Overall Banking Activities of Shahjalal Islami Bank Limited by lawjuris

Overall

Banking Activities of Shahjalal

Bank

Islami

Limited

Chapter # 1 Introduction The Internship is a four-credit compulsory course for the business students graduating from Bangladesh University of Business & Technology (BUBT). The objective of this component is to provide a hands-on experience to a student graduating under different discipline of Bangladesh University of Business & Technology (BUBT). The Internship takes place in a firm/organization or an institution. After completing one hundred and twenty credit hours, a BBA student have to do an internship in any area of business specialization under the concentration like Marketing, Finance, Management, Human resource etc.

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

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

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

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

a. To know about the general banking. b. To know about loans and advances. c. To know about Foreign Exchange. d. To analyze the performance of over all Islami banking of SJIBL. e. To know about the difference between conventional and Islami banking. f. To identify Marketing mix of SJIBL g. To identify an understand different product offering of SJIBL.

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

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

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

A) Primary sources: The primary sources include interviewed with the bankers and my work experience. B) Secondary sources: The secondary sources are the annual reports of the SJIBL 2006-2007 and other published prospects. Articles, newspaper, Relevant books, journals etc

1.5.3) Data collection procedure: A) Primary data: Observation, Focus group, In-depth interview, and survey method are used for primary data collection B) Secondary data: Secondary data collect from annual report, articles and Shahjalal Islami Bank Limited website.

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

1.5.5) Sampling Plan: A)Target Population: All the officials & clients of at Shahjalal Islami Bank Limited (SJIBL), General Banking and Credit were target population of my study. B) Sample Unit: For buyer questionnaire, survey sample unit was the individual officials & clients of at Shahjalal Islami Bank Limited (SJIBL) Banani branch, Dhaka. C) Sample size: Minimum 66 sample size I took. 30 for employee & 36 for customer.

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

Employee Surveyed Target

Client Surveyed

Sample Unit

Sample

General

size 10

Population Shahjalal Islami Banking(GB) Bank

Limited Credit

(SJIBL) Banani Foreign branch, Dhaka.

10 10

Exchange (FE) 30

Target Population

Sample Unit

Sample size

Shahjalal Islami

General

Bank Banking(GB)

Limited

Credit

(SJIBL) Banani Foreign branch, Dhaka.

12 12

Exchange (FE) 36

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

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

Chapter # 2 Profile of the Organization (2.1) Profile of the Organization: Shahjalal Bank Limited was established as a public limited company on April 01, 2001 under company act, 1994. The bank commenced its commercial operation in accordance with Islamic Shahriah on the 10th May 2001 under the ambit of the bank companies Act, 1991. The name of the bank was changed to Shahjalal islami bank limited w.e.f 10 th May 2004. During Last five years SJIBL has increased its service coverage by opening new branches at different strategically important locations across the country. In order to cover the shortfall in capital adequacy and fulfill other requirements, the paid up capital has been increased to TK. 466.83 million by injecting TK. 236.20

million by the sponsors in 2004. the sponsors again injected additional TK. 469.00 million by 15 th May 2005 to make the sponsors contribution to capital TK. 935.83 million. The bank has the plain to go for initial public offerings (IPO) of share, which will assist the bank to raise its paid

up capital to

TK. 1871.65 million. The bank was sponsored by the group of local businessmen having exposure in RMG, insurance, electronics and education etc. Alhaj Sajjatuz Jumma is the present and founder chairmen of the bank having business experiences of more than 26 years in the field of electronics, food and education. SJIBL provides a wide range of sharia based commercial banking services.

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

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

 Other objectives of Shahjalal Islami Bank include:  To establish interest-free and welfare oriented banking system  To help in a poverty alleviation and employment generation  To contribution on sustainable economic growth of Bangladesh

(2.3) Vision:

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

(2.4) Mission:  To provide quality services to customers  To set high standards of integrity  To make quality investment  To ensure sustainable growth in business  To ensure maximization of Shareholders’ wealth  To extend customers innovative services acquiring state of the art technology blended with Islamic principals

 To ensure human resource development to meet the challenges of the time

(2.5) Strategies:  To strive for customers best satisfaction & earn their confidence  To manage & operate the Bank in the most effective manner  To identify customers needs & monitor their perception towards meeting those requirements  To review & update policies, procedures & practices to enhance that ability to extend better services to the customers

 To train & develop all employees & provide them adequate resources so that the customers needs are reasonably addressed

 To promote organizational efficiency by communicating company plans, policies & procedures openly to the employees in a timely fashion

 To cultivate a congenial working environment  To diversify portfolio both the retail &wholesale markets

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

Higher import cost of commodity prices, price hike in international oil market as well as money and credit growth resulted in higher inflation. As a result, the economy of the country showed every sign of recession. The efficient workforce of the Bank and the prudent management developed a seamless teamwork which pushed the Bank through all the shadows of uncertainty towards the light of sources. Despite numerous adversities, closed the balance sheet of the Bank with an enormous per-tax profit of

TK. 1216 million with excellent growth rate of 54.44%. while the whole financial sector faced a slowdown. This credit worthy achievement has been possible due to our professional smoothness and confidence.

(2.7) Management hierarchy:

Figure: 2-1

(2.8) Social Responsibility: As an Islamic bank, they are committed to serve the causes of humanities. In this course, they expanded their helping hand to the flood affected; winter distressed and SIDR affected people of

various resigns of the country. They awarded scholarships to the poor meritorious students of their country to carry forward their future education. they donated found to Chief Advisorâ&#x20AC;&#x2122;s Relief Fund to help SIDR affected people as well as the employees of the Bank can avail themselves of the physical aid at a minimum cost.

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

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

(2.10) Information Technology: Main objective of the Bank is to take care of different economic groups of the society and meet their all types of banking requirements stretching its services to the doorstep of the people with the help of information technology gradually. We are providing customersâ&#x20AC;&#x2122; service through online facilities. Ultimate aim is to enable their respected and valued clients to shop under the same roof. In line with

that SJIBL VISA DEBIT CARD, SMS/ push pull services have already been introduced. Beside, clients are also being facilitated by the service of REUTERS, SWIFT, western Union Money Transfer etc.

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

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

2.11.1) Product and services of SJIBL A. Deposit products Cheque-based Account

 Al-Wadish current Deposits  Mudaraba Saving Deposits  Mudaraba Short Notice Deposit Non-cheque-based Account

 Mudaraba Term Deposits  Mudaraba Double/Triple Benefit Scheme  Mudaraba Monthly Deposit Scheme ( 5, 8 , 10 years )  Mudaraba Millionaire Scheme (12, 15, 25, years terms)  Mudaraba Hajj Scheme ( 1 to 25 years terms )  Mudaraba Housing Deposit Scheme  Mudaraba Cash waqf Deposit Scheme  Monthly Income New product for 2007

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

B. Investment Products

 Profit applies monthly  Calculations based on simple method  Calculation mode on annuity method Markup system

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

 Musharaka  Mudaraba  Murabaha  Bi-Muzzal  HPSM  HPSM-HHD Scheme  HPSM- (staff)  Ijara  Bai-Salam  Istisnaa  Muqawala  Quard-e-Hasana  Inland Doc. Bills Purchased 2.11.2) Price: This component addresses management of all the outlays incurred by customers in obtaining benefits from the service product. SJIBL is not limited to the traditional pricing tasks of determining the selling price to customers, setting margins for any intermediaries and establishing credit terms. SJIBL is trying hard to minimize the cost of taking services because everyone wants best service in a reliable price.Shahjalal Islami bank offers very reasonable price to its customers. For this reason there are huge number of people are very loyal to them. There are plenty of services provided by SJIBL and there are dynamic price list for different service. Profit Rates (Price) of SJIBL in General Banking

Attractive and competitive interest rate Sl# Types of Deposits Interest Rates 1 STD (Short Term Deposit) 7.00% 2 Savings Deposit: Urban/Rural 6% 3 Savings Deposit: Non Chequing & No withdrawal for 6(six) 6%* months 4 Savings Deposit: Non Chequing & No withdrawal for 1(one) year & 8.00%* above 5 FDR for 1(One) month and above 8% 6 FDR for 3(Three) months and above 11.25% 7 FDR for 6(Six) months and above 11.50% 8 FDR for 1(one) year and above 11.75% Note: The rate of interest offered earlier on FDR (s) shall remain unchanged till their next maturity

2.11.3) Place: Delivering product elements to customer involves decisions on the place and time of delivery, as well as on the methods and channels used. IN Shahjalal Islami Bank â&#x20AC;&#x201C; delivery of service involves physical & electronic distribution depending on the nature of the service being provided. Shahjalal Islami Bank is the largest private commercial bank in our country. It has 26 branches all over the country. So they are very conscious about delivering service near to customer. The bank has one or more branches in important & lucrative places so that the customer can easily reach to it. Because Shahjalal Islami Bank knows â&#x20AC;&#x201C; speed & convenience of place and time for the customer are becoming important determinants in service delivery strategy. Some important location on Shahjalal Islami Bank can represent their sense of place & timing â&#x20AC;&#x201C;

2.11.4) Promotion: Effective marketing communication is very important for any kind of organization. This component plays three vital roles: providing needed information & advice, persuading target customers of the merits of a specific product, and encouraging them to take action at specific times. Integrated Marketing Communication/Promotion Mix of Shahjalal Islami Bank: SJIBL blended its promotional tools as follow

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

i. Print & broadcast ads ii. Brochures & booklets iii. Directories

iv. Symbols & Logos v. Billboards 2. Sales promotion: It involves extra value or incentives to the sales force or ultimate customers and can stimulate immediate sales. Shahjalal Islami Bank often go for consumer oriented sales promotion. Sales promotion of SJIBL:

I. Premiums & gifts II. Fairs & trade shows III. Rebates IV. Low-interest financing V. Trade in allowance 3. Publicity/Public relations: Publicity usually comes in the form of a news story, editorial or announcement about an organization or its product/service. Credibility is the advantage of this medium. Public relation is the management function which evaluates public attitudes. Shahjalal Islami Bank goes for both publicity & public relation.

I. Press kits II. Seminars III. Annual reports IV. Charitable donations V. Company magazine VI. Publications 4. Interactive/Internet marketing: Shahjalal Islami Bank is now paying more concentration on internet marketing. Because it has a he prospect. Interactive media allow for a back and forth flow of information whereby users can participate in and modify the form and content of the information they receive in real time. As internet service is not so much available everywhere in the country the bank cannot spread their interactive marketing in the country. But they can provide online services.

2.11.5) Physical Environment: The appearance of SJIBLâ&#x20AC;&#x2122;s building, landscaping, vehicles, interior furnishing, equipment, staff members, signs, printed materials, and other visible cues all provide tangible avidence of the banks service quality. Shahjalal Islami Bank manages its physical evidence very carefully, as it can have a profound impact on customersâ&#x20AC;&#x2122; impression. They have:

1. Well decorated office space.

2. Prayer time & space. 3. Necessary furniture & electric equipment 4. Seating arrangement for customers 5. Car parking facility 6. Printed materials 7. Skilled manpower etc. 2.11.6) Process: Shahjalal Islami Bank creates and deliver product elements to customers require the design and implementation by effective process. A process is the method and sequence of actions in the service performance. Shahjalal Islami Bank designs its process in such a way that lead to fast, dynamic and very effective service delivery and result in satisfied customers. As the process of the bank is very well designed it helps a lot to the front line staffs to do their jobs well, resulting in high productivity and decrease likelihood of service failure. In the bank most of the directions comes from head office but there are different culture in different branch based on location but every where a specific process is highly maintained.

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

(2.12) SWOT ANALYSIS:

Figure: 2-2SWOT analysis

STRENGTHS:

 Good asset quality  Satisfactory business growth

 Diversified product lines  Good profitability  Experienced top management  Good operating efficiency WEAKNESS:

 Negative related earnings  Dependent on fixed deposit  Moderate risk management system  Limited delegation of power  MIS at primary stage  Weak in shariah compliance  Limited branch network  Limited Market share OPPORTUNITIES:

 SME and Agro based business  Real time online banking  Credit card in dual currency  Basel-II compliance to tap advantage from RM system THREATS:

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

Chapter # 3 Theoretical Aspects

(3.1) Theoretical Background and Business Practice of Islamic Banking: From the viewpoint of Islamic Shariah, the banking system has to avoid interest. Consequently, financial intermediation in Islamic banking between the bank and the client takes place as a partner rather than a debtor-creditor. The financial activities of modern conventional banks are based on a creditor-debtor relationship between depositors and bank on the one hand and between the borrower and the bank on the other. Interest is regarded by conventional banks as the price of credit reflecting the opportunity cost of money. As interest is prohibited in Islam, commercial banking in an Islamic framework could not be based on the creditor debtor relationship. The other aspect of the theoretical basis of Islamic banking is that the interest free bank is not risk free. This principle is applicable to two main factors of production, i.e. labor and capital. According to this principle, as no payment is allowed to labor, unless it is applied to work, no reward for capital should be allowed, unless it is exposed to business risk. From these two principles of the theoretical basis of Islamic banking, it may be said that Islamic financial relationships are of a participatory nature (Ahmad, 1993). Based on the theoretical background, business practices of Islamic bank, especially sources and uses of bankâ&#x20AC;&#x2122;s funds, are characterized by the following modes or techniques.

