Executive Summary

The internship program is an integral part of Bachelor of Business Administration

(BBA). This program creates a unique opportunity for the student to apply their
theoretical knowledge into practice and gain valuable real world business experience.
During the program, student can also realize existing business condition apart from
having opportunities to solve the problem using various analytical tools. My report
covers all most all the investment activities that Foreign Exchange Branch of IBBL
performs. My study also covers the history of Islami Bank Bangladesh Limited. I
have tried to put my best effort to organize all required information on order to make
the report comprehensible and fruitful. This internship report is prepared based on the
study of Islami Bank Bangladesh Limited. The topic of this report is Analysis of
Investment Activities of Islami Bank Bangladesh Limited : A Case Study on
Foreign Exchange Branch. The main objective of the report is to identify the
investment management process and to understand the existing mechanism of
investment modes of IBBL. Mainly two types of data are used to prepare this report,
such as primary and secondary data.

The first chapter is Introduction, it includes objective of the study, scope of the
study, origin of the study, methodology of the study, time period of the study,
limitations of the study. The second chapter is Profile of the Organization, it
includes history of IBBL, aims and objectives of IBBL, special features of IBBL,
vision, mission, goals of IBBL, commitments, management, organ gram of IBBL,
financial information etc. The third chapter is Conceptual Framework, it includes
introduction, concept of bank, concept of islami bank, types of bank, function of
bank, objective of islami bank, conventional vs. islami banking, business group of
foreign exchange branch of IBBL and literature review. The fourth chapter is
Analyses and Findings, it includes introduction, modes of investment, investment

1
instrument. The fifth and last chapter includes conclusion & recommendations.

People of our country have no proper knowledge about the activities of IBBL. IBBL
can't invest in all economic sectors which is prohibited by law of Islam. There is a
large amount of money being idle and thus potential profit is not increasing. IBBL has
lack of promotional activates, limited modes and schemes. They can't avoid interest
fully. The applying process of investment is too much lengthy. It has less interested in
Musharaka mode and limited investment schemes. It has less female employees, lack
of proper space for the employees, no female introducer for female customer in the
Foreign Exchange Branch of IBBL. Because of improper, insufficient application of
Islamic Banking rule in our country the investment operations of IBBL cant run
smoothly.

IBBL should take initiative for people to increase Islami Banking Knowledge. They
should investment carefully, more concentrate in Musharaka mode, agricultural sector.
IBBL can introduce new schemes like education investment scheme, shop financing
scheme and so on. They should reduce investment processing time and fees also. The
Foreign Exchange Branch of IBBL should maintain and increase their growth rate,
concentrate in Bai-Muajjal mode, commercial sector. IBBL can consider employing
more female employees in the branch, especially in the investment sector to attract
more female entrepreneur. They should create proper space for employees and can
consider female introducer to solve female customer's problem.

2
 Acknowledgement

First of all I remember almighty Allah for making me successfully to prepare this
report. I am very grateful to my parents also to assist me in every step of my work.
Whenever I need them, I found them beside me.

I also would like to thanks and convey my gratitude to my internship supervisor, Mr.
Md. Mahbub-ul-Alam, Assistant Professor of BIU, for providing me continuous
support and guideline to prepare a formal report. I would also like to express my
sincere appreciation to him for his wholehearted support and guidance. His
suggestions and comments to make the report good one was really a great source of
spirit for me.

I would like to thank all the officers of Islami Bank Limited for their cooperation. I
would like to thanks Md. Giasuddin Ahmed (EVP), Mujibur Rahman (VP of GB)
Abdul Malek (VP of Industrial), Abdulla Rashed (VP of Foreign Exchange) at IBBL,
Foreign Exchange Branch. For their constant guidance and help, save my valuable
time placement and termination of internship period.

3
At last I must mention the wonderful working environment and co-operative group
behavior of this bank that has enabled me a great deal to do and observe the banking
activities during my internship period of two months.

-------------------------------------

Fahmida Nusrat

Acronyms

Acronyms Elaboration

AIIS Agricultural Implement Investment Scheme

BBA Bachelor of Business Administration

BIU Bangladesh Islami University

4
CIS Car Investment Scheme

DMD Deputy Managing Director

EVP Executive Vice-President

GB General Banking

HDS House-hold durables Scheme

HPSM Hire Purchase under Shirkatul Melk

IBBL Islami Bank Bangladesh Limited

IBTRA Islami Bank Training and Research Institute

ISD Investment Scheme for Doctors

MD Managing Director

MIIS Micro Industries Investment Scheme

NEIS Entrepreneurs Investment Scheme

NRB Non Resident Bangladeshi

OIC Organization of the Islamic Conference

PO Principal Officer

5
 REIP Real Estate Investment Program

SBIS Small Business Investment Scheme

SO Senior Officer

SPO Senior Principal officer

SWOT Strengths, Weakness, Opportunities, Threats

TIS Transport Investment Scheme

VP Vice President

WEIS Women Entrepreneurs Investment Scheme

Table of Contents

Student's Declaration

Official Certification

Executive Summary........................................................................................................i

Acknowledgement........................................................................................................iii

Acronyms......................................................................................................................iv

Table of Contents...........................................................................................................v

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Chapter-01 : Introduction.............................................................................................1

1.1 Introduction of the Study.........................................................................................2

1.2 Objectives of the Study............................................................................................3

1.3 Scope of the Study...................................................................................................3

1.4 Methodology of the Study........................................................................................3

1.5 Time Schedule of the Study.....................................................................................4

1.6 Limitations of the Study...........................................................................................5

Chapter-02 : Profile of the Islami Bank Bangladesh Limited...................................6

2.1 Historical Background of Islami Bank Bangladesh Limited...................................7

2.1.1 IBBL at a Glance...................................................................................................8

2.1.2 Functions of IBBL.................................................................................................9

2.1.3 Vision....................................................................................................................9

2.1.4 Mission..................................................................................................................9

2.1.5 Objectives of IBBL...............................................................................................9

2.1.6 Employee Hierarchy of Foreign Exchange Branch of IBBL..............................11

2.1.7 Organogram of IBBL..........................................................................................12

2.2 Financial Information.............................................................................................13

7
2.2.1 SWOT Analysis of IBBL....................................................................................15

Chapter-03 : Conceptual Framework........................................................................16

3.1 Definition of Bank..................................................................................................17

3.2 Types of Banks.......................................................................................................17

3.3 Function of Bank....................................................................................................18

3.4 Investment..............................................................................................................18

3.5 Factors of Investment.............................................................................................19

3.6 Importance of Investment......................................................................................19

3.7 Investment Management........................................................................................19

3.8 Objectives and Principles.......................................................................................20

3.9 Islamic Investment.................................................................................................20

3.10 Definition of Islamic Bank...................................................................................21

3.11 Objectives of Islamic Banking.............................................................................22

3.12 Difference between Conventional and Islamic Banking......................................22

Chapter-04 : Analysis and Findings..........................................................................25

4.1 Introduction............................................................................................................26

4.2 Investment Operation of IBBL...............................................................................26

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4.2.1 Models of Charging Securities............................................................................30

4.3 Modes of Investment of IBBL...............................................................................31

4.4 Bai Mechanism (Trading Mode)............................................................................32

4.4.1 Bai-Murabaha Meaning......................................................................................32

4.4.2 Bai-Muajjal Meaning..........................................................................................33

4.4.3 Bai-Salam Meaning.............................................................................................33

4.4.4 Bai-Istishna Meaning..........................................................................................34

4.5 Share Mechanism...................................................................................................34

4.5.1 Mudaraba.............................................................................................................34

4.5.2 Musharaka...........................................................................................................35

4.5.2.1 Quard................................................................................................................35

4.5.2.1 Quard-E-Hasana...............................................................................................35

4.6 Ijara Mechanism (Leasing Mode)..........................................................................36

4.7 Special Investment.................................................................................................36

4.8.1 Trend of IBBL Year Wise Investment.................................................................37

4.8.2 Mode Wise Investment........................................................................................38

4.8.3 Sector Wise investment.......................................................................................40

4.8.4 Scheme Wise Investment....................................................................................42

4.9 Investment Information of Branch.........................................................................44

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4.9.1 Organogram of Foreign Exchange Branch, IBBL..............................................44

4.9.2 Year Wise Investment of Foreign Exchange Branch, IBBL................................45

4.9.3 Mode-Wise Investment of Foreign Exchange Branch, IBBL.............................46

4.9.4 Sector Wise Investment of Foreign Exchange Branch, IBBL.............................48

4.10 Findings................................................................................................................50

4.11 Overall Learning from my Internship..................................................................52

Chapter-05 : Recommendations and Conclusion.....................................................54

5.1 Recommendations..................................................................................................55

5.2 Conclusion..............................................................................................................57

References...................................................................................................................58

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 Chapter-01

Introduction

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1.1 Introduction of the Study

Internship is an important & unavoidable part for completing the graduation

in business studies. Internship can help the students to acquire practical knowledge
about his or her particular learning. For the four years BBA program, internship is a
major requirement for sharing knowledge & to gather knowledge. I need to do my
internship in any business organization that is well reputed in its field. I have got a
great opportunity to involve in a leading commercial bank name Islami Bank
Bangladesh Limited which is a recognized bank not only in our country but also all
over the world.

