This report is originated to fulfill the requirement of the assign project internship report on “Investment Mechanism of IBBL
EXECUTIVE SUMMARY Islamic Bank Bangladesh Limited is a joined Venture Public Limited Company engaged in the commercial banking business based on Islamic Shariah with 53.03% foreign shareholding having largest branch network( 221 Branches & 30 SME/Krishi Branches i.e. total 251 Branches) among the private sector Banks in Bangladesh. It was established on the 13th March 1982 as the first Islamic Bank in the South East Asia. Now the authorized capital of the Bank is TK10, 000 million and Paid-up capital is TK 7.413.12 million having 58,923 shareholders. To execute this logically arrange the report as chapter wise that includes introductory part, Overview of the Company, Theoretical Background Investment Process & Disbursement stages, Findings and Recommendation parts, hi introductory part describe the way and the method in which
collect all the necessary data in preparing the report, hi theoretical
Background part tried to give the definitions of the terms that are related to the Investment Division, hi Investment Process & Disbursement stage describe the Application stages, Sanctioning stage, Disbursement stage etc. hi the year 2006 (he investment was TK 1,13,575 million and in 2010 it stands at TK 263225 million. The investment amount increases year by year. The bank makes investment in various investment mechanism but they make maximum investment in Bai-mechanism and lowest in Share-mechanism. In analysis part, showed the various investments, Mode wise investment, Sector wise Investment etc over the last five years. From the study we get some findings about The Islamic Banking. IBBL invest following the Islamic shariah and to monitor this they also have a shariah council. Among the different modes they invest highly in bai-Murabaha then the other modes. The income from the investment was increasing significantly in every year. It was 10,999 in 2006 and it increased by 24,931 in 2010. On the basis of findings it can be recommended for IBBL by which they can achieve their mission, Vision and objective, such as: to improve bank's financial position, recommend them to strictly monitor their investments, to provide more investment in agriculture sector, reduce the overdue. The bank is trying to increase its investment quality by following Islamic rules strictly.
Chapter- One 1.1 Introduction Bangladesh is one of the largest Muslim countries in the world. The people of
this country
are deeply committed to Islamic way of life as enshrined in the Holy Quran and the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their economic lives in accordance with the precepts of Islam. The Bank is the lifeblood of an economy to keep the wheels moving forward and to play the vital role in the economic development of the economy. The present economic state of Bangladesh demands the immediate development of the financial intuitions. The banking sector had lots of areas to improve upon. After participating in internship program conducted to IBBL of Haji Camp Branch. Assigned to submit a report on “Investment Mechanism”. This report helps significantly to build a perception about day to day affairs of the bank and some recommendation for improvement and efficiency of those functions. 1.2 Origin of the Report For any business student only curriculum activity is not enough for handling the real business situation, therefore it is an opportunity for the students to about the field of business though the internship program. As an internship program is a perfect blend of the theoretical and Practical knowledge. This report is originated to fulfill the requirement of the assign project internship report on “Investment Mechanism of IBBL”. In this regard an organization attachment at Haji Camp branch of IBBL has been given to
a period of two months
commencing from 07th may ,2012 to 11th June, 2012 .During this period learned how the host organization works with the help of internal supervisor. The internal supervisor assigned me one of the project s and shuffled me aground to educae about the operation of the bank. 1.3 Background of the Report
2
As a part of the Internship Program of Bachelor of Business Administration, Was assigned for doing internship in Islami Bank Bangladesh Limited (IBBL) for the period of 60 days. In IBBL was assigned for the different activities. Report topic is “Rural Development Scheme (RDS): its problems and prospects” which was assigned by organizational supervisor of the said bank. So it has become a moral obligation to gain proper knowledge on Islami Banking Practice, Islamic banking ideology and its application. 1.4 Significance of the report This Internship Report is an import partial requirement of BBA program. This is because knowledge and learning become perfect when it is associated with theory and practice. By this program student can establishes contracts and networking. Contracts may help to get a job in life. That is, student can train and prepare themselves for the job market. A developing country like Bangladesh has an overwhelming number of unemployed educated graduates. As they have no internship networking system, which is important in getting a job. Therefore, it is obvious that the significance of Internship is clearly justified as the crucial requirement of BBA Program. 1.5 Scope of the study Islami Bank Bangladesh Limited is one of the first generation banks in Bangladesh. Scope of the study is limited to the Haji camp branch only. The report covers the organizational structure; background, functions and the performance of the bank have mainly worked in the investment so report covers all the activities of investment department in the Haji Camp Branch. While preparing this report haven’t any limitation the employees of investment department has helped a lot and have use both primary and secondary data which available. 1.6 Objectives Primary Objective is to learn the real world experience because have gathered theoretical knowledge of BBA course and to match real world experience with the theoretical knowledge. 1.6.1 The broad of objective The prime objective of this report is to analyze the “Investment Mechanism of IBBL”. 1.6.2 Specific objective:
The study was conducted to achieve the following secondary objective•
To conduct interest-free investment and strictly observance of the Islamic Shariah Principles.
•
To know the Investment Mechanism of IBBL
•
To show the investment mechanism and product offerings in different modes of IBBL.
•
To show overall investment proposal, appraisal procedures, documentation system of IBBL.
•
To show the different modes of investment.
•
To show about the different investment schemes of IBBL.
•
To identify strength and weakness of investments of IBBL.
•
TO identify some finding and raise possible recommendations.
1.7 Methodology of the Study This report has been prepared on the basis of experience gathered during the period of internship. The methodology of the report is given below1.7.1 Type:. This is a “Descriptive Research”, which briefly reveals the investment Mechanism of Islami Bank Bangladesh Ltd. 1.7.2 Sources of Information: To accomplish the report, manly used secondary sources of data. •
Secondary sources:
The finding part of the report has been also prepared on the basis of secondary data. However, to find out the secondary data the following sources have been used
Annual Report of Islamic Bank Bangladesh Ltd.
Manuals of Islamic Bank Bangladesh Limited (Bai-Murabaha, Bai-Muajjal, BaiSalam, Mishawaka, Hire Purchase under shirkatul Melk etc.
4
Training sheets which are provided by Islamic Bank Training and Research (IBTRA).
Different books, booklets, papers, brochures, reports, information, circulars, Instructions, circulars published by Islamic Bank Bangladesh Limited
From the banks web site.
1.7.3 Data Analysis &reporting: Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with the goal of highlighting useful information, suggesting, conclusions, and supporting decision making. 1.8 Limitations of this Report There are some limitations in our study. Faced some problems during the study, which are mentioning them as belowi) Lack of time: The time period of this study is very short. Had only 2 months in hand to complete this report, which was not enough. So could not go in depth of the study. Most of the times, the officials were busy and were not able to give much time. ii) Insufficient data: Some desired information could not be collected due to confidentiality of business. iii) Lack of monitory support: Few officers sometime felt disturbed, as they were busy in their job. Sometime they didn’t want to supervise us out of their official work. iv) Other limitations: As newcomer, there is a Lac of previous experience in this concern. And many practical matters have been written from my own observation that may vary from person to person.