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

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

Islamic banking business means banking business whose aims and operations do not involve any element which is not approved by the Religion of Islam. Therefore, if a bank by definition, avoids interest on its all transactions, but dose not keep itself away from other Haram (forbidden) transactions, like investment to pork meat industry, alcoholic beverage industry, gambling, etc. is not an Islamic, but all Islamic banks must be interest free. Islamic bank, thus, can also be defined as a financial institution which dose not pay or receive interest on any of its operations in any form and its all activities conform to the principles of Islamic Shariah.

(3.3) THE MAIN OBJECTTIVES OF ISLAMIC BANKING:

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

 To abolish Riba  To establish Baiya (trad, commerce and industry)  To mobilize savings for productive purpose  To earn reasonable profit through Halal (permissible) transactions  To establish Maruf (good) and Ihsan (kindness)  To create more employment opportunities by increasing economic activities  To distribute income and wealth equitably  Not to allow concentration of wealth  Generally to serve all classes of people, especially to favors the weaker sectors.  To establish a balanced and welfare society The above objectives are also the objectives of Islamic economics, so, hundred percent of these objectives cannot be achieved by Islamic banking operations alone. Islamic banking can play an important role to achieve these objectives for the establishment of a welfare economy.

(3.4) Banking System of Bangladesh: The banking system of Bangladesh is composed of a variety of banks working as Nationalized Commercial Banks (NCBs), Private Banks, Foreign Banks, Specialised Banks and Development Banks. However, 28 out of 50 banks in Bangladesh are private, of which only 5, namely Islami Bank Bangladesh Limited, Exim Bank Limited, Al-rafah Islami Bank Limited, Social Investment Bank Limited, and The Oriental Bank Ltd have been operating as Islamic banks. Besides these full-fledged Islamic banks, some conventional banks in the private sector have opened full-fledged Islamic banking branches and Islamic Banking Counter respectively to deal with the Islamic banking business parallel to their conventional operations.

(3.5) Banking Environment in Bangladesh: Bangladesh appeared as a new nation on the world map in the year 1971. After independence financial institutions, especially banks played a vital role in re-constructing the war-torn economy of Bangladesh. As reported by BSB (P. 29, 1993), “the banking system of Bangladesh is a mixed one comprising nationalized, private and foreign commercial banks. Bangladesh Bank is the central bank of the country and is in charge of monetary policies of the Government and controls all commercial banks.” Immediately after independence the government of Bangladesh nationalized most of the

banking institutions, though, within a short period, due to the failure in administering them properly, many of them were returned to their owners. The banking sector is one of the fast growing sectors of economy in Bangladesh. At present there are 34 banks working in the financial market of the country, including five Islamic banks and a number of foreign banks. Central Banks and the Islamic Banks and submitted a report in 1981 on the “Promotion, Regulation and Supervision of Islamic Banks”. The report highlighted the need to provide for central bank assistance to the Islamic banks on a basis compatible with the Shariah. The report also discussed many monetary aspects such as liquidity requirements, reserve requirements, supervision of Islamic banking activities, and fiscal treatment of income from participation, ownership, capital requirements, and the maintenance of sound relationships between capital, reserves and total assets. The report recommended the fostering of interest-free financial instruments to enable the Islamic banks to meet the statutory liquidity requirements of the central banks. A study regarding “The Relationship between Central Banks and Islamic Banks” prepared by IAIB was submitted to the third Expert Level Meeting on Islamic Banking Studies (Dhaka, 1989).

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

(3.7) Difference between Islamic Banking and Conventional Banking: In Islamic Banking accounting the main difference with conventional Banking is that Islamic Banking can not deal with interest transaction and also con not deal with Haram Business.

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

Islamic Banking

Conventional Banking

1. Islamic Banking are to follow Quaran, Sunnah,

1. Conventional Banking follows man made

Ijma and Kias i.e. Shariah in all the business

practice and rules.

transactions including Accounting Entries. 2. They can not engage in any interest in the transactions/ Haram(prohibited) business.

2. They conduct their Transactions on interest basis and also engage in Haram (prohibited) business.

3. If any interest is including/ entered in the

3. Interest is their main income.

operations of the banks it should be excluded from the regular income if the bank. 4. If any income is earned violating Shariah principles

that cannot

4. They do not follow Sharia rule and regulation.

be included in the

distributable income of the bank. 5. in Musharaka investment, income cannot be accounted for on accrual basis. 6. For delay of investment, in case of BaiMudrabaha and Bai-Muazzal Investment further amount of profit cannot be changed. 7. In case of overdue Investment compensation may be charged if an independent committee like Review

committee

decided

impose

the

5. In conventional asking there is no practice of Musharaka Investment. 6. No such Bai- Muraba and Bai- Muazzal investment in conventional Banks. They charge interest / penal interest for delay in payment. 7. They charge interest / penal interest on over due investment.

compensation. 8. Islamic Bank is to pay Zakat on its reserves. 9. Islamic Banks are to pay a certain agreed amount

investment

Income

(agreed

percentage) to the Mdaraba Depositors. 10. Mudaraba Depositors are to share the loss, if any, incurred out of Investment market from Mudaraba dejposits. 11. Islamic banks are to follow Accounting, auditing and Shariah standerds developed by Accounting and Auditing Organization for Islamic financial Institutions (AAOIFI) for in addition to

8. They do not pay any Zakat on reserves. 9. They do not pay a certain amount to the depositor from their Investment income, rather they pay fixed rate of interest inrrespedtive of Investment Income. 10. Their depositors do not share any loss or profit. 11. they only follow International Accounting Standards (IAS) and International Standards of Auditing (ISA)

international Accounting Standards (IAS) and international accounting standards of Auditing (ISA) developed by international Federation of Accountants.

(3.8) 7P’s of marketing mix: 7P’s is a framework which acts as a guideline for marketers to implement a marketing concept. It consists of a set of major decision areas that a company needs to manage in order to at least satisfy consumer needs. The traditional marketing mix contains of four major elements, the "4-Ps of marketing". As defined by Kotler et al. (1999):

1. Product: "Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. In includes physical ob-jects, services, persons, places, organizations and ideas."

Price: "The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service."

Promotion: "Activities that communicate the product or service and its merits to target customers and persuade them to buy."

4. Place: "All the company activities that make the product or service available to target customers."

Four P’s

   

Four C’s Product Price Place Promotion

   

Customer solution Customer cost Convenience Communication

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

organizations. Because success depends on the proper implementation of these P’s along with their associated variables. Thus it is for this reason that the marketers converted the four P’s into four C’s. Consumer wants and needs (vs. Products) You can't develop products and then try to sell them to a mass market. You have to study consumer wants and needs and then attract consumers one by one with something each one wants. Cost to satisfy (vs. Price) You have to realize that price - what you sell the product for - is only one part of the cost to satisfy. If you sell meals, for example, you have to consider the cost of driving to your restaurant what if you provided a delivery service? Pricing is one of the most difficult decisions to make - selling at the lowest price is not always the best option. If you rely strictly on price to compete you are more vulnerable to competition. Convenience to buy (vs. Place) You must think of convenience to buy instead of place. You have to know how each subset of the market prefers to buy - on the Internet, from a catalogue, on the phone, using credit cards, etc. Communication (vs. Promotion) You have to consider communication instead of promotion. Promotion is manipulative - it’s a statement from the seller. Communication requires a give and take between the buyer and seller - This is much more subtle. Be creative and you can make any advertising "interactive". Use phone numbers, your web site address, etc. to help here. "Orange Wednesday" is a good example. Developing a brand takes into account these considerations. Developing a brand is developing a promise. When you take into consideration the "4 C’s" noted above you begin the process of developing a brand! The marketing mix is probably the most famous phrase in marketing. The elements are the marketing 'tactics'. Also known as the 'four Ps', Marketing decisions generally fall into the following four controllable categories:

 Product  Price  Place (distribution)  Promotion

Figure-3.1 Product: The product is the most important aspect of the marketing mix. The product can be a service or even a holiday destination. Products have both tangible and intangible benefits. Tangible benefits include benefits which can be measured such as the top speed of a car. Intangible benefits are benefits that cannot be measured such as the enjoyment the customer will get from the product. It is important that the product is changed as necessary to bring it up to date and prevent it from being overtaken by competitors.

Figure: 3-2 Exactly what product or service are you going to sell to this market? Define it in terms of what it does for your customer. How does it help your customer to achieve, avoid or preserve something? You must be clear about the benefit you offer and how the customer's life or work will be improved if he or she buys what you sell The term "product" refers to tangible, physical products as well as services. Here are some examples of the product decisions to be made:

 Branding  Functionality  Quality level  Products line  Packaging  Repairs and Support

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

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

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

 Price discrimination Place: The place is where you can expect to find your customer and consequently, where the sale is realized. Knowing this place, you have to look for a distribution channel in order to reach your customer. The place is not where is located your business but where our customers are. For a retailer it is the same but for a boat producer located in Philippines the real place is the entire world. Do not confuse positioning and place. Here place means the real physical position of the customer in a geographic area or along a distribution channel. Distribution is about getting the products to the customer. Some examples of distribution decisions include:

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

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

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

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

a) People b) Process c) Physical Evidence People:

Figure: 3-4 Figure:6 All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer and other customers in the service environment. Teamwork, training, recruiting and motivating employees are the associated variables. How people are dressed, their personal appearance, their attitudes and behaviors all influence the customer’s perceptions of the service. In many service situations, customers themselves can also

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

Figure: 3-5 The

actual

procedures,

mechanisms and flow of activities by which the service is delivered. In other words, it is the service delivery and operating system

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

Figure: 3-6 The environment in which the service is delivered

and

where

customer

interact

and

the any

firm and tangible

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

Chapter # 4 Analysis and Findings

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

1. Al-Wadeeah ( Current Account)

2. Al-Mudaraba (Deposit Account)

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

 The depositor can deposit any amount in this account  The depositor can withdraw any amount by cheque  No profit is allowed in this account  The depositor shall also not bear any loss  Cheques, bills etc collected in this account against commission  Govt. excise and incidental charge realize from this a/c as per rule.

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

(4.2) Mudaraba Deposit Products:

 Mudaraba Savings Account (MS)  Mudaraba MonthlyTerm Deposit Receipt (MTDR)  Mudaraba special Term Deposit Receipt (MTDR)  Mudaraba Doubl /Tripol Benefit Scheme  Mudaraba milliner Deposit Scheme

 Mudaraba Monthly income Scheme  Mudaraba Mohor Deposit Scheme(new)  Mudaraba Waqf Cash Account (MWCA)  Mudaraba Hajj Deposit Scheme  Mudaraba Bibaho Deposit Scheme(new)  Mudaraba Lac potty Deposit Scheme(new)

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

 A/c opened by minors  Joint (two or more persons)  Firms  Co-operative societies  Government  Public bodies  Agents  Executors  Administrators  Trustees  Liquidators  Receivers  Non-Resident

(4.4) Account opening: This section opens account. It receives account opening application from the interested applicants, examines and scrutinizes the applications and then selects final customers. Selection of customers is very much important as the success and failure of the bank is largely dependent on the

valued customers. If the customer is found to be fraudulent or create some sort of forgery, it will ultimately destroy the goodwill of the company.

The following formalities must be maintained by the customer for opening of different types of account.

4.4.1) Individual

Genuine & acceptable introduction

ii.

Attested photograph of the account operator’s/A/c holder’s

iii.

Certificate from the Chairman/ Commissioner/ Gazetted Officers or any responsible person

iv.

Verification of introducer’s signature

Admittance of the signature(s) of opener/ operator’s A/c

vi.

Transaction profile

vii.

Obtain KYC

viii.

Declaration/Undertaking

ix.

Letter of Thanks

(a) It must be sent to the A/c holder and introducer (b) Office copy to be affixed with the AOF (c) It will have to be dispatched under registered courier (d) Courier /Postal receipt must be affixed to the AOF (e) This receipt must contain the A/c number against which the letter has been sent (f) After receiving back of the acknowledgement, it must be affixed with concerned AOF for easy location in case of need

(g) If the letter of thanks is returned back, without delivery for non-availability of address or person, it must be marked on this letter and to be informed to the computer department. 4.4.2) Joint Account

All item for individual account holder as stated above

ii.