This report is based on an internship program. IBTRA arranges internship program to

gather practical knowledge about banking activities followed by IBBL for University
students as Universities conducted with different organization after the completion of
theoretical courses of program of Bachelor of Business Administration (BBA). A
group of interns must carry out a specific project, which is assigned by the IBTRA. In
this particular report, I am an internee of the previously mentioned program and the

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concerned organization is Islamic Bank Bangladesh Limited (IBBL) which is a
prominent private and the first Bank of Bangladesh that based on Islamic Shariah.
Hence I am placed in Dilkusha, Motijheel, Foreign Exchange Branch of Islami Bank
Bangladesh Limited from January 4 to March 2016. In way of delegation,
responsibility of carrying out the study has conferred upon the concerned interns.

Islami Bank Bangladesh Limited has been the nations leading banking specialties of
uncompromising quality with world class banking for the last decade. This leading
banking company of Bangladesh has been making every effort to ensure the
effectiveness and safety of the financing which it makes sure. Islami bank provides
the highest quality financing at comfortable facilities to fulfill the needs of the
millions of people of the country. Regular introduction of innovative system in line
with the needs of customers has been the key to the companys success over the year.

1.2 Objective of the Study

The broad objective of the study is to fulfill the requirement internship and achieving
academic and practical knowledge about how organizations are managed in real life.
This report also has some other specific objectives, these are :

1. to identify the investment activities of Islami Bank Bangladesh Limited;

2. to understand the existing mechanism of investment modes of IBBL;

3. to evaluate the performance of investment schemes of Foreign Exchange

Branch;

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 4. to understand the investment policy of IBBL with other banks; and

5. to highlight the problems and necessary recommendations to overcome the

problems in investment of IBBL.

1.3 Scope of the Study

The scope of this paper is limited to the organizational structure, background, and
objectives, functions, and investment performance of IBBL as a whole. The scope is
also limited to different investment schemes, modes, mechanism, investment proposal
appraisal procedures, monitoring and documentation of IBBL and SWOT analysis of
IBBL.

1.4 Methodology of the Study

For achieving the specific objectives of the study, data will be gathered most of from
primary sources and little from secondary sources.

Sources of Data

I have used both primary and secondary sources of data make the report more
meaningful and presentable; both the following sources of data and information will
be used widely:

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 1. The Primary Sources

a) Face-to-face discussion with the relevant officials

b) Practical/ hands-on experience of working at the RDS department
c) Study of background material and relevant files provided by the officers
concerned
d) Interviewing people

2. The Secondary Sources

a) Annual reports
b) Training sheets which are provide by Islami Bank Training and Research
Academy (IBTRA)
c) Office files
d) General report
e) Worldwide webs
f) Selected books and other publications etc.

1.5 Time Schedule of the Study

Table 01 : Time schedule for dissertation work has been set up by supervisor is given
bellow :

Sl. No. Description Duration

01 Topic Selection, Data Collection, Analysis 20 days

02 Data Observation and Separation. 20 days

03 Report Preparing. 33days

04 Data input to computer, Setting, Processing and preparing 15 days

the Report.

05 Make as a Book & Shown to Supervisor for correction then 02 days

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 submitted finally.

Total time 90 days

Source : Self - Created

1.6 Limitations of the Study

Objective of the practical orientation program is to have practical exposure for the
students. My permanent status was for only two months, which was somehow not
sufficient enough to gather adequate experience of such vast banking business. After
working whole day in the office it was very much difficult and also impossible to
study again the theoretical aspects of banking. Finally as the banks renovation
activities was going on so the physical working condition was not healthy enough that
we thought it would be the following aspects.

1. Lack of Time : The time period for this study was very short, which was not
enough. So, I could not go in depth analysis. Sometimes the officials were
busy & were not able to give much time.
2. Insufficient Data : Some essentials information could not be collected due to
confidentiality of business.
3. Lack of Supervision : Few officials sometimes felt disturbed, when they were
busy with their tasks. Sometimes, they didnt want to supervise due to pressure
of work load.

Other Limitations
a) The staffs of the branch were some time so busy that they could not help us all
time.
b) Preparing internship report is really troublesome.

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c) This type of report preparation is expensive.
d) Collection of data was not smooth.

e) Analyzing with financial data is much more confusing and complicated than
any other data.

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 Chapter-02

Profile of the Islami Bank Bangladesh Limited

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2.1 Historical Background of Islami Bank Bangladesh Limited

In August 1974, Bangladesh signed the charter of Islamic Development Bank and
committed itself to reorganize its economic and financial system as per Islamic
Shariah. For the favorable attitude of the government of the peoples republic of
Bangladesh, at present six Islamic Banks operate in Bangladesh Financial market.
These are:

1. Islamic Bank Bangladesh Limited

2. The Oriental Bank Limited (Al-Baraka Bank Bangladesh Limited)

3. Al Arafah Islami Bank Limited

4. Social Investment Bank Limited

5. Shahjalal Islami Bank Limited

6. Exim Bank Limited

Besides Prime Bank, Dhaka Bank, South East Bank, the Premier Bank, the Jamuna
Bank, HSBC Bank and Standard Chartered Bank also have opened Islamic banking
branches. Islami Bank Bangladesh Limited. was incorporated as the first shariah
based interest free bank in south East Asia on the 13 march, 1983 as a Public
Company with limited liability under the Companies Act, 1913, started limited
operation on 30 March, 1983 and introduced a full package of banking services in
August, 1983. Its board objective is banking business under shariah. Its registered
office is located in Dhaka with prior permission from the Bangladesh Bank, it open
branches anywhere within and outside the country. By December, 2015 IBBL opened
294 branches all within Bangladesh. It is a joint venture of Bangladeshi and
overseas capital in the ratio of thirty six to sixty four. Its overseas capital is owned by
Islamic Development Bank (IDB), nine other institutions and three individuals of
Arab nationality, while the local capital is owned by Government of Bangladesh

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(GOB), Investment Corporation of Bangladesh (ICB), four non profit private
institutions and a good number of private individuals.

2.1.1 IBBL at a Glance

Islami Bank Bangladesh Limited is a Joint Venture Public Limited Company engaged in
commercial banking business based on Islamic Shariah with 63.09% foreign
shareholding having largest branch network ( total 304 Branches) among the private
sector Banks in Bangladesh. It was established on the 13th March 1983 as the first
Islamic Bank in the South East Asia. It is listed with Dhaka Stock Exchange Limited
and Chittagong Stock Exchange Limited. Authorized Capital of the Bank is Tk.
20,000.00 Million and Paid-up Capital is Tk. 16,099.90 Million having 33,686
shareholders as on 31st December 2015.

Table 02 : Organizational Information of IBBL

Chairman, Board of Director Engr. Mustafa Anwar

Managing Director & CEO Mohammad Abdul Mannan

Company Secretary Abu Reza Md. Yeahia

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CFO Mohammed Shahid Ullah, ACA, CDCS

Number of Zones 15

Number of Branches 304

Number of AD Branches 52

Number of ATM Booth 410

Number of Shareholders 33,686

Number of Manpower 11,381

Source : Website : www.islamibankbd.com

2.1.2 Functions of IBBL

The functions of Islami Bank Bangladesh Limited are as under :

1. to maintain all types of deposit accounts and make investment;

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 2. to conduct foreign exchange business;

3. to extend other banking services; and

4. to conduct social welfare activities through Islami Bank Foundation.

2.1.3 Vision

1. To be the unique modern Islami Bank Bangladesh Limited in Bangladesh.

2. To make significant contribution to the national economy.

3. Enhance customers trust & wealth, quality investment, employees value and
rapid growth in shareholders equity.

2.1.4 Mission

Islami Bank Bangladesh Limited aims to become one of the leading Banks in
Bangladesh by prudence, flair & quality of operations in their banking sector. The
bank has some mission to achieve the organizational goals. Some of them are :

1. to provide high quality service to customer;

2. to set high standards of integrity;

3. to make quality investment;

4. to ensure sustainable growth in business ;

5. to maximization of shareholders wealth;

6. to extend our customers innovative services acquiring state-of-the-art

technology blended with Islamic principles; and

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 7. to ensure human resource development to meet the challenges of the time.

