non-formal non-corporate sector, it would, among others, involve in cash Waqf Certificate and development and management of WAQF and MOSQUE properties, and Trust funds.

3.1 Mission & Vision: Our Mission •

High quality financial services the latest technology.

•

Fast, Accurate and Satisfactory customer service.

•

Balanced & sustainable growth strategy.

•

Optimum return on shareholders' equity.

•

Introducing innovative Islamic Banking products.

•

Attract and retain high quality human resources.

•

Empowering real poor families and create local income opportunities.

•

Providing support for social benefit organizations - by way of mobilizing funds and social services.

Our Vision Social Islami Bank Ltd started its journey with the concept of 21 st Century Islamic participatory three sector banking model: •

Formal Sector- Commercial Banking with latest technology;

•

Non-Formal Sector - Family Empowerment Micro-Credit & Micro-enterprise program

•

Voluntary Sector - Social Capital mobilization through CASH WAQF and others.

Finally, "Reduction of Poverty Level" is our Vision, which is a prime object as stated in Memorendum of Association of the Bank with the commitment "Working Together for a Caring Society".

3.2 Policy Facilities: Social Islami Bank Ltd. provides many policy facilities for the clients. Like, Provisional Rate (Subject to change according to Mudaraba Principles): Name of Policy

Profit Rate

Mudaraba Savings Deposit

4.00

Mudaraba Notice Deposit A/C

3.50

Mudaraba Scheme Deposit •

Cash Waqf

9.50

•

Mudaraba Hajj Savings Deposit

9.50

•

Mudaraba Monthly Savings Scheme

9.50

•

Mudaraba Bashsthan Savings Scheme

9.50

•

Mudaraba Special Deposit Pension Scheme (5 Years)

9.50

•

Mudaraba Monthly Profit Deposit Scheme

9.50

•

Mudaraba Millionaire Savings Scheme

9.50

•

Mudaraba Education Deposit Scheme

9.50

•

Mudaraba Lakhopati Deposit Scheme

9.50

•

Mudaraba Special Deposit Pension Scheme (10 Years)

9.50

•

Mudaraba Double Benefit Deposit Scheme

9.50

•

Mudaraba Marriage Savings Scheme

9.50

•

Mudaraba Mohorana Savings A/C (5 Years)

9.50

•

Mudaraba Mohorana Savings A/C (10 Years)

9.50

Mudaraba Term Deposit Receipt •

01 Month

•

03 Months (Below 50 lac)

•

03 Months (Above 50 lac)

•

06 Months (Below 50 lac)

•

06 Months (Above 50 lac)

•

12 Months (Below 50 lac)

•

12 Months (Above 50 lac)

FORMAL BANKING SECTOR

•

Islami Banking

•

Bai-Muazzal

Commercial

Bai-Muajjal is a contract between Buyer and Seller under which the seller sells certain specific goods (permissible under Shariah and Law of the country), to the Buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments. The seller may also sell the goods purchased by him as per order and specification of the Buyer. This mode is applicable for working capital finance. In conventional Banks, the allow loan in the form of cash credit against hypothecation of goods & collateral security.

House Hold

Bai-Muajjal is a contract between Buyer and Seller under which the seller sells certain specific goods (permissible under Shariah and Law of the country), to the Buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments. The seller may also sell the goods purchased by him as per order and specification of the Buyer. This mode is applicable for working capital finance. In conventional Banks, the allow loan in the from of cash credit against hypothecation of goods & collateral security.

Trust Receipt

Bai-Muajjal is a contract between Buyer and Seller under which the seller sells certain specific goods ( permissible under Shariah and Law of the country ), to the Buyer at an

agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments. The seller may also sell the goods purchased by him as per order and specification of the Buyer. This mode is applicable for working capital finance. In conventional Banks, the allow loan in the from of cash credit against hypothecation of goods & collateral security. •

HPSM

Commercial

Hire Purchase (Participatory Ownership) is a Special type of contract which has been developed through practice. Actually it is a synthesis of three contracts: •

Shirkat

•

Ijarah and

•

Sale

•

Shirkatul Melk

Shirkat means partnership. Shirkatul Melk means participation in ownership. When two or more persons supply equity, purchase an asset; own the same jointly, and share the benefit as per agreement and bear the loss in proportion to their respective equity, the contract is called Shirkatul Melk contract. •

Ijarah

The term Ijarah has been derived from the Arabic words Ajar and Ujrat which means consideration, return, wages or rent. This is really the exchange value or consideration, return, wages, rent of services of an ASSET. Ijarah has been defined as a contract between two parties, the Hiree and Hirer where the Hirer enjoys or reaps a specific service or benefit against a specified consideration or rent from the asset owned by the Hiree. It is a hire agreement under which a certain asset is hired out by the Hiree to a Hirer against fixed rent or rentals for a specified period. •

Sale

This is a sale contract between a Buyer and a seller under which the ownership of certain goods or asset is transferred by seller to the buyer against agreed upon price paid / to be paid by the buyer. Thus in Hire Purchase (participatory ownership) mode both the Bank and the client supply equity in equal or unequal proportion for purchase of an asset like land, building, machinery, transport etc. Purchase the asset with that equity money, own the same jointly, share the benefit as per agreement and bear the loss in proportion to their respective equity. The share, part or portion of the asset owned by the Bank is hired out to the client partner for a fixed rent per unit of time for a fixed period. Lastly the Bank sells and transfers the ownership of it's share / part / portion to the client against payment of price fixed for that part either gradually part by part or in lump sum within the hired period after the expiry of the hire agreement.

Real Estate

Hire Purchase (Participatory Ownership) is a Special type of contract which has been developed through practice. Actually it is a synthesis of three contracts: •

Shirkat

•

Ijarah and

•

Sale

•

Shirkatul Melk

Ijarah

agreement under which a certain asset is hired out by the Hiree to a Hirer against fixed rent or rentals for a specified period.

•

Sale

Transport

Hire Purchase ( Participatory Ownership) is a Special type of contract which has been developed through practice. Actually it is a synthesis of three contracts: •

Shirkat

•

Ijarah and

•

Sale

•

Shirkatul Melk

Ijarah

Sale

Mudaraba

Bill of Exchange

In case of Bai-Murabaha Banks procure the goods as per indent of the customer, retain it in its custody and sell the same part by part or at a time to the client who gave indent for the goods. This mode is applicable for working capital finance. In conventional Banks, they allow Loan against pledge of goods against fixed rate of interest. o Post Import Bai-Murabaha is a contract between a Buyer and Seller under which the Seller sells certain specific goods permissible under Islamic Shariah and Law of the land to the Buyer at a cost plus agreed profit payable in cash on any fixed future date in lump sum or by installments. The profit marked-up may beBai-Murabaha is a contract between a Buyer and Seller under

which the Seller sells certain specific goods permissible under Islamic Shariah and Law of the land to the Buyer at a cost plus agreed profit payable in cash on any fixed future date in lump sum or by installments. The profit marked-up may be fixed in lump-sum or in percentage of the cost price of the goods. In case of Bai-Murabaha Banks procure the goods as per indent of the customer, retain it in its custody and sell the same part by part or at a time to the client who gave indent for the goods. This mode is applicable for working capital finance. In conventional Banks, they allow Loan against pledge of goods against fixed rate of interest. â&#x20AC;˘

Foreign Exchange Trade

o Export Finance Foreign Exchange Trade of SIBL is dealt with its 09 AD branches out of which 4 branches are in Dhaka and the remaining 05 are in Chittagong, Khulna, Sylhet, Rajshahi and Bogra. We as a 21st Century Bank, providing our services in foreign trade through import and export finance and also playing significant role in the area of foreign remittance. To facilitate the import obligation of our Bank as well as considering the requirement of foreign currency of our country we encourage potential exporters to do their export business with us. We provide working capital on their requirement. Presently our export finance is extended for RMG and for non-traditional item that is handled by a number of experienced bankers. We offer competitive exchange rate for foreign currency to our valued exporters. In the last 03 years our export business performance is significant. o Import Finance We also deal in import business and our import business is extended to commercial importers (traders) for import of various shariah approved items and industrial importers (Users) for import of raw cotton, yarn, clinker, pharmaceutical raw materials, TV parts, Computer parts etc raw materials for their industries. We also provide post import finance such as MPI (LIM), LTR and HPSM (Lease financing). Our post import finance is also provided for importing of capital machinery. o Foreign Remittance We are playing important role in the Foreign Remittance sector also.