Two or more persons can open an account

iii.

Authorized person can operate the account

iv.

Authority is automatically revoked by death, insanity or bankruptcy

v. vi.

Stoppage of payment by any one of the account holders Special instruction regarding operation of the A/c in any of the following forms:

(a) By any of the Joint account holder singly (b) By either or survivor singly (c) By either singly (d)By any two or more joint account holding jointly

(e) By all the survivors jointly vii.

Accounts mandate-regarding drawing, survivorship, power to overdraw and other matter, i.e. for withdrawal of goods kept for safe custody, separate mandate from surviving persons, closing of debit a/c, stopping operation of a/c after instantly of any person, obtain

receipt made by survivors and representatives of deceased

persons.

viii.

Role of survivorship incase of joint-account by husband and wife: If the account is opened for convenience of husband, then the balance cannot be claimed by the window but to be sent to the estate of the deceased person. But, if the account is opened for the provision for wife, then the widow can claim the balance in full.

4.4.3) Sole Proprietorship In case of opening an account by a sole-proprietor of a firm, he/she should sign the account opening form and furnish his specimen signature showing his representative character.

All items for individual account holder as stated above.

ii.

Valid trade license or attested photocopy thereof issued by the competent authority

iii.

Membership certificate from local business association/Chamber of Commerce

4.4.4) Partnership Firm

A banker should not open an account in the name of a partnership unless one or more of the partners apply to him to do so. Except where the partner, making an application for the opening of an

Account in the firm’s name, is deprived of the power, which fact is known to the banker, there can be no legal objection to a banker opening an account in the name of the firm at request. Failure, however, to make proper enquiries by referring to the partnership agreement or any other record in writing which maybe available before opening of account on behalf of a firm in a partner’s name may lead a banker in trouble.

All items for individual account holder as stated above.

ii.

Valid trade license or attested photocopy thereof issued by the competent authority

iii.

Two or more person can form a partnership firm by partnership deed. (Registered notarized)

iv.

Clear mandate for operating the a/c from the partners regarding name of the persons to draw cheques and borrow money, to overdraw, to mortgage or to sell properties owned by the firm

In case of insolvency of the firm: Operation should be stopped after receiving notice of insolvency of the firm

vi.

Insolvency of the partner: If the balance is in debit, the a/c must be closed and the debt should be proved to the receiver. If the a/c is in credit the other partners may continue the account. Any cheque previously drawn by the partner’s maybe paid on the confirmation of the partners.

vii.

Death of a partner: If the account is in credit, then other partners may be allowed to continue the same but the bank should take fresh mandate from other partner but if the account is in debit then the account must be closed to determine the liability of the deceased’s estate.

4.4.5) Private Limited Company A company registered under the Companies Act, 1913 has a legal entity apart from its shareholder. Private Company means a company which by its articles:

 Restricts the right to transfer the shares if any;  Limits the number of its members 2 to 50

ď&#x201A;ˇ Prohibits any invitation to the public to subscribe for the shares, if any or debentures of the company. When a current account is to be opened for a private limited company the banker will have to obtain the following requirements:

All terms for individual account holder as stated above

ii.

Copy of memorandum and articles of association duly certified by the Secretary/Director of the company

iii.

Certificate of incorporation

iv.

Certified copy of resolution of the board of Directors regarding opening of a/c, the execution of papers and conduct of the account.

v. vi.

List of Directors under the signature of the Chairman Copies of latest financial statement/ Transaction profile.

4.4.6) Public Limited Company Any seven or more persons associated for any lawful purpose, any subscribing their names to a memorandum of association and otherwise complying with the requirements of the Act (13A) in respect of registration, from an incorporated company. When an account is to be opened in the name of a Public limited Company the following formalities are to be observed:

All terms for individual account holder as stated above

ii.

Certified copies of memorandum and article of association are to be submitted

iii.

Certificate of incorporation

iv.

Certified copy of commencement of business for inspection and return in case of a newly floated company

v. vi.

List of Directors under the signature of the Chairman to be furnished Certified copy of a resolution of the Board or Directors regarding opening of the bank a/c execution of the papers and conduct of the account to be furnished

4.4.7) Trust Account:

A trustee is a person entrusted with the work of the management of a property under a trust created by the owner thereof for the benefit of another or of another and the owner section 3 of the Trust Act 1882 defines “ trust” & a trustee as, “ A trust is an obligation annexed to the ownership of property and arising out of confidence reposed in and accepted by the owner, or declared and accepted by the owner or declared and accepted by him, for the benefit or another or of another and the owner, the persons who reposes or declares the confidence is called the trustee.”

All terms for individual account holder as stated above.

ii.

Trustee is a person entrusted with the work of a management of a property under a trust deed.

iii.

Discharges his duties as per trust deed

iv.

Attested photo is required

(4.5) Mudaraba Savings A/c (MS A/c):

Nationality certificate from Ward Commissioner/ UP Chairman or Passport (photocopy) of every signatories of the A/c

ii.

KYC form for individual

iii.

Introduction of any current account/ Savings account holder

iv.

Two copies attested photographs of a/c operators

(4.6) Mudaraba Special Savings (Pension) MSS A/c:

KYC Form for individual

ii.

Introduction of any current account/ Savings account holder.

iii.

Two copies attested photographs of a/c operators.

Types of Deposit & Their Corresponding Provisional Profit Particular of Deposit

Provisional Profit

1. Mudaraba Hajj Savings From 11 to 25 years

11.47%

From 1 to10 years

10.47%

2. Mudaraba Waqf Cash Deposit

3. Mudaraba Term Deposit (MTD) Mudaraba Term Deposit i) 1 Month ii) 2 Month iii) 3 Month iv) 6 Month v) 1 Year General

Provisional Rate 08.00% 08.50% 11.25% 11.50% 11.75%

5. Double the Money Scheme

4. Mudaraba Muhor Savings A/c For 3 years

12.00%

For 5 years

12.00

For 8 years

12.00%

6. Mudaraba Monthly Profit Deposit Scheme

12%

7.Monthly Deposit Scheme: Amount payable at maturity (Provisional 5/11.00 â&#x20AC;&#x201C; 8/11.10 â&#x20AC;&#x201C; 10/11.20 %) Installment Amount in Taka Period

100

250

8,02

20,0

Years 8

5 15,5

65 38,7

Years 10

00 22,2

50 55,5

500

1,000

40,125

80,250

77,500 1,11,00

2,000 1,60,50

0 1,55,00 3,10,00

5,000

10,000

4,01,250

8,02,500

7,75,000

0 0 2,22,00 4,44,00 11,10,00

25,000 20,06,25

15,50,00

0 38,75,00

0 22,20,00

0 55,50,00

50,000 40,12,500 77,50,000 1,11,00,00

Years

8. Mudaraba Savings Account

5.5%

9. Mudaraba Millionaire Scheme (MMS) Amount payable at maturity (Provisional) Period

Installment Per Month

Amount Payable At Maturity

12 Years 15 Years 20 Years 25 Years

TK.3,280.00 TK.2,120.00 TK.1,080.00 TK. 575.00

TK. 10,00,000.00

(4.7) Closing Of an Account: It could be closed either by a banker or by the customer itself.

Banker: If the customer does not have transaction with the bank for more than a year it may categorized as irregular. And if the customer does not have transaction for 10 years, the customer will be sent a letter.

Customer:

If the customer intentionally wants to close the account he/she has to write an

application forwarding the Manager with reasons behind the closure of the account.

(4.8) Cash Section:

A banker’s transactions are mainly of three types. They include:

 Cash  Transfer &

ď&#x201A;ˇ Clearing

The cash section of any bank plays very significant role in general banking department because, it deals with most liquid assets. Basically cash department is the most vital and sensitive department of the branch which deals with all kinds of transaction in cash. All cash receipts and payments are made through this department. The IBBL (ge Branch) is equipped with electronic machinery with fully computerized system which delivers quick service to its valued customers. This section receives cash from depositors and pay cash against cheques, draft, Pay order (PO), etc over the counter. This section accepts cheques from the depositors for payment in cash. The drawer who wants to receive money against cheque comes to the payment counter and presents the cheque to the officer. He verifies the following information:

I. Date of the cheque II. Signature of the account holder III. Material alteration IV. Whether the cheque is crossed or not V. Whether the cheque is endorsed or not VI. Whether the amount in figure and in word corresponds with each one

Then the officer checks the cheque from the computer for further verification. Here is the following information that is checked.

I. Whether there is sufficient balance or not II. Whether there is stop payment instruction or not III. Whether there is any legal obstruction or not

The cash section deals with all type of negotiable instruments. It also includes the Vault which is used as the store of the cash instruments. The vault is insured up to a certain amount, which is called the vault limit; the excess cash is then transferred to Bangladesh Bank. The SJIBL, Uttara Branch Vault limit is 1 crore. When the excess cash is transferred, the cash officer issues IBDA. The vault counter is around 35 lacs.

Any client who wants to deposit money will fill up the deposit slip and give the form along with the money to the cash officer over the counter. The cash officer counts the cash and compares with the figure written in the deposit slip. He then puts his signature on the slip along with the ‘cash received’ seal and records in the cash receive register and also in the computer against the account holder.

(4.8) Bills & Clearing Section: A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. [Section-6, Negotiable Instrument Act, 1881]

A cheque may be an open cheque (which can be presented for payment by the holder) or a crossed cheque (which can be paid only through a collecting banker.)

The picture below (Fig.1) shows a typical cheque issued by banks.

Cheques

customers

its are

received for collection from other banks. In case of receiving cheques, following points should be checked very carefully:

 The cheques should not carry a date older than the receiving date for more than 6 months. In that case it will be a stale cheque and it will not be allowed for collection.

 The amount in figure and words in both sides of the pay-in-slip should be same.  The name mentioned in the cheque should be same in both side of the pay-in-slip and it should be the same with the name mentioned in the cheque

 The cheque must be crossed

The place where banks meet and settle their dues is the clearing house. The clearing house of the IBBL, Gulshan Branch, and 42 Motijheel is the local office.

(4.9) Types of cheque:  Inward clearing cheques: Inward cheques are those ones drawn on the respective branch which have been presented on other banks and will be cleared/honored through the clearing house. For example, the cheque drawn on SJIBL, Head Office.

 Outward Cheques: These cheques are received on the counter from other banks. There are 3 types:

1. Drawn on another branch of SJIBL. These are called Outward Bills for Collection (OBC). 2. Drawn on another bank, which is situated in the clearing house area. This cheques are called clearing cheque.

3. Drawn on another bank, which is situated outside the clearing area. This cheques are also called as OBC.

In the first case, these cheques are directly sent to the respective branch and requests them to send IBCA (Inter Bank Credit Advice) by which a branch credits the account of another branch. No clearing house formalities are necessary here. When IBCA comes, then customer’s accounts are credited of the amount for the cheque.

In the second case, the cheques are sent to the clearing house. When the drawee bank honors the cheque then the account of the depositor against the cheque is credited.

In the third case, two procedures exist. First way, if the bank exists within the clearing house area of the drawer bank, then we send the cheque to that branch of our bank and that branch collects the proceeds through clearing house formalities and sends an IBCA to us. In the second case if there is no branch of our bank, then we directly send the cheque to the drawee bank and request them to send the cheque to the proceeds by TT, DD or by other means.

4. 9.1) Outward Bills for Collection (OBC) OBC are those cheques drawn on other banks which are not within the same clearing house. An officer gives OBC seal on this type of cheques and later sends a letter to the manager of the branch of the same bank located in the branch on which cheque has been drawn. After collection of that bill, branch advice the concerned branch in which cheque has been presented to credit the customer account through IBCA. In absence of the branch, officer sends a letter to the manager of the bank on which the cheque is drawn. That bank will send pay order in the name of the branch. This is the procedure of OBC mechanism.

4.9.2) Inward Bills for Collection (IBC) All clearing cheques are not received on the counter. Some cheques are received from other source for collection. These cheques are received from other branch of IBBL. These cheques are settled by sending IBCA.

(4.10) Remittance:

Remittance means transmission/transfer of money from one place to another. Local remittance represents remittance that takes place within the territory of a country. Banks have a wide network of branches all over the country and offer various types of remittance facilities to the public/customer/client etc.

Virtually there are three types of remittances as under:

 DD- Demand Draft  TT – Telegraphic Transfer

 PO - Payment Order

(4.11) Demand Draft: According to Section85 (A) of the negotiable instruments Act, a demand draft is “an order to pay money drawn by one office of the bank upon other office of the same bank for a sum of money payable to order on demand.”

The followings are essential features of a demand draft issued by the bank:

1. It is a negotiable instrument 2. It is drawn by one office of a bank upon another office of the same bank 3. It is payable on demand. 4. Its payment is to be made to the person whose name is mentioned in the instrument or according to order. In other words, it cannot be made payable to the bearer.

