Internship Report On Investment Modes & Procedures of Islami Bank Bangladesh Limited-Daffodil International University

INTERNSHIP REPORT
ON
INVESTMENT MODES & PROCEDURE
OF
A STUDY ON MIRPUR-10 BRANCH
SUBMITTTED TO
FATEMA NUSRAT CHOWDHURY
Senior Lecturer
Department of Business Administration
Faculty of Business and Economics
Daffodil International University
SUBMITTED BY
MUNSHI MIRAJUL ISLAM
ID NO: 142-11-3937
MAJOR IN ACCOUNTING

LETTER OF TRANSMITAL

Senior Lecturer
Subject: Submission of Internship Report on Investment Modes and procedures of Islami

Bank Ltd.
Dear Madam,
I am very pleased to inform you that I have prepared my internship report on Investment
Modes and procedures Of Islami Bank Bangladesh Ltd. for the program of Bachelor of
Business Administration (BBA).
I have prepared this report based on the practical experience of working and data collecting
through the observation and interview of the employees of Islami Bank Ltd.
Please accept my internee report and if you have any question regarding this report please
call me for further information at your convenient time and place.
Sincerely yours
------------------------
Munshi Mirajul Islam
ID:142-11-3937
Daffodil International University I

Certificate of Approval
This is to certify that Munshi Mirajul Islam, Student of Bachelor of Business Administration
(BBA) under Department of Business Administration of Daffodil International University, has
successfully completed his assigned Internship Report on Investment Modes & Procedure of
Islami Bank Bangladesh Limited.
He has placed in the Islami Bank Bangladesh Limited which is one of the glorious banks both
at home and abroad. Islami Bank Bangladesh Limited is also the first bank which introduce
the Islami Sariah based banking system in Bangladesh.
The BBA Internship Report, he has submitted on the topic, is up good in the terms of the quality
and the organization.
I wish his every success in life.
----------------------------------------

Senior Lecturer
Daffodil International University II

Acknowledgement
First of all, I want to express my special gratitude to Almighty Allah for giving me the
opportunity & strength to complete the report on time.
I am deeply indebted to a large number of people for their kind suggestion and cooperation. I
would like to give special thank you to my Academic supervisor
FATEMA NUSRAT CHOWDHURY Mam, who was very kind to supervise, instruct and direct
me to complete my Internship report.
I would like to thank the Course Director Masuma Begume FAVP and coordinator Dr. Saleh
Matin, SPO & FM of IBTRA; for giving me the opportunity to know about IBBL, supporting
& directing to make this report. I profoundly grateful Md. Mujibur Rahmam SPO(Investment
in charge), Md. Boni Amin (In charge of GB) and Md. Kamruzzaman, SPO of Mirpur 10
branch for their supervision, guidance and cooperation.
This report, with all the interpretation on practical orientation in bank with the function and
mechanism in the field of banking activity, would not be possible without help and cooperation
of the officers engaged in the Mirpur 10 branch of IBBL. They have willingly supplied all the
practical knowledge and interpretation for making this report so convenient with the purpose
of our BBA program.
I am thankful to and fortunate enough to get constant encouragement, support and guidance
from all Teaching staffs of Daffodil International University which helped me in successfully
completing my report.
Daffodil International University III

Executive Summary
The internship report is a partial requirement for the Bachelor of Business Administration. As a part
of the internship program, I was placed at Mirpur-10 Branch Ltd. During this two month internship I
have worked with the department of Investment sector of this bank.
Islami Bank Bangladesh Limited (IBBL) is considered to be the first interest free bank in South Asia.
It was incorporated on March 13,1983 as a public company with limited liability under the companies
act 1913.Islami Bank began its operations on March30, 1983.They gained success from the very
beginning of operation and were capable enough to hold the success year after year. They gained
success very early because they have a very strong financial backup.
Investment or loan department are the crucial part of a bank. The objectives of this study are to
identify the task of loan disbursement procedure of Islami Bank, to describe the different loan
products and it services to identify the limitations, if any and to recommend suggestions. The report
contains information about loan product and its disbursement procedure.
Islami Bank of Mirpur Branch offers a full range of deposit products such as saving deposit, current
deposit, fixed deposit and so no. This bank provides mainly two types of lending procedure, funded
and non-funded. Here funded indicates providing the cash immediately and no funded indicated it is
not needed to provide the loan in cash immediately guaranty or promise to the customers.
Investment products of Islami Bank have some limitations what I have written roughly trough out my
internship report.
Daffodil International University IV