We have correspondent relationship with almost all major 122 Banks of 109 countries of the world like Standard Chartered Bank, American Express Bank Limited, HSBC, HBZ Finance, Mashreq Bank PSC, Dresdner Bank AG and with local banks in Pakistan, India, Nepal and Bhutan etc with whom we have advising, reimbursing and add confirming arrangement. Visitors of our website can download our Foreign Currency Current Account (FCCA) Opening Form from the Download Section and also can take a print of the Form in Legal Size Paper. o SWIFT SIBL is the member of SWIFT and we have 09 SWIFT workstations in all of our 09 AD branches. Besides our 24 branches are equipped with online banking. We are trying to keep all the SWIFT workstations under online system. Inward remittances are credited to the beneficiaryâ&#x20AC;&#x2122;s account on the same day of receipt if the beneficiary maintains A/C with them or within next 24 hours on receipt of the same from our overseas correspondents. All correspondences of foreign trade both export and import are communicated through SWIFT. As a result foreign exchange trade become expeditious and instant. â&#x20AC;˘

Deposit Scheme

o Mudaraba Monthly Profit Social Islami Bank Ltd is an Islamic Bank ruled by Islamic Shariah. The bank is operating in Formal, Non-Formal and Voluntary banking sector for alleviating poverty in the Bangladesh. But to reduce poverty in a country like Bangladesh there is no other alternative but increase internal deposit. Increase in deposit will increase investment and new investment will result in more employment. For this reason SIBL have introduced "Mudaraba Monthly Profit Scheme". Under this scheme the depositor will get monthly profit on the deposited amount. The reasons for introducing this scheme are as follows: a. The scheme provides monthly profit for service holders who may deposit the pension benefit. b. For those Bangladeshis working abroad willing to deposit once and provide a fixed amount monthly to family and relative residing in Bangladesh.

c. The trust and foundations willing to provide monthly scholarship to students against one time deposit. For the parents who wants to bear educational expenses of their child against deposit. The features of this scheme are as follows: 1. Tk. 1, 00, 000/-, 1, 10,000/-, 1, 20,000/- or 1, 25,000/- or any amount multiple can be deposited under this scheme. 2. The duration of the amount should be for Five years. 3. Profit shall be distributed under this scheme as follows: a. 1,00,000/- Tk. 900 (net) b. 1,10,000/- Tk. 1000 (net) c. 1,20,000/- Tk. 1100 (net) d. 1,25,000/- Tk. 1150 (net) 4. The payable profit will become due after 1 month of deposit. But the amount will be deposited to account in the last week of the month. 5. Generally, a depositor cannot withdraw the amount before 5 years. But, in unavoidable circumstances the depositor can withdraw the amount and in that case 6. The depositor will have to submit the duly filled application form of the scheme. 7. The depositor will have to maintain a Mudaraba Savings account in which the profit of the scheme will be deposited. 8. In case of change of address the depositor must inform the bank as soon as possible. 9. If the scheme is closed before 1 year then no profit will be given. o Hajj Scheme Hajj is one of the most important bases of Islam. Religious Muslims tends to perform Hajj when they gather financial ability. But they find it difficult to gather the required amount to perform as there is no such systematic way of saving the money. To help our muslim brothers Social Islami Bank Ltd introduced Hajj/Umrah Scheme.

The basic rules of this scheme are: a. This account shall be called as Hajj/Umrah Savings Scheme. b. Any Muslim Residing in Bangladesh may open an account under this scheme. c. This scheme will be accounted under Mudaraba rules. The Bank as Mudarib and the account holder will be treated as Sahib-e-Mal. The account holder will have to enjoy the Profit / Loss of the Banks respective year. d. The depositor will be provided with a Deposit book and the deposited amount must be written and verified by the Bank's authorized official. In case of losing the deposit book Tk. 20 has to be deposited for issuing a new one. e. In case of change of address the bank must have to be notified as soon as possible. f. The savings of this scheme can be used. g. Provisional profit will be charged on June and December closing. If the account holder is unable to perform the Hajj/Umrah or any other person does not perform instead of the account holder then the corresponding account will be treated as a Mudaraba Savings account and accordingly profit will be distributed. h. An introducer must be there to open an account. The Bank retains the authority to change, modify, rectify or cancel the rules regarding the scheme and the account holder must abide by the decision. o Mudaraba Millonaire Scheme People of Bangladesh are the followers of Islam. They are mostly interested to make interest free deposits. Taking these facts into consideration SIBL a joint venture Islamic bank introduced a monthly installment based "Mudaraba Millionaire Scheme" Rules and regulations of this scheme: 1. Tk. 550/-, Tk. 1050/- or Tk. 2050/- is taken as monthly installment under Mudaraba principles of Islami Shariah.

2. Duration of this scheme will be 15, 20 and 25 yrs. After maturity an estimated amount will become as follows:

Duration

Monthly Installment

Estimated amount after maturity

2,050/-

Tk. 10 lac

1,050/-

Tk. 10 lac

25 550/Tk. 10 lac 3. The amount in the above is an estimated amount and may vary at maturity. 4. After starting of operation of this scheme size of installment cannot be changed. 5. Any depositor may open one or more account in the same name in the same branch. 6. In case of the scheme account is closed before maturity then profit will be applied at the rate of Mudaraba Savings Deposit. But if the account is closed before 6 months no profit will be applied. 7. 80% of the amount deposited can be taken as loan but profit rate decided by the bank must have to be paid by the client. 8. If a depositor fails to deposit 4 consecutive installments then the account will be closed and profit will applied as per rate of Mudaraba Savings Rate. Profit for the first 06 (Six) months shall not be applied. 9. The Bank reserves the right to invest the funds received in mudaraba term deposit accounts, in its sole judgment, in any interest-free "Halal" business it deems fit. 10. In case of change of address or telephone number the depositor must inform the bank immediately. The bank will make correspondence with the depositor by postal service and in case of missing or delay in delivery, the bank will not be liable. o Mudaraba Special Savings (Pension) Scheme Generally people wants save a portion of their income for economic assurance at old age. For this reason a unique kind of savings scheme has to be introduced so that a portion of income

can be deposited regularly for a long time span. This enables a person to get quite a considerable amount after maturity. Taking the above reasons into account Social Islami Bank Ltd, a joint venture Islamic bank have introduced monthly installment based "Mudaraba Special Savings (Pension) Scheme". Under this scheme any person can deposit a fixed amount monthly and after maturity the depositor will get a handsome amount with increased profit. The depositor may encash the total amount at a time or can take as monthly pension until a stipulated time. Intentions and Goal of the scheme: 1. To create awareness to deposit among average income people. 2. To create a chance for attractive deposit scheme. 3.

To create an interest free investment.

Eligibility: 1. Any Bangladeshi person aged above 18 yrs and having sound mental condition can may open this scheme. 2. To open this account there must be a signature of a valued introducer. 3.

Parents or legal guardians can open this scheme in the name of their underaged children.

Rate of installment: Tk. 100/-, Tk. 200/-, Tk. 300/-, Tk. 400/-, Tk. 500/-, Tk. 1000/Profit & Weight age: The depositors will get a percentage from the shariah-based investments made by the bank. Duration of the scheme

Weight age

5 yrs

1.05

10 yrs

1.08

The maturity amount may be more or less than the estimated amount. In case of amount withdrawn before 6 months no profit will be applied. In case of amount withdrawn before 5

yrs but after 6 months profit will be applied as Mudaraba Savings Rate. In case of 10 years scheme if the amount withdrawn after 5 yrs then profit will be applied as per MSDPS rate for 5 years and for the rest period profit will be applied as Mudaraba Savings Rate. After the end of scheme period the depositor may take the matured amount with profit by fixing a monthly take home amount.After maturity estimated profit will be applied as follows:

Estimated amount after maturity Monthly Installment 5 years

10 years

100/-

8000/-

22500/-

200/-

16000/-

45000/-

300/-

24000/-

67000/-

400/-

32000/-

90000/-

500/-

40000/-

112500/-

1000/-

80000/-

2,25,000/-

Nominee selection: The depositor may nominate single or multiple person of hire account. In case of multiple people being nominee then percentage of each nominee must be mentioned. In case death of the nominee the depositor may change the nominee by providing notice to the bank.