4.11.1) Issuance of DD

1. A prescribed Application Form bearing No (F20). The following columns should be filled in properly.

(a) Name & address of the applicant (b) Telephone No (c) Date (d) Signature of the applicant (e) Name of the payee (f) Drawee branch (g) Amount in words and figure 2. Commission to be realized/charged as per Head Office circular, at present

@0.1 % but

min TK.10/-

3. Total amount should be deposited by the party in cash or cheque as per arrangement. 4. Printed DD block/leaf to be filled in by a bank official as per request of the purchase i.e.

(a) Name of the issuing branch (b) Date (c) A/c payee rubber stamp (d) Payee’s name (e) Amount in words and figure

(f) Drawee branch

5. DD should be signed by two authorized officials 6. Test Number should be given for DD of TK. 25000/- and above 7. Amount should be written by a cheque written in red ink.

8.Particulars

should

entered

issue

registered

B-44

under

supervision of a authorized official. 9.Telegram/Telex should be sent for amount exceeding Tk.1.00 lac Telex/Telegram charge should be realized from the customers. 10. If the DD issued for cash payment A/c payee rubber stamp should be cancelled and a letter requesting the drawee branch to pay the DD in cash should be issued under sealed cover and signature of the payee should be attested. 11. DD Advice should be sent on the same day.

4.11.2) Accounting entries for issuance of DD Debit…………..Cash/party’s A/c Credit………….IBGA Credit………….Commission

4.11.3) Payment of Drafts

1. When the draft is presented to the drawee branch for payment, the particulars of the draft are checked with the advice and signature(s) therein verified.

2. Payment of the DD has not been stopped is to be ensured 3. Verification of Test no. is to be done.

4. In case the advice is not received when the draft is presented, the bank will pay the draft, after satisfying itself that the instrument is in order. However, on payment of a draft in the absence of the relative advice the drawee branch should inform the issuing branch and obtain confirmation about the payment.

5. The drawee branch should ensure that the payment of the instrument is made in due course. 6. As the demand drat is payable to order it is duty of the paying branch to obtain identification of the payee if payment is desired over the counter.

7. If the DD is presented through a bank, the endorsement appearing on the instrument should be prima-facie in order of certified by the collecting banker.

8. Though there is no time limit for presentation, the paying bank should put an enquiry if a draft is presented after a reasonable period say 6 months. Such draft may be paid if the collecting banker certifies that amount has been credited to the payee’s A/c in absence of such a certificate, it would be advisable to return the draft for revalidation before payment.

(4.12) Telegraphic Transfer (TT): Telegraphic Transfer is by far the quickest method of transferring funds from one place to another. Sometimes, the remitter of the funds requires the money to be available to the payee immediately. In that case the banker is requested by the remitter to remit the funds telegraphically. It is an instruction conveyed by telegraph/telex/telephone to the drawee branch for paying certain amount of money to a specified person.

4.12.1) Accounting entries for issuance of TT Debit…………..Cash/Remitter’s A/c Credit………….IBGA Credit………….Commission Credit………….Telex/Telephone Charges A/c

4.12.2) Accounting entries for payment of TT Debit …………. IBGA A/c Credit…………. TT Payable A/c Debit………….. TT Payable A/c Credit…………. Client’s A/c

(4.13) Payment Order: Payment order is meant for making payment of the banker’s own or of the customers dues locally and not for effecting any remittance to an out station. In a sense, the payment order is used for making a remittance to the local creditors.

4.13.1) Issuance & Payment of PO

1. F-19 form should be filled properly 2. Total amount should be deposited through cheque/cash. 3. Commission to be realized as per bank’s circular 4. Printed payment order leaf should be filled in as per F-19 and signed by two authorized officers.

5. Entry should be given in B-22 register under supervision of authorized official 6. The instrument should be handed over to the purchaser 7. PO is required to be discharged by the beneficiary where applicable on revenue stamp of appropriate value against in cash or through account. Remarks: No Test is required for PO 4.13.2) Accounting entries for issuance of PO Dr………. Cash/ Party’s A/c Cr………. PO A/c Cr………. Commission A/c

4.13.3) Accounting entries for payment of PO Dr………. PO A/c Cr………. Cash/Party’s A/c

(4.14) Investment: The special feature of the investment policy of Islamic Banks is to invest based on profit-loss sharing system in accordance with the tenets and principles of Islamic Shariah. Earning of the profit is not the

only motives and objectives of the Islamic Bank’s investment policy rather emphasis is given in attaining social goals and in creating employment opportunities.

Investment Mechanism of SJIBL

Figure- 4-1

4.14.1) Objectives and principles The objectives and principles of investment operations of the Bank are:

 To invest fund strictly in accordance with the principles of Islamic Shariah.  To diversify its investment portfolio by size of investment portfolio by sectors (Public &Private), by economic purpose, by securities and by geographical area including industrial, commercial & agricultural.

 To ensure mutual benefit both for the bank and the investment client by professional appraisal of investment proposals, judicious sanction of investment, close and constant supervision and monitoring thereof.

 To make investment keeping the socio economic requirement of the country in view.  To increase the number of potential investors by making participatory and productive investment.

 To finance various development schemes for poverty alleviation, income and employment generation with a view to accelerate sustainable socio-economic growth and enlistment of the society.

 To invest in the form of goods and commodities rather than give out cash money to the investment clients.

(4.15) Investment policy of SJIBL: Investment policy of Islamic Bank and non Islamic bank are fully different. The investment policies of Islamic bank are

 Strict observance of Islamic Shariah principles.  Investment to national priority sectors.  Diversified investment portfolio: Diversification by size, sector, geographical area, economic purpose, securities and mode of investment.

 Preference to short-term Investments.  Preference to investment of small size.  To ensure safety & security of investments  To look profitability of investments.  To give support to government denationalization industrial program.

(4.16) Investment Strategy of SJIBL: Investment strategy of Islamic Bank and interest-based bank are contradictory. The investment strategies of Islamic Bank are:

 To check exodus of investment clients.  To induct good investment clients of other Banks.  To enhance existing limits of good investment clients.  Extension of investment transport sector.  Extension of investment to backward as well as forward linkage industries.

 Strengthening supervision, control and monitoring mechanism.  Training and motivation of manpower to handle increased and diverse volume of investment s.

 To give due consideration to high risk, high return and low risk, low return investment proposals.

 Adaptation of modern technology

(4.17) Growth of investment: The investment of the Bank demonstrated steady growth over the years. The total investment to the Bank stood at TK.20616.60 million in 2007.It was TK.15515.79 million in 2007. Total Investment (Including share investment) Year

Investment (TK in million)

2002

1999.98

2003

4269.32

2004

7148.68

2005

10790.28

2006

15515.79

2007 Table-7

20616.60 Source: Annual Report 2006&2007

Tend of Total Investment(2002-2007)

7148.68 1999.98 4269.32 2002

2003

2004

15515.79 10790.28

20161.6 Investment

2005

2006

Year

Figure: 4-2 Trend of total investment (2002-2007)

2007

Am ount (Tk in Million)

From the above figure we can see that the increasing trend of overall investment of SJIBL Investment is increasing due to expansion of branches. Every year SJIBL authority imposes an investment target to the concern branch. So manager try to achieve the target .Islami Bank Foundation activities, advertisement, profit sharing mode investment opportunity, people who want to do business Islami Shariah they come to the bank for investment. These reasons people come Islami bank's financing.

(4.18) Investment Instrument of SJIBL: IBBL invests its money in various sectors of the economy through different modes permitted by Shariah and approved by the Bangladesh Band. The modes of investment are as follows: A. Profit &Loss Sharing Mode: ** Musharaka **Mudaraba B.Bai Mode (Buying &Selling): **Bai-Murabaha **Bai- Muajjal **Bai-Salam **Bai- Istishna etc C. Rent Sharing Mode: ** Ijarah (Lease) ** Ijarah wa Iqtina (Hire Purchase) ** Hire Purchase under shirkatul melk (HPSM)

A. Profit & Loss Sharing Mode 1.Mudaraba: It is a form of partnership where one party provides the fund while the other provide the expertise, labor and the letter referred to at the Mudaraba any profits accrued are shared between the two parties on a pre –agreed basis, while capital loss in exclusively born by the partner providing the capital. Importance Features:

 Bank supplies capital as Sahib- al –Mall and client invest if in the business with his experience.

 The client maintains administration and management.  Profit is divided as per agreement.  Bank bears the actual loss alone. 2. Musharakah: The term Shirkat and Musharaka have been derived from Arabic words “Shairkah” and “Sharika.” The word shirkah means a partnership between

more than one partner. Thus the ward “Musharaka” and “Shirkat” means a partnership established between two or more partners for purpose of a commercial venture participate both in the capital and management where the profit may be shared between the partners as per agreed upon ratio and the loss. If any incurred, is to be borne by the partners as per capital ratio. In case of investment “Musharaka” meaning a partnership between the bank and the client for a particular business in which both the bank and client provide capital at an agreed upon ratio and bear the loss, if any in proportion to their respective equity. Bank may move itself with the selected client for conducting any Shariah permissible business under Musharaka mode.

Important Features:

 The investment client will normally run manage the business..  As the investment client shall manage the enterprise, the bank may more share of profit to him than that of his proportion capital contribution.

 Loss, if any, shall be shared on the basis of capital ratio. B. Bai Mode Bai-Murabaha: Bai- murabaha may be defined as a contract between a buyer and a seller under which the sells certain specific goods (permissible under Islamic Shariah and the law of the land) to the buyer at a cost plus agreed profit payable in cash or on any fixed future data in lump sum or by installments. The marked up profit may be fixed in lump sum or in percentage of the cost price of the goods. Important features: It is permissible for the client to offer an order to purchase by the bank particular goods deciding its specification and committing him to buy same from the bank on murabaha, i.e. cost plus agreed upon profit. It is permissible to make the promise binding upon the client to purchase from the bank, that is, he is to satisfy the promise or to indemnify the damages caused by breaking the promise without excuse. It is also permissible to take cash / collateral security to guarantee the implementation of the promise or indemnify the damages. Stock availability of goods is a basic condition for signing a Bai-murabaha agreement. Therefore, the bank must purchase the goods as per specification of the client to acquire ownership of the same before signing the Bai-Murabaha agreement with the Client. After purchase of goods the Bank must bear the risk of goods until those are actually sold and delivered to the Client, i.e., after purchase of the goods by the Bank and before selling of those on

Bai-Murabaha to the Client buyer, the bank bear the consequences of any damages or defects, unless there is an agreement with the Client releasing the bank of the defects, that means, if the goods are damaged, bank is liable, if the goods are defective, (a defect that is not included in the release) the Bank bears the responsibility. The Bank must deliver the specified Goods to the Client on specified date and at specified place of delivery as per Contract. The bank shall the goods at a higher price (Cost + {profit) to earn profit. The cost of goods sold and profit markup therewith shall separately and clearly be mentioned in the Bai-Murabaha agreement. The profit Mark-up may be mentioned in lump sum or in percentage of the purchase/cost price of the goods.

Bai-Muajjal: Bai-Muajjal may be defined as a contract between a buyer and seller under which the seller sells certain specific goods permissible under Islamic 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 him as per order and specification of the buyer. Important feature: i)

Bank is not bound to declare cost of goods and profit mark-up separately to the client.

ii) Spot delivery of the item and payment is deferred. iii) The bank transfers ownership and possession of the goods to the client before receipt of sale price. iv) Client may offer an order to purchase by the bank any specified goods and committing himself to buy the same from the Bank on Bai-Muajjal mode. v) It is permissible to make the promise binding upon the client to purchase from the bank. That is, he is either to satisfy the promise or to indemnify damage caused by breaking the promised. vi) Cash /Collateral Security should be obtained to guarantee the implementation of the promise or to indemnify the damages. vii) Mortgage / Guarantee /Cash Security may be obtained before / at the time of signing the agreement. viii) Stock and availability of goods is a pre- condition for Bai- Muajjal agreement. The responsibility of the bank is to purchase the desired goods at the disposal of the client to acquire ownership of the same before singing the Bai-Muajjal agreement with the client. Bai-Salam: Bai-Salam may be defined as a contract between a buyer and a seller under which the seller in advance in the certain commodity/products permissible under Islamic Shariah and the law of the land to the Buyer at an agreed price payable on execution of the said contract and the commodity products to the buyer at a future time in exchange of an advance price fully paid on the spot Importance Features:

Bai-salam is mode of investment allowed by Islamic Shariah in which commodity/product can be sold without having the said commodity (ies)/product(s) either in existence or physical/constructive possession of the seller. If the commodity /product are ready for sale, Bai-Salam is not allowed in Shariah. Then sale may be done either in Bai-Muajjal mode of investment.Generally, Industrial and agricultural products are purchased /sold in advance under Bai-Salam mode of investment to infuse finance so that product is not hindered due to shortage of fund/cash.