Acronyms Elaboration
IBBL Islami Bank Bangladesh Limited
IBCA Inter Branch Credit Advice
IBDA Inter Branch Debit Advice
HO Head Office
L/C Letter of credit
LCA Letter Of Credit Authorization
IMP Import
EXP Export
TIN Tax Identification Number
B/E Bill Of Exchange
B/L Bill Of Lading
FCC Foreign Currency Clearing
TR Trust Receipt
FDD Foreign Demand Draft
DD Demand Draft
OD Over Draft
FDR Fixed Deposit Rate
Daffodil International University V

TABLE OF CONTENTS
CHAPTER 01 ..1
INTRODUCTION ...1
Introduction........2
1.2 Background of the Report ..2
1.3 Scope of the study..2
1.4 Objectives of Islami Bank: ....3
1.5 Methodology..4
1.6 Limitation of the Study .5
CHAPTER 02
Overview of Islami Bank Bangladesh Limited ....8
2.1 An overview of Islami Bank ..9
2.2 History of Islami Bank of Bangladesh Limited .....9
2.3 Concept of Islamic Banking. ..10
2.4 Mission and Vision of IBBL.....12
2.5 Shariah Council of IBBL .13
2.6 SPECIAL FEATURES OF IBBL ...14
2.7 Distinguishing Features of Islamic Banking against Commercial Banking.15
2.8 Present Program of IBBL.16
2.9 Functions of IBBL .16
2.10 Business Philosophy of IBB .17
2.11 Role and contribution of IBBL to Bangladesh Economy ......17
2.12 Achievements.19
2.13 Organizational Hierarchy of IBBL.22
2.14 Aims of IBBL.23
2.15 Products and Services,,,..23
2.15.1 Investment Modes . ....24
2.15.3 Investment scheme .24
2.16 Investment .25
2.17 Objectives and Principles of Investment ..26
2.18 Factors Related with Investment ... .26
2.19 Importance of Investment . . ....26
2.20 Investment Policy of Islami Bank Bangladesh Limited (IBBL) . .27
2.21 Principles or Modes of Investment of IBBL... . 28
2.21.7 Welfare-oriented Investment Schemes of IBBL . ..37
2.21.8 Investment Process of IBBL .. . ....39
2.21.9 Investment Classification ........ ..44
CHAPTER 03
REPORT ANALYSIS
3.1 Outcomes... .48
3.2 Deposit Products.... .48
3.3 General Investment... ..49
3.4 Sector wise investment ... ..50
3.5 Mode-wise Investment.... . ..51
3.6 SME Investments.. .52
3.7 Contribution of IBBLs SME Exposure to National SME Exposure ...53
Daffodil International University VI

3.8 Scheme-wise Investment.. ..54
3.9 Performance under the Schemes at a glance as on 31.12.2016.. ....56
3.10 Expansion of RDS & UPDS in the last 5 years is shown in the following table.. ...56
3.11 Investment Program .....57
3.12 Growth of investment ......58
3.13 Non-Financial (welfare) Programs under the Schemes ...59
3.14 Non-performing Investment ....60
3.15 Ratio Analysis..62
CHAPTER 05
FINDINGS AND RECOMMENDATIONS 83
4.1 Findings . .84
4.2 Swot Analysis Of IBBL . .. ...84
4.3 Recommendations... . ......85
4.4 Conclusion. ... ..86
Appendices . ...88
Bibliography........................ ........................... ........................ ...................................................87
Daffodil International University VII