2.1.5 Objectives of IBBL

Objectives of Islami Bank Bangladesh includes :

1. to establish interest-free & welfare oriented banking system;

2. to help in poverty alleviation and employment generation;

3. to contribute in sustainable economic growth;

4. to collect deposits on profit loss sharing basis;

5. to establish welfare-oriented banking system;

6. to extend co-operation to the poor, the helpless and the low income group for
their economic development;

7. to establish participatory banking instead of banking on debtor-creditor

relationship;

8. to invest through different modes permitted under Islamic Shariah; and

9. to contribute in achieving the ultimate goal of Islamic economic system.

Strategies

1. To strive for customers best satisfaction &earn their confidence.

2. To manage &operate the bank in the most effective manner.

3. To identify customers need & monitor their participation towards meeting

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 those requirements.

4. To review & update policies, procedures &practices to enhance the ability to

extend better services to the customers.

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

6. To promote organizational efficiency by communicating company plans

policies &procedures openly to the employees in a timely fashion.

Core Values of IBBL

1. Trust in Almighty Allah.

2. Strict Observance of Islamic Shariah.

3. Highest Standard of Honesty, Integrity & Morale.

4. Welfare Banking.

5. Equity and Justice.

6. Environmental Consciousness.

7. Personalized Service.

8. Adoption of Changed Technology.

9. Proper Delegation, Transparency & Accountability.

Commitments of IBBL

1. To Shariah

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 2. To the Regulators

3. To the Shareholders

4. To the Community

5. To the Customers

6. To the Employees

7. To other stakeholders

8. To Environment

2.1.6 Employee Hierarchy of Foreign Exchange Branch of IBBL

The total employees of Foreign Exchange Branch are 110.

Table 03 : Some Employee of Foreign Exchange Branch.

Serial Name of The Employee Designation

No.

01 Md. Giasuddin Ahmed EVP

02 Mujibur Rahman VP of GB

03 Abdul Malek VP of Industrial

04 Abdulla Rashed VP of Foreign Exchange

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 05 A. B. M. Morshed SPO

06 Md. Abul Kalam Azad SO

07 Mohammed Faridur Rahman Khan PO

Source : Self-Created

2.1.7 Organogram of IBBL

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Figure 01 : Organogram of IBBL (Source : Self created))

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2.2 Financial Information

Table 04 : Financial Performance of IBBL (2010-2014)

Particulars 2010 2011 2012 2013 2014

Income Statement

Investment Income 4,306.62 9,481.01 14,998.60 17,966.32 19,725.91

Profit paid on Deposit 3,133.69 5,466.12 9,710.48 12,107.71 12,616.77

Net Investment Income 1,172.93 4,014.89 5,288.12 5,858.61 7,109.14

Non Investment Income 3,378.95 1,851.58 1,693.98 1,757.09 2,485.88

Non Investment Expenses 1,328.61 1,539.69 2,226.56 2,667.14 3,261.57

Net Non Investment Income 2,050.34 311.89 (532.58) (910.05) (775.69)

Profit Before Tax & 3,223.27 4,326.78 4,755.54 4,948.56 6,333.45

Provision

Provision For Investment 370.80 380.16 811.44 588.15 1,846.86

Profit Before Tax 2,852.47 3,946.62 3,944.10 4,360.41 4,486.59

Provision For Tax 893.43 1,747.87 1,998.69 2,083.73 2,161.64

(Including Deferred Tax)

Profit After Tax 1,959.04 2,198.75 1,945.41 2,276.68 2,324.95

Balance Sheet

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Authorized Capital 5,000.00 10,000.00 10,000.00 15,000.00 15,000.00

Paid up Capital 4,677.28 5,893.37 7,130.98 8,343.25 9,469.58

Reserve Funds & Other 1,779.08 2,437.43 4,079.63 4,827.20 5,620.87

Reserve

Shareholders' Equity 9,790.36 11,989.11 14,050.69 16,091.17 18,159.52

Deposits 53,882.96 82,186.98 118,683.39 140,980.55 166,851.17

Investment 53,582.96 77,714.95 106,650.42 125,715.39 146,740.36

Investment in Shares & 2,078.83 3,771.83 5,511.24 7,138.93 9,120.90

Securities

Fixed Assets 655.39 968.13 2,394.62 2,517.22 2,661.11

Total Assets 74,005.01 106,768.18 149,320.36 173,161.63 210,439.01

Foreign Exchange
Business

Import Business 55,934.10 76,112.10 71,931.70 85,915.00 101,244.70

Export Business 32,042.40 52,202.10 58,476.60 68,980.30 75,843.90

Guarantee Business 3,081.15 1,812.38 1,955.72 2,006.61 3,365.27

Inward Foreign Remittance 4,431.90 6,876.20 23,120.40 7,042.50 8,541.10

Capital Measures

Core Capital (Tier-l) 9,582.85 11,924.50 13,073.14 15,113.62 17,181.97

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Supplementary Capital 929.96 1,123.40 1,731.59 1,511.75 1,732.06
(Tier-ll)

Tier-l Capital Ratio 13.21 12.31 10.38 13.33 12.74

Tier-ll Capital Ratio 1.28 1.16 1.37 1.33 1.28

Total Capital 10,512.81 13,047.90 14,804.73 16,625.37 18,914.03

Total Capital Ratio 14.49 13.47 11.75 14.66 14.03

Investment Quality

Volume of Non-Performing 610.48 751.10 1,783.60 3,598.83 6,982.60

investment

% of NPIS to Total 1.14 0.95 1.63 2.77 4.50

Investment

Provision for Unclassified 666.95 866.46 1,021.15 749.60 938.27

Investment

Provision for Classified 137.58 305.93 711.63 1,128.03 1,518.78

Investment

Provision for Off Balance 230.71 214.48 221.66 273.37 305.01

sheet Exposures

Share Information

Number of Shares 467,727,936 589,337,199 713,098,010 834,324,671 946,958,503

Outstanding

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Earnings Per Share (Taka) 4.14 2.79 2.38 2.46 2.20

Book Value Per Share 16.47 16.69 19.70 19.29 19.18

(Taka)

Market Price Per Share 66.88 37.8 24.29 19.10 14.90

(Taka)

Price Earning Ratio (Times) 13.24 13.55 10.21 7.76 6.77

Price Equity Ratio (Times) 4.06 2.26 1.23 0.99 0.78

Cash Dividend (%) - - - - 14.00

Bonus Share 26 21 17 13.50 -

Operating Performance
Ratio

Net Profit Margin% 2.22 5.55 5.88 5.70 5.88

Investment / Deposit Ratio 93.43 89.07 90.56 88.74 88.59

Return on Equity (ROE)% 20.01 18.34 13.85 14.15 12.80

Return on Assets (ROA)% 2.65 2.06 1.30 1.31 1.10

Cost of Fund % 9.72 11.08 12.34 11.02 10.85

Cost/ Income ratio in 29.19 26.25 31.89 35.02 33.99

operating Business (%)

Other Information

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Number of Branches 78 88 100 110 119

Number of Employees 1,711 1,807 2,110 2,387 2,649

Number of Shareholders 49,386 54,267 52,739 58,466 52,007

Source : Annual Report 2014

2.2.1 SWOT Analysis of IBBL

Strength- Weakness-Opportunity-Threat analysis of IBBLs is shown below :

a) Strength

1. Strong fund sources

2. Largest network among private commercial banks

3. Strong liquidity

4. Less expense of fund

5. Quality products & services

6. Company reputation and goodwill

b) Weakness

1. Lack of Islami Security market

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 2. IT & e banking is not enough strong

3. Lack of full scale automation

c) Opportunities

1. Increase consciousness about Islami Banking

2. Increase islami instrument of investment

3. Increasing trend in international business

4. Value addition in products &service

5. Increasing purchasing power of people

d) Threats

1. Increase competition to collect government deposit

2. Pressure to decrease rate of profit

3. National and global political unrest

4. Increased competition for market share in the industry

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 Chapter-03

Conceptual Framework

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3.1 Definition of Bank

Bank is a financial intermediary accepting deposit and granting, loans offers the
widest menu of services to any financial institutions.

A bank is a financial institution that creates credit by lending money to a borrower,

thereby creating a corresponding deposit on the bank's balance sheet. Lending
activities can be performed either directly or indirectly through capital markets.

The institution which accepts the cheques of the persons from whom it collected
money in current accounts is called Bank - H. L. Hert.

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Banking is the business of a banker, the keeping or management of a Bank
-The Oxford English Dictionary

In United Dominions (1966), Lord Denning deferred to these words to define a

bank:

"An establishment for the custody of money received from, or on behalf of, its
customers. It's essential duty is to pay their drafts on it : its profits arise from the use
of money left unemployed by them."