I. It is permissible to obtain collateral security from the seller client to secure the investment from any hazards vis non-supply of supply of commodity (ies)/product, supply of low quality commodity (ies)/ product(s) etc.

II. It is also permissible to obtain mortgage and /or personal guarantee from a third party as security before the signing of the agreement or at the time of signing the agreement.

III. Bai-salam on a particular commodity (ies)/product(s) or on a product of a particular field or farm cannot be affected.

IV. The seller (manufacture) client may be made agent of the bank to sell the goods delivered to the bank by him provided a separated agency agreement is executed between the bank and the client (agent).

C. Rent Sharing Mode: A) Ijarah (Lease): The term Ijarah has been derived from the Arabic words Ajr and Ujrat, which means consideration, return, wages or rent. This is really the exchange value or consideration; return wages font of service 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 specified consideration or rent from the asset owned by the Hiree .to a Hirer against fixed rent or rentals hires out a certain asset for a specified period.

B) Ijarah wa Iqtina (Hire Purchase): This term refers to a mode of financing adopted by Islami banks. It is a contract under which the Islami Bank Finance equipment, building, or other facility for the client against an agreed rental together with an undertaking from the client to purchase the equipment or the facility. The rental as well as the purchase price is fixed in such a manner that the bank gets back its principal sum along with some profit which is usually determined in advance. C) Hire Purchase under Shirkatul Melk: Hire Purchase under Shirkatul Melk is a Special type of contract that has been developed through practice. Actually, it is a synthesis of three contacts:

i. ii. iii.

Shirkat Ijarah and Sale

These may be defined as follows: i) Shirkatul Melk: Shirkat means partnership. Shirkatul Melk means share 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. ii) Ijarah: The term Ijarah has been derived from the Arabic words (Air) and (Ujrat) which means consideration, return, wages or rent. This is really the exchange value or consideration, return, wages, rent of service 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 the Hiree to a Hirer against fixed rent or rentals hires out a certain asset for a specified period. iii) 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,

Hire

purchase

under

Shirkatul

Melk

mode

both

the

Bank

and

the

Client supply equity in equal or unequal proportion for purchase of an asset like land, building, and machinery, transport etc. Purchase the asset with that quit money, own the same jointly, share the benefit as per agreement and bear the loss in proportion their respective equity. The share, part of 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 its share/part/portion to the client against payment of price fixed for the either gradually part by part or in lump sum within the hire period or after the expire of the hire agreement.

Importance Features: â&#x2014;&#x2122; In case of Hire Purchase under Shirkatul melk transaction the assets / property involved is jointly purchased by the Hiree (Bank) and the Hirer (client) with specified equity participation

under

Shirkatul Melk contract in which the amount of equity and share in ownership of the asset of each partner (Hiree Bank and Hirer Client) Are clearly mentioned. Under this agreement, the Hiree and

the become co-owner of the asset under transaction in proportion of their respective equity participation. ◙ In Hire Purchase under Shirkatul Melk agreement, the exact ownership of both Hiree (Bank) and Hirer (Client) must be recognized. However, if the partners agree and wish that the asset purchased may be registered in the name of any of them or in the name of any third party, clearly mentioning the same in the Hire purchase Shirkatul melk agreement. ◙ The share /part of the purchase asset owned by the Hiree (Bank) is put at the disposal / possession of the Hirer (client) keeping the ownership with him for a fixed period under a hire agreement in which the amount of rent per unit of time and the benefit for which rent to be paid along with all other agreed upon stipulation are also to be clearly stated. Under this agreement, the Hirer (client) becomes the owner of the benefit of the asset but not of the asset itself, in accordance with the specific provision of the contract which entitles the Hiree (Bank) is entitled for the rentals.

4.18.1) Mode wise investment of SJIBL: Total investment of the Bank stood at Tk. 2061661 million as on 31. 12. 2006 registering an increase of Tk. 510082 million, i.e. 32.88% growth. The Bank is careful in development of the fund. Mode wise investments portfolio as on 31.12.2007 is given below: SL.NO

Mode of Investments

Taka

1 2 3 4 5 6 7 8

Murabaha Bi-muajjal Haire-purchase & Ijara Investments against L/C Bill purchased/ discounted Investment against Scheme Deposits Quard Others Total

million 5,844.81 8,882.60 3,581.92 19.15 1,588.00 17.25 29.65 653.23 20,616.61

in Percentage of Total Investment 28.35% 43.08% 17.37% 0.09% 7.70% 0.08% 0.14% 3.17% 100.00%

Table-8

Total Bank entertains good investment-clients having credit-worthiness and good track record. The Bank has got a few investment Schemes to provide financial assistance to comparatively less advantaged group of people; which are:-

 Household Durable Scheme.  Small Business investment Scheme.  Small Entrepreneur Investment Program.

 Medium Entrepreneur Investment Program.  Housing Investment Scheme.  Rural investment Scheme.  Car Investment Scheme.  Woman Entrepreneur Investment Scheme.

Investm ent Portfolio of 2007 0%

Murabaha

17%

Bi-Muajjal 28%

Hire-Purchase Investment AgainstL/C Inland bills Purchase Investment in Scheme Quard Other Investment

44%

Figure: 4-3 Investment Portfolios of 2007 of SJIBL

In Milliom Taka

Tend of Investment from2003 to 2007

25000 20000 15000 10000 5000 0

Total Inestment

20616.61 15515.79 4269.32 2003

7148.68

2004

2005 Year

Figure: 4-4: Investment from 2003 to 2007 of SJIBL

10590.27

2006

2007

Deposit Investm ent

Deposit & Investm ent Position

2 2 6 18 . 18 2 0 6 16 . 6 1

18 0 9 0 .6 5 15515. 79

6039.34 4 2 6 9 .3 2

9 0 9 1.6 6 714 8 . 6 8

2004

2005

20000 15000

10 59 0 . 2 7

10000 5000

12 2 0 . 6 3

2003

25000

2006

2007

Year

Figure: 4-6 Deposit & Investment Position of SJIBL

4.18.2) Sector wise Classification of investment: Sector

As at 31 December 2007

As at 31 December 2006

Agriculture& Fishing

Amount 249460925

Composition 1.21%

Amount 280835793

composition 1.81%

Cotton & Textile

3383184935

16.41%

1502696876

16.13%

Garments

1781274701

8.64%

1636915812

10.55%

Cement

383468859

1.86%

538397902

3.47%

Pharmaceuticals& Chemicals

1276167870

6.19%

260665267

1.68%

Real Estate

1309154439

6.35%

1498825283

9.66%

Transport

461811960

2.24%

501160007

3.23%

Information Technology

63911477

0.31%

522882112

3.37%

Non Banking Financial Institutions

1855494480

9.00%

1714494760

11.05%

Steel & Engineering

1791583004

8.69%

847162117

5.46%

Paper& Paper products

311310741

1.51%

408065269

2.63%

Others

7749781945

37.59%

4803688485

30.96%

Total

20616605335

100%

15515789683

100%

Table- 9

Sector wise Investment(2007) 37.59, 29%

0.31, 0%

Industry Commerce Real Estate Transport

1.21, 1%

72.2, 56%

Agriculture Other

2.24, 2%

Information Tecnology 6.35, 5%

9, 7%

Figure: 4-7 Sector wise Investment of SJIBL

4.18.3) Geographical Location-wise Investment: Division

As at 31 December 2007

As at 31 December 2006

Amount

Composition

Amount

Composition

Dhaka

17213935665

83.50%

12886513305

83.05%

Chittagong

3123875971

15.15%

1489468962

16.05%

Sylhet Total Table-10

278793699 20616605335

1.35% 100%

139807416 15515789683

0.09% 100%

Geographical Location-w ise Investm ent(2007) 1.35, 1% Dhaka Chittagong 15.15, 15% 83.5, 84%

Figure: 4-8 Geographical Location r wise Investment of SJIBL

(4.19) Operational Procedures of Investment of SJIBL:   

Induction of client Application Categorization

Sylhet

Sources: Annual Report

     

Processing and appraisal Sanction Documentation Purchase of goods by the Bank Taking delivery of goods by the Bank Sales and delivery of goods to the client

4.19.1) Induction of client



Hole preliminary discussion with the prospective client regarding his investment

needs, business experience, viability of the project and Shariah permissibility of the asset the business and the uses of the asset.



Brief him on the salient features of Hire Purchase under Shirkatul Milk mode of

Investment. Apprise, in particular, the usual terms and conditions under which the Bank made such investment. Discuss about Client’s equity participation and its immediate availability.



Look to the past performance of the Client, Check-up Head Office Current

Investment Policy and Branch’s track record of Hire purchase under Shirdatul Melk Investment of the item(s).



If the Proposal is found permissible under Islamic principles and suitable, advise the

Client to submit formal Application. If not found suitable, regret politely.



Request potential Client to open an Al-Wadeeah Current account. Let him maintain

the Current account. Let him maintain the current Account satisfactorily for a reasonable period. (This will generally mean six month).

4.19.2) Application:

 Obtain application in triplicate from the client of F-167A and record the

same in the

Investment Proposal Received and Disposal Register (B-53).

 Obtain and affix attested photograph(s) of the Proprietor /Partner/Directors/ Trustee/ Administrator on the top right hand corner of the application.

 Scrutinize the application of the Client to see that(a) All columns are properly field in;

(b) Particulars and information given therein are complete and correct in

all

respects; (c)All required Documents/papers as listed in the footnote for the application is submitted; (d) It is signed by the client as per specimen signature with the bank and duly verified by the authorized official of the bank.

4.19.3) Categorization: Categories the proposal as under:

 Hire Purchase under Shirkatul Melk Commercial: Investment on hire purchase under Shirkatul Melk mode to individual /firm/company /society for commercial purpose shall be termed as hire purchase under Shirkatul Melk Commercial.

 Hire Purchase under Shirkatul Melk Industrial: Hire Purchase under Shirkatul Melk investment to industrial undertaking in the form of land, building, machineries, equipment, transport, etc shall be termed as Hire Purchase under Shirkatul Melk Industrial

 Hire Purchase under Shirkatul Melk Agriculture: Hire Purchase under Shirkatul Melk investment to agriculture sector in the form of Agriculture equipments, machineries, shallow Tube–well, Tractor, trailers, Transport etc. shall be termed as Hire Purchase under Shirkatul Melk agriculture.

 Hire Purchase under Shirkatul Melk Transport: Hire Purchase under Shirkatul Melk Industrial in the form of transport –Bus, truck, car, taxi, lunch, steamer, cargo vessel, air transport etc. shall be termed as Hire Purchase under Shirkatul Melk transport.



Hire Purchase under Shirkatul Melk Real Estate: Hire Purchase under Shirkatul Melk Industrial in the form of land building, market, apartments, for use /rental shall be termed as Hire Purchase under Shirkatul Melk Real Estate.

4.19.4) Processing and Appraisal: Enter the Application in the “Investment Proposal Received and Disposal Register (B-53) and allot a Serial Number to it.



Examine Shariah permissibility of the goods. Reject the proposal outright, if not permitted by Islamic Shariah.



Check-up Credit Restriction Schedule of Bangladesh Bank and Head Office Current Investment Policy Guidelines.



Visit the Business establishment of the Client. Talk to the business and important personalities of the locality to ascertain the Honesty, Integrity and Business dealings of the Client.



Request for confidential report of the client from local Bank Branches. Confident Report from Credit Information Bureau (CIB) of Bangladesh Bank through Head Office Investment Division as per Instruction Circular of Head Office in this Regard.



Obtain Financial Statement/Balance Sheet of the Client for the last three consecutive years for Investment Proposals of Tk. 50.00 lacs or above as per Head Office Instruction.



Inspect Land, Building, other Assets and Properties proposed to be Mortgaged or Hypothecated.



Forward Documents, Title Deeds and other relevant Papers to approve Lawyer of the Bank for examination and furnishing his opinion.

 

Obtain Lawyer’s Opinion as per clause No. 8.02. Please study the following carefully and note down the actual findings in the Appraisal Form against each item :



Effective demand, price of the goods, short or long-term duration, quality and other specifications of the goods, availability, etc. of the said or projected goods.



Where sale price of the goods is payable by the client at specified future date in lump sum or installments as per proposal.



For Bai-Murabaha Commercial and Bai Murabaha Industrial Investment, prepare Appraisal Report on F-167B. For appraisal Bai-Murabaha agriculture and For BaiMurabaha Import use special Appraisal Form devised for each of those, if any,



Otherwise F-167B providing the available/required supplementary information. In course of preparation of the appraisal report please ensure incorporation of all information of all information, particulars figures and statistics in Appraisal Form correctly with special attention to the following: Contact primarily with the producers/sellers/suppliers of the goods in the market, study the market price and work out the purchase and sale prices of the goods as per guidelines.