Automatic close of the account: If the depositor fails to deposit 3 (three) installments consecutively before completion of 5 years of the account then the account will be closed and profit will be applied as per Mudaraba Savings Deposit rate. Others:

1. The depositor must deposit the installment by cash or cheque within 15th day of each month. In case of 15th day being govt. holiday then the amount can be deposited in the next working day. 2. In case of clearing cheque is not collected within 15th day then the depositor will be treated as defaulter for that month. 3. The amount and duration of the scheme will not be changed. 4. The account can be transferred from one branch to another by a written application mentioning the actual reason of transferring. 5. The depositor can close the account any time with a service charge of Tk. 25.00. 6. VAT, TAX as applicable by Govt. must be borne by the depositor. 7. The bank reserves the right to add or alter any or all the rules governing MSDPS and such altered or additional rules shall be immediately thereafter be deemed to be binding on all depositors. o Mudaraba Education Savings Scheme Education expenditure especially for higher studies is increasing day by day. In many cases children loses the chance of education as their guardians become unable to adjust with the expenditure. But if proper financial planning is adopted earlier then it is easier for the parents to bear the expenses. Housing has become one of the most fundamental needs of human civilization. But in this early 20th century most of the people of Bangladesh are lacking to fulfill this basic need. As a follower of Islamic Shariah, Social Islami Bank Ltd focuses forward to help people to fulfill this basic need.

Main features of this scheme: imam a. The applicant has to fill the application form duly.

b. An amount of Tk. 500/-, 1000/-, 1500/-, 2000/- or any amount multiple can be deposited under this scheme. c. The depositor will enjoy earnings from investments under Islami Shariah based Mudaraba rules. d. As per rules of Islami banking the actual amount may vary from the estimated amount. e. In case of failing of 3 (Three) consecutive installments the account will be closed. In such cases profit will be given as per savings account rate, but no profit will be given if the account is closed within 6(Six) months. f. The account holder may choose any installment size on account opening, which cannot be changed later. g. Installment must be deposited within first 15 day of the month. Any amount deposited as advance installment is always welcome. h. The scheme is 15 years long and if the depositor intends to withdraw the amount then profit will be given as per savings rate. Income tax imposed on the earnings from the deposited amount should be deducted from depositors account. â&#x20AC;˘

Deposit Account

o Al Wadiah Current Deposit 1. AL-Wadiah Current Deposit A/Cs is opened on proper introduction with minimum initial deposit fixed by the Bank. 2. AL-Wadiah Deposit is accepted on AL-Wadiah principles which mean al Amanah with permission to use. According to this principle Bank can use the fund of the account along with other funds as per Shariah at bank's own risk. Account holder(s) will not share any profit/loss.

3. The Law and regulation of Bangladesh, usual customs and procedures common to banks in Bangladesh including Islamic Banking Principles shall apply to and govern the conduct of account opened with the Bank. 4. Withdrawal can be made only through cheques issued by the bank. 5. The A/c. holder(s) shall preserve the cheque book with utmost care so that it might not be lost or stolen. For any misappropriation taken place through any such stolen or lost cheque, the Bank shall not be held responsible. 6. The depositor shall take back the pay-in-slip after deposit of any money or cheques etc. clearly specifying the number and title of account in the slip. All cheques, DD/PO etc shall be crossed before deposit. 7. Bankers shall note "Stop payment" of the account holder with due care. Payment of any such cheque, the Bank shall not be held responsible. 8. Any change in the address of the depositor should be immediately communicated to the bank. No responsibility can be accepted by the bank for delay, non-delivery etc. of letters, remittances etc sent through Post office and other agents. 9. Bank makes entry in the account with due care. However, for any wrong entry, the Bank reserves the right for adjustment/correction and no responsibility can be accepted by the bank for any loss caused by the caused by the account holder due to such inadvertent/wrong entry passed by the Banker. o Mudaraba Savings Deposit To open a Mudaraba Savings Deposit account in our Bank the following rules and regulations are applied: â&#x20AC;˘

Mudaraba i.e. Deposit of one party and on the basis of operation by another party this deposit is taken.

â&#x20AC;˘

By providing Introducer of the account as required by the bank and by depositing a minimum amount any depositor or multiple depositors can open single or joint

account. Any educational institute, Club, Association or Social institutes can open this account. •

The bank may merge amount collected through this deposit and may invest in any shariah allowed investments.

•

After determining the annual profit/loss the depositor will get his part of profit.

•

In case of balance declining below bank stipulated margin in any month profit shall not be provided for that month.

•

Any amount can be deposited in any working hour but for applying profit the lowest amount from 6th day till the last day of the month will be taken as the deposit of that month.

•

Amount must be withdrawn only by bank issued instruments like cheques.

•

Amount can be withdrawn twice a week but highest 4 times a month. One fourth of the deposited amount or Tk. 2000/-, the lowest can be withdrawn without notice. If any amount exceeding the above is withdrawn without providing 07 days prior notice then no profit will be applied for that month.

•

If an account is closed before the declaration of current years profit rate then the depositor will have to take profit as per previous years declared profit rate.

•

The Bank has the right to deny opening any account or can close down any existing with showing any reason.

•

The bank operates the client accounts with utmost attention but still if any miscalculation occurs the bank holds the right to make adjustments and rectify the problems. But in this situation if any miscreants occur which is caused by the client the bank will not be hold liable for that.

Mudaraba Term Deposit •

Mudaraba Term Deposits are accepted by the bank with a sum of Tk. 5000 or above (multiple

1000)

from

individuals

(single

and

joint),

firms

(propietorship/partnership), limited companies, autonomous bodies, charitable institutions, association, educational institution, local bodies, trusts, etc, against issuance of non transferable receipts in acknowledgement of MTD account may be opened in the names of minors jointly with their guardians, for example : Received from Mr. X Guardian of Mister/Miss…………………. (Minor) •

The mudaraba term deposits are accepted for periods of 12, 24, 36 months. Weight age on the rate of return is given to deposits of longer maturity.

•

The Bank reserves the right to invest the funds received in mudaraba term deposit accounts, in its sole judgment, in any interest-free "Halal" business it deems fit.

•

Mudaraba term deposit account holder will share the profit of investment with Social Islami Bank Ltd, at the rate declared by the bank from time to time. Any loss which cannot be covered by the investment loss offsetting reserve will be adjusted from Mudaraba fund and in that case the bank shall not take any remuneration for the service rendered in managing the fund.

•

The profit earned on Mudaraba Term Deposit account will be credited as determined by the bank as its sole direction on the basis of its net working results at the end of the year, within a reasonable time from the dae of the close of the books of accounts of the bank. The banks decision in this respect will be final & binding on the Mudaraba Term depositors. If the Mudaraba Term Deposit account is closed before declaration of profit of current year, the depositor shall accept profit at the rate declared in the preceding year. In that case, both the bank & the depositor will relinquish their claim on difference amount of profit, which may accrue at the close of the year.

•

The account holder is not allowed to withdraw the amount before maturity date. But on obtaining the Bank's prior consent the depositor(s) may withdraw the deposit before maturity without any profit i.e. no profit no loss basis.

•

MTD account holder may withdraw the profit amount annually if he so desires on condition the final adjustment. If needed, will be made at the end of the year. MTD account holder will give an undertaking to that effect.

•

If the profit amount is not withdrawn it will automatically be added to the principal amount annually and the entire amount will earn profit/loss.

•

MTDR is not transferable instrument & as such it cannot be endorsed in favor of others.

•

The MTDR should be preserved properly. In case of loss, the account holder should notify the issuing branch immediately by quickest possible means so that the bank can take care of.

•

Matured deposit if not encashed within one month of maturity, the deposit shall automatically be renewed for the period it kept before.

•

Any change in the address of the depositor should be immediately communicated to the bank. No responsibility can be accepted by the bank for delay, non-delivery etc. of letters, remittances etc sent through Post office and other agents.

•

The bank retains the right of refusing to accept any deposit from any person in MTD account without assigning any reason.

•

The bank reserves the right to add or alter any or all the rules governing this scheme and such altered or additional rules shall be immediately thereafter be deemed to be binding on all depositors.

NON FORMAL BANKING SECTOR •

Micro Investment Scheme

Family Empowerment Micro-Credit Program: Family Empowerment Micro-Credit Program is designed to develop the Socio-economic condition of the grass-root people committed to build a caring society by reducing poverty through income generation for small and low-income families, under which financing is provided without collateral.