Chapter- Two 2.1 Introduction. Bangladesh is one of the largest Muslim countries in the world. The people of this country are deeply committed to Islamic way of life as enshrined in the Holy Quran and the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their economic lives in accordance with the precepts of Islam. The establishment of Islamic Bank Bangladesh Limited on March 13, 1983, is the true reflection of this inner urge of its people, which started functioning with effect from March 30, 1983. This Bank is the first of its kind in Southeast Asia. It is committed to conduct all banking and investment activities on the basis
of interest-free profit-loss sharing system. In doing so, it has unveiled a new horizon and ushered in a new silver lining of hope towards materializing a long cherished dream of the people of Bangladesh for doing their banking transactions in line with what is prescribed by Islam. With the active co-operation and participation of Islamic Development Bank (IDB) and some other Islami banks, financial institutions, government bodies and eminent personalities of the Middle East and the Gulf countries, Islami Bank Bangladesh Limited has by now earned the unique position of a leading private commercial bank in Bangladesh 2.2 Corporate Information (As on December 2011)
Date of Incorporation
13th March 1983
Inauguration of 1st Branch 30th March 1983 (Local office, Dhaka) Formal Inauguration
12th August 1983
Zone
12
Equity
TK 28,400.03 million
Deposit
TK 291,934.60 million
Investment
TK. 275,493.94 million
Foreign Exchange Business
TK. 610,331.00 million
Share of Capital Local Shareholders
41.77%
Foreign Shareholders
58.23%
Authorized Capital
Tk10,000 Core
Paid-up Capital
Tk. 7,413.12 million
Branches
6
Total number of Branches
251
-Regular Branches
221
-SME Service Centers
30
Number of Shareholders
58,923
Manpower
10,349
Source: Lecture Sheet, Islami Bank Training & Research Academy 2.3 Definition and Concept of Islamic Bank The definition of “Islamic Banking” and prove whether its activities are unequal to the conventional banking system & satisfy the principle of Islamic Shariah. Definition given by ‘OIC’ is- “An Islami bank is financial institution whose statutes, rules and regulations expressly state it’s commitment to the principle of Islamic shariah and to he banning of the receipt and payment of interest on any of its operation”. This definition indicates that IBBL is more convenient and acceptable to the Muslim mankind. Islamic Bank is committed to conduct all kinds of banking activities on the basis of profitloss sharing system. The objective of the Islamic Shariah is to promote the welfare of the people which lies in safe guarding their faith, their life, their intellect, their posterity and their wealth. The basis of this Shariah is wisdom and welfare of the people in this world as well as the hereafter, which lies in complete justice, mercy, well-being and widow. 2.4 Vision of IBBL Islamic bank vision to always strive to achieve superior financial performance is considered a leading Islamic bank by reputation and performance. They are: •
To establish and maintain the modern banking technology,
•
To ensure the soundness and development of the financial system based on Islamic principles
•
To become the strong and efficient organization with highly motivated professionals, working for the benefit of people, based upon accountability, transparency and integrity in order to ensure the stability of finical systems.
•
Try to encourage savings in the form of direct investment.
•
Try to encourage investment particularly in project, which are more likely to lead to higher employment.
2.5 Mission of IBBL •
To establish Islamic banking through the introduction of welfare oriented banking and also ensure equity and justice in the field of all economic activities,
•
Achieve balanced growth and equitable development through diversified investment operations particularly in the priority sectors and less development areas of the country.
•
Its main concern is to encourage social-economic up liftman and financial services to the low -income community particularly in the rural areas.
2.6 Aims and Objectives of IBBL The primary objective of establishing Islamic banks all over the world is to promote, foster and develop the application of Islamic principles in the business sector. Its objectives are different from conventional banking that is as follows: •
Establishing participatory banking instead of banking on debtor- creditor relationship.
•
Investing through different modes permitted under Islamic Shariah.
•
Accepting deposits on profit- loss sharing basis
•
Establishing welfare oriented banking system.
•
Extending co-operation to the poor, the helpless and the low-income group for their economic enlistment
•
Conducting interest- free banking
•
Playing a essential role in human development and employment generation.
2.7 Goals of IBBL •
To establish Ihsan (gracious conduct or kindness) in economic affairs
•
Establishment of Maroof (proper and good acts, institutions) in economic life.
•
Elimination of Munker (Evil, wrong of injurious practices) from economic life.
•
To achieve maximum economic growth
•
To maximized employment to ensure maximum distribution of wealth in society
8
•
To achieve universal education and to encourage co-operation in society.
2.8 Core Values •
Trust in Almighty Allah
•
Strict Observation of Islami Shariah
•
Welfare Banking
•
Personalized service
•
Equity and Justice
•
Environment Consciousness
2.9 Commitment •
To Islami Shariah
•
To the Regulators
•
To the Shareholder
•
To the customers
•
To the Community
•
To the Employees
•
To the Stakeholder
•
To the Environment
2.10 Business Philosophy of IBBL The philosophy of IBBL is to the principles of Islamic Shariah. The organization of Islamic conference (OIC) defines an Islamic bank as "a financial institution whose status, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banking of the receipt and payment of interest on any of its operations. The sponsor, perception is that IBBL should be quite different from other privately owned and managed commercial bank operating in Bangladesh, IBBL to grow as a leader in the industry rather than a follower. The leadership will be in the area of service, constant effort being made to add new dimensions so that clients can get "Additional" in the matter of services
commensurate with the needs and requirements of the country' growing society and developing economy. 2.11 Management Commitment As a internee it is obvious that wouldn’t get the management completely committed to assessment. Though did not have full access to all the documents and information for corporate secrecy reasons, still got full co-operation from the management, they gave us all the time that they could manage from their busy schedule, they did take an interest in what were trying to do and they had a very encouraging attitude towards . 2.12 Document Research: have looked at IBBL’s prospectus and organizational chart. They did not provide any system documents but, have some documents and information system from the bank web’s site (www.Islambankbd.com).Because of company policy and secrecy, was not been provided with any problem documents. 2.13 Features of Islamic Bank: 2.13.1. Prohibition of interest The traditional capitalist banking system depends on interest. It receives interest for providing loans and pays interest for taking loans. The spread between these two interests is the source of its profit. But according to Islamic Shariah all types of interest is banned. So, Islamic bank does not carry on business of interest and it completely avoids the transaction of interest. 2.13.2. Investment Based on Profit After departing from interest, the alternate ways of income for Islamic bank is investment and profit. Thus IBBL gives up any transaction of interest and makes investments based on profit. Bank distributes its profit to its depositors and shareholders. 2.13.3. Investment in Halal Business Islamic Shariah has banned the business of haram goods. For example, Islam not only forbids the drinking of alcohol but also banned any business of alcohol. Therefore, Islamic bank does not get any haram business and only do halal business. 2.13.4. Halal Paths and Procedures