3.2 Types of Banks

Bank's activities can be divided into :

1. retail banking, dealing directly with individuals and small businesses;

2. business banking, providing services to mid-market business;

3. corporate banking, directed at large business entities;

4. private banking, providing wealth management services to high-net-worth

individuals and families; and

5. investment banking, relating to activities on the financial markets.

3.3 Function of Bank

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The functions of banks are briefly highlighted in following Diagram or Chart.

Figure : Function of a bank

3.4 Investment

The word comes from the Latin word credo meaning I believe .It is a lenders trust
in a persons/firms/companys ability potential ability to command goods or services
of another in return for promise to pay such goods or services at some specified time
in the future. In other word, the purchase of a financial product or other items of value
with an expectation of favorable future returns is called investment. In general terms,
investment means the use money in hope of making more money. The objective of the
investment management is to maximize the performing asset and the minimization of
the non-performing asset as well as ensuring the optimal point of loans and advances
and their efficient management.

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3.5 Factors of Investment

1. Risk

2. Time

3. Interest Rate

4. Security Or Collateral

5. Operating Expense

6. Legal Considerations

7. Inflation.

3.6 Importance of Investment

Investment plays a vital role in national economy in the following ways :

1. it provides working capital for industrialization;

2. it helps to create employment opportunities;

3. investment controls almost all kinds of production activities of the country;

4. it brings social equity;

5. cash generation occurs for its successful performance;

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 6. business cycle can run well only by the help of lending system;

7. economic stabilization; and

8. raise standard of living.

3.7 Investment Management

Investment management is a dynamic field where a certain standard of long range

planning is needed to allocate the fund in diverse field and to minimize the risk and
maximizing the return on the invested fund. Continuous supervision, monitoring and
follow-up are highly required for ensuring the timely repayment and minimizing the
default. Actually the investment portfolio is not only constituted the banks asset
structure but also a vital factor of the banks success. The overall success in
investment management depends on the banks loans and advances. Therefore, while
analyzing investment policy, investment procedure and quality of investment
portfolio.

3.8 Objectives and Principles

The objectives and principles of investment operations of the banks are :

1. the investment fund strictly in accordance with the principles of Islamic

Shariah;

2. to diversifies its portfolio by size of investment, by sectors (public and

private), by economic purpose, by securities and by geographical area
including industrial, commercial and agricultural;

3. to ensure mutual benefit both for the Bank and the investment client by
professional appraisal of investment and monitoring therefore;

Page | 29
 4. to make investment keeping the socio-economic requirement of the country in
view;

5. to increase the number of potential investors by making participatory and

productive investment;

6. to finance various developments schemes for poverty alleviation, income and

employment generation with a view to accelerating sustainable socio-
economic growth and uplifting of the society; and

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

3.9 Islamic Investment

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 a 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 hand, the
purchase of a legal right to receive income in the form of capital gains or dividends
would be indicative of financial investments. Specific examples of financial
investments are : deposits of money in a 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 assets in the form of the
expansion of plant and equipment. Since Islam condemns hoarding savings and a 2.5
percent annual tax (Zakat) is imposed on savings, the owner of excess savings, if he is
unable to invest in real assets, has no option but to invest his savings in financial
assets.

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3.10 Definition of Islamic Bank

Islamic banking has been defined in a number of ways. The definition of Islamic bank
approved by the General Secretarial of the OIC is stalled in the following manner.
An Islamic bank is a financial institution whose status, rules and procedures
expressly state commitment to the principle of Islamic Shariah and to the banning of
the receipt and payment of interest on any of its operations.

According to Islamic Banking Act 1983 of Malaysia : An Islamic Bank is a

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

Dr. Ziaul Ahmed says, Islamic banking is essentially a normative concept and could
be define conduct of banking in consonance will the ethos of the value system of
Islam.

It appears from the above definitions that Islamic banking is a system of financial
intermediation that avoids receipt and payment of interest in its transactions and
conducting operations in a way that it helps achieving the objectives of an Islamic
economy. Alternatively, this is a banking system whose operation is based on Islamic
principle transactions of which profit and loss sharing (PLS) is a major feature
ensuring justice equity in an economy. That is why Islamic banks are often known as
PLS-banks.

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3.11 Objectives of Islamic Banking

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. More
specifically, the objectives of Islamic banking when viewed in the context of its role
in the economy are listed as following:

1. to offer contemporary financial services in conformity with Islamic Shariah :

2. to contribute towards economic development and prosperity within the
principles of Islamic justice;
3. optimum allocation of scarce financial resources; and
4. to help ensure equitable distribution of income.

3.12 Difference between Conventional and Islamic Banking

Conventional banking is essentially based on the debtor-creditor relationship between

the depositors and the bank on the hand and between the borrowers and the bank on
the other. Interest is considered to be the price of credit, reflecting the opportunity cost
of money.

Islam on the other hand, considers a loan to be given or taken, free or charges, to meet
any contingency. Thus in Islamic banking, the creditors should not take advantage of
the borrower.

The basic difference between Islamic Banking and conventional banking is the
contractual relationship. This fundamental difference posed a totally different outlook

Page | 32
on what happens after that. The contract between a customer and a conventional bank
is simple; a loan where interest is charged upon. But look at an Islamic contract. It is
much more complex.

Table 05 : The distinguishing features of the conventional banking and Islamic banking

Conventional Banks Islamic Banks

1. The functions and operating modes 1. The functions and operating modes
of conventional banks are based on of Islamic banks are based on the
manmade principles. principles of Islamic Shariah.

2. The investor is assured of a 2. In contrast, it promotes risk

predetermined rate of interest. sharing between provider of capital
(investor) and the user of funds
(entrepreneur).

3. It aims at maximizing profit without 3. It also aims at maximizing profit

any restriction. but subject to Shariah restrictions.

Page | 33
4. It does not deal with Zakat. 4. It has become one of the service-
oriented functions of the Islamic
banks to collect and distribute Zakat.

5. Leading money and getting it back 5. Participation in partnership

with interest is the fundamental business is the fundamental function
function of the conventional banks. of the Islamic banks.

6. Its scope of activities is narrower 6. Its scope of activities is wider

when compared with an Islamic bank. when compared with a conventional
bank. It is, in effect a multi-purpose
institution.

7. It can charge additional money 7. The Islamic banks have no

(compound rate of interest) in case of provision to charge any extra money
defaulters. from the defaulters.

8. In it very often, banks own interest 8. It gives due importance to the

becomes prominent. It makes no effort public interest. Its ultimate aim is to
to ensure growth with equity. ensure growth with equity.

9. For interest-based commercial 9. For the Islamic banks, it is

banks, borrowing from the money comparatively difficult to borrow
market is relatively easier. money from the money market.

10. Since income from the advances is 10. Since it shares profit and loss, the
fixed, it gives little importance to Islamic banks pay greater attention to
developing expertise in project developing project appraisal and
appraisal and evaluations. evaluations

Page | 34
 11. The conventional banks give 11. The Islamic banks, on the other
greater emphasis on credit-worthiness hand, give greater emphasis on the
of the clients. viability of the projects.

12. The status of a conventional bank, 12. The status of Islamic bank in
in relation to its clients, is that of relation to its clients is that of
creditor and debtors. partners, investors and trader.

13. A conventional bank has to 13. Strictly speaking, and Islamic

guarantee all its deposits. bank cannot do that.

Source : www.islamibankbd.com

Page | 35
 Chapter : 04

Analysis and Findings

Page | 36
4.1 Introduction

Islamic Investment is a unique form of socially responsible investments because Islam

makes no division between the spiritual and the secular. Various Islamic financial
institutions, especially in Islamic countries offer various types of investment products
that are free of Riba or interest. So, Islami Bank Bangladesh Limited Branch
conducted its portfolio under the principles of Islamic Shariah. Profit earning is not
the only objective of Islami Bank Bangladesh Limited., Rather than welfare of the
society through managing its investments is also looked into. The banks generally
allow investment in different sectors including priority sectors declared by the
government. Its main areas of investment are trade and commerce, industry,
agriculture, real estate, rural development etc.

Page | 37
4.2 Investment Operation of IBBL

Figure : Investment Operation System of IBBL (Source : www.assignmentpoint.com)

(1) Selection of the client

It is to be noted that the client/customer must agree with the banks rules &
regulations before availing investment. Generally, bank analyses the following five
Cs of the client :

a) character,

b) capacity,

c) capital,

Page | 38
 d) collateral, and

e) condition.