Family empowerment Micro-Credit Program is a group-based lending. Investment is provided for maximum three years @ 10% return per annum at flat rate where maximum ceiling of Investment is Tk.25,000/=. â&#x20AC;˘

Micro Enterprise Investment Scheme

1. Family Empowerment Micro-Enterprise Program: Family Empowerment Micro-Enterprise program is introduced to enhance the Socioeconomic condition of the potential entrepreneur, small and medium Businessmen, successful Micro-Credit graduates through income generating activities. Ceiling of investment is from Tk.50,000/= to Tk.5,00,000/= @ 10% return per annum at flat rate for maximum three years. Investment upto Tk.50, 000/= is provided without collateral. In case of investment of above Tk.50, 000/= minimum collateral security is required. 2. Family Empowerment Micro-Enterprise Program (SMES): Considering the potentiality of SMEs sector, SIBL has launched Family Empowerment Micro-enterprise program (SMEs) to fulfill the diversified need of SMEs clients. Investment ceiling under this program is from Tk.2, 50,000/= to Tk.5, 00,000/=@ 14% return per annum for one year on revolving basis. 3. Small, Medium and Micro-Enterprise Development Program jointly with JOBS project, USAID: On the basis of Memorandum of Understanding (MoU) signed in 2001 between Social Islami Bank Ltd. and Job Opportunity and Business Support (JOBS), collaborative efforts are being made to create easy access to business capital for the Small Medium and Micro-Enterprises (SMEs) through enhancing the capacity and performance of the entrepreneurs with available technical assistance from JOBS to be financed through Social Islami Bank Ltd. (SIBL) under Family Empowerment Micro-Credit and Micro-Enterprise Program. â&#x20AC;˘

Joint Scheme

1. Small, Medium and Micro-Enterprise Development Program jointly with JOBS project, USAID:

On the basis of Memorandum of Understanding (MoU) signed in 2001 between Social Investment Bank Ltd. and Job Opportunity and Business Support (JOBS), collaborative efforts are being made to create easy access to business capital for the Small Medium and Micro-Enterprises (SMEs) through enhancing the capacity and performance of the entrepreneurs with available technical assistance from JOBS to be financed through Social Investment Bank Ltd. (SIBL) under Family Empowerment Micro-Credit and MicroEnterprise Program. â&#x20AC;˘

Development & Rehabilitation Scheme

1. Displaced Garments Child Workers Students Stipend Disbursement Program Aiming To Eliminate Child Labor From The Garments Sector Implemented Jointly With The International Labor Organization (ILO) : On the basis of the agreements signed between SIBL & ILO during 1996 and 1998, SIBL has successfully completed the stipend disbursement program among the displaced garments child worker's to eliminate child labour in Bangladesh within the frame work of international program on the elimination of child labour. â&#x20AC;˘

ILO, UNICEF

1. Micro-Credit Program to the Garments Child Worker (parents)/adult family member jointly with ILO under project finance from govt. of Italy & Norway. In view of the SIBL's satisfactory performance of Stipend Disbursement Program, two agreement on "Family Empowerment Micro-Credit Program" have been signed between SIBL and ILO under project BGD/98/01/PO50/ITA and BGD/99/02/PO70/NORAD on 12.09.2000 and 19.11.2000 respectively for implementing the Program among the parents of the displaced garments child worker for self employment to their parents. It was an action program, against the child labour in garments sector. The recovery under these programs is continuing. 2. Financial Assistance Among The 100 Parents/Guardian Of Former Garments Working Children Under Project UNICEF To Continue Their Education.

A memorandum of Understanding (MoU) had been signed between the UNICEF & SIBL on December 15, 2002 for the project entitled "Family Empowerment Program among the 100 parent/guardian of former garments working children". The purpose of the project is to develop a regular source of income for the families of the former garments child workers so that their parents could provide monthly school fees to continue their children' education. By the financial support from unicef, sibl provided assistance of maximum tk. 10,000/- to-individual member. Recovery under the program is continuing. 3. Family Empowerment Micro-Credit Program for self-employment of HTR (Hard to Reach) graduates to implement Micro-Credit program in connection with the Letter of Exchange (LOE) signed with UNICEF. On the basis of the previous MoU with UNICEF signed in the year 2002 , both the organization has signed a Letter of Exchange (LoE) on 29.05.2005 to provide Microcredit to a good number of parents/guardians of HTR (Hard to Reach) graduates who have received Livelihood Skill Training from Dhaka Ahsania Mission under a project supported by UNICEF. VOLUNTARY BANKING SECTOR

â&#x20AC;˘

Cash Waqf Scheme

In the voluntary sector SIBL has also introduced Cash Waqf Certificate, a new product for the first time in the history of banking. Together, a new beginning can be made for a participatory economy. Cash Waqf provides a unique opportunity for making investment in different religious, educational and social services. Savings made from earning by the well off and the rich people of the society can be utilized in our organized manner. Income earned from these funds will be spent for different purposes like the purposes of the waqf properties itself. This

scheme has been well received by the public in general due to its unique feature. The guidelines for operation of this scheme are stated below: 

Cash waqf is an endowment in conformity with shariah, bank manages the waqf on behalf of the waquif.



Waqfs are done in perpetuity and the A/c is opened in the title given by the waquif.



Waquif have the liberty to choose the purpose(s) to be served either from the list of 32 purposes identified by the bank, covering (a) family empowerment credits (b) Human resource development (c) Health and sanitation and social utility services or any other purpose(s) permitted by shariah.



Cash waqf amount earns profit at the highest rate offered by the Bank from time to time.



Cash waqf amounts remain intact and only the profit amount is spent for the purpose(s) specified by the waquif. Unspent profit amounts automatically added to waqf amount and earn profit to grow over the time.



Waquif can also instruct the Bank to spend the entire profit amount for the purpose specified by him/her.



Waqif have the opportunity to create cash waqf at a time. Otherwise he/she may declare the amount he/she intends to build up and may start with a minimum deposit of Tk. 100/-(one hundred) only. The subsequent deposits may also be made in thousand or in multiple of thousand.



Waquif have the right to give standing instruction to the bank for regular realization of cash waqf at a rate specified by him/her from any other A/c maintained with SIBL.



The amount in Cash Waqf Account is a perpetual deposit.

•

Mosque Waqf Property Development Scheme

As a declared corporate policy, the Bank intends to help mosque and waqf property holders with free consultation & technical support so as to make it economically & socially self-

sustained. Meanwhile, the bank has completed a small project for development of a mosque property at Uttar Khan, Dhaka. ANCILLARY SERVICE •

Locker Service

Safe locker service is available at our Dhanmondi Branch & Gulshan Branch. The locker room has also an attached dressing room. Client may keep his/her valuable ornaments, documents etc. into the locker against a nominal yearly fee. •

Utility Bill Receive

In the formal corporate sector, this Bank would, among others, offer the most up-to date banking services through collection of bills like as gas bill, WASA bill, Bangladesh Telephone & Telegraph bill and Electric bill. E-AGE BANKING •

Any Branch Banking

Recently the Bank has introduced Online Banking amongst 20 branches of SIBL through which our customers have access to their access from another branch. •

ATM (Debit Card)

SIBL has introduced E-Cash ATM Debit Card service since June 2004 through E-Cash ATM booths within Dhaka, Chittagong, Sylhet, Rajshahi and Cox's Bazar city.

ATM Booth Locations

Any body, who has a Current/Savings/Short Notice Deposit Account at our any branch, he/she can apply for E-Cash ATM Debit Card from that branch. He/she also can apply for one or more ATM Card against a single deposit account as mentioned above. Visitors can download and print (in legal size paper) the ATM account opening form ATM Account Opening Form (Front Page) ATM Account Opening Form (Back Page) Benefits of E-Cash ATM Debit Card Service: Customer can get 24-hour Cash Withdrawal service including holidays. Customer can pay Grameen, Aktel and City Cell mobile phone bill through E-Cash ATM Booth. â&#x20AC;˘

Online Banking

SIBL is providing Online Banking Service to its clients since January 2004. The Bank has deployed this On-Line Banking system through V-Sat communication. The Information & Communication Technology (ICT) Department is closely monitoring the online transactions. Everyday the designated officers check and monitor the online related equipments like V-Sat, Router, Switch etc. to ensure uninterrupted online operation at branches.

Online Transactions are executed by the PcBANK2000 integrated banking software through a secured database and worldwide tested V-Sat Communication Link.