10
Islamic Shariah also rejects any harems path or process in case of a halal business. Therefore, Islamic bank system only allows the halal path procedures of halal business. 2.14 Organ Gram of IBBL
Board of Directors Shariah Council
Executives Managing Director Deputy Managing Executive Vice President Senior Vice President Vice President
Assistant Vice President
2.15 Information of Haji Camp Branch Haji Camp Branch Of IBBL Particular
Information
Date Of Incorporation
December 19th 2009
No. of Division At That Time
Two Division
Period Of Investment
December 19th 2009
No. Of Employee At Now
24
Total Deposit At Now
154 core(as on 27 May 2012)
Total Investment At now
23,40,00,000
Total Profit
4.54 core
Situated At
Haji Camp, Ashakona Uttara ,Dhaka
Figure- : Information of Haji Camp Branch 2.16 Financial Highlights of IBBL from FY2006 to FY2010. Taka in million(Where applicable) Particular
2006
2007
2008
2009
2010
Authorized Capital
5,000.00
5,000.00
10,000.00
10,000.00
10,000.00
Paid-up Capital
3456.00
3801.00
4752.00
6177.60
7413.12
Share Money Deposit
1.99
1.99
1.99
1.99
1.99
Reserves fund
6551.23
7418.05
9308.49
13927.94
16081.14
Retained Earnings
1400.59
1427.36
2674.80
3804.55
2594.59
Total Equity
10435.96
14957.74
18572.08
23619.81
28400.03
Total Deposit (Including 132419.4 bill payable) 0
166325.29 202115.45 244292.14
Total 117132.83 16586.32 Investment(Including Inv in share)
18786.55
22572.41
291934.60 275493.94
Import Business
96810.00
137086.00 168329.00 161230.00
246281.00
Export Business
51133.00
6690.00
93962.00
148421.00
Remittance
53819.00
84143.00
140404.00 194716.00
214629.00
Total Foreign exchange 201822.0 Business 0
287919.00 402695.00 462370.00
609331.00
Total Income
17699.52
30128.90
12
14038.30
23756.33
10624.00
25403.86
Total Expenditure
11129.63
13918.70
17408.50
18886.20
20559.21
Net profit before tax
2908.67
3780.82
6347.83
6517.67
8454.71
Payment to 1490.12 Government(Income tax)
2322.46
3245.08
3253
4108.98
Dividend
25% (Stoke)
30% (Stoke)
Total Asset contra) Fixed Asset
Cash 15% Stock10%
10%(Cash) 20% (Stoke) (including 188115.27 250012.79 288017.19 340638.49 3724.69
Number of Correspondent
Foreign 254
35% (Stoke) 443684.79
3987.23
4407.22
6512.36
6748.44
884
906
919
919
Number of Shareholders
20960
26488
33686
52164
58923
Number of Employees
7459
8426
9397
9888
10349
Number of Branches
176
186
206
231
251
per 263
236
228
271.22
316.93
Book value share(taka)
of
Cost of fund %
9.34%
9.06%
(.56%
8.76%
8.65%
Cost of income ratio
0.79
0.79
0.73
0.74
0.72
Retune on Equity(ROE) %
13.42%
13.00%
19.02%
16.93%
19.00%
Retune on Asset(ROA) %
1.03%
.84%
1.27%
1.34%
1.37%
Price Earnings ratio
10.97
17.88
10.78
12.87
13.29
Earnings Per Share
3
4.33
4.59
4.46
4.84
Price Equity ratio
1.57
1.69
2.05
2.18
2.52
Market Value per Share 474.90 (taka)
70
83
89
90
Capital Adequacy Ratio
10.61
10.72
11.65
11.06
9.43%
Chapter Three
Theoretical Background 3.1 Divisions of Islami Bank Bangladesh Ltd The functions of IBBL are divided into three sections these are •
General Banking
•
Foreign Exchange
•
Investment
Above these three sections of IBBL do their services. Each of this section serves various service for satisfying their client. 3.2 General Banking General banking department is one of the most important departments of Islamic Bank Bangladesh Limited. Basically bank provides the main services to the customer through this department. In general this section of the Islamic Bank Bangladesh Limited is divided into the following categories: •
Accounts opening section
•
Cash section
•
Remittance section
•
Bills and clearing section
•
Accounts section
•
Online branch banking section
3.3 Foreign Exchange Department Banks play a very important role in effecting foreign exchange transaction of a country. Mainly transactions with overseas countries are in respect of imports; exports and foreign remittance come under the purview of foreign exchange department. Banks are the vital sectors by which such transactions are effected/settled. Central Bank records all sorts of foreign exchange transactions. The other banks dealing with foreign exchange are to report to Bangladesh Bank regularly (viz. daily, monthly, quarterly, yearly etc.). 3.3.1 Sub Division Foreign Exchange The foreign exchange department consists of three sections. They are:
14
•
Import section
•
Export section
•
Foreign remittance section
3.4 Investment Division Investment is the action of deploying funds with the intention and expectation that they will earn a positive return for the owner. Funds may be invested in either real assets or financial assets. When resources are used for purchasing fixed and current assets in a production process or for a trading purpose, then it can be termed as real investment., The establishment of a factory or the purchase of raw materials and machinery for production purposes are examples in point. On the other, the purchase of a legal right to receive income in the form of capital gains or dividends would be indicative of financial investments Specify examples of financial investments are deposits of money in bank account, the [purchase of Mudaraba Savings Bonds or stock in a company. Ultimately, the savings of investors in financial assets are invested by the respective company into real asserts in the form of the expansion of plant and equipment. 3.5 Investment Mechanism a. Bai- Murabaha b. Bai- Muajjal c. Bai- Salam d. Istishna’a
a. Mudaraba b. Musharaka 1. Bai-Mechanism 2. Ijara Mechanism a. Hire Purchase b. Hire Purchase under Shirkatul Melk 3. Share Mechanism IBBL, Haji Camp Branch has provided various types of Investment Mechanism for her different types of customers according to their requirements. The Investment provided by IBBL can be divided into three types first. These three types again are sub-classified into various types which are given bellows:
3.6 Bai-Mechanism (Trading Mode) Under Bai Mechanism banks are invested their money in some different way. Such as: Figure 03: Bai-Mechanism (Trading Mode) Bai-Mechanism Bai-Murabaha Bai-Muazzal Bai-Salam Bai-Istishna
3.6.1 Bai-Murabaha (Contract Sale on Profit) The terms “Bai-Murabaha” come from Arabic words .The word Bai means purchase and sale and the word Murabaha means an agreed upon profit. “Bai-Murabaha” means sale on agreed upon profit. Bai-Murabaha may be described as a contract between a Buyer and a Seller under which the Seller 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 date in lump sum or by installments. The profit marked-up may be fixed in lump sum or in percentage of the cost price of the goods. In respect of dealing parties Bai-Murabaha may be of two types. I) Ordinary Bai-Murabaha If there are only two parties, the seller and the buyer, where the seller as an ordinary trader purchases the goods from the market without depending on any order and promise to buy the same from him and sells those to a buyer for cost plus profit, then the sale is called Ordinary Bai-Murabaha. ii) Bai-Murabaha on Order and Promise If there are three parties, the buyer, the seller and the Bank as an intermediary trader between the buyer and the seller, where the Bank upon receipt of order from the buyer with specification and a prior outstanding promise to buy the goods from the Bank, purchases the ordered goods and sells those to the ordering buyer at a cost plus agreed profit, the sale is called “Bai-Murabaha on Order or Promise”, generally known as Murabaha. This Murabaha upon order and promise is generally used by the Islami Banks, which undertake the purchase
of commodities according to the specification requested by
The Clients and sale on Bai-Murabaha to the one who ordered for the goods and promised to buy those for its cost price plus a marked-up profit agreed upon previously by the two Parties the Bank and the Client. 3.6.1.2 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 the same from the Bank on Murabaha, i.e. cost plus agreed upon profit. •
It is permissible to take cash/collateral security to guarantee the implementation of the promise or to indemnify the damages.