Chapter-1
INTRODUCTION OF THE REPOERT
Daffodil International University Page | 1

1.1 Introduction
In the backdrop of economic liberalization and financial sector reforms, a group of highly successful
local entrepreneurs conceived an idea of floating Islami Bank Bangladesh Ltd system. For them, it
was competence, excellence and consistent delivery of reliable service with superior value products
based on Islamic Shariah. Lending money is the major part of a bank. It is the main investment
segment of any bank and required different phases of activities and policy guideline while going for
credit facilities to a customer. Islami Bank has introduced investment schemes to improve the quality
of life particularly of the fixed income earner of the society.
The banking system plays a vital role in the progress of economic development in a developing
country like Bangladesh .The journey of private commercial banks started playing banking arena in
Bangladesh in the year 1982-1983. After commencement the private commercial play an important
role in the economic development of the country. In every aspect of profit, banking sector contributes
the national economy as well as to the individual organization. Despite overall growth of the banking
sector being positive, the performances of different categories of banks were not equally attractive.
There are people interested to abide by the injunctions of religions in all sphere of life including
economic activities.
1.2 Background of the Report
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.
It has become essential for every person to have some idea on the bank and banking procedure. As
our educational system predominantly text based, inclusion of practical orientation program is an
exception to the norm. From practical knowledge, we will be able to know real life situations and
start a career with some practical experience.
After the completion of BBA program I was placed in Islami Bank Bangladesh Limited for the
internship program under the guidance of my faculty supervisor. The duration of my organizational
attachment was 2 months, starting from 2nd October 2017 to 26th November 2017.For successful
completion of BBA program; it requires to submit a report, which would illustrate a basic reflection
of the learning.

1.3 Scope of the study
The scope of the organizational part covers the organizational structure, background, products and
services and the financial performance of Islami Bank Bangladesh Limited as a whole and the main
part covers investment risk management of IBBL. This report helps us to understand the clear real-
time experience about the investment business operations of IBBL.
In this report I have focused on all the qualitative which include profiles of IBBL, Investment
mechanism like Bai mechanism, Partnership or Share mechanism and Leasing or Ijara mechanism,
different schemes of investment such as household durable schemes, housing investment scheme,
transport investment scheme, car investment scheme, investment scheme for doctors, small business
investment schemes, rural development scheme etc.
1.4 Objectives of the study
1.4.1 Broad Objective: The prime objective of this report is to analyze the Investment Modes
and Procedures of Islami Bank Bangladesh Limited.
1.4.2 Specific Objectives: In order to accomplish the broad objective following specific
objectives are emerged,
To depict the procedures of IBBL follow for lending to the customer.
To know the policies of investment management of IBBL.
To know the trend and growth of investment of IBBL over the year.
To know and analyze the sector-wise investment, mode-wise investment, geographical
distribution of investment etc. of IBBL.
To evaluate the overall investment management system of IBBL through different ratios. To
compare and analyze the investment and investment risk related performance of IBBL with
other Islamic banks of Bangladesh as well as the banking sector.
To recommend actions that may be necessary to redesign the investment management of
IBBL.
1.4.3 OTHER OBJECTIVES

(a) Establishment of an Interest frees financial system.
(b) Ensuring justice to both suppliers of fund and user of fund.
(c) Encouraging & patronizing entrepreneurship.
(d) Creating employment.
(e) Bridging up the gap between the surplus and deficit of fund.
(f) Development of a healthy capital and money market.
(g) Providing various services and utilities to the public.
(h) Development of standard of living.
(i) Maintaining justice and equity at all level of transaction.
(j) Swishing over to mass banking from class banking.
(k) Alleviating Poverty through Zakat & profit sharing micro-finance.
1.5 Methodology
Methodology is the process or a system through which a study is being carried out for the purpose of
collection of information that is required is collection with the study for reaching a conclusion on that
study. For smooth and accurate study everyone have to follow some rules & regulation. The study
impute were collected from two sources:
1.5.1 Data Collection