(2) Application stage

At this stage, the bank will collect necessary information about the prospective client.
Documents that are necessary for getting investment of IBBL, Foreign Exchange
Branch are prescribed below :

a) trade license photocopy (for proprietorship);

b) abridged pro forma income statement;

c) attested copy of partnership deed (for partnership business);

d) prior three (03) years audited balance sheet (for joint stock company);

e) prior three (03) years business transactions statement for the

musharaka/mudaraba investment;

f) abridged pro forma income statement for the musharaka/mudaraba investment;

g) attested copy of the Memorandum of Association (MOA) & Articles of

Association (AOA) for the joint stock company;

h) attested copy of the Tax Identification Number (TIN)- including final

assessment;

i) tenders of the proposed assets (in case of HPSM);

j) detailed summary of the sundry debtors and creditors (including both time &
schedule);

k) summary of the personal movable & immovable assets; and others.

Page | 39
(3) Appraisal stage

Appraisal report is used to the client for gathering all the information.

a) Companys/Clients information,

b) Owners Information,

c) List of partners/directors,

d) Purpose of investment/facilities,

e) Details of proposed facilities/investment,

f) Break up of present outstanding,

g) Other liabilities of the client/group,

h) Previous bankers information,

i) Details of sister/allied concerns,

j) Allied deposit as on,

k) Business/Industry analysis,

l) Relationship analysis,

m) Asset-liability position of the client as per audited balance sheet,

n) Working capital assessment risk grade,

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 o) Particulars of the goo down for storing MPI/Murabaha goods,

p) Insurance coverage,

q) Audit observation, and

r) Security analysis.

(4) Sanctioning stage

In this case client receives banks sanction letter. IBBL, Foreign Exchange Branch
sanction letter contains the following elements :

a) Investment limit in million,

b) Mode & amount of investment,

c) Purpose of investment,

d) Period of investment,

e) Rate of return, and

f) Securities.

(5) Documentation stage

The documentation stage, Foreign Exchange Branch of IBBL checks some documents
of the client.

a) Tax Payment Certificate

Page | 41
 b) Stock Report

c) Trade License (renewal)

d) VAT Certificate.

e) Liability Statement from Different parties

f) Receivable from Different Clients

Other Assets Statement

a) Aungykar Nama

b) Ghosona Potra

c) Three (03) years net income & business transactions

d) Performance report with the bank

Account Statement Form of the bank

1. Valuation Certificate Outstanding

a) Particulars of the Proposal

b) Particulars of the Mortgagor

c) Particulars of the Properties

2. Liability position of the bank

Page | 42
(6) Disbursement stage

At this stage, bank decides to pay out money. Here, the client gets his/her desired fund
or goods. It is to be noted that before disbursement a site plan showing the exact
location of each mortgage property needs to be physically verified.

(7) Monitoring & Recovery stage

Bank can obtain monthly stock report from the client in case of micro investment.
Here, the bank will keep his eye on over the investment taker. If needed, bank will
physically verify the clients operations. Also if bank feels that anything is going
wrong then it tries to recover its investment fund from the client.

4.2.1 Models of Charging Securities

The following models of charging securities are applied in the Islami Bank
Bangladesh Limited.

Lien

A lien is right of banker to hold the debtors property until the debt is discharged.
Bank generally retains the assets in his own custody but sometimes these goods are in
the hands of third party with lien market. When it is in the hand of third party, the
third party cannot discharge it without the permission of bank. Lien gives banker the
right to retain the property not the right to sell. Permission from the appropriate court
is necessary. Lien can be made on movable goods only such as raw materials, finished
goods, shares debentures etc.

Page | 43
Pledge

Pledge is also like lien but here bank enjoys more right. Bank can sell the property
without the intervention of any court, in case of default of loan. But for such selling
proper notice must be given to the debtor. To create pledge, physical transfer of goods
to the bank is must.

Hypothecation

In this charge creation method physically the goods remain in the hand of debtor. But
documents of title to goods are handed over to the banker. This method is also called
equitable charge. Since the goods are in the hand of the borrower, bank inspects the
goods regularly to judge its quality and quantity for the maximum safety of loan.

Mortgage

Mortgage is transfer of interest in specific immovable property. Mortgage is created

on the immovable property like land, building, plant etc. Most common type of
mortgage is legal mortgage in which ownership is transferred to the bank by
registration of the mortgage deed. Another method called equitable mortgage is also
used in bank for creation of charge.

Advance against Fixed Deposit Receipts

1. Advance against Fixed Deposit Receipt will be subject to investment

restrictions imposed from time to time by Head office/Bangladesh Bank.
Islami Bank Bangladesh Limited usually sanctions investment limit up to 90%
of the FDR value. Scrutinize the Fixed Deposit Receipts with regard to the
following points.

Page | 44
 2. The Fixed Deposit Receipt is not in the name of minor.

3. It is discharged by the depositor on revenue stamp of adequate value and his

signature is verified.

4.3 Modes of Investment of IBBL

Islami Bank Bangladesh Limited being an ideological banking organization is firmly

committed to implement and materialize the economic and financial principles of
Islam in the banking are and thereby to do disparity and establish justice in the trade,
commerce, and industry and build socio-economic infrastructure, create opportunities
for employment and income generation and property alleviation, contribute to the
socio-economic enlistment and sustained economic growth of the country by
providing different types investment facilities.

Modes of Investment Scheme

B a i S M h I o a j ad r er e a s M o d e

M u Hd a i g r ha be ra P u r c h a s e
M u Hs h i ga hr ae kr a P u r c h a g e U n d e r S h i r k a t u l M e l k

B a i - M u r a b a h a
B a i - I s t i s h n a
B a i - M u a j j a l
B a i S a l a m

Figure 02 : Modes of Investment of IBBL. (Source : Self Created)

4.4 Bai Mechanism (Trading Mode)

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4.4.1 Bai-Murabaha Meaning

The terms Bai and Murabaha have been derived from Arabic words
Murabahaand Bai. The word Bai means purchase and the word Murabaha means a
in cash Bai-Murabaha means sale for which payment is in cash or in future fixed
date or within a fixed period. In short, it is a sale on cash.

Types of Bai-Murabaha

In respect of dealing parties Bai-Murabaha may be of two types.

1. Ordinary Bai-Murabaha

2. Bai-Murabaha on order and promise

1. 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.

2. 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 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.

Page | 46
Important features of Bai-Murabaha

a) There are three parties involved in this contract : Bank, Client and Supplier.

b) Purchase price and profit are to be mentioned separately in the sanction

advice.

4.4.2 Bai-Muajjal Meaning

The terms Bai and Muajjal have been derived from Arabic words Ajal and Bai.
The word Bai means purchase and sale and the word Ajal means a fixed time or a fixe
period Bai-Muajjal 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.

Categorization

1. Bai-Muajjal Commercial

Investment for Purchase and sale goods to individual /Firm/Company for

Commercial purpose shall be termed as Bai-Murabaha Commercial.

2. Bai-Muajjal Industrial

Investment to industrial undertakings in the Form of Land, Buildings,

Machineries, Equipments, Raw Materials, etc. shall be termed as Bai-
Murabaha Industrial.

3. Bai-Murabaha Agriculture

Investment to agriculture sector for supply of seeds, fertilizer etc. shall be

Page | 47
 termed as Bai-Muajjal Agriculture.

4. Bai-Muajjal Import

Investment for Import of goods from abroad shall be termed as Bai-Muajjal

Import.

Important features of Bai-Muajjal

a) Whether the goods that the client intends to purchase are marketable and have
steady demand in the market.

b) Whether the goods are perishable in short or in long-term duration.

c) Whether the price of the goods is subject to frequent and violent changes.

4.4.3 Bai-Salam Meaning

The terms Bai and Salam have been derived from Arabic words Bai and Salam.
The word Bai means Sale & Purchase and the word Salam means Advance.
Bai-Salam means Advance sale and purchase.

Important Features of Bai-Salam

a) Where are two parties involved in the contract : Bank and the clients.

b) Advance purchase of goods by the bank from the client.

c) Purchase price and profit need not be mentioned separately.

d) Bank may sale out the goods to anybody after getting delivery from the client.

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4.4.4 Bai-Istishna Meaning

The word Istishna has been derived from the word Istishna which means industry
or Manufacturing enterprise. Istishna to goods manufactured by placing orders to a
manufacturer.

Important Features Bai-Istishna

a) It gives the buyer the opportunity to pay the price in some future dates or by
installments.

b) It is a binding contract & no party is allowed to cancel the contract after the
price is paid & received in full or in part or the manufacturer starts the work.

c) It is specially practiced in manufacturing & industrial sector.

4.5 Share Mechanism

4.5.1 Mudaraba

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 pre-agreed basis and loss is exclusively borne by the partner providing the
capital.

Important Features of Mudaraba

a) Bank supplies capital as Sahib-Al-Mall and the client invest his experience.