•
Stock and availability of goods is a basic condition for signing a Bai-Murabaha Agreement.
•
The Bank must purchase the goods as per specification of the Client to acquire ownership of the same/goods before signing the Bai-Murabaha agreement with the Client.
•
The Bank must deliver the specified Goods to the Client on specified date and at specified place of delivery as per Contract.
•
The price once fixed as per agreement and deferred cannot be further increase.
3.6.1.3 Application of Bai-Murabaha Murabaha is the most frequently used form of finance in Islamic banking throughout the world. It is suitable for financing the different investment activities of customers with regard to the manufacturing of finished goods, procurement of raw materials, machinery, and other required plant and equipment purchase
3.6.2 Bai-Muajjal (Deferred Sale) 3.6.2.1 Meaning and Definition of Bai-Muajjal The terms “Bai- Muajjal” come from Arabic words. ‘Bai’ means purchase and sale and the word ‘Mujjal’ means a fixed time or a fixed period. BaiMuajjal” means sale for which payment is made at a future fixed date or within a fixed period. In short, it is a sale on Credit Bai-Muajjal may be defined as a contract between a Buyer and a Seller under which the Seller sells certain specific goods (permissible under Shariah and Law of the Country), to the
Buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments. The seller may also sell the goods purchased by him as per order and specification of the Buyer. In this Bank, Bai-Muajjal is treated as a contract between the Bank and the Client under which the Bank sells to the Client certain specified goods, purchased as per order and specification of the Client at an agreed price payable within a fixed future date in lump sum or by fixed installments 3.6.2.2 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 the same from the Bank on Bai-Muajjal i.e. deferred payment sale at fixed price. •
Stock and availability of goods is a basic condition for signing a Bai-Muajjal Agreement.
•
The Bank must purchase the goods as per specification of the Client to acquire ownership of the same/goods before signing the Bai-Muajjal Agreement with the Client.
•
After purchase of goods the Bank must bear the risk of goods until those are actually delivered to the Client.
•
The Bank must deliver the specified Goods to the Client on specified date and at specified place of delivery as per Contract.
•
The price once fixed as per agreement and deferred can not be further increased The Bank may sell the goods at one agreed price and here profit is not mentioned.
3.6.3 Bai-Salam (Advance Payment) 3.6.3.1 Meaning and Definition of Bai-Salam The terms “Bai” and “salam” have come from Arabic words. The word “Bai” means “sale and purchase” and the word “salam” means “advance”. Bai-salam means advance sale and purchase. Bai salam may be defamed as a contract between a buyer and a seller under which the seller sells in advance the certain commodities/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 commodities/products is delivered as per specification, size, quality, quantity at a future time
in a particular place. 3.6.3.2 Important Features: Bai-Salam is a Investment Mechanism allowed by Islamic Sharia in which commodity /product can be sod without having the said commodity /product 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 the sale may be done either in Bai-Murabaha or Bai-Muajjal Investment Mechanism. •
Industrial and agricultural products are purchased/sold in advance under BaiSalam.
•
It is permissible to obtain collateral security from the seller client to secure the investment from any hazards via non-supply/partial supply of commodity /product supply of low quality commodity /product.
•
It is also permissible to obtain Mortgage and Personal Guarantee from a third party as security before the signing of the Agreement or at the time to signing the Agreement
•
Bai-Salam on a particular commodity /product or on a product of a particular field or firm cannot be affected (for Agricultural Product(s) only).
3.6.3.3 Application of Bai-Salam Salam sales are frequently used to finance the agricultural industry. Banks advance cash to farmers today for delivery of the crop during the harvest season. Thus banks provide farmers with the capital necessary to finance the cost of producing a crop. Salam sale are also used to finance commercial and industrial activities. Once again the bank advances cash to businesses necessary to finance the cost of production, operations and expenses in exchange for future delivery of the end product. Istisna’a means to purchase specific products by placing order to a manufacturer or to sale specific. 3.6.4 Bai-Istisna’a Products after having the same manufactured against order of a buyer. 3.6.4.1 Definition of Bai-Istisna’a
The Istisna’a sale is a contract in which the price is paid in advance at the time of the contract and the object of sale is manufactured and delivered later. It is a contract with a manufacturer to make something and it is a contract on a commodity on liability with the provision of work. IBBL can utilize Istisna’a in two ways. 1) It is permissible for the bank to buy a commodity on Istisna’a contract then sell it after receipt for cash or deferred payment. 2) It is also permissible for the bank to enter into a Istisna’a contract in the capacity of seller to those who demand a purchase of a particular commodity and then draw a parallel Istisna’a contract in the capacity of a buyer with another party to manufacture the commodity agreed upon in the first contract. 3.6.4.2 Important Feature: •
Istisna’a is an exceptional Investment Mechanism allowed by Islamic Shariah in which products can be sold without having the products/goods in existence. If the product are ready for sale. Istisna’a is not allowed in Shariah. Then the sale may be done either in Bai-Murabaha or Bai-Muajjal Investment Mechanism, in this mode deliveries of goods are deferred and payment of price may also be preferred.
•
It facilitates the manufacturer sometimes to get the price of the goods in advance, which he may use as capital for producing the goods.
•
It gives the buyer opportunity to pay the price in some future dates or by installments.
•
It is building contract and no party is allowed to cancel the Istisna’a contract after the price is paid and received in full or in part or the manufacturer starts the work.
•
Istisna’a is specially practiced in manufacturing and industrial sectors. However it can be practiced in agricultural and constructions sectors also.
3.6.4.3 Application of Istisna'a Sale The Istisna'a contract allows Islamic banks to finance the public needs and the vital interests of the society to develop the Islamic economy in accordance with Islamic teachings. Finally, the Istisna'a contract is also applied in the construction industry such as apartment buildings, hospitals, schools, and universities to whatever that makes the network for modern life.