To prepare this report the data has been collected from two sources, such as primary source and
secondary source
1.5.1.1 Primary Sources of Data: I discussed with the officials and executives of the IBBL,
Mirpur Branch and found the approximate data which has been used and presented in this report. The
study has been conducted through the assistance of Investment Department, Mirpur Branch as per
their operating and maintaining an investment business through applying modern and technological
means. I have also physically observed the effectiveness of the efforts relating investment business
effectively and efficiently managed by Islami Bank Bangladesh Limited, Mirpur Branch. Primary
sources of data include the following:
Practical work experience,
Direct Interviews & Conversation
Official records
Observation of various organizational procedures

Expert opinion
Practical desk work
Direct observations
1.5.1.2 Secondary Sources Data: I have collected secondary data from the following sources:
Annual report of Islami Bank Bangladesh Limited.
Training sheets which are provided by Islami Bank Training and Research Academy
(IBTRA).
IBTRA Library.
Files & Folders of IBBL
Memos & Circulars of IBBL
Various publications on Bank,
Manuals of IBBL regarding investment business.
IBBLs website (www.islamibankbd.com).
Different circulars sent by Head Office and Bangladesh Bank. Data Collection Technique
Personal interview and conversation with employees of the organization.
Face to face conversation with the respective officers
Practical deskwork
Software: MS Word, Microsoft Excel
1.5.1.3 Data Analysis Tools and Techniques:
To analyze and present the numerical data and values associated with Investment Risk Management
of Islami Bank Bangladesh Limited. I have used following tools and techniques:
i. Column Chart,
ii. Bar Chart,
iii. Line Chart,
iv. Pie Chart, and
v. The formula has generated and used in Microsoft Excel.
1.5.1.4 Data Analysis and Reporting: Both qualitative and quantitative analyses have been done
while conducting this study. Microsoft Word and Microsoft Excel were used to analyze, process and
graphically represents the gathered data.

1.6 Limitation of the Study
Although I have obtained the whole hearted co-operation from the employees of Islami Bank
Bangladesh Limited, Mirpur Branch and Islami Bank Training and Research Academy but in the way
of my study, I have faced the following problems, which may be termed as the limitations of the
study. Some limitations are as under:
The main constraint of the study was insufficiency of information, which was required for the
study. There are various information the bank employee cant provide due to security and
other corporate obligations.
All the branches of the bank were not physically visited and all the concerned personnel of
the bank have not been interviewed.
Lack of in-depth knowledge and analytical ability for writing such report.
Lack of experience.
Learning all the banking functions about the investment mechanism within just 60 days was
really tough.
Data and information used in this study are mostly from secondary sources.
Large scale research was not possible due to the constraints and restrictions posed by the bank.
The report has encountered these limitations that may hinder the progress of the study but
with constant effort, I try to minimize the negative effects of these limitations.

Chapter-2
OVERVIEW OF ISLAMI BANK

BANGLADESH LIMITED

2.1 An overview of Islami Bank
The interest based banking system and mechanism is very familiar to us. At the time of independence
Bangladesh inherited an interest-based banking system introduced by the British government during
the colonial period. At present four nationalized banks, four specialized banks, nine foreign banks
and thirty one private commercial banks are operating in the financial market of Bangladesh. But the
Islamic banking in Bangladesh dates back to 1983 when the Islami Bank Bangladesh Limited was
established with a view to conducting its banking activities based on the principle of Islamic Shariah.
Islamic banking was successfully tries in Egypt. After establishing the MitGhamar Model, Naser
Social Bank was in the process of establishment. During the seventies, Islamic Development Bank
(IDB) and a number of Islamic banks at national levels were established in the Islamic world. At
home the Islamic groups were vigorously working for adoption of Islam as the complete code of life.
They found Islamic banking in ready form of immediate introduction. Two professional bodies
Islamic Economics Research Bureau (IERB) and Bangladesh Islamic Bankers Association
(BIBA) were taking practical steps for imparting training on Islamic Economics and banking to a
group of bankers and arranging some national and international seminars/workshops to mobilize local
and foreign people and attract investors to come forward to establish Islamic bank in Bangladesh.
Their professional and right-thought activities were reinforces by a number of Muslim entrepreneurs
working under the aegis of Muslim Businessman Society. The body concentrated mainly in
mobilizing equity capital for the emerging Islamic bank. Due to continuous and dedicated work of
the above groups and individuals and active support from the government, Islamic banking could be
established in early eighties.
Islamic banks have been operating in Bangladesh alongside with the traditional banks. Like any other
traditional commercial banks, they do mobilize deposits and produce loans. But there modes of
operation, based on Shariah, are different from the other traditional commercial banks. However the
eight Islamic banks operating in Bangladesh are:
Al-ArafahIslami Bank Limited
Export Import Bank of Bangladesh Limited
First Security Islami Bank Limited
ICB Islami Bank
Islami Bank Bangladesh Limited
Shahjalal Islami Bank Limited
Social Islami Bank Limited