Region

Transaction Type

Service Charge

Cash Withdrawal/ Cash Deposit

FREE

Tk 10+ VAT for transaction up to 25,000/Tk 15+ VAT for transaction 25,001/- to 50,000/Tk 20+ VAT for transaction 50,001/- to 1,00,000/Tk 30+ VAT for transaction 1,00,001/- to 5,00,000/Tk 40 + VAT for transaction above 5,00,000/-

Intra city

Fund Transfer

Inter city

Cash Withdrawal / Cash Deposit / Fund Transfer

0.05% of Transacted amount + VAT but minimum Tk. 30/- + VAT

- Charge for each Account Statement through Online is Tk.10/-. - Customers can Deposit/Withdraw money from any of our branches or Transfer money within our branches. - Prompt Service - Saves time and effort of the customers

4. Financial Analysis 4.1. Introduction Islamic bank is most important function of banking services. Social Islami Bank Limited is a new generation of Islami Bank. â&#x20AC;&#x153;Islamic Bank is a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic shariah and to the banning of the receipt and payment of interest on any of its operation.â&#x20AC;? It is committed to provide high quality financial services/products to contribute to the G.D.P of the country through stimulating trade & commerce, accelerating the peace of industrialization, boosting up export, creation employment opportunity for the educated youth, poverty alleviation, raising standard of living of limited income group and over all sustainable socioeconomic development of the country by base of Islamic shariah. In achieving the afore said objectives of the Bank, investment operation of the Bank is of paramount importance as the greatest share of total revenue of the Bank is generated from it, maximum risk is centered in it and even the very existence of Bank depends on prudent management of its investment port-folio. The failure of a commercial Bank is usually associated with the problem in investment portfolio. As such, investment portfolio not only

featured dominates in the assets structure of the Bank, it is critically important to the success of the Bank also. To provide a broad guide line for the Investment Operation towards achieving the objectives of the Bank, for efficient and profitable deployment of its mobilized and to the Investment portfolio in the most efficient way, a clearly defined, well-planned, comprehensive and appropriate investment and control guidelines of the Bank is a prerequisite. In view of the above, this investment and Control Guidelines of the Bank has been prepared which is subject to amendment, revision, re-adjustment and refinement from time to time as may be warranted by the change of circumstances due to passage of time to time the requirement of the bank. The purpose of this policy statement, which replaces all previous ones, is to set out the investment policies of the board of Directors. The policies described under the following headings: •

Investment Principles

•

Investment Categories

•

Investment approval

•

Investment monitoring and review 4.2 Function of Islamic Bank

Function of an Islamic Bank can be deviled into four major categories: 1. Management of investment 2. Investment 3. Financial Services 4. Social Services 4.3 Definition of Bai - Muajjal Bai-Muajjal is a contract between Buyer and Seller under which the seller sells certain specific goods (permissible under Shariah and Law of the country), to the Buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments. Literally, a credit sale. Technically, a financing technique adopted by Islamic banks. The seller may also sell the goods purchased by him as per order and specification of the Buyer. This mode is applicable for working capital finance. In

conventional Banks, the allow loan in the form of cash credit against hypothecation of goods & collateral security. The investment of any banking institution is a combination of certain accepted time tested standards, and some other dynamic factors determined by the realities of varying and changing situations in the market place. The accepted standards relate to the aspects of security and liquidity whereas the dynamic factors relate to such other aspects as the nature of risk, profit margins, investment concentration, investment dispersal, and bank’s own capabilities. It is, therefore, necessary that the investment is kept under constant review by the Head office Investment committee which is responsible for evolving and recommending a sound, healthy and realistic investment and its due implementation. As is true for any other institution, Social Islami Bank Limited may have certain unique characteristic relating to its operations, such as its age, and geographical concentration. These unique features may require certain amount of flexibility in the investment, but as a rule, the general standards of security and liquidity should not be allowed to be impaired and the operations must be carried out in strict conformity with local laws and supervisory requirements as stipulated. Investment lays down the basic principal and broad parameters of the financing operations. The key to a sound, healthy and profitable financing operation, however, lies in the quality of judgment and sense of proportion of the officers making financing decisions, and their knowledge of the “Mudarib”s and the market place. The following pages contain only a statement of the basic principles of Social Islami Bank Limited’s investment.

4.4 Scopes and Definition Scope: 2

The investment extends to the Head office and all branches of Social Islami Bank Limited.

Definitions: 1. The net worth – as used herewith shall mean the aggregate of paid up capital, subordinated investment, and capital notes, unencumbered reserves and inappropriate profits.

2. “Bai-Muajjal” shall mean any debit balances on customer’s accounts excluding debit balances on the accounts of other banks and excluding investment under specific counter finance arrangement. 3. “Investment Extension” is defined as granting of financial accommodation or consideration to a customer which could incur the Bank in monetary loss in the event of non-repayment by the customer, or the settlement of a claim to a third party on behalf of a customer for which no reimbursement is obtained. 4. “A Customer Entity” signifies one or more actual and/or memorandum accounts whose principles are in the actual or beneficial ownership of one common party whether individual, partnership, corporate, association or government and/or which share the same directors and/or which are linked by guarantees, etc. Including those cases where although the majority ownership may be vested in others, nonetheless one common party exercises management control. 5. “Bai-Murabaha” is defined as the pledge or mortgage of tangible readily realizable unencumbered assets, the sale proceeds of which will repay the customer’s obligations and / or acceptable bank guarantees and letters of credit offered as security for the customer’s obligations. 6. “Bia-Muajjal” is defined, as extensions not supported by tangible assets in (5) above.

4.5 Basic Principles of Investment in Social Islami Bank Ltd. Investment policy: 1.

Aggregate investment policy shall not exceed times the Bank’s net worth or 65% of customers deposits whichever is lower.

2. Within the aggregate limit of investment as mentioned in (1) above 50% of financing will be small industry sector in accordance with prescribed norms of the government and the central bank in terms of the banks objectives with 50% to the commercial sector. No term loans will be approved for the commercial sector. Exceptions will be rare and will require approval of the Executive Committee. 3. All financing will be adequately secured with acceptable security and profit margin requirement as laid down by the Head office. 4. The bank shall not incur any uncovered foreign exchange risk (currency exposure) in the financing of funds.

5. End- use of working capital facilities will be closely monitored to ensure financing used for the purpose for which they were advanced. 6. Country risk in investment will be accurately identified and shall be within the country limits if any approved for the bank . The same treatment will be given to country risk arising out of contingent liabilities relating to Letters of credit and letters of guarantee . 7. Investment shall be normally funded from customers deposits of a permanent nature and not out of short term temporary funds of borrowings

from other

banks or through short term money market operations . 8. The aggregate outstanding investment shall be dispersed according to the following guidelines (subject to item above whereby 50% of financing being to small industry sector ) : (a) Short term commercial investment ( to include self Liquidating and other short

term finance to retail And wholesale business clients to finance their

usual Domestic and international trade \ shipping of goods. This category to include working capital to hotel and tourism. (b)

Facilities to shipping and transport ( facilities for the purchase and

construction of ship / vessels and other modes of transport both by land and air ). 10.

Spreads over cost of funds on Investment and commissions and fees on other transactions should be commensurate with the rating of the mudarib, quality or risk and the prevailing market conditions.

11.

Investment risk evaluation will include: An accurate appraisal of risk in any investment exposure is highly subjective matter involving quantitative and qualitative judgments. The financial statements of the borrower do not always provide a complete picture of the borrower.

Therefore the bank has to use all financial data available and combine this with a number of qualitative factors analyzing the borrowerâ&#x20AC;&#x2122;s financial position. In analyzing any investment proposal the analyst should follow THREE distinct and logical steps to conclude on and make appropriate recommendations. These are: Historical Analysis (Identify nature of risk):

Evaluate the past performance of the mudarib. Determine the major risk factors and how they have been mitigated in the past. Identify factors in the mudaribâ&#x20AC;&#x2122;s present Condition and past performance which may foreshadow difficulties or indicate likelihood of success in his ability to repay the investment, at a future time. Forecast (Judging future degree of risk): Having identified the nature of risk involved and how these are mitigated, make a reasonable forecast of the probable future conditions of the mudarib and conclude on his ability service the proposed level of finance. Investment structure and protection: Assess the mudaribâ&#x20AC;&#x2122;s investment worthiness and prepare a proposal for structuring investment facility that can be repaid or amortized given the mudaribâ&#x20AC;&#x2122;s assets or his projected Cash flow and the facility offering adequate protection against loss and control of the financing relationship. There is also mention that, Social Islami Bank sharing profit and loss proportionately.

Format of investment analysis: Every investor should follow format of banking services. All investment proposals are to be analyzed by the analyst as per standard investment analysis. The detail of the analysis is focused on that part and also in other charters. (a)

Prevalent investment practices in the market place.

(b)

Investment worthiness, background and track record of the mudarib.

(c)

Financial standing of the mudarib supported by financial statements and documented evidence.

(d)

Legal justification and implications of applicable laws.

(e)

Effect of any applicable regulations and laws.

(f)

Purpose of the finance/purpose.

(g)

Tenure of the finance/facility.

(h)

Viability of the business proposition.