3.7 Share Mechanism: Under Share Mechanism banks are invested their money in two different way. Such as: Figure: Share Mechanism Share Mechanism Mudaraba Musharaka
3.7.1 Mudaraba (Share Mechanism) 3.7.1.1 Meaning and Definition of Mudaraba The term Mudaraba come from Arabic word “Travel” means for undertaking business. It is a form of partnership where one party provides the funds while the other provides the expertise and management. The first party is called the Sahib-Al-Maal and the latter is referred to as the Mudarib. Any profits accrued are shared between the two parties on a preagreed basis, while capital loss is exclusively borne by the partner providing the capital. 3.7.1.2 Important features •
Bank supplies capital as Sahib-Al-Mall and the client invest if in the business with his experience.
•
Administration and management is maintained by the client. Profit is divided as per management.
•
Bank bears the actual loss alone.
•
Client cannot take another investment for that specific business without the permission of the Bank.
3.7.2 Mishawaka (Partnership)
3.7.2. Meaning and Definition of Mishawaka The word Mishawaka is derived from the Arabic word Shirkat meaning partnership or sharing. It’s An Islamic financial technique that involves different types of profit and loss sharing partnership. Share both in the capital and management of a project so that profits will be distributed among them as per rations, where loss is shared according to ratios of their equity participation. In this case both the bank and the client provide capital at an agreed upon ratio and manage the business jointly. Share the cent as per 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 Mishawaka mode. 3.7.2.2 Important feature: •
The investment client will normally run and manage the business.
•
The Bank shall take part in the policy and decision making as well as overseeing (supervision and monitoring) the operations of the business of the client. The Bank may appoint suitable person(s) to manage the business and to maintain books of accounts of the business property.
•
As the investment client shall manage the enterprise, the Bank may pay more share of profit to him than that of his proportionate capital contribution. As the investment client shall manage the enterprise, the Bank may pay more share of profit to him than that of his proportionate capital contribution.
•
Loss, if any, shall be shared on the basis of capital ratio
3.7.2.3 Concluding Remark Financing through a Mishawaka partnership is investment-based. The capital provider has full control in the management of the business. In addition, he shares proportionately in both the profits and losses of the business. Therefore, the rate of return is uncertain and can be either positive or negative. The cost of capital is also uncertain and there exists perfect correlation between the relationship of cost of capital and rate of return on capital. 3.8 Ijara mechanism (Leasing Mode)
Under Ijara Mechanism banks are invested their money in two different way. Such as: Figure 0: Ijara mechanism (Leasing Mode) Ijara Mechanism Hire purchase Hire purchase under Shirkatul Melk
3.8.1 Hire purchase (HP) (Ijara) The term Ijarah has been derived from the Arabic works Ajr and Ujrat which means consideration, return, wages or rent. Ijarah has been defined as a contract between two parties; the Hiree and Hirer where the Hirer enjoys or reaps a specific service on benefit gains a specified consideration or rent from the asset owned by the Hiree. 3.8.2. Hire Purchase under Shirkatul Melk (HPSM): Figure 0: Hire Purchase under Shirkatul Melk (HPSM) Ijara Mechanism Shirkat Ijara Sale
Hire Purchase under Shirkatul Melk is a Special type of contract which has been developed through practice. Actually, it is a synthesis of three contracts: 1) Shirkat Melk 2) Ijara 3) Sale These may be defined as follows: 3.8.2.1 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. 3.8.2.2 Ijarh The term Ijarah has come 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 hire and hirer where the hirer(lessee) enjoys or reaps a specific service or benefit against a specified consideration or rent from the asset owned by the hire(lessor). It is a hire agreement under which a certain asset is hired out by the hire to a hirer against fixed rent or rentals for a specified period. Related terminologies or elements of Ijara. According to the majority of Fuqaha, there are seven elements of Ijarah. They are given below:1) The wording: This includes offer and acceptance. 2) Contracting parties: This includes a Hire, the owner of the property, and a Hirer, the party that benefits from the use of the property. 3) Subject matter of the contract: This includes the rent and the benefit. 4) The Hire (Muajjir): The individual or organization hires/rents out the property of service is called the Hire (muajjir). 5) The Hirer (Mustajir): The individual or organization hires/takes the hire of the property or service against the consideration rent / wages / remuneration is called the Hirer (mustajir). 6) The benefit / asset (Maajur): The benefit which is hired / rented out is called the benefit (maajur). 7) The Rent (Ujrat): The consideration either in monetary terms or in kinds fixing quantity of goods / money to be paid against the benefit of the asset or service of the asset is called the rent or ujrat. 3.9 Some Special Investment Schemes The Bank, since its inception, has been working for the uplift and emancipation of the underprivileged, downtrodden and neglected sections of the populace and has taken up various schemes for their well being. The objectives of these schemes are to raise the standard of living of low-income group, development of human resources and creation of
avenues for self-employment. 3.9.1 Household Durables Scheme The objective of the scheme is to increase standard of filing and qualify of life of the fixed income group by extending them investment facilities to purchase household articles such as furniture like Almirah, sofa set, wardrobe; electric and electronic equipment like television, refrigerator, gas cooker; air conditioner, PC, washing machine; electric generator-IPS, UPS; motor cycle; corrugated iron sheet, cement, rod, wood etc, for construction of dwelling house; gold ornaments, tube-well, mobile telephone set etc; medical/ engineering instruments/equipment, computer, books etc for students. Objective •
To increase standard of living and
•
To increase quality of life of the fixed income group.
•
To create opportunity for the service holders to enjoy the benefit of modern and sophisticated living and at the time lead a decent and honest life
Mode of Investment Bai-Muajjal / HPSM (item wise).
3.9.2. Investment Scheme for Doctors A good number or newly graduated doctors from medical College are unemployed. Many of the medical graduated are waiting for because the opportunity for Government service is limited. The Bank has taken up this Scheme to help unemployed qualified doctors to go for selfemployment and to provide latest medical equipments to specialist doctors to extend modern Medicare facilities throughout the country. Objective •
To help unemployed qualified doctors to go for self-employment
•
To provide latest medical equipments to specialist doctors to extend modern medical facilities throughout the country.
•
To assist specialists and consultant physicians to procure specialized medical equipment for extending improved to the people
. Mode of Investment
Bai-Muajjal / HPSM (item wise). 3.9.3 Transport Investment Scheme To ease the existing transportation problem and ensure speedy economic growth and development of the country particularly the expansion of trade, commerce and industry, the Bank has taken up this Scheme. Under this Scheme investment is being allowed to the existing successful businessmen and potential entrepreneurs in this sector for all types of road and water transport like bus, mini-bus, truck, launch, cargo-vessel, transport for rent-a-car service; and baby taxi, tempo, pick-up van for self-employment; and ambulance for clinic & hospital. The Bank is also extending investment facilities to multinational companies, established business houses and well to do officials and professionals for acquisition of private cars, microbus and jeeps. Objective • To ease the existing transportation problem. •
To ensure speedy economic growth and development of the country particularly the expansion of trade, commerce & industry.
•
To assist in the development of communication system of the country.
Mode of Investment Bai-Muajjal / HPSM 3.9.4 Housing Investment Scheme A house is in a abode of peace and happiness. Housing has now an acute problem in the country, especially in the town, cities and metropolis. With their limited income, it has become almost impossible on the part of the lower middle class. The Bank has introduced this scheme recently to ease the serious housing problem in the urban areas and to make arrangement for comfortable accommodation of the fixed income group. Objective •
To assist in solving the existing housing problem of the country.