Union Bank Limited
The Organization of Islamic Conference (OIC) defined an Islamic Bank as a financial institution
whose statutes, 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 operation.
According to Islamic banking Act 1983 of Malaysia, and Islamic Bank is a company which carries
on Islamic Banking Business Islamic Banding business means banking business whole aims and
operations do not involve any element which is not approved by the religion Islam. From those
definitions, we can find some characteristics of Islami Banking as:
It is a financial institution.
It is a business institution.
It operates its business activities free from interest.
It is run according to rules and regulations formed and amended by Shariah
Council.
Islamic bank means not business product but running business through money.
It is profit loss sharing business organization.
The main objective of Islamic Banking is not only to earn profit, but also to do good and welfare to
the people. Islam upholds the concept that money, income and property belong to Allah and this
wealth is to be used for the good of the society.
2.2 History of Islami Bank of Bangladesh Limited

Establishment of Islamic Development Bank (IDB) by the OIC member states in the year 1975 has
been proved to be a breakthrough in the expansion of Islamic Shariah based finance and specially
banking throughout the world. As a founder member of IDB, the Government of Bangladesh also had
the commitment to establish Islamic banks which was reflected in different steps taken by the
governments of the country. The OIC members consented to the proposals to introduce Islamic
economy and banking in their respective countries held in the foreign ministers conferences in 1978
and 1980 in Dakar and Islamabad respectively. In the year 1981, OIC in its 3rd summit held in
Makkah approved the proposition submitted by Bangladesh to introduce separate banking system
following Islamic ideology. As per decision, the GOB sent representatives to the Middle Eastern
countries to learn the existing banking systems in those countries.
In the private sector, the Islamic Economics Research Bureau (IERB) was the first organization that
took active initiative in this regard. They arranged a national seminar on Islamic Economics and

Banking in the year 1979 and inspired by the discussion and the papers presented in the seminars,
some local bankers formed Islami Bank Working Group. The IERB again arranged an international
seminar in 1980. After the seminar, Dhaka based Muslim Businessman Society (later renamed as
Industrialist and Businessmen Association) under the leadership of renowned industrialist Abdur
Razzaque Lasker, took initiative to establish an Islamic bank and applied to the government for
permission. At this stage, the GOB provided necessary permission in the year 1983 and at last Islami
Bank Bangladesh was registered under Company Act in which 19 Bangladeshi national, 4
Bangladeshi institutions and 11 banks, financial institutions and government bodies of the Middle
East and Europe including IDB and two eminent personalities of the Kingdom of Saudi Arabia joined
hands to make the dream a reality.
2.3 Concept of Islamic Banking

A banking system is based on the principles of Islamic law (also known Shariah) and guided by
Islamic economics. Two basic principles behind Islamic banking are the sharing of profit and loss
and, significantly, the prohibition of the collection and payment of interest. Collecting interest is not
permitted under Islamic law.
Since this system of banking is grounded in Islamic principles, all the undertakings of the banks
follow Islamic morals. Therefore, it could be said that financial transactions within Islamic banking
are a culturally distinct form of ethical investing (for example, investments involving alcohol,
gambling, pork, etc. are prohibited). The Dubai Islamic Bank has the distinction of being the world's
first full-fledged Islamic bank, formed in 1975.
2.3.1 What is Islamic Banking?