4.19.5) Sanction:



On completion of Appraisal as provided herein above, of the Proposal is found viable, issue Sanction Advice (F-188) if it is within the business power of the Branch mentioning all the terms and condition is duplicate to the Client and endorse copies to Zonal and Head Offices retaining one copy in the Client’s file duly accepted by the Client.



If the proposal is not within the Discretionary Power of the Branch, the Branch shall with Appraisal Report on F-167A and F-167B to Zonal Office/Head Office.



If the proposal is within the Business Power of the Zonal Office, Zonal Office shall accord Approval /Regret the Proposal.



If the proposal is not within the Business of the Zonal Office shall forward the proposal to Head Office with their views and recommendations.



On receiving the proposal and the Appraisal Report along with supporting papers Head Office will either approve or Regret.



If the Branch/the Zonal Office /Head Office, the branch will issue the Sanction advice (F188) with a copy to ZO/HO duly recorded in /Facility Sanctioned Register (B-119) with authority to the investment Client for the limit.



If the client duly accepts the sanction terms and conditions enter the particulars of the sanctioned proposal in the limit Register (B-117) allotting a Fixed Serial number for each Client as per Limit Register which shall remain permanent irrespective of the mode(s) so long the Client continues business with the Bank.



Open file Client-wise, affixing the Fixed Number allotted to him as per Limit Register (B-117) and Client’s name, address, telephone number be recorded prominently in the inner side of the investment File for easy tracing in case of need.



In case of investment to the existing Client, obtain required papers, document with the past performance and outstanding liabilities of the Client, if any and process of sanction the proposal as per instruction laid down here-in-above after due evaluation or study.

4.19.6) Documentation: ► Before purchasing the asset/property by the Bank, obtain sufficient collateral securities as mentioned in the sanction advice along with the following charge documents properly executed i.e. duly filled in, signed, stamped, verified and witnessed where necessary:

I. Hire Purchase under Shirkatul Melk Sanction Advice deal-wise duly accepted by the client.

II. Hire Purchase under Shirkatul Melk Agreement (Deal-wise). III. Letter of Pledge (Deal-wise)/Mortgage Deed. IV. Single party D.P. Not, if there is no guarantor. V. Double party D.P. Not, if there is guarantor (s) to be made by the Client in favor of the guarantor and endorsed by the later to the Bank.

VI. D.P. Not Delivery letter. VII. Letter of Hypothecation for the asset(s) and Client’s stock in Trade/work- in-process.

VIII. Letter of Disclaimer, (if stored in Client’s/Party’s own/hired Godown. IX. Insurance policy (If stored in Client’s/Party’s Godown/yard under Bank’s effective control) duly recorded in insurance register.

X. Letter of guarantee. XI. Balance confirmation letter. XII. Letter of installments. XIII. Letter of Disbursement. ► If the investment is made collaterally secured by Mortgage of property, obtain the following documents:

a) In case equitable mortgage, Memorandum of Deposit of Title Deep (MDTD) signed by the owner of the property.

b) In case of Legal Mortgage, Registered Mortgage Deed should be obtained. c) Personal Guarantee of the owners of the property on. d) Original Title Deeds with CS, RS, SA, Mutation Parcha, DCR of the property and Mutation record.

e) Up-to-date Rent Receipt. f) Non-encumbrance Certificate along with Search Fee Paid Receipt of the concerned Registry/Sub-Registry office.

g) Site plan (Map/Naksha) of the Mortgaged property. h) Valuation Certificate (issued by a competent civil engineer and physically verified by the Branch Officials) countersigned by the Manager certifying the Market value and the Forced sale value. Value of the land and value of the construction to be shown separately taking the depreciated value of the construction/building into consideration as per standard norms. (The valuation Certificate should be self contained one giving full particulars of the land, i.e. Deg Number, Khatian Number, Plot Number, Holding Number, Mouza Number and name of the Mouza, Schedule (Chowhaddi), mentioning the name of the owners of the Land/Building along with a site plan duly signed by the owners of the property, the Client and attested by a civil Engineer and the Branch Manager).

Lawyer’s certification about verification of the Title Deed which should be in clear terms that the property covered by the Title Deeds is free from all encumbrances and the mortgagor(s) have clear valued Title to the property and the same can be accepted as collateral security against the Investment/Facility. Legal opinion should be self-contained, without any ambiguity and clean in all respects.

j) An Affidavit be sworn in before a 1st Class Magistrate by the owner of the property to the effect that the property offered for mortgage as security is of his own and free from all encumbrances and the owners is/are lawful owners in possession and he/they will not Encumber/Transfer/sale and/or charge the property in any manner whatsoever to other during the continuance of Bank’s Investment without prior clearance of the Bank.

► In case of investment to Private or public Limited Company, obtain the following additional document:

I. Obtain certified copy of the Memorandum and Articles of Association of the company to ensure that the company has necessary power to borrow/avail investment from any Bank.

II. Resolution of the board Directors of the Company to avail Investment/Facility/Borrow, do Business with IBBL and authorizing the office bearers to execute necessary Documents.

III. Personal Guarantee of the Directors of the Company. IV. If the investment is allowed on Hypothecation of assets, in addition to other charge documents, 1st charge under relevant section of the Company’s Act-1994 shall be created in Bank’s favor in respect of Company’s assets prescribed as security. This charge shall be created with the registrar of Joint Stock Companies within 21 days from the date of execution of relative Change Documents.

V. Certificate issued by the registrar of Joint Stock Companies under section 114 of The Companies Act-1994 in respect of creation of charges.

VI. Copies of Memorandum and Articles of Association with the latest amendments, if any, duly certified by the registrar of joint stock companies and attested by the managing director on every page with official seal of the company and duly verified by the Incumbent-In-Charge of the Branch.

VII. A copy of the Certificate of Incorporation duly attested by the Incumbent-In-Charge of the Branch.

VIII. A copy of the certificate of commencement of Business (incase of publish Limited company) duly attested by the Incumbent-In-Charge of the Branch.

►In case of investment to a trust organization obtains the following Document in addition to other charges Documents:

I. Copy of trust deed duly attested by a 1st class Gazette officer and verified by the incumbentin-charge of the branch with the original copy. The Trust Deed must contain a clause authorizing the Trustees to do Business with banks and to avail investment facilities /borrow from banks.

II. Resolution of the Board of Trustees to do business with IBBL and avail investment/borrow from IBBL.

III. The charge documents and all other agreements shall be signed /executed by persons authorized by all the members of the board of Trustees, in Trustees are authorized to delegate their powers by the trust Deed; otherwise all the Trustees must sign/execute the charge documents and all other agreements.

IV. Personal guarantee of all the members of the board of trustees must be obtained. â&#x2013;şIn case of investment to co-operative security, obtain the following documents also:

I. Clearance from the register of co-operative societies for doing business and avail faculties / investment from IBBL within the annual borrowing limit of the society.

II. Litter to be issued to; the concerned registrar of co-operative societies under registered A/D Mail informing about allowing investment /facility to the concerned society by the bank as per clearance accorded by him.

III. Personal guarantee of the office Bearers of the society if their personal capacity. IV. A copy of the byelaws of the society duly certified by the registrar of the co-operative societies.

Signature of the Client: After completion of Document, enter Document in Documents Execution Register (B-103) Movement of Document, if any, should be duly recorded in the Document Ex-custody Register duly singed by the Custodians.

(4.20)MODES OF ADVANCE OF THE CONVENTIONAL BANKS: Conventional banks engage in the following types of financing arrangements: Loans The most obvious form of financing by a conventional bank is the loan arrangement. The bank advances (loans) a lump sum to an individual (the borrower) for a set length of time at either a fixed or viable rate of interest. The borrower repays the loan with equal installments over the prescribed term or in one lump sum at the end of the term. There are no checks issued in this type of relationship.

Overdrafts The extension of financing through overdrafts can only occur when there is an existing demand deposit account. An overdraft occurs when the amount of a check presented for payment to the bank exceeds the clients deposit balance. The banks may choose to pay on the item, thereby causing a negative balance in the clientâ&#x20AC;&#x2122;s account. This negative balance is effectively an extension of financing and can be a prior arrangement with the bank. In addition, overdraft facilities may be extended against deposit certificates and/or government promissory notes. Cash credits Cash credit is a popular mode of borrowing by traders, industrialists and agriculturalists. It is a separate account by itself and does not require having any other account with the bank. It resembles the use of overdrafts on a checking account. It is an arrangement whereby the borrower may withdraw funds borrower may not exceed a predetermined limit and must deposit cash back into the account as funds become available from daily operations. Interest is charged on the daily balance in the account. Medium term loans This type of loan is advanced to industries and agriculture for fixed capital requirements. These loans are also granted to traders for purchase of fixed assets, to transport operators for purchase of vehicles, and to self-employed persons for purchase of equipment. These loans are usually extended for a term of 3 to 7 years and in special cases up to 10 years and are generally repayable by installments. Since it will take a year or two to derive the full benefits of expansion or renovation, installments for repayment may commence after one or two years of the disbursement of the loan. Interest is charged on annual basis. Hire-purchase advances Under this arrangement, conventional banks grant advances to its clients engaged in hire-purchase business relating to transports, refrigerators, and televisions, for example. This type of financing is usually repaid with installments including principal and interest. The bank generally requires immovable property as collateral against this type of financing.

Bills purchased/discounted Export-Import businesses are performed through opening of L/Cs with Bank. The client, while opening the L/C, comes to an agreement with the bank that the latter will repay the bill received on the farmer's behalf on a certain date onward in exchange for a specific rate of interest determined at

the time of agreement. If the bill happens to reach well ahead of the date mentioned, the bank may purchase the bill, if requested, with a discount. In this case, the bank makes the return twice: first, by charging interest and then by discounting the bill.

(4.21) Foreign Exchange: Foreign Exchange Department is a very important department of IBBL, which deals with import, export and foreign remittances. Foreign Exchange department is an international department of the bank. It facilitates international trade through its various modes of services. It bridges between importers and exporters. If the branch is an authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign country. This department mainly deals in foreign currency, thatâ&#x20AC;&#x2122;s why it is called foreign exchange department.

Bank branch should be authorized dealer, with due approval from Bangladesh Bank to run foreign exchange transactions. According to the Bangladesh Law, the payment must be received within 120 days.

This department is playing an important role in enhancing export earning, which aids economic growth and in turn it helps for the economic development. On the other hand, it also helps to meet those goods and service which are more demandable and not adequate in our country.

Foreign Exchange Department is dividend in to 3 sections.

Import

Export

(4.22) Mode of Foreign Exchange Business: 1. Import 2. Export

Remittance

3. Remittance A. Inward Remittance B. Outward Remittance

4.22.1) IMPORT: Meaning of Import: Import means lawfully carrying out of anything from one country to county for Buying. It will be occurred according to the Government law.

Import Policy Order:

Based on the needs of commodity and availability of finance, Government declares policy. For import of goods for a particular period having approval from the National Assembly is defined as Import policy order. Import policy is a guideline of a set of rules envisaged by Government Authority i.e. the Ministry of Trade and commerce for the registered importer for import of goods inside the country.

Duration: Earlier import policy has been formulated the five years. But present import policy order has been formulated for 3 (three) years, Effect from the 14th June 2003 to 30th June 2006 and valid till announce of new import policy order. If require Government can revise the policy in each every years.

General Rules in connection with import: Restriction of Import: a) Negative list of Merchandises. b) Restricted list.

c) Footnote under Restricted List d) Freely importable items. ITC number is compulsory (H.S code 6 digit) to be mentioned in the L/C and LCAF to identification the item to be imported. 1. Requirement Right of Refusal (ROR) for public sector agency from Ministry of Industry or respective Ministry/department of both to Import item under Restricted List. 2. Import cannot be Israel. 3. Pre-shipment inspection (PSI) for private sector normally PSI is not mandatory. 4. Shipment to be made through Bangladeshi ship some exemption a) Single importer maximum 20 MT grow importer highest 100 MT b) General waiver from department of shipping otherwise certificate of Waive is to be obtained to ship through Foreign Cargo c) Import of Raw materials export oriented Industries to be made on Competitive rate. Import L/C (Letter of Credit): Letter of Credit is a credit contract where the Opening/Issuing Bank is committed to place an agreed amount of money at the beneficiaryâ&#x20AC;&#x2122;s disposal under some agreed conditions. In other words letters of credit is a letter from the importer Bankers to the exporter that the bills if drawn as per terms & conditions complied with will be honored on presentation.

4.22.2) EXPORT: Meaning of Export: Export means lawful carrying out of anything from one country to another country for sale.