•
To assist the service holder and professionals with fixed income to arrange for of their own
•
To extend the benefits of the investment of the bank under the scheme to deferent sections of the people.
3.9.5 Car Investment Scheme Car is considered as an essential mode of transport in the modern society, particularly by a section of the officials, business houses and business executives and established professionals for movement in discharging their duties and responsibilities punctually and efficiently. To meet this need, Islami Bank has introduced the "Car investment Scheme" for the mid and high ranking officials of government and semi-government organizations, corporations, executives and directors of big business houses and companies and also for persons of different professional groups on easy payment terms and conditions. Objective • To help a section of the officials, business houses and business executives • To established professionals for movement in discharging their duties and responsibilities punctually and efficiently. • To diversify the investment portfolio of the bank by size, sector, and volume Mode of Investment Hire Purchase under Shirkatul Melk (HPSM) 3.9.6. Real Estate Investment Program Professionals, Service-holders, Businessmen, Real Estate Developer and other categories of people who are not entitled for availing investment facilities under Housing investment Scheme, shall be eligible under this program. Investment is to be extension/ completion of the house already constructed, commercial building, shopping complex, flat/ apartment etc. Objective • To ease the housing problem in the urban areas. •
To make arrangement for comfortable accommodation of the fixed income group.
Mode of Investment Bai-Muajjal / HPSM 3.9.7 Small Business Investment Scheme This Scheme has been taken up for self-employment of educated unemployed youths of rural and urban areas and to provide investment to small businessmen and entrepreneurs. Investment is extended for about 200 economic activities in sectors as live-stock, fishery, agro-trading/shop-keeping, transportation, agricultural implements, forestry and service viz. laundry, signboard painting etc. Objective • To help the educated unemployed youths of rural and urban areas for selfemployment. •
To provide investment to small businessmen and entrepreneurs.
Mode of Investment Bai-Muajjal / HPSM (item wise). 3.9.8 Agriculture Implements Investment Scheme In keeping with view of the people-oriented and welfare objectives of the Bank, this scheme has been introduced to provide power tillers, power pumps, shallow tube wells, thresher machines etc. on easy terms to unemployed rural youths for self-employment and to the farmers to help. Objective •
To provide power tillers, power pumps, shallow tube wells, thresher machines etc. on easy terms to unemployed rural youths for self-employment.
•
To the farmers to help augment production in agriculture sector.
•
To create opportunities for self-employed rural youths.
Mode of Investment Bai-Muajjal / HPSM (item wise). 3.9.9 Micro-Industries Investment Scheme To create wider base for industries as well as to encourage establishment of micro-industries in different areas of the country by the potential entrepreneurs and for diversification of the Bank's investment port-folio, the Bank introduced 'Micro industries Investment Scheme'. Different sectors including food and agriculture based industries, plastic & rubber industries, forestry and forestry and furniture industries, engineering industries, leather industries, chemical industries, textile industries, recycling industries, service industries, electrical accessories industries, computer technology industries, paper products industries, handicrafts industries, fishery & live stock farming, hollow bricks, roof tiles and any other viable microindustries have been identified for financing under the Scheme Objective • To create wider base for industries as well as to encourage establishment of microindustries in different areas of the country. •
To create potential entrepreneurs.
•
Diversification of Bank investment port-folio.
Mode of Investment Bai-Murabaha / HPSM (item wise). 3.9.10 Rural Development Scheme
Bangladesh is predominantly an agricultural country with vast majority living in rural areas. Near than 60% of the people live below the poverty line. Seasonal unemployment and under idle and without job in most of the time of the year. As a result people in large number are migrating to urban areas, particularly in metro polish in search of employment thereby creating social and environment hazards. Islami Bank has, therefore, taken up a Scheme to reactive the rural economy and develops model villages through integrated rural development approach. The objective of the Scheme is to create income generating and productive selfemployment opportunities through extension of investment for the development of rural areas and thereby contribute in alleviating rural poverty. Investment will be allowed for the purpose of, amongst others, production of 21 types of main crops viz. food, cereals and cash crops, off-farm activities like dairy, beef fattening, goat rearing, poultry, shop keeping, peddling etc, rural transport like rickshaw, rickshaw-van, cart etc; irrigation equipment, hand tube-well, housing materials. in all covering about 343 types of economic activities, Islami Bank Foundation, a subsidiary of the Bank, engaged in social welfare activities shall, side by side, take care of the requirement of sanitation, Medicare and education of the villages through integrated area development approach under Islamic model Chapter Four 4.1 Investment Processing Of IBBL Generally a bank takes certain steps to deliver its proposed investment to the client. But the process takes deep analysis. Because banks invest depositor’s fund, not banks Own fund. If the bank fails to meet depositors demand, than it must collapse .So, each bank should take stone concentration on investment proposal. Here, investment taker (client) approaches to any of the branch of Islami Bank Bangladesh Limited (IBBL) . Then, he talks with the manager or respective officer (Investment). Secondly, bank considers five C’s of the client. After successful completion of the discussion between the client and the bank, bank selects the client for its proposed investment. It is to be noted that the client/customer must agree with the bank’s rules & regulations before availing investment. Generally, bank analyses the following five C’s of the client: • • • • •
Character Capacity Capital Collateral; and Condition.
4.2 Application Stage: The bank will collect necessary information about the prospective client. For this reason, the bank informs the prospective client to provide and duly respective information which is
crucial for the initiation of investment proposal. Document that are necessary for getting investment of IBBL are prescribed below •
Trade License photocopy
•
Abridged pro forma income statement
•
Attested copy of partnership deed
•
Prior three years audited balance sheet
•
Prior
three
years
business
transaction
statement
for
the
musharaka/mudarraba investment •
Attested copy of the tax identification number (TIN) including final assessment
•
Attested copy of the Memorandum of Association (MOA) and Articles of Association (AOA) for the joint stock company.
•
Abridged pro forma income statement for the musharaka/mudarraba investment
•
Detailed summary of the sundry debtors and
4.3. Appraisal stage: At this stage, the bank evaluates the client and his/her business. It is the most important stage. Because, on the basis of this stage, bank usually goes for sanctioning the proposed investment limit/proposal. If anything goes wrong here, the bank suddenly stops to make payment of investment. In order to appraise the client, Islami Bank Bangladesh Limited (IBBL) provides a standard F-167B Form (Appraisal Report) to the client for gathering all the information. The original copy of the appraisal report is enclosed in the appendix chapter. However, the following contents are presented from that appraisal report: S Company's/Client's Information. •
Owner's Information.
•
Company/Client information.
•
List of Partners/Directors.
•
Purpose of Investment/Facilities.
•
Details of Proposed Facilities/Investment
•
Break up of Present Outstanding.
•
Other Liabilities of the Client/Group.
•
Previous Banker's Information.
•
Details of Sister/Allied Concerns.
•
Allied Deposit as on.