Islamic bank is a financial institution whose status, rules and procedures expressly state its
commitment to the principle of Islamic Shariah and to the banning of the receipt and payment of
interest on any of its operations. -OIC
Ziauddin Ahmed says, Islamic bank is essentially a normative concept and could be defined as
conduct of banking in consonance with the ethos of the value system of Islam.
It appears from the above definitions that Islamic bank is systems of financial intermediation that
avoids receipt and payment of interest in its transactions and conducts its operations in a way that it
helps achieve the objectives of an Islamic economy. Alternatively, this is a banking system whose
operation is based on Islamic principles of transactions of which profit and loss sharing (PLS) is a
major feature, ensuring justice and equity in the economy. That is why Islamic bank is often known
as PLS-banks.
2.3.2 Objective 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:
To offer contemporary financial services in conformity with Islamic Shariah;
To contribute towards economic development and prosperity within the principles of Islamic
justice;
Optimum allocation of scarce financial resources
To help ensure equitable distribution of income.
To conduct interest-free banking.
To establish participatory baking instead of banking on the debtor-creditor relationship.
To accept deposits on profit-loss sharing basis.
To contribute in achieving the ultimate goal of the Islamic economic system.
These objectives are discussed below.
Offer Financial Services: Interest-based banking, which is considered a practice of Riba in
financial transactions, is unanimously identified as anti-Islamic. That means all transactions
made under conventional banking are unlawful according to Islamic Shariah. Thus, the
emergence of Islamic banking is clearly intended to provide for Shariah approved financial
transactions.
Islamic Banking for Development: Islamic banking is claimed to be more development-
oriented than its conventional counterpart. The concept of profit sharing is a built-in
development promoter since it establishes a direct relationship between the bank's return on
investment and the successful operation of the business by the entrepreneurs.
Optimum Allocation of Resources: Another important objective of Islamic banking is the
optimum allocation of scarce resources. The foundation of the Islamic banking system is that
it promotes the investment of financial resources into those projects that are considered to be
the most profitable and beneficial to the economy.

Islamic Banking for Equitable Distribution of Resources: Perhaps they must important
objective of Islamic banking is to ensure equitable distribution of income and resources among
the participating parties: the bank, the depositors and the entrepreneurs.
2.3.3 Features of 'Islamic Banking

Islami Bank Bangladesh Limited (IBBL) was incorporated on 13.03.1983 as a public company with
limited liability under the companies act, 1913. The bank started functioning with effect from
30.03.1983 as the first Shariah based interest-free bank in South-East Asia.
The bank is committed to run all its activities as per Islamic Shariah. IBBL through its steady progress
and continuous success has, by now, earned the reputation of being one of the leading private sector
banks of the country. The distinguishing features of IBBL are as under:
All its activities are conducted on interest-free system according to Islamic Shariah.
Investment is made through different modes permitted under Islamic Shariah.
Investment-income of the bank is shared with the Mudaraba depositors according to a
ratio to ensure a reasonably fair rate of return on their deposits.
Its aims are to introduce a welfare-oriented banking system and also to establish equity
and justice in the field of all economic activities.
It extends Socio-economic and financial services to the poor, helpless and low-income
group of the people for their economic up lift ment particularly in the rural areas.
It plays a vital role in human resource development and employment generation
particularly for the unemployed youths.
Its aim is to achieve balance growth & equitable development of the country through
diversified investment operations particularly in the priority sectors and in the less
developed areas.
2.4 Mission and Vision of IBBL
2.4.1 Vision of IBBL

IBBL vision is to always strive to achieve superior financial performance, be considered a leading
Islamic bank by reputation and performance. To accomplish our aims, we have identified a series of
strategic goals:

Our goal is to establish and maintain the modern banking techniques, to ensure the
soundness and development of the financial system based on Islamic principles and 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 stability of financial systems.
IBBL will try to encourage savings in the form of direct investment.
We will also try to encourage investment particularly in projects, which are more likely to
lead to higher employment.
2.4.2 Mission of IBBL