Page | 49
 b) The client maintains administration and management.

c) Profit is divided as per management and

d) Bank bears the actual loss alone.

e) Client cannot take another investment for that specific business without the
permission of the Bank.

4.5.2 Musharaka

Musharaka means equity sharing. The partners share both 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.

Important feature

a) The investment client will normally run and manage the business.

b) The Bank shall take part in the policy and decision making, supervision and
monitoring the operations of the business of the client.

c) 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.

d) Loss, if any, share be shared on the basis of capital ratio.

4.5.2.1 Quard

The word Quart is an Arabic word which means loan or credit on advance. The

Page | 50
literal meaning of Quard is giving Fungible goods for use without any extra value
returning those goods. In banking sector, money is used as Quard. Quard is Halal by
Islam for not to pay any extra or interest in return.

Characteristics of Quard

a) There should have fungible goods,

b) Goods must be returned equally,

c) There is no extra payment and

d) Specific period for returning goods.

4.5.2.1 Quard-E-Hasana

Quard-E-Hasana is also one kind of Quard, which is given, with the expectation of
return or not.

4.6 Ijara Mechanism (Leasing Mode)

Hire Purchase/ Ijara

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

Hire Purchase Under Shirkatul Melk (HPSM)

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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 : Shirkat, Ijara
and sale. Shirkat means partnership. Shirkatul Melk means share an 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 contract.

Stages of Hire Purchase under Shirkatul Melk

Thus Hire Purchase under Shirkatul Melk Agreement has got three stages.

1. Purchase under joint ownership

2. Hire and Sale / transfer of ownership to the other partner Hirer

4.7 Special Investment

Side by side commercial and industrial sector IBBL has Some Special investment.

1. House Hold Investment Scheme

2. Household Durables Scheme (HDS)

3. Car Investment Scheme (CIS)

4. Small Business Investment Scheme (SBIS)

5. Micro Industries Investment Scheme (MIIS)

6. Agricultural Implement Investment Scheme (AIIS)

7. Real Estate Investment Program (REIP)

Page | 52
 8. Rural Development Scheme (RDS)

4.8.1 Trend of IBBL Year Wise Investment

Table 06 : Year wise investment position of IBBL (2011-2015)

Year General Inv. Increase/Decrease Inv. Growth

(million Tk )

2011 305,841 Nil Nil

2012 372,921 67,080 21.93%

2013 403,195 30,274 8.12%

2014 463,475 60,281 14.95%

2015 530,194 66,719 14.40%

Source : Annual Report of IBBL, 2015

Trend of Investment
600,000

500,000

400,000
General Inv.
300,000

200,000

100,000

0
2011 2012 2013 2014 2015

Page | 53
 Graph 01 : Year Wise Investments of IBBL. ( Source : Self Created)

Growth Rate of General Investment

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2012 2013 2014 2015

Graph 02 : Investment Growth Rate of IBBL. ( Source : Self Created)

Analysis : Total General Investment of the bank increased to Tk.530,194 million as

on 31.12.2015 from Tk.463,475 million as on 31.12.2014 showing an increase of Tk.
66,719 million and 14.40% growth. The growth was affected due to the overall
economic scenario prevailing throughout 2015. The trend of investment shows near
doubling of the figure in 5 years.

From the graph we can find out that in 2013 investment growth rate was slow down
by 8.12%. In 2012 the growth rate was 21.93% which was the highest position among
5 years. In 2014 the investment growth rate was 14.95%. In 2015 IBBL's investment
growth rate was 14.40% which was lower than 2014.

4.8.2 Mode Wise Investment

Table 07 : Mode wise investment of IBBL (2013-2014)

Amount (million Tk)

Page | 54
 Mode 2014 2013

Growth %
Particulars Amount % to total Amount % to total
Investment Investment

Bai-Murabaha 331,239 62.48% 281,556 60.75% 17.64%

HPSM 123,856 23.36% 109,941 23.72% 12.65%

Bai Muajjal 34,818 6.57% 15,443 3.33% 125.461%

Bill 15,004 2.83% 30,424 6.56% -50.68%

Purchased &
Negotiation

Quard 14,564 2.75% 15,478 3.34% -5.90%

Bai- Salam 5,320 1.00% 4,808 1.04% 10.64%

Mudaraba 5,000 0.94% 3,000 0.65% 66.66%

Musharaka 393 0.07% 2,825 0.61% -86.08%

Total 530,194 100% 463,475 100% 14.39%

Source : Annual Report of IBBL, 2015

Page | 55
 % of Mode Wise Investment (2014)

Bai-Murabaha HPSM Bai Muajjal Bill Purchased & Negotiation

3% 3% 1% 1% 0%
7%

23%
Quard Bai- Salam Mudaraba 62%
Musharaka

Graph 03 : Mode Wise Investment of IBBL 2013 ( Source : Self Created)

% of Mode Wise Investment (2013)

Bai-Murabaha HPSM Bai Muajjal Bill Purchased & Negotiation

3% 1% 1% 1%
7%
3%
24%
Quard Bai- Salam Mudaraba
61%
Musharaka

Graph 04 : Mode Wise Investment of IBBL, 2104. ( Source : Self Created)

Page | 56
 Growth % of Mode Wise Investment
150.00%
100.00%
50.00%
0.00%
-50.00%
-100.00%

Graph 05 : Growth of mode wise investment of IBBL, 2014. ( Source : Self Created)

Analysis : In the year 2013 total mode wise investments was Tk. 463,475 million and
in the year 2014 investment was Tk. 530,194 million. In 2014 and 2013 Bai
Murabaha investment was the highest portion among the other mode wise investment.
Then HPSM mode was the second position and the lowest investment was in
Musharaka contract which was 0.07% and 0.61%

From the graph we can find out that in 2014, the Bai-Murabaha investment growth
rate was increased by 17.64%. In 2014, Bai Muajjal investment growth rate was
125.461% which reached highest position from other mode of investment. Bill
Purchased & Negotiation (-50.68%), Quard (-5.90%) & Musharaka (-86.08%) which
growth rate were decreased in 2014.

4.8.3 Sector Wise investment

Table 08 : Sector wise Investment of IBBL, 2013 &2014

Amount (million Tk)

Page | 57
 Sector 2014 2013

Growth
%

Particulars Amount % to total Amount % to total

Investment Investment

Commercial 36,854 6.95% 42,352 9.14% -12.98%

Real Estate 41,778 7.88% 37,680 8.13% 10.88%

Agriculture 10,638 2.01% 11,354 2.45% -6.31%

Transport 6,820 1.29% 6,435 1.39% 5.98%

SME 229,864 43.35% 181,918 39.25% 26.36%

Others 31,649 5.97% 28,304 6.11% 11.82%

Total 530, 194 100% 463,475 100% 14.40%

Source : Annual Report of IBBL, 2015

Page | 58
 % of Sector Wise Investment (2014)

Commercial
9% 10%
12% Real Estate
3% Agriculture
2% Transport
SME
64%
Others

Graph 06 : Sector wise Investment of IBBL 2014. (Source : Self Created)

% of Sector Wise Investment (2013)

9% 14%
12%
Commercial Real Estate Agriculture Transport
4% SME Others
2%
59%

Graph 07 : Sector wise Investment of IBBL, 2013. (Source : Self Created)

Page | 59
 Growth % of Sector Wise Investment
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Commercial Real Estate Agriculture Transport
-5.00% SME Others
-10.00%
-15.00%

Graph 08 : Growth of Sector Wise Investment of IBBL, 2014. (Source : Self Created)

Analysis : In 2014 investment of SME sector was increased from 39.25% to 43.35%
which was biggest portion also. The investment of transport sector of IBBL was
1.29% in 2014 which was lower than 2013.

From the graph we can find out that in 2014, SME sectors growth rate was 26.36%
which was best position from other sectors. In 2014, commercial (-12.98%) and
agriculture investment sector (-6.31%) of IBBL's growth rate were declined.

4.8.4 Scheme Wise Investment

Table 09 : Special Scheme of IBBL (2011-2015)

Amount (million Tk)

Sl. Name of Scheme 2012 2013 2014 2015 Growth

No. %

i. Rural Development 10390 13731 17380 20,799 19.67%

Page | 60
 Scheme (RDS)

ii House-hold 955 1048 1392 1,545 10.99%

Durables Scheme

iii. Investment Scheme 32 37 55 58 5.45%

for Doctors

iv. Transport 6887 7057 6832 7,207 5.49%

Investment Scheme

v. Car Investment 113 75 69 124 79.71%

Scheme

vi. Small Business 2774 3202 3817 4,094 7.25%

Investment Scheme

vii. Micro-Industries 36 29 22 54 145.45%

Investment Scheme

viii. Agricultural 278 337 882 2,929 232.09%

Investment

ix. Housing Investment 316 261 209 166 -21%

Scheme

x. Housing Investment 15660 15903 20780 23,250 11.88%

Program (HIP)

xi. Palli Griha Nirman 1483 2059 2717 3,260 20%

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 Beniyog Prakalpa

xii Sub Total 43739 43739 54156 63,487 17.23%

xiii Total Investment 406817 406817 463475 530,194 14.40%

xiv % to total 10.75% 10.75% 11.68% 11.97% 2.48%

Investment

Source : Annual Report of IBBL, 2015.