•
Business/Industry Analysis.
•
Relationship Analysis.
•
Working Capital Assessment.
•
Risk Grade.
•
Particulars of the go down for stoning MPI/Mudarabaha good.
•
Insurance Coverage.
•
Audit Observation.
•
Security Analysis.
4.4. Sanctioning stage At this stage, the bank officially approves the investment proposal of the respective client. In this case client receives bank's sanction letter. Islami Bank Bangladesh Limited (IBBL)'s sanction letter contains the following elements: •
Investment Limit in million.
•
Mode & amount of investment.
•
Purpose of investment.
•
Period of investment.
•
Rate of return.
•
Securities:
Primary- Stock of goods is the primary security. LC/Bills: Related Documents. Murabaha Post Investment (MPI)/Bai-Murabaha: Pledge of MPI/Bai-Murabaha goods. MPI/Bai-Bai Murabaha-TR: Lien on goods to be released. •
Cash/Goods-
•
Bai-Murabaha: 25% cash security on cost price to be subsequently converted to goods security. S TR (Trust Receipt): Without cash security.
•
Collateral: Immovable properties.
Cash/Goods security In allowing Murabaha investment and amount of cash security is generally realized from the client (amount depends on the nature of goods, creditworthiness of the client, collateral security obtained etc.) which is converted to goods security after purchase of goods purchased out of bank's investment and client's cash security is pledged to the bank, kept under bank's custody before its delivery to the client on payment. Example: If, for a Murabaha investment cash security is fixed at 25% Bank's investment stands at 75% on the total goods purchased. For example, if cost of total goods purchased is Tk. 100000 Bank's investment will be Tk.75000 and client's cash security will be Tk.25000. Table 10: Cash / Good Security Bank
Client
Total cost of goods
Tk. 75000 (75%)
Tk. 25000 (25%)
Tk. 100000 (100%)
4.5. Documentation stage: At this stage, usually the bank analyses whether required documents are in order. In the documentation stage, Islami Bank Bangladesh Limited (IBBL) checks the following documents of the client: •
Tax Payment Certificate.
•
Stock Report.
•
Trade License (renewal).
•
VAT certificate
•
Liability statement from different parties.
•
Receivable from different clients.
•
Other assets statement.
•
Aungykar Nama.
•
Ghosona Potra.
•
Three (03) years net income & business transactions.
•
Performance report with the bank.
•
Account Statement Form of the bank.
•
Valuation Certificate
•
Particulars of the Proposal.
•
Particulars of the Mortgagor.
•
Particulars of the Properties.
•
Outstanding liability position of the bank.
•
CIB (Credit Information Bureau) Report.
4.6. Disbursement stage: At this stage, bank decides to pay out money. Here, the client gets his/her desired fund or goods. It is or be noted that before disbursement a "site plan" showing the exact location of each mortgage property needs to be physically verified.
4.7 Monitoring & Recovery stage: At this final stage of investment processing of the Islami Bank Bangladesh Limited (IBBL), bank will [contact with the client continually, for example- bank can obtain monthly stock report from the client case of micro investment. Here, the bank will keep his eye on over the investment taker. If needed, will physically verify the client's operations. Also if bank feels that anything is going wrong it tries to recover its investment fund from the client.
Chapter Five
Analysis 5.1 Performance of IBBL This has been appreciable improvement in the Performance of the bank in all respect. As such, there has been a noticeable rise in deposits as investment as also foreign exchange business. Profits of the bank witnessed a marked up from TK 3403551874 in 2009 to TK 4463471909 EPS of pragmatic and prudential policies in overall management of the bank under the table the guidance of the board of the directors. 5.1.1 Deposits: Year Amount
2006 132419
2007 16632
2008 202115
5
2009 24429
2010 291935
2
Source: Annual Report (2006-2010) Deposit Amount in million
Figure-5.1: Deposit.
Interpretation: from the above graph it is found that the deposit amount increases gradually year by year. The total deposit of the bank increased by 19.50 % From TK. 244292 million at end of 2009 to TK. 291935 million at end of 2010.So Deposit amount was TK.132419 million in 2006 and then its increases to TK. 291935 million in 2010. 5.1.2 Investments Year
2006
2007
2008
2009
2010
Amount
113575
144921
180054
21461
263225
9
Source: Annual Report (2006-2010) Investment Amount (million Tk.)
Figure-5.2: Investment. Interpretation: from the above graph it is found that the investment amount increases gradually year by year. The total investment of the bank increased by 22 % From TK 214619 million at end of 2009 to TK.263225 million at end of 2010.So investment amount was TK.113575 million in 2006 and then its increases to TK 263225. million in 2010.The investment amount increases in every year. 5.2 Mechanism wise investment of IBBL There are three mechanism of investment in IBBL. Investment under are-Bai, Ijara and Share mechanism. The table and graph of the performance of Mechanism wise investment of IBBL (last five years) are given bellow: 5.2.1 Bai-Mechanism (Trading Modes) Bai-Mechanism means the investment process happen through buying and selling. There are four modes to invest under this mechanism and which simply follow the buying and selling procedure and those are Bai-Murrabah, Bai-Mujjal, Bai Salam, Bai Istisna.
Year Amoun t
2006 6638 6
2007 83767
2008 2009 112,766 134,00 5
Source: Annual Report (2006-2010) Bai Mechanism Amount (million Tk.)
Figure-5.3: Bai-mechamis
2010 168,7 52
Interpretation: from the above graph it is found that in the five years the investment on Baimechanism increases gradually year by year . In the five years the investment in Baimechanism increased by 19.50 % From TK. 244292 million at end of 2009 to TK. 291935 million at end of 154.2% and which amount was more than double in in 2010 as much as the amount in 2006.2010.In 2010 the investment is higher than the other years. 5.2.2 Ijjara Mechanism Ijara Mechanism means invest though giving Ijjara of a product. There are two modes to invest under this mechanism and are Hire Purchase under Shirkatul Malek (HPSM)and Ijara.
Year Amou nt(mil lion in TK.)
2006 39399
2007 50255
2008 67,10 7
2009 78,22 7
2010 85,12 4
Source: Annual Report (2006-2010) Ijara Mechanism Amount (million Tk.)
Figure-5.4: Ijara-mechamis Interpretation: from the above graph it is found that in the year the investment in amount was increases gradually year by year .The highest invest had made in the year 2010. The total Ijara mechanism increased by 8.82 % to 885124 million in 2009 was TK. 78227 million and in 2010. 5.2.3 Share Mechanism(Sharing Modes) Share mechanism means the investment happen though sharing or making partnership with the client. There are two modes to invest under the mechanism and those are Mudaraba and Mishawaka. Year Amount(Millio
2006 13
2007 17
2008 40
2009 642
2010 2809
n in TK.)