Definition of Exporter:

The importers and exports trade of the country is regulated by the Imports Exports Control Act 1950. No person /firm is allowed to export any thing from Bangladesh unless he is registered with CCI and E under the registration order (Importer and Exporter) 1952. To become an exporter an ERC (export Registration Certificate) must be obtained from the office of CCI & E.

Procedure for obtaining Export Registration Certificate (ERC):

For obtaining Export Registration Certificate (ERC), intending Bangladesh Exporters are required to apply to the CCI & E authority in the prescribed from along with the following documents: a) Nationality Certificate. b) Copy of valid Trade License. c) Income Tax Certificate. d) Bank Certificate. e) Copy of rent receipt of the business firm. f) Registered Partnership Deed in case of partnership concerns. g) Memorandum of Articles & Association and Incorporation certificate in Case of Limited Company.

On satisfaction of the CCI & E the potential exporter is advised to deposit export registration fee of Tk. 1,000/- through Treasury Chelan to Bangladesh Bank/ Sonali Bank for enabling them to issue ERC. The ERC may be renewed every year on payment of renewal fee of Tk. 1,000/through Treasury Chelan as started.

Export Documents Checking: After submissions of export documents by the exporter, Bank must check, whether the entire required document submitted or not. Bank must examine all documents stipulated in the credit with reasonable care to ascertain whether or not they appear, on their face to be in compliance with the terms and conditions of the credit. The Banks will not examine documents not stipulated in the credit. To examine documents Bank must follow the L.C

terms and international standard banking practice. Automated or computerized carbon copies to be treated as original documents if it is marked ‘original’ Copy documents need not be signed. Multiple documents means one original and remaining copies, Signature, Mark, Stamp or label is sufficient for authentication of document. Bank will accept a prohibited in the L/C.

422.3) REMITTANCE: Meaning of Remittance: The word “Remittance” originates from the word “remit” which means to transmit money/ fund. In banking terminology the word “remittance means transfer of fund one place to another. When money transferred from one country to another is called “Foreign Remittance”

Types of Remittance: Foreign remittance may be classified into.  Inward Foreign Remittance.  Outward Foreign Remittance.

Inward Foreign Remittance: Inward Foreign Remittance means Remittance received from foreign countries from abroad. In other words remittance coming into our country from other countries by the remitter by way of permissible banking channel through freely convertible Foreign Currencies is called ‘Inward Foreign Remittance’ i.e. payless point of view it is inward foreign remittance. On the other hand remitter’s point of view it is called outward Foreign Remittance. During The year 1995-1996 Bangladesh received and amount of US$ 1217.062 Mil as Foreign remittance. The above process of Remittance may be presented diagrammatically as under:

Outward Remittance: Outward remittance of funds be made by means of T.T., D.D.T.T. etc. the remitter has to deposit money along with the application contains name and address of the payee name of the currency etc. All outward remittances must cover the transactions approved by the Bangladesh Bank. Which are usually for importers travel & educational expenses.

(4.23) Equity of the Bank:

The Authorized Capital of the Bank is TK. 2,000 million and paid-up capital of the Bank is TK. 1872 million as on 31.12.2007. Total equity was TK. 3,041 million as on 31.12.2007. the Bank has raised its paid-up capital of TK. 936 million through Initial Public offering (IPO) in the month January-February 2007. Comparative position of Equity for the year 2007& 2006 is given below:SL. NO a) b) c) d) e)

Particulars Paid-up capital Statutory Reserve Retained Earnings General Provision Exchange Equalization Total

2007 1,871.65 510.39 405.69 252.98 0.17 3,040.88

2006 935.83 267.13 1.96 157.48 0.17 1,362.57

Table-1

Equity com position of 2007 Paidup capital 62%

Statuory Reserve Retain Earnings

17% 0%

General Provision

13%

Exchange Equalization

Figur-4-9

Equity Moveement From 2003 to 2007 Year

In Million Taka

2003

2004

2005

2006

2007

3200

3,040.88

2200 1,362.57

1200 200

296.43

340.06

848.35 Total Equaty

Figur-4-10

 Deposit of the Bank: Total deposit of Shahajalal Islami Bank stood at TK. 22,618.19 million as on 31.12.2007 as against TK.18,090.65 million of 31.12.006 registering an increase of TK. 4,527.54 million, i.e. 25.03% growth. Deposit is the ‘life-blood’ of a bank has given utmost importance in mobilization of deposits

introducing a few popular and innovative schemes. The mobilized deposits were ploughed back in economic activities through profitable and safe investments:

Mudaraba monthly Income Scheme

Mudaraba Double/Triple Benefit Scheme

Mudaraba Monthly Deposit Scheme

Mudaraba Millionaire Scheme

Mudaraba Hajj Scheme

Mudaraba Housing Deposit Scheme

Mudaraba Cash waqf Deposit Scheme

The Deposit-mix of the Bank as on 31.12.2007 was as bellow:SL.NO

Nature of Deposit

Taka in million

Percentage

1 2 3 4 5 6

Al-Wadia Current Deposit Mudaraba Savings Deposit Mudaraba Short Notice Deposit Mudaraba Term Deposit Mudaraba Schemes Deposit Other Deposit Total

734.71 1,832.75 608.75 11,341.51 6,869.13 1,231.35 22,618.19

Deposit 3.25% 8.10% 2.69% 50.14% 30.37% 5.44% 100.00%

Total

Table-2

ď&#x201A;ˇ Investment: Total investment of the Bank stood at TK. 20,616.61 million as on 31.12.2007 as against TK.15,515.79 million of 31.12.2006 registering an increase of TK. 5,100.82 million, i.e. 32.88% growth. The Bank is careful in development of the fund. Mode wise investments portfolio as on 31.12.2007 is given below: SL.NO

Mode of Investments

Taka

1 2 3 4 5 6 7 8

Murabaha Bi-muajjal Haire-purchase & Ijara Investments against L/C Bill purchased/ discounted Investment against Scheme Deposits Quard Others Total

million 5,844.81 8,882.60 3,581.92 19.15 1,588.00 17.25 29.65 653.23 20,616.61

Table-3

in Percentage of Total Investment 28.35% 43.08% 17.37% 0.09% 7.70% 0.08% 0.14% 3.17% 100.00%

 Household Durable Scheme.  Small Business investment Scheme.  Small Entrepreneur Investment Program.  Medium Entrepreneur Investment Program.  Housing Investment Scheme.  Rural investment Scheme.  Car Investment Scheme.  Woman Entrepreneur Investment Scheme. Investm ent Portfolio of 2007 0%

Murabaha Bi-Muajjal

Hire-Purchase

28% 17 %

Investment AgainstL/C Inland bills Purchase Investment in Scheme Quard Other Investment

44%

Figur-4-11

In Milliom Taka

Tend of Investm ent from 2003 to 2007

40000 20000 4269.32

0 2003

2004

7148.68 2005 Year

Figur-4-12

Total Inestment

10590.27 2006

15515.79 2007

20616.61

Deposit Investm ent

Deposit & Investment Position

22618.18 20616.61

18090.65 15515.79 9091.66

6039.34

15000 10000 5000

10590.27 7148.68

4269.32 1220.63

2003

2004

2005

2006

25000 20000

2007

Year

Fi gur-4-13

ď&#x201A;ˇ Foreign Exchange Business Total Foreign Exchange Business handled during the year 2007 was TK. 44868.60 million as against TK. 1137.64 million, i.e. 33.93% growth. The particulars of Foreign Exchange Business are given below:-

Particulars Import Export Foreign Remittance Total Table-4

Amount in Million Taka 2549.10 15084.00 4294.50 44868.60

Percentage of Total 56.81% 33.62% 9.57% 100.00%

Composition of Foreing Exchange Business of 2007

10% Import Export

34%

56%

Rem ittance

Figur-4-14 During the year 2007 this Bank Branches opened 7104 Import Letter of Credit as against 5613 of 2006 and handled 8027 Export bills in 2007 against 6336 of 2006.

(4.24) PERFORMANCE EVALUATION:

4.24.1) Foreign Exchange Performance of SJIBL

Shahajalal Islami Bank Limited has glorious history in mobilizing Foreign Exchange Business. Over the years the bankâ&#x20AC;&#x2122;s Foreign Exchange Business was a record high amount among all banks in Bangladesh. The Bank has a wide Network of

Authorized Dealers throughout the year. Well- equipped and

international network with skilled manpower, the bank is confident of running Foreign Exchange business efficiently to the satisfactory of importers, exporters and Bangladeshi Expatriates working abroad. SJIBL has a good network of correspondent banks around the world for its Foreign Exchange Business. The performances are given in the following pages.

4.24.2) FOREIGN EXCHANGE BUSINESS OF SJIBL: Amount in Tk.Million Particulars Import

Amount in Million Taka 25490.10

Percentage of Total 56.81%

Export

15084.00

33.62%

Foreign Remittance

4294.50

9.57%

Total

44868.60

Table-12

100%

Source: International Wing, SJIBL

As the above table shows that, the overall Import, Export and Remittance business of SJIBL .From this table we can compare ,which business perform more ,also gather the idea about the turnover of the foreign exchange business. For better look, the following graph shows the foreign exchange business for the years 2007. omposition of Foreign Exchange Bussiness of 2007

10% IMPORT

34%

EXPORT

56%

REMITTANCE

Figure: 4-15 Total F.EX businesses for 2007 The Graph snows that the foreign exchange business by SJIBL is stable and the growth rate is nearly sustain. From above we saw that import is more growth and the growth also high rather than the two type of business.

4.24.3) YEARLY NUMBER OF IMPORT L/C ISSUED YEAR 2006

No of L/C Issued 5613

2007

7104

Total

12717

Table-13 As the Above table shows that the total import L/C opened by the bank from 2006&2007. In the year 2007 the opened Total L/C is 7104 and the next year it reached 10,000.In the year 2006 Total the amount was 5613. As in April 30, 2008, import business volume of the bank stood at Tk 1284 crore with the growth rate of 50 per cent.

No.of L/C Opened

7104

2007

2007 2006

5613

2006 Im port L/C

Figure: 4-15 no. of L/C opened from 2006-2007

Chapter # 5 Survey Result (5.1) Find out, how many General Banking services provided by SJIBL: This question was aimed at finding out the General Banking services provided by Shahjalal Islami Bank Limited at present. This identification will help in developing the subsequent part of the research. Total Respondents: 36 Client of Shahjalal Islami Bank Limited (Banani Branch).

MSS

STD

Current 0

Figure: 5-1

Interpretation:

The above figure shows 55.55% of the total customer are maintaining CD A/c with Shahjalal Islami Bank Limited issuing procedure. Some Client also maintains, 25% SB A/c, 52 .77% loan A/c, 11.11% MSS A/c, 8.3% STD A/c, 16.6% FDR A/c.

(5.2) Number of A/c holder: Objective of the Question: The objective of Question 2 was to find out the number of 24(Twenty Four) A/c maintain in the other bank. Total Respondents: 36 Client of Shahjalal Islami Bank Limited (Banani Branch). Number of A/C Holder

33% YES 50%

NO TOTAL

17%

Figure: 5-2 Interpretation: Majority percent number of the clients, 8.3% go to Sonali Bank , 2.7%Islami Bank, 2.7% Basic Bank, 8.3% Prime Bank , 2.7% Al-Arapha Bank , 5.5% HSBC Bank, 8.3% Brack Bank, 2.7% Mercantile Bank, 5.5% Agrani Bank, 11.11% Janata Bank, 2.7% Bank Asia,5.5% National Bank. The above figure shows that 33.34% has no A/c any other bank.

(5.3) A/c opening procedure: Objective of the Question: The objective of Question 3 was to find out the level of regarding A/c opening procedure of Shahjalal Islami Bank Limited. Total Respondents: 36 Client of Shahjalal Islami Bank Limited (Banani Branch). 60 40 20 0 Excellent

Figure: 5-3 Interpretation:

Good

Moderate

Poor

Very Poor

satisfaction

Majority percent of clients 36.11% expressed that A/c opening procedure excellent where as 58.34% Said Good Service 5.55% said moderate service. Therefore, in general it can be said that customer are satisfied A/c opening procedure of Shahjalal Islami Bank.

(5.4) Cheque Book Issuance procedure of Shahjalal Islami Bank Limited: Objective of the Question: The objective of Question 4 was to find out the level of satisfaction regarding Cheque issuing procedure Of Shahjalal Islami Bank Limited. Total Respondents: 36 Credit Client of Shahjalal Islami Bank Limited (Banani Branch). 80 70 60 50 40 30 20 10 0 Excellent

Good

Moderate

Poor

Very Poor

Figure: 5-4 Interpretation: The above figure shows 75% of the total customer are said Shahjalal Islami Bankâ&#x20AC;&#x2122;s Cheque Book Issuance procedure are excellent that is they are fully satisfied regarding the Cheque Book issuing procedure of Shahjalal Islami Bank Limited, 25% are said good. Therefore, in general it can be said that customers are satisfied regarding Cheque Book Issuance procedure of Shahjalal Islami Bank Limited.