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 Scheme Wise investment of IBBL, 2015
250.00%

200.00%

150.00%

100.00%

50.00%

0.00%

-50.00%

Graph 09 : Growth Analysis of Scheme Wise Investment of IBBL, 2015. (Source : Self Created)

Analysis : Outstanding against welfare oriented investment schemes over the last five
years increased from 10.75% to 11.97% of General Investment.

From the graph we can find out that the growth rate of all scheme were in good
position. Housing Investment Scheme growth was (-20.57%) in 2015 and which
growth rate was lower than other schemes.

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4.9 Investment Information of Branch

4.9.1 Organogram of Foreign Exchange Branch, IBBL

IBBL, Foreign Exchange Branch

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 Figure 03 : Organogram of Foreign Exchange Branch (Source : Self Created)

4.9.2 Year Wise Investment of Foreign Exchange Branch, IBBL

Table : 10 Year Wise Investment of Foreign Exchange Branch (2011-2015)

Serial Year Amount Increase/ Growth %

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No. (million Tk) Decrease

01 2011 18598.82 Nil Nil

02 2012 20939.81 2,340.99 12.58%

03 2013 16719.63 -4,220.18 -20.15%

04 2014 17690.20 970.57 5.80%

05 2015 23133.37 5,443.17 30.76%

Source : Yearly statement of Affairs of the Foreign Exchange Branch, IBBL. (Year 2015)

General Investment Foreign Exchange of IBBL

25000

20000

15000

10000

5000

0
2011 2012 2013 2014 2015

Graph 10 : General Investment of Foreign Exchange Branch, (Source : Self-Created)

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 Growth Rate of General investment
40.00%
30.00%
20.00%
10.00%
0.00%
2012
-10.00% 2013 2014 2015
-20.00%
-30.00%

Graph 11 : Investment Growth Rate of foreign Exchange Branch, (Source : Self Created)

Analysis : Total General Investment of the bank increased to Tk.23133.37 million as

on 2015 from Tk. 17690.20 million as on 2014, showing an increase of Tk. 5443.17
million and 30.76% growth. The trend of investment shows the Foreign Exchange
Branch of IBBL has satisfactory position in 2015.

From the graph we can find out that the growth rate was slow down in 2013 but it
was increased in 2014 to 2015.

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4.9.3 Mode-Wise Investment of Foreign Exchange Branch, IBBL

Table 11 : Performance of Investment sector of Foreign Exchange Branch of IBBL, (Year

2012-2015)

Amount (million Tk)

Mode 2012 2013 2014 2015 Growth

%

Bai Murabaha
1926.55 4248.04 5450.50 6765.27
(General) 24.12

Bai Murabaha
6627.87 2216.60 1432.75 3132.80
(Post-import) 118.66

Bai Salam 246.23 262.03 253.28 295.90

16.83

Bai Muajjal 431.43 198.64 90.51 23.50

-74.04

Musharaka 2819.14 986.96 428.13 696.73

62.74

HPSM 6795.70 6608.52 5411.16 5688.24

5.12

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Murabaha
Import Bills 300.41 1335.22 1310.51 1359.28 3.72
(UPAS)

Source : Yearly Statement of Affairs of the Foreign Exchange Branch of IBBL, 2015.

Mode Wise Investment Foreign Exchange Branch of IBBL

25000
20000
15000
10000
5000 2015
0
2014
2013
2012

Graph 12 : Mode Wise Investment of Foreign Exchange Branch. (Source : Self-Created)

Growth rate of Mode Wise Investment

150
100
50
0
-50
-100

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 Graph 13 : Growth Rate of Investment modes in Branch, (Source : Self Created)

Analysis : HPSM investment was satisfactory position in 2012 to 2015. In 2014 and
2015, Bai Murabaha (General) investment was better position from previous two
years. The Bai-Muajjal investment of Foreign Exchange Branch of IBBL had less
concentrate in (2012-2015).

From the graph we can find out that in 2015, Bai Murabaha (Post Import) growth rate
was 118.66% which was better position from other modes and Bai Muajjal investment
was decreased and growth rate was (-74.04%).

4.9.4 Sector Wise Investment of Foreign Exchange Branch, IBBL

During this short spend of time the bank of time had been successful to position itself
as a progressive and dynamic financial institution in the country. The bank had been
widely acclaimed by the business community from small businessmen, entrepreneurs
to large tracers and industrial conglomerates, including the top rated corporate
borrowers for forward looking business outlook and innovative financing solutions.
Following are performance & analyzing given.

Table 12 : Sector Wise Investment of IBBL Foreign Exchange Branch.

Serial No Sector Amount (Million Tk) % of Investment

01 SSDS 2.22 0.009%

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 02 HDS 0.52 0.002%

03 SHBIS 339.92 1.34%

04 Industrial 22807.91 89.73%

05 Car Investment 1.34 0.0053%

06 Housing Investment 397.23 1.56%

07 Commercial 1211.61 4.77%

08 Real Estate 6.20 0.024%

09 Transport 432.69 1.702%

10 Womens Entrepreneur 0.30 0.0012%

11 Others 217.77 0.857%

12 Total 25417.69 100%

Source : Yearly statement of Affairs of the Foreign Exchange Branch of IBBL, 2015

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 Sector
SSDS Wise Investment
HDS Foreign
Exchange Branch of IBBL (2015)
SHBIS Industrial

Car Investment Housing Investment

Commercial Real Estate

Transport Womens Entrepreneur

Others

Graph 14 : Sector Wise Investment of Foreign Exchange Branch 2015. (Source : Created)

Analysis :From the graph we can fimd out that in 2015, the Foreign Exchange
Branch of IBBL was invested Tk. 22807.91 million in industrial sector which was
highest invest amount from other sectors. commercial sector was the second
investment position and other investment was lower comparatively and the total
sector wise investment was Tk. 25417.69 million.

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4.10 Findings

While working on Islami Bank Bangladesh Limited, Foreign Exchange Branch, I

gained a newer kind of experience. Findings are accumulated after identifying and
analyzing the investment activities of IBBL, which are completely from my point of
views.

a. Most of the people in our country have a bad impression of IBBL's operations
regarding indirect generation of interest which meaning no difference between
investment of IBBL and loan/Credit/advance of conventional banks for this
reason, they are not too much interested to make investment with IBBL.

b. Majority of our people have no proper knowledge about the activities of

Islamic Banking as well as its investment mechanism hamper large scope of
investment of IBBL.

c. This Bank cant invest in all economic sectors like Alcohol Industry, Tobacco
factory etc. These sectors are prohibited for the bank to invest.

d. Sometimes IBBL cant invest its assets in proper portfolio due to insufficient
and unskilled manpower in these regards. As a result, there is a large amount
of money being idle and thus potential profit is not increasing.

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e. IBBL has no strong promotional activities to increase motivate its present and
potential investment client.

f. This Bank revalues its investment operations within limited number of

investment modes and does not initiate investment modes according to
changing diverse needs of people.

g. Sometimes investment operations of IBBL are hampered due to increase,

dishonest, indiscreet, hypocritical nature of people.

h. Because of improper, insufficient application of Islamic Banking rule in our

country the investment operations of IBBL cant run smoothly.

i. Day by day new upcoming banks are coming with their new investment
services, which could be the threats for IBBL, because IBBL has limited
investment schemes.
j. Though IBBL is committed to avoid interest but they cant do this fully.

k. The trend of investment of IBBL was near doubling of the figure in 5 years.
In 2012 the growth rate was 21.93% which was the highest position among 5
years. In 2013 investment growth rate was slow down by 8.12% but now it's
gradually increasing. In 2014 the investment growth rate was 14.95%. In 2015
IBBL's investment growth rate was 14.40% which was lower than 2014.
l. In 2014, IBBL increased Bai-Muajjal investment which growth rate was
125.46% but their highest investment was Bai-Murabaha then HPSM . On the
other hand lowest investment was in Musharaka contract which growth rate
was decreased by 86.08%.
m. In 2014, SME sectors of IBBL growth rate was 26.36% which was highest
position. The investment in commercial and agriculture sector growth was
decreased by 12.98% and 6.31%.
n. In 2015, Housing Investment Scheme of IBBL growth rate was (-20.57%) and
which growth rate was lower than other schemes.
o. In 2015, the trend of investment shows the Foreign Exchange Branch of IBBL
was satisfactory position from previous 4 years and growth rate was 30.76%.
p. In (2012-2015), investment of Foreign Exchange Branch, IBBL had more
concentrate in HPSM and less concentrate in Bai-Muajjal mode. In 2015, the

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 growth rate of Bai Murabaha (post Import) increased by 118.66% and Bai
Muajjal decreased by ( -74.04%) which was lower than other modes.
q. In 2015, investment in industrial sector of Foreign Exchange Branch, IBBL
was highest than any other investment, commercial sector was the second
investment position and other investment is lower comparatively.