(i)

Cash flow projections.

(j)

Quality and adequacy of security, if available.

(k)

Risk taking capacity of the mudarib.

(l)

Entrepreneurship and managerial capabilities of the mudarib.

(m)

Reliability of the sources of repayment.

other

(n)

Volume of risk in relation to the risk taking capacity of the Bank or company concerned.

(o)

Profitability of the proposal to the Bank or company concerned.

CONTINGENT LIABILITIES 1. Commercial letters of credit The Bank shall not undertake contingent liability for letters of Credit exceeding in aggregate four times net worth of the Bank. 2. Letters of guarantee The Bank shall not undertake contingent liability under letters of Guarantee issued because of customers exceeding in aggregate four times the net worth of the Bank. 3. Acceptance on account of customers: These shall not exceed 5% of aggregate outstanding advances.

Investment Department Operation: This part of this policy contains instructions covering the details of various types of loans and advances of the Bank, the documents to be obtained, accounting record to be maintained, process of the Investment Relationship Management Department & SME, which is responsible for processing and servicing all advances as well as maintaining the records connected with the function. Main functions of Investment Department: a) Interviewing the prospective “Mudarib”. b) Receiving the investment information assembled and placed in the Client’s File. c) Processing and sanctioning of investment facilities to the cleint. d) Disbursement of investment facilities to cleint in accordance with established procedures e) Recording investment facilities in the Register / Card. f) Preparing “ENTRY TICKETS” (Voucher) pertaining to investment facilities disbursed and passing to General Ledger Accounts. g) Controlling of securities and their proper custody.

h) Maintenance / Filling of Mudarib’s Investment Card / Register. i) Follow up and recovery of investment as per due date. j) Computation and checking of interest accrued on investment and preparation of entry ticket thereof. k) Preparing of “ENTRY TICKETS” (Voucher) for investment repaid and passing the same to the corresponding General Ledger Accounts

4.6 Investment Principles Social Islami Bank follows investment principle in a right way. The following are the principles to be adopted for financing authority, approval, monitoring and control on a basis consistent with the global operational objectives and business strategies of the Bank. A. General: The Bank shall provide suitable investment services and products for he markets in which it operates. Investment shall normally be financed from mudaribs’ deposits and not out of temporary funds or borrowing from other banks. Investment will be allowed in a manner, which wills in no way compromise the Bank’s standards of excellence and to the customers who will complement such standards. All investment extension must copy with the requirements of Bank’s Memorandum & Articles of Association, Banking Companies Act 1991 as amended from time to time, Bangladesh Banks instruction $ other applicable rules $ regulations. B. Structural: The authority structure for extension of investment should enable effective adaptation to changes in the economic, technological, regulatory and competitive environment within which the Bank operates. A. Performance: The conduct and administration of the investment portfolio should contribute, within defined risk limitation, to the Bank’s achievement of profitable growth and superior return on the Bank’s capital. Investment advancement shall focus on the development and enhancement of customer relationships and shall be measured on the basis of the total yield for each relationship with a customer (on a global basis), though individual transitions should also be profitable. Investment facilities will be extended to those companies/persons, which can make best use of them, thus helping to maximize our profits as well as economic growth of the country. To ensure achievement of this objective we will base our financing decision mainly on the mudarib’s abilities are granted on a transaction/one-off basis the yield from the facility should be commensurate with the risk. B. Profit Share: Islamic Bank promotes risk sharing between provider of capital and the entrepreneur. Maximizing profit sharing should not objective of an Islamic Bank. Social Islami Bank Ltd. Also do that type of activities.

C. Administration/ Monitoring: The administration of the investment process shall ensure compliance with all laws and regulations at both local and global levels including Bank policy as set out in those documents and the Bank’s manual/ Circulars. Proper analysis of investment proposal is complex and requires a high level of numerical as well as analytical ability and common sense. To ensure effective understanding of the concepts and thus to make the overall investment portfolio of the Bank healthy, proper staffing of the credit departments shall be done through. Placement of qualified officials who have got the right aptitude, formal training in finance, investment risk analysis, Bank investment procedures as well as required experience.

4.7 Investment Proposal Approval The primary factor determining the quality of the Banks investment portfolio is the ability of each borrower to honors, on a timely basis, all investment commitments made to the bank. The authorizing investment personnel prior to proposal approval must accurately determine this. The investment proposal approval process shall be governed by the Bank investment framework, which can be summarized under the following headings: 1. Investment Evaluation Principles: To have the optimum returns from the deployed funds in different kinds of financing, more emphasis shall be given on refund of investment out of funds generated by the mudaribs from their business activities (cash flow) instead of realization of money disposing of the securities held against the advance which is very uncertain and time consuming. Accordingly the investment evaluation principles must be adhered to at every level of approval. The financing risk analysis tool containing analysis of both the business risk and security risk provides overall rating of risk in a particular loan under the following financing process: •

Assess risk of failure to repay.

•

Decide whether to accept or reject a investment proposal

•

Set pride and terms.

•

Obtain sanctioning documents and disburse.

•

Monitor performance and ensure repayment/recovery

The most pertinent and prime part of the process is assessment of risk of failure to repay which deals with the overall financing risk combining the business risk and the security risk in matrix derived out of six segments of the Business risk viz. •

Supplier risk

•

Sales risk

•

Performance risk

•

Resilience risk

•

Management competence risk &

•

Management integrity risk and tow segments of the security risk viz. (1) Security controllers & (2) Security cover risk.

The overall matrix provides four kinds of financing risk for decision-makers viz. •

Good

•

Acceptable

•

Marginal

•

Special Mention

•

Sub standard

•

Poor

•

Bad/loss that is detailed in the financing, risk analysis Circular/Credit Risk Grading manual.

Bank shall not approve any financing having an overall risk as “marginal” and “poor” without proper justifications except for renewal of existing facilities under compelling circumstances or for other reason such as salvage, which shall also contain covenants for future improvement of the position. All investment proposal applications rated shall require the approval of the Board regardless of purpose, tenor or amount. 2. Investment Risk Evaluation/Assessment: The importance of a detailed and complete investment risk assessment for each facility and customer relationship cannot be over emphasized. The steps that should be following in carrying out such an assessment are set out in the Bank manual and in Head Office Circulars issued from time to time. All proposals of investment facilities must be supported by a complete analysis of the proposed investment. A comprehensive and accurate appraisal of the risk in every investment exposure of the Bank is mandatory. No proposal can be put up for approval unless there has been a complete written analysis.

It is the absolute responsibility of the proposing officer to ensure that necessary proposal documentation is collected before the facility request is sent to the sanctioning officer. 3. Financing Authority: To assure proper and orderly conduct of the business of the Bank, the Board of Directors will empower Managing Director and other Executives of the Bank to finance up to certain terms, and condition at their discretion. The financing officers are broadly categorized as follows: Managing Director (MD) Deputy Managing Director (DMD) The investment proposals at first go to the Head Office IRMD (Investment Risk Management Division) and SME department. Then they will evaluating the investment proposal, which is sanctioned or not. The amount and scope of each officerâ&#x20AC;&#x2122;s financing authority is a function of the amount and extent of authority required buy the officers to carry out his/her responsibilities to the bank and its clients in a prudent, effective and efficient manner. It must be emphasized that an officer will not be delegated financing authority only on the basis of his position. In other words, an officer does not automatically get financing authority by virtue of his corporate and/or functional title. Specified financing authority will be delegated by the Managing Director to various Executives after taking consideration his proven investment judgment, knowledge and experience. The amount of financing authority approved by the Board for various Executives forms the upper limit of the authority that may be delegated to an officer holding corporate title. Each individuals financing authority will be delegated to him in writing. Authorities given to an incumbent will not automatically be transferred to a replacement. The letter will have financing authorities delegated to him in writing and amount delegated will depend

upon

the

individual.

The

Managing

Director

with

the

Executive

Committee/Board will review all financing authorities periodically. 4. Approval under Dual Signature: All approval of investment facilities must be conveyed under dual signature. Ideally both the signatories must have the required financing authority; if however, two financing officers of the required financing authority are not available, one of the signatory must have the financing authority. 5. The responsibilities for investment, procedure, approval & review shall vest amongst the following groups:

a) Board of Directors: They establish overall policies and procedures for approving & reviewing investments. Delegating authority to approve and review investment. Approving investment for which authority is not delegated. Approving all extensions of investment which are contrary to Banks written investment policies b) IRMD Committee: IRMD committee of the Board shall be responsible for: •

Approving facilities as delegated by the Board

•

Supervising the implementation of the directives of the Board

•

Reviewing of each extension of invesment approval by the Head office IRMD committee.