(5.5) Loan Issuance Procedure of Shahjalal Islami Bank Limited: Objective of the Question: The objective of Question 5 was to find out the level of satisfaction regarding loan-issuing procedure of Shahjalal Islami Bank Limited. Total Respondents: 36 Credit Client of Shahjalal Islami Bank Limited (Banani Branch).

70 60 50 40 30 20 10 0 Excellent

Figure: 5-5

Good

Moderate

Poor

Very Poor

Interpretation: The above figure shows 8.34% of the total customer are said Bank ’s loan issuing procedure are excellent that is they are fully satisfied regarding the loan issuing procedure of Shahjalal Islami Bank Limited, 63.88% are said good on their loan issuing procedure. Therefore, in general it can be said that the credit customers are satisfied regarding loan issuing procedure of Shahjalal Islami Bank Limited.

(5.6) Interest Rate Charged by Shahjalal Islami Bank on different lone: Objective of the Question: The objective of Question 6 was to find out the level of satisfaction regarding Credit Pricing (Interest Rate) Of Shahjalal Islami Bank Limited. Total Respondents: 36 Credit Client of Shahjalal Islami Bank Limited (Foreign Exchange Branch). 50 40 30 20 10 0 Excellent

Good

Moderate

Poor

Very Poor

Figure: 5-6 Interpretation: The above figure shows nuns of the customer are fully satisfied regarding interest rate charged by Shahjalal Islami Bank Limited on their different Credit Scheme. 47% are said good that is they are satisfied, 19.47% are said moderate that is they are moderately satisfy, and only 08.33% are said excellent and 25% are not totally satisfied on their credit price. Therefore, in general it can be said that the credit customers are not satisfied regarding interest rate charged by Shahjalal Islami Bank Limited on their different Credit Scheme.

(5.7) The Bank’s Attitudes on Issuing Loan: Objective of the Question: The objective of Question 7 was to find out the level of satisfaction regarding the Bank’s Attitudes on Issuing Loan. Total Respondents: 36 Credit Client of Shahjalal Islami Bank Limited (Banani Branch).

Excellent Good Moderate Poor Very Poor No Comment

Figure: 5-7 Interpretation: The above figure shows 11.11% of the total customer are said that the bank’s attitudes on issuing loan are excellent that is they are fully satisfied regarding the bank’s attitudes on issuing loan, 58.33% are said good that is they are satisfied, 5.55% are said moderate that is they are moderately satisfy, and only 25% are not totally satisfied on their attitudes on issuing loan. Therefore, in general it can be said that the credit customers are satisfied regarding the bank’s attitudes on issuing loan.

(5.8) Opinion about the online Banking System: Objective of the Question: The objective of Question 8 was to find out the Opinion about the online banking system of Shahjalal Islami Bank Limited. Total Respondents: 36 Credit Client of Shahjalal Islami Bank Limited (Banani Branch).

100 80 60 40 20 0 Strongly Agree

Agree

Disagree

Strongly Disagree

Figure: 5-8 Interpretation: The above figure shows 100% of the total customers are strongly agreed about the Online banking System could be helpful.

(5.9) Opinion about banking teansaction is more reliable at Shahjalal Islami Bank than others: Objective of the Question: The objective of Question 9 was to find out the level of satisfaction of Shahjalal Islami Bank Limited. Total Respondents: 36 of Shahjalal Islami Bank Limited (Banani Branch).

Strongly Disagree Disagree 61.11

Agree 38.8

Strongly Agree 0

Strongly Disagree Dis agree

38.8

Strongly Agre e

61.11

Agree

Figure: 5-9 Interpretation:

The above figure shows 38.8% of the total customer are Strongly Agreed about the Banking with Shahjalal Islami Bank Limited Is better then other, 61.11% are agreed about the opinion.

(5.10) Opinion about Services charge of money transfer is reasonable: Objective of the Question: The objective of Question 5 was to find out the level of satisfaction about the service charge of money transfer of Shahjalal Islami Bank Limited. Total Respondents: 36 Client of Shahjalal Islami Bank Limited (Banani Branch).

Figure: 5-10

80 60 40 20 0 Strongly Agree

Agree

Disagree Strongly Disagree

Data Collected:

Responses60

Frequency

Percent

40 Strongly Agree

16.6%

Agree

63.8%

Disagree

20 0

Strongly Strongly Disagree Agree

Total

05 Agree

01 36

13.8% Disagree Strongly 2.77% Disagree

100%

Interpretation: The above figure shows 16.6% of total customer are strongly agreed with the opinion about services charge are reasonable, 63.8% are agreed with the opinion,13.88% customer are disagreed, 2.77% customer are strongly disagree with the opinion. Therefore, in general it can be said that customer are not satisfied with the services charge of money transfer.

SUMMARY OF FINDINGS At 55% customers are maintaining CD A/c with Shahjalal Islami Bank issuing procedure. Some clients also maintain, 25% SB A/c, 52.77% loan A/c, 8.33% loan A/c 11.11% MSS A/c, 16.16% STD A/c. Majority of the clients, 11.11% go to Janata Bank ,8.3% Brac Bank ,2.7% Islami Bank, 2.7% Basic Bank 5.5% Prime Bank , 5.5% HSBC , 2.7% Al – Arafa Bank , 5.5% National Bank , 5.5% Agrani Bank, 8.3 Sonali Bank , 2.7% Mercantile Bank,2.7% Bank Asia, & the above figure shows that 33.5% has no A/c any other bank. Majority of the clients about 36.11% expressed that A/c opening procedure excellent whereas 58.34% said Good Service 5.55percentage said moderate service. Therefore, in general it can be said that customer are satisfied A/c opening procedure of Shahjalal Islami Bank Limited. At 75% of the total customers are said Shahjalal Islami Bank ’s Cheque Book Issuance procedure are excellent that is they are fully satisfied regarding the Cheque Book issuing procedure of Shahjalal Islami Bank Limited, 25% are said good .Therefore, in general it can be said that customers are satisfied regarding Cheque Book Issuance procedure of Shahjalal Islami Bank Limited . At 8.34% of the total customers are said Shahjalal Islami Bank’s loan issuing procedure are excellent that is they are fully satisfied regarding the loan issuing procedure of Shahjalal Islami Bank Limited, 63.88% are said good, 2.78% are said moderate that is they are moderately satisfy, and on 20% are not totally satisfied on their loan issuing procedure., and on20% are not totally satisfied on their loan issuing Shahjalal Islami Bank Limited. No of the customer is fully satisfied regarding interest rate charged by Shahjalal Islami Bank Limited on their different Credit Scheme. 47.22% are said good that is they are satisfied, 19.41% are said moderate that is they are moderately satisfy, and only 25% are not totally satisfied on their credit price. Therefore, in general it can be said that the credit customers are not satisfied regarding interest rate charged by Shahjalal Islami Bank Limited on their different Credit Scheme. At 8.33% of the total customers are said Shahjalal Islami Bank’s procedure of repayment installment are excellent that is they are fully satisfied regarding the time taken by Shahjalal Islami Bank to Issuing Loan, 58.33% are said good that is they are satisfied, 5.55% are said moderate that is they are moderately satisfy, and only 27.77% are not totally satisfied on procedure of repayment installment.

So, in general it can be said that the credit customers are satisfied regarding Procedure of Repayment Installment of Shahjalal Islami Bank. At 11.11% of the total customers are said that the bank’s attitudes on issuing loan are excellent that is they are fully satisfied regarding the bank’s attitudes on issuing loan, 58.33% are said good that is they are satisfied, 5.55% are said moderate that is they are moderately satisfy, and only 27.77% are not totally satisfied on their attitudes on issuing loan. Therefore, in general it can be said that the credit customers are satisfied regarding the bank’s attitudes on issuing loan At 27.7% of the total customers are said Bank credit monitoring system are excellent that is they are fully satisfied regarding the credit monitoring system , 41.6% are said good that is they are satisfied, 5.55% are said moderate that is they are moderately satisfy, and only 25% are not totally satisfied on their credit monitoring system. Therefore, in general it can be said that the credit customers are satisfied regarding credit monitoring system At 5.55% of the total customers are said Shahjalal Islami Bank’s loan disbursement timing are excellent that is they are fully satisfied regarding time taken by Shahjalal Islami Bank to disbursement of Loan, 50% are said good that is they are satisfied, 19.4% are said moderate that is they are moderately satisfy, and only 25% are not totally satisfied on their loan disbursement timing. Therefore, in general it can be said that the credit customers are satisfied regarding time taken by Bank to disbursement of Loan. The above shows that 94.44% of customers aware of loan scheme is available in Shahjalal Islami Bank Limited, 5.56% are not aware about this. At 100% of the total customer are strongly agree about the Online banking System could be helpful.

Chapter # 6 Major Findings & Recommendation (6.1) Major Findings: After completing the observation I observed some major finding or problem those are follows:

Status and recognition of Shariah Council No adequate disclosure in the Balance sheet No separate computer software Non- existence of separate Books and forms Follow common guides and circulars Uses of surplus and deficit funds Lack of Trading and motivation

Lack of Maintenance of SLR and CRR No separate product / Service Service personnel are working under pressure because they have to deal with large number of customer every day. Customers need to wait for long time. Office Hour not Flexible. Branch premises is not large enough for the customer

(6.2) Recommendation: Although this branch is making a huge amount of profit and generating a large volume of deposit, a number of problem have been dictated while I working this branch. Based on my work experience at SJIBL, Banani branch, I would like to put my some recommendations:

Bank need to increase its quality of customer service and it should Separate form other banking activity. Branch should be innovative and diversified in its service and well behave with their customer. Need modern technology, without using modern technology no bank can even think of remaining in the business in near future. So the bank must decide right now how it equip its branches with modern technology. Information system should be developed. Bank should be using internet not only for local but also international correspondence. Chain of doing job in the branch should be made clear. In the branch chain of completing a work is not clearly, one employee sometimes performs same duty and in another time different employee performs it, So no employee can be held liable for defective work or for delay in work. Need to speed up processing of investment proposal to send in investment division that they result early. Theyâ&#x20AC;&#x2122;re being no restriction customers clients are found to move hither and thither inside the bank premises. This hinders the smooth functioning and amount to security of the bank office should more careful about this. Computer division need to be up date and extensive for the greater welfare of the branch. Bank should be increase their branch all over the Bangladesh as soon as possible Bank should more invest in agricultural sector. Should give Micro credit for small entrepreneurs

Bank should emphasize on marketing division through media. Bank should take officer who are subject related that can understand Banking with in a short time they can progress a banking activity rather than other officer. Bank should more concentrate on foreign exchange.

Conclusion: Interest free banking system is no more a concept. It is now a Reality, a dynamic system, embodying a set of superior banking mechanism. More than 300 Islamic bank and financial institutions are operating in different Countries throughout the world with a marked success from this inception in our country in 1983. Shahjalal Islami Bank Limited has been operating with real and confidence in corporation with other conventional banks. Bringing a new concept in such business sector, which is growing to rapidly in the world, is rally bold step. As a large Islamic commercial bank, Islamic bank took various steps to create employment and socio-economic development for the poor through Islamic shariah. During the three months internship program at Banani, Branch all the desks have been observed mire or less. Gaining knowledge of practical banking and to compare this practical knowledge with theoretical knowledge. Though all departments and sections are covered in the internship program, it is not possible to go to the dept of each activities of branch because of time limitation. So, objective of this internship program have not been fulfilled with complete satisfaction. However, highest effort has been given to achieve the objective the internship program. During the internship, it is found that the branch provides all the type of banking services as well as some specialized financing activities to the economy. They train me as their colic and willingly. At there have not enough large scale customer but there have many small type of customer who deposit their money. In this branch minimum 150 small scale customer open account daily. In this branch there have also low scope of investment. In this branch deposit investment has balance position. In foreign Exchange desk daily two L/C opened. Overall I can say that this branch increasing their activity and fulfill their target that given from Head office.

Bibliography (A) Reference Books: ď&#x201A;ˇ Principles of Marketing (11th Edition), by Philip Kotler & Gary Armstrong. New Jersey, Person prentice Hall, 2006

ď&#x201A;ˇ Advertising & Promotion (6th Edition) by George E. Belch & Michael A. Belch.

New Delhi, Tata Mc Graw-Hill Publishing Company, 2006

 Business Research Methods (9th Edition) by Donald R. Cooper/Pamela S. Schindler. New York, Mc Graw-Hill, 2006

(B) Reports: 1. Annual Report of SJIBL, 2006-200 2. Confidential Report of IBBL, 2006 3. Shariah Islami Banking subject 7th training course 4. Economic Trends published by Bangladesh Bank