4.11 Overall Learning from my Internship

Working in IBBL in Foreign Exchange Branch of IBBL as an intern was the best
opportunity for me to acquire practical knowledge about banking sector. I worked the
all department of this branch. It was tremendous journey for me to go through the
actual experience of banking sector. Real word is far away different from the
theoretical knowledge. As in intern of IBBL I had experience of so much new things. I
knew actual work of bankers and observed how the works are being done according to
serve to serve the customer properly.

My Some Experience in General Banking

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We were three intern in Foreign Exchange Branch of IBBL and I got chance to work
in general banking.

1. Account opening
2. Cheque book issue
3. DD, PO issue
4. Clearing section
5. Remittance
6. Alternative delivery channel.

My Experience in Investment Department

1. Sanction letter and documentation.

2. Charge document or mortgage facilities.
3. Pre audit memo disbursement procedures.

My Experience in Foreign Exchange Branch

1. Import Section,
2. Import Section and
3. SCA section.

My Observation

Foreign Exchange Branch of IBBL should evaluate for a better working plan due to
its environment and employees. During my 2 month internship program I really
enjoyed a healthy and worm atmosphere there but there was short-coming too.

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Shorts of IBBL

a. Their ATM booths are not available according to peoples demand.

b. IT facilities of Foreign Exchange Branch, IBBL are not satisfactory good.
Computer system which owned by branch are not up to date, not sufficient and
moreover some of computer system not work properly when they are needed.
c. Lack of proper space for the employee of Foreign Exchange Branch of IBBL.
d. Less female employees in the Foreign Exchange Branch of IBBL, especially
in investment sector.
e. There are no female introducer for female customer in Foreign Exchange
Branch.
f. Lack of Employee in customer service desk in Foreign Exchange Branch of
IBBL.

A Few suggestion to Overcome These Shorts

a. The bank need to open more ATM booths in different places as it has a huge
number of customers.
b. IBBL should develop Information Technology to ensure better service for
customer.
c. Increase Space for all department of Foreign Exchange Branch of IBBL.
d. The bank can consider employing more female employees in the branch,
especially in the investment sector to attract more female customers.
e. They can consider female introducer to attract more female customer and they
can easily solve female customers problem.
f. Increase the number of employee in customer service desk.

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 Chapter-05

Recommendations and Conclusion

Page | 78
5.1 Recommendations

According to my findings and knowledge think the authority of the IBBL should take
some step which can help them to survive in the banking sector even economic world.
Everything needed modification for the competitive world.

a. There is a difference between investment of IBBL and loan/credit/advance of

conventional banks because IBBL dont give loan, they give investment &
they take their percentage when their investment purpose is profited. On the
other hand, conventional bank give loan & take their percentage after a fixed
period. This difference should be known to the people or customer.
b. Islami banking and Islami economy must be included in the syllabus of
schools and universities so that Islami educated people can have opportunity
to get employed in Islami bank and the service of Islami bank can be better

Page | 79
 with the help of these skilled personnel.
c. Islami bank can invest in all economic sectors if those projects is not haram so
that those project should be helpfull for the people. So, people who want to
start a business should be honest and peacefull. If people are honest, Islami
bank will be interested more in all halal economic sectors.
d. IBBL cant invest its assets in proper portfolio due to insufficient and
unskilled manpower in these regards. As a result, there is a large amount of
money being idle and thus potential profit is not increasing. For this reason,
they have to appoint some skilled manpower & have to be trained about
investment so that this trained people can give knowledge to the people.
e. IBBL should take strong promotional activities so that it can increase &
motivate its present and potential investment client. Thats why client will be
invested more next time.
f. Islami bank widely uses the Bai-Murabaha mode. They should increase their
use in other investment modes. It may be fill up the diverse needs of people.
g. Since investment operations of IBBL are hampered due to increase, dishonest,
indiscreet, hypocritical nature of people, so bank have to identify the real
people for investment.
h. The bank should more invest in safe sector & choosing most credit worthy
borrower.
i. The IBBL should invest more in musharaka which is the most ideal
investment mode according to Shariah and initiates different investment
modes according to changing/diverse needs of clients by conducting huge
research and study.
j. Our country is agro based for that reason IBBL should invest more in
agriculture sector. Now our commercial sector is developing day by day. So
IBBL can more investment in commercial sector.
k. IBBL should make its investment schemes more attractive for availing high-
return projects and may arrange monthly/quarterly training courses/workshops
for the prospective clients selected by the branches in order to promote
Investment schemes at desired level.
l. IBBL should introduce new schemes like Education Investment Scheme, Shop
Financing scheme and so on to cope with the competitive market.
m. The Foreign Exchange branch of IBBL should maintain and increase their
growth rate.
n. In (2012-2015), investment of Bai-Muajjal mode was lower position than

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 other modes. So they should more concentrate in this mode.
o. The Foreign Exchange Branch, IBBL growth investment can grow up by
concentration of Bai-Muajjal mode investment of Foreign Exchange Branch.
p. The Foreign Exchange Branch of IBBL can more concentrate in commercial
sector to involve profitably in this sector for the development of the branch as
well as the economy.
q. They can introduce online application, submission and personal credit
processing facility; reduce investment processing time and fees to attract more
prospective clients.
r. The bank should provide emphasis to maintain documentation process
properly and should concentrate on to minimize disbursement time of
investment.

5.2 Conclusion

Islami Bank Bangladesh Limited (IBBL) was incorporated on 13, March, 1983 as a
public company with limited liability under the companies act, 1913. The bank started
functioning with effect from 30, March, 1983. IBBL is the first interest (Riba) free
banking in South Asia. The establishment of this bank conducted new age in
Bangladesh, the 3rd largest Muslim country in the world. The bank is committed to run
all its activities as per Islamic Shariah. IBBL through its steady process and continued
success has, by now 2016, earned the reputation of being one of the leading private
sector banks of the country. The bank has shown steady process in this important
sector. Main items of import (by the help of IBBL) are machinery, garments, fabrics
and accessories, ships for scarping, rice pharmaceuticals etc. Whereas main items of
exports are jute goods, readymade garments, leather, frozen fish, fertilizer, etc. Still
now hear about 301 Islamic banking and financial institutions in about 49 countries of
Asia, Africa, Europe, America and countries like Pakistan, U.K., U.S.A., Germany,
Argentina, Denmark, Luxembourg, Switzerland and India have been established. The
banking system of Pakistan and Iran was totally remodeled on the basis of Islamic
Shariah services. IBBL will be more effective in our economy by lunching new
financial products to attract deposit as Consumer Credit Scheme, Pension Scheme,

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Child Education Scheme, Plastic Money ATM and Online service etc

References

Books

1. Gordon & Natarajan (2010). Banking Theory, Law & Practice. 11th Edition
New Delhi, India : Himalaya Publishing House.

2. Lawrence, J. G. (2013). Principle of Managerial Finance. 10th Edition. New

York, USA : Pearson Education.

3. Ross, S., Westerfield, R. & Jordan, B. (2015). Fundamental of Corporate

Finance. 11th Edition. New York, USA : Pearson Education.

Page | 82
Prospectus

1. Annual Report, Islami Bank Bangladesh Limited, 2011

2. Annual Report, Islami Bank Bangladesh Limited, 2012

3. Annual Report, Islami Bank Bangladesh Limited, 2013

4. Annual Report, Islami Bank Bangladesh Limited, 2014

5. Annual Report, Islami Bank Bangladesh Limited, 2015

6. Articles of Islami Bank Bangladesh Limited.

7. Department of Islami Bank Bangladesh limited, Foreign Exchange Branch.

8. Islamic Economics Research Bureau A Special issue on Islami Bank.

Website

1. http://www.educarnival.com/islami-bank-bangladesh-limited/
2. www. wikipedia
3. www.islamibankbd.com
4. http://www.assignmentpoint.com/business/finance/investment-management-
of-islami-bank-bangladesh-limited.html
5. http://www.islamibankbd.com/annual_report.php
6. http://kalyan-city.blogspot.com/2011/04/functions-of-banks-important-

banking.html

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