•

Keeping the Board informed covering all the above.

4.8 Branch Investment Committee Branch Investment Committee to be headed by the Branch Manager, other members to be selected by the Manager in consultation with Head office. Responsibilities •

The branch Manager will be the first line financing officers and are responsible for exercising their authority with due diligence and discipline.

•

They must also know their borrower fully

•

Comply with the applicable instruction, manuals, circulars and other rules of the Bank and well as those of Bangladesh Bank Banking companies Act 1991 (as amended from time to time).

•

Ensure that investment proposals submitted to head office, IRM Division are complete and consistent with established polices & procedure.

•

Review and analyses the following in connection with investment risk proposals coverage any obligator A. History of antecedent of the obligor and its management personnel. B. Financial condition of the obligor evidenced by comparative statement, latest Balance Sheet, income statement, operating results and supplementary facts as well as by personal Net worth statement of the proprietor, partners & Director.

C. Bank & Credit Information Bureau (CIB) checking and trade standing obtained through investigation. D. Any other pertinent information. Secure necessary and adequate Legal & Banking documentation as well as insurance cover, all in our favor to ensure maximum legal protection. They should also ensure that all charge documents, securities, collateral etc. as per sanction letter have been obtained prior to disbursement. Comply with necessary and customary internal & external control & safeguard. Ensure continuing review of the risks and exposure and compliance with limits with particulars attention being paid to term investment. At the minimum the following should be done: A. Every month all investment facilities should be reviewed by Branch Manager along with other members of Branch Investment Committee. B. Ensure that all investment covenants are being complied with. C. Review that regular deposits are being made in the accounts especially for CC & SOD limits and the deposits commensurate with limits and business. D. Ensure verification of stock reports by the Manager or his authorized officer every month. E. Visit the business establishment/factories of the borrower at least once in a month to review business position, profitability, future projection etc. and prepare a report of the finding, which is to be cooped to head office. â&#x20AC;˘

Ensure that all investment facilities are covered by appropriate approval and that they are kept within approved limits and ensure compliance with terms and conditions of the approval.

4.9 Documentation: It is essential that the proposal define clearly the purpose of the facility, the sources of repayment, the agreed repayment schedule security and the customer relationship considerations implicit in the financing decision. Where security is to be accepted as collateral for the facility all documentation relating to the security shall be in the approved form. All approval procedures and required documentation shall be completed and all securities shall be in place, prior to the disbursement of the facilities. General

documentations as require for different kinds of advance are enumerated below. There may be requirement of specific banking or legal documents to secure a investment according to sanction terms and conditions, which should also be obtained in addition to the following activities: •

Trade license

•

Voter ID/National ID

•

Stock Position

•

Asset-liability declaring

•

Creditors/debtors list

•

Projected income

•

Income Statement

•

Contact Point Verification(CPV)

•

Seal deed

•

Legal opinion

•

Survey report

•

Manager certificate

•

Visit report(Branch Official)

All required documents, as enumerated above, should be obtained before any investment is disbursed. Disbursement of any investment facility requires approval of then sure, before exercising such authority that all the required documentation has been completed.

4.10 Appraisal

Project Appraisal Procedure Before sectioning investment Social Islami Bank Ltd. assess the viability of a project. It is subjected to scrutiny and appraisal from the technical, marketing , financial, economic, organization and management points of view to ensure that the project. The H. O. provides basically medium and short-term project loan. An appraisal practices in Social Islami Bank Ltd. concentrates on the following five major aspects.

The Market Feasibility: A very exhaustive analysis is made by the Investment Division of H. O. covers the following aspects. 1. Market demand projection that is the total effective demand for the product at the time when the product will come into operation. 2. Export project and prevailing condition of the international market that is what changes may take place in the international market of the product of the product if it is exportable. 3. Local market condition that is what portion of this market will be captured by the existing firms and firms who are under construction and shall be producing at that time. 4. The expected price of the product when it will appear inlet market 5. The total supply of the product. 6. The supply gap of the expected product. 7. Changes in Government policy on prices and distribution control. 8. Marketing and selling arrangements and other promotional arrangements of the product. Financial Viability: Financial appraisal of a project decides which project will be the most viable and profitable that is which will give better yield and a satisfactory rate of return. The financial analysis evaluates this ability by adopting ratio techniques. Projections of operational and capita costs etc. are made after allowing due margin for all items of capital of costs as well as recurring inputs. To provide for unforeseen contingencies suitable provision for escalation is also made. The feasibility analysis from the financial view point relates to not only profitability but also to cash flow because the institution would ensure that the interest and loan repayment will be adequate covered.

4.11 Position of Investment Each fund has a defined investment goal to describe the remit of the investment manager and to help investors decide if the fund is right for them. Income or value based investment tends to select stocks with strong income streams, often more established businesses. Growth investment selects stocks that tend to reinvest their income to generate growth. Each strategy has its critics and proponents; some prefer a blend approach using aspects of each. Social Islami Bank Ltd. Rasulpur Branch start their footsteps last year. After that they increase their investment more & more. Now I shows a table of growth of investment.

Growth Rate: Investment Formal Non Formal Total Table-1

Graph-1

30.12.09 49 64 113

30.06.10 100 91 191

Growth rate 51% 27% 78%

â&#x2014;? Interpretation: Investment of the SIBL, Rasulpur Branch stood at showing an increase of 191 against 113; 78% growth of investment of the Banking sector. This increased growth of investment of the Bank in 2010 may be attributed to the trust given to foster investment and to reduce the Surplus Liquidity of the Bank.

4.13 Proposal Sanctioning Procedure of Social Islami Bank Ltd. Before disburse investment follows some processes and procedure. The flow chart below describes the procedure in a brief manner. Submission of Profile and Other Necessary Documents

Investment Report Letter from Bangladesh

CIB Report Taken from Bangladesh Bank

Analysis of the Viability of the whether proposal can be Sanctioned or not

Preliminary Approval from the Branch Manager

Deliver it to the Head Office for Final Approved

Approved by the Head of the IRM Division/SME Deliver the Issue to the Executive Committee Meeting for Approved from the Board of Directors (BOD)

Approval from the BOD of EC Meeting

4.14 Sector Wise Distribution of Investment

Name of Sector

Percentage of amount

Agriculture

Industrial (Term investment)

Industrial(Working Capital)

11%

Export Finance

11%

Import Finance

Internal Trade Finance

35%

Transport & Communication(Housing)

Transport & Communication(Special

16%

Program) Others

Table-2

18%

Graph-2

â&#x20AC;˘

Interpretation:

Above table and the graph shows that investment in Internal Trade Finance and Transport & Communication (Special Program) is much more than other investment sectors. In 2010, investment in Internal Trade Finance and Transport & Communication (Special Program) is 35% and 16% respectively. On the other hand in 2010, investment in Industrial (Term loan) is the lowest.

Trend Analysis: Investment Trend Year 2009 2010

Rate 100% 169%

Table-3

Graph-3 â&#x20AC;˘

Interpretation:

Above table and the graph shows that investment is much more in 2010 against 2009. It shows the increasing trend over the years. Here, we are showing just last two year investment over six months in Rasulpur Branch.

Recovery Trend: Mode Of Investment Formal Non Formal Total Table-4

Total Investment 108 105 213

Investment Recovery 37 28 65

Growth Rate 0.71 0.77 1.48

Graph-4 â&#x20AC;˘

Interpretation:

Here, we see that investment in formal sector totally 108 and 37 investment have been recovered over the years. In percentage shows that, 71% investment recovered over the one year. But no investment preiod are end last one year.

Graph-5 •

Interpretation:

Here, we see that investment in non-formal sector totally 105 and 28 investment have been recovered over the years. In percentage shows that, 77% investment recovered over the one year. But no investment preiod are ended last one year.

• • • • • • • • • • Graph-6 •

Interpretation:

In summury we see that, investment in non-formal sector is much more than recovered against formal setor. In percentage shows that, 77% in non-formal sector and 71% in formal sector.