Share Mechanism
Figure-5.5: Share-mechamis Interpretation: from the above graph it is found that in the year the Share mechanism the investment increased slowly from 2006 to 2008 but in 2009 it suddenly increased. The investment was 642 million at the end of the year 2009 and which increased by 337.54% in 2010. 5.3. Mode wise investment in Percent The bank arranges investments in different modes based on Islamic shariah. Year wise investments of IBBL are: Investment Bai
Hire
Mode
Purchase Muajjal purchas
2010
Murabah
Bai
Bill
a
e
55.52%
nego 1.95%
30.42%
4.71%
Quard
Bai
Muda
Mush
E
Salama raba
araka
1.38%
4.65%
& Hasana 0.8%
Source: Annual Report (2010)
0.57%
Figure-5.6: Modes wise investment in percent Interpretation: from the above graph it is found that IBBL distribute its investment facilities according to different sectors. In those sectors the bank invested in the industry and SME sector more than the other sectors. Moreover the lower investment had made in travel sector. 5.4 Sector wise investment Islami Bank invest in different sector, to suit the need of in different client in the society. The mentioning sectors of the investment of IBBL are giving bellow with the amount of investment. Sectors 2010
Industry 43.30%
Commerce
Real
Agricultur
Travel
SME
Others
17.53%
Estate 4.31
e 5.41%
1.74%
28%
0.00%
%
Source: Annual Report (2010)
Figure-5.6: Sector wise in investment Interpretation: from the above graph it is found that each year their income was increasing as much as their investment increases. The amount of income from investment was TK.10999 million in 2006 and in 2010 it increases . IBBL distribute its investment facilities according to different sectors. Among those seven sectors the bank invested in the industrial and SME sector more than the other sector in 2010. Moreover the lower investment had made in travel sector. 5.5 Investment schemes Outstanding amount of investment as at the end of the year under different welfare schemes are as under: Amount in million take Sl.
Name of Scheme
2006
2007
2008
2009
2010
No. i.
Rural
development
2242.2
2885
3012
3752
5110
ii.
scheme House-hold
iii.
Scheme Investment Scheme for
33.3
0 23.64
iv.
Doctor Transport
2698.8
2624.2
3087.55
3717
4872
8 23.54
4 31.46
41.16
53.81
138.79
768.45
876.34
1104.65
1159.63 1703.44
Durables
Investment
Scheme v. Car Investment Scheme Business
2 699.95
7420.8
638.40
686.49
961.64
15.34
17.06
15.27
vi.
Small
vii.
Investment Scheme Micro-industry
6.24
35.79
31.50
50.39
47.44
viii.
Investment Scheme Agriculture
11.94
13.61
27.21
76.64
127.15
Investment
506.75
485.29
429.24
452.67
418.92
Scheme x. Real Estate Investment
6582.8
6903.0
7183.26
7933.2
10154.95
5
9
Implements Investment ix.
Scheme Housing
Scheme
0
Source: Annual Report (2006-2010) 5.6 Income from investment Year
2006
2007
2008
2009
2010
Amount
10,999
14,562
19,525
20,768
24,931
Source: Annual Report (2010)
Income from Investment Amount (million Tk.)
Figure-5.7: Income from investment Interpretation: from the above graph it is found that IBBL distribute its investment facilities
according to different sectors. Among those seven sectors the bank invested in the industrial and SME sector more than the other sector in 2010. Moreover the lower investment had made in travel sector. 5.7 Performance of investment in trade
Year Amount(Millio n in TK.)
2006 3501 4
2007 47095
2008 54,410
2009 75,354
2010 82,953
Source: Annual Report (2010)
Performance of Investment in trade Amount (million Tk.)
5.8. SWOT analysis of the IBBL. Strength and Weakness of Islami Bank Bangladesh Haji Camp Branch. Strengths Weakness a) IBBL of Haji Camp has most a) Less efficiency in operating new experienced manpower. technology. b) IBBL discovered EIBS software b) Employees are not motivated in by the own IT specialist. some areas. c) Good cooperative with the client. c) Haji Camp sometime faces d) Consistent quality in every shortage of efficient manpower service. almost in every department. e) More funds for Investment. d) Investment system is co critical. f) Honest and reliable Employees. e) Lac of up-to-date equipments. g) Experienced top management.
Opportunities and Threats of Islami Bank Bangladesh Haji Camp Branch. Opportunities
Threats a) Call money system. b) Increased competition in the
market. c) Tribulations in classified loans.
recovering
Chapter Six Findings, Conclusion and Recommendation IBBL is committed to Provide banking services that is purely based on Islamic Shariah, transparent and efficient in this competitive environment. From this report we get positive and negative findings. The findings are necessary for to take corrective measure. So we disclose the findings bellow: •
In case of mechanism wise investment, the investment in share mechanism increases highly in 2010 from 2009.
•
In case of mechanism wise investment, Bai mechanism growth rate was 154.2% from 2006 to 2010.
•
In case of Ijara mechanism in 2019 the investment was Tk. 78227 million and in 2010 it increased by 8.82% to Tk.85124 million.
•
In case of by Bai-Murabaha was higher investment in 2010 from the different modes of IBBL investment mechanism.
•
Among the different modes of IBBL invest higher in 2010 than 2009 and at the same time among the different modes IBBL highly concentrate Bai-Murabaha and hire purchase.
•
Among the different sector IBBL invest highly in industry and commerce sector.
•
The investment amount of HDS and Agriculture and agro based was fluctuating year by year.
•
The income from the investment increases gradually in every year.
Conclusion Islamic banks in Bangladesh have become successful in the field of savings and investment Mechanism. As a result, the growth of Islamic banking in terms of branch
expansion was evident not only in Islamic banking companies but also in Traditional banking companies. Islamic banking is growing well in terms of resource mobilization. These indicate that premises of Islamic banking system in Bangladesh have become stronger, although Islamicbanking system is working side by side with Traditional banking system. Since the establishment of Haji Camp Branch of IBBL till now, it plays as outstanding performance in all the two sectors- namely general banking, investment. Already Haji Camp branch is an authorized dealer. All employers here are sincere, honest, dedicated. It is now fully an updated electron zed bank. But Bai Salam & istisnah should be practiced as they are absence. This branch creates vast effect on economy & development in Haji Camp area. And it has been able to win good response from customers. The banking system of the country will forward towards Islamic banking system in future and it is really promising for other countries Recommendation Following recommendation are prepared for IBBL: •
Overall financial performance of IBBL is good as present, so they should thing to retain their position providing satisfied service of the customers.
•
IBBL should retain the current position
of share mechanism because it highly
increases 2009 to 2010. •
House building investment sector under Bai Muajjal Investment Mechanism; bank should proper step to increase the investment; because in this sector investment decrease by 29.02%.
•
ATM service must be increase within short time.
•
IBBL should give attention to retain their position in industry and commerce sector, because IBBL are generating higher income from these sector.
•
Increase public awareness for understanding the difference between investment of IBBL and loan / credit/advance of conventional banks in order to remove their misunderstandings.
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IBBL should give attention to retain their investment under Ijara mechanism because it highly increases in 2006 to 2010.
Bibliography •
IBBL, working manual for different departments.
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Annual report-2010.
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Lecture sheet provided by IBTRA.
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www.ibtra.com
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www.islamibankbd.com.