4.15 Comparative Analysis with Other Bank: Sl. No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Particulars Paid-up Capital Total Capital (Equity) Capital Surplus/ (deficit) Total Assets (Excluding contra) Total Deposits Total Investments (excluding Investment in Shares/ Securities) Total Contingent Liabilities and Commitments Investment Deposit Ratio Percentage of Classified Investment against Total General Investments Profit after Tax & Provision Amount of Classified Investment during current year Provision kept against Classified Investments Provision Surplus/ (deficit) Cost of Fund Profit Earning Assets Non-Profit Earning Assets Return on Investments (ROI) Return on Assets (ROA) Income from Investments Earnings per Share (Taka) Net Income per Share (Taka) Price Earning Ratio (Times)

Shahjalal Islami Bank 2009 274.00956 542.9972779 154.6690779 5892.08954 4745.923149

Social Islami Bank 2009 269.17259 391.4616931 1299733631 3998.081947 3158.81604

4395.826071 1447.513753 92.62%

2658.05846 1010.684779 96.08%

0.94% 107.0568293

3.19% 43.1522723

41.323422 11.8009403 9.8703709 11.07% 5313.179327 578.9102133 11.74% 2.08% 40.9019391 39.07 39.07 9.79

84.8939 24.1962145 0.5 7.16% 3506.014612 492.0673348 3.93% 1.24% 5.1480983 18.39 18.39 16.75

Table-5 â&#x20AC;˘

Interpretation:

Here we see that, a Company total deposit of SHAHIBL is much more than SIBL. Also we see that, total investments are same situation. But in ROA is relatively same in two companies. We know that, ROA is the best measuring tool to understand the position of the company. Strong earnings and profitability profile of a bank reflect Good health and banks its ability to support present and future operations. More specifically, this determines the capacity to absorb losses by building an adequate capital base, finance its expansion and pay adequate dividends to its

shareholders. Although there are various measures of earning and profitability, the best and widely used indicator is returns on assets (ROA), which is supplemented by return on equity (ROE).

Regression analysis: Coefficients(a)

Mode l

(Constant) Deposit

Unstandardized Coefficients Std. B Error -143366015.355 .000 .953 .000

Standardized Coefficients

Sig.

Beta 1.000

. .

a. Dependent Variable: Investment

Interpretation: Y = b1x1 In this line regression equation, we can show the relationship between Investment (dependent ˆ . variable) and Deposit (independent variable). If Investment and Deposit is zero then a = y ˆ = y

-14.33 which is y intercept. Now, if the value of b1 or the slope of x1 is 0.953. It means that if the volume of deposit increases by Tk 1 crore, the positive investment increases by Tk. 0.953 crore, assuming all other variables held constant. If there is no deposit, so there is no investment, assuming all variables held constant. which is showed in appendix 1.

Findings 1) SIBL can extend its banking more to rural areas for the grater welfare of the rural people 2) It can tremendously extend its Rural Development Schemes (Micro Level) to reach to door to door of the poor people of the common mass of the rural areas which will help the villagers to get rid of the high interest of NGOs 3) By reducing paper hazard during the sanction of investment limit, investment clients can feel more comfortable. 4) Overall Function especially “Investment Management” of bank is guided by different laws, circular and Bangladesh Bank guidelines.

5) Investment policy of SIBL is not extending to agricultural sector. 6) Investment approval process of bank especially SIBL is well structured but not extended. 7) Creation of charge documents of investment process is organized & developed. 8) Bank followed different modern risk analysis procedure when appraise the investment case e.g. CRG. 9) Recovery procedure and mechanism of SIBL is adequate but it is not more organized. 10) In branch investment recovery is satisfactory level, but it should be monitored.

Recommendation Firstly a separate Islami Banking Act is very much essential for playing smoothly and better functioning of Islamic Banks & Financial Institutions in our national economy for the following reasons: 1. The nature of deposits of Islamic Banks is different from that of conventional Banks. The Social Islami Bank mobilize deposit on Mudaraba and Al-Wadiah basis under Islamic Shariah, while conventional Banks do this on prefixed interest basis. The Depositors of Social Islami Banks are business partners of the Banks and they share the Profit/loss of the business. 2. It is obligatory for Social Islami Bank as per Shariah to pay Zakat while Conventional Banks do not act on such obligation. In the Bank Company Act, 1991 there is no provision to pay Zakat by the Social Islami Bank. 3.

The Social Islami Bank deploys their funds as per different modes of Investment/Financing approved by Islamic Shariah. Most of the Investments of Islamic banks are on Bai-Mode. In this mode Banks sell specified goods to the clients on cost plus agreed upon profit or at a negotiable price payable after a certain fixed period. If, the client fails to pay the price within the fixed period, the Islamic Banks can not impose or realize additional amount as income of the Bank.

As activities and operations of Islamic Banks particularly Investment Port-folio is completely separate form that of Conventional Banks, the Act and Procedures for initiation of legal action against the default clients should be separate under the framework of Islamic.

Inspections of Islamic Banks are made as per system adopted for Conventional Banks and sometimes by the Inspectors without having any knowledge of Islamic system and law. The inspection of Islamic banks should be done with a view to identifying both general and shariah lapses by the persons having good knowledge of Islamic Shariah and Banking.

Conclusion Social Islami Bank Limited is one of the Islami banks in the financial sector in Bangladesh, which commenced in 1995 when the Bank started growing fast and in size. The study concentrated on the Investment. As of beginning of the firm it has passed tremendous success in business operation. The fact that it has continuous growth in deposit and investment volume; at the same time it has been experiencing increased profit position. The study based on the trend analysis with particular reference to the deposits, investment, overdue, recovery, profitability and liquidity. The analysis reveals that investment of SIBL is sound and it can improve day by day. SIBLâ&#x20AC;&#x2122;s capital adequacy, deposits, reserves, earning per share, export, import and remittances are also increasing. Investment mechanism of SIBL and conventional bank is different but procedure is all most the same. Conventional banks deal with money and loans and advance but SIBL deals with selling and buying the goods. SIBL is like a selling and buying agent. Mode of investment of conventional, like Cash Credit (CC), Hire Purchase and Call Money investment is fully difference. SIBL never provides cash to the clients and call money investment. So called general principle of Hire Purchase is not permitted as per shariah. As a result SIBL follows the Hire Purchase under Sirkatul Meelk (HPSM) instead of Hire Purchase. Ownership is gradually transferred to the client after payment of each installment in the HPSM system but it is fully ignored under traditional Hire Purchase system. SIBL does not invest its money to the call market due to violation of Islami Shariah. So, the investment mechanism of SIBL differs from that of conventional banks.

Finally, it may be said that the banks in Bangladesh, an equal treatment is being followed for all banks including the Islamic ones by the Bangladesh Bank. In some cases, Bangladesh Bank has given some special provision for the Islamic banks. Yet, for the smooth development and operation of the Islamic banking, Bangladesh Bank should devise the separate regulatory and supervisory guidelines for the Islamic banks and non-bank Islamic financial institutions. Islamic banks can provide efficient banking services to the nation if they are supported with appropriate banking laws, and regulations. This will help them introducing PLS modes of operations, which are very much conducive to economic development.

References: 1. www.bangladesh-bank.org 2. www.siblbd.com/ 3. Credit Risk Grading Manual 4. Credit Risk Management â&#x20AC;&#x201C; Bangladesh Institute Of Bank Management 5.

www.bangladesh-bank.org/mediaroom/circulars/brpd/oct2305brpd14.html

6. www.shahjalalbank.com.bd 7. Shariah Board Secretariat 8. Investment Risk Management Division 9. SME Banking Division 10. Annual Report 2009 of SIBL

Bibliography SIBL- Social Islami Bank Limited IRMD-Investment Risk Management Risk Division SME-Small & Medium Enterprise CC-Cash Credit SOD-Security over Document SCB-State Owned Commercial Bank

PCB-Private Commercial Bank DFI-Government Owned Development Finance Institute FCB- Foreign Commercial Bank RMG-Ready Made Garments MSDPS-Mudaraba Savings Deposit Pension Scheme GDP-Growth Domestic Product HPSM-Hire Purchase under Sirkatul Melk NGO-Non Government Organization Appendix 1. Regression Variables Entered/Removed(b) Variables Variables Entered Removed Deposit(a) . a All requested variables entered. b Dependent Variable: Investment Model 1

Method Enter

Model Summary

Model 1

R R Square 1.000(a) 1.000 a Predictors: (Constant), Deposit

Adjusted R Square 1.000

Std. Error of the Estimate .

ANOVA(b) Model 1

Sum of Squares Regressio n Residual

1970555270043938.000

.000

1970555270043938.000 a Predictors: (Constant), Deposit b Dependent Variable: Investment

Total

Mean Square 19705552700 43938.000 .

Sig. .

Coefficients(a) Unstandardized Coefficients

Model

(Constant) Deposit

B -143366015.355 .953

Std. Error .000 .000

Standardized Coefficients

Sig.

Beta 1.000

. .

.(a)

a Dependent Variable: Investment