To establish Islamic Banking through introduction of welfare oriented banking system.
To ensure equity and justice in all economic activities.
To achieve balanced growth and equitable development through diversified investment
operations particularly in the priority sectors and less developed areas of the country.
To encourage the socio-economic development and financial services to the low-income
community particularly in the rural areas.
2.5 Shariah Council of IBBL

Profile of Council Members: The Shariah Council of Islamic Bank generally consists of experts from
the following four areas:
1. Fuqaha: Persons representing this group must be well versed in the Quran, Sunnah and fully
conversant with the opinion of all schools of islami thought and Islami law and jurisprudence. They
must view Islam as a total way of life and a living religion.
2. Banker: There must be a member who is fully conversant with banking law and practices and has
practical experiences in Banking business including foreign trade.
3. Economist: A member from this group need not necessarily be an Islami economist to start with.
But if he is an Islami Economist it is an added advantage. What is important is that he must be really
proficient in modern economies with an in depth study of the community, which a bank is going to
solve. He must have up to date knowledge in the development of the contemporary world.
4. Lawyer: A member representing this group should be a successful practitioner lawyer. He must be
proficient in commercial law including company law. In consultation with the Fuqaha and Economist

members of the council, he should be able to draft such innovating contracts, which will have the
sanction of Islami principles and a banking law of the land.
2.5.1 Objectives of Shariah Council
The functions of the council are to offer views and opinions on matters related to the bank from time
to time. The council may require any paper document from the bank and examine the same to see
whether it is according to see whether it is according to Islamic principles.
The shariah council assists the Board of Directors by advising them on matters related to shariah.
The opinion of the majority of members is taken as the opinion of the council provided that the said
opinion is supported by at least three Muftis of the council.
The council maintains its secretariat and a well-equipped library as the Head Office of the bank where
it keeps proper records of all of its proceedings and decisions.
2.6 SPECIAL FEATURES OF IBBL

(a) Prohibition of Interest:
The traditional capitalist banking system depends of 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.
(b) Investment Based on Profit:
After departing from interest, the alternative ways of income for Islamic Bank are investment and
profit. Thus Islamic Bank gives up any transaction of interest and makes investments based on profit.
Bank distributes its profit to its depositors and shareholders.
(c) Investing 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.
(d) Halal Paths and Procedures:
Islamic Shariah also reject any haram path or process any case of a halal business. Therefore Islamic
Banking system only allows the halal path procedures of Halal business.
2.7 Distinguishing Features of Islamic Banking against Commercial

Banking:

(a) Risk Sharing:
No predetermined rate of return.
Sharing end result of the business.
Mudaraba loss is entirely borne by the Shahib-al-Maal.
(b) Emphasis on productivity not on credit worthiness:
Dominant consideration no on collaterals.
Emphasis on soundness of the project.
(c) Moral Dimension:
Islamic value oriented system.
Full compliance of Shariah.
No finance for wine/tobacco/casino/pork production or trading.
(d) Equity:
Justice to all parties.
Riba is unjust.
(e) Allocative efficiency:
Productive of the project.
Finance goes to high productive project even if credit worthiness is lower.
(f) Stability of the Banking System:
Mudaraba & Musharaka Mechanism ensures stability.
(g)Growth:
Promotes Innovation.
Entrepreneurship Development.

2.8 Present Program of IBBL
Figure 2-1: Program of IBBL

2.9 Functions of IBBL:
The IBBLs has number of Functions, they are as follows:
2.9.1 General banking

Account Opening Section
M.S.B, M.S.S, Hajji Section
P.O, T.D.R, D.D, T.T Section
Cash Section
Clearing House Section
Transaction Entry Section
2.9.2 Foreign Exchange Section
Activities for importer
Activities for exporter
Collecting and sending foreign remittance
2.9.3 Investment Section
Activities for importer
Activities for exporter
Collecting and sending foreign remittance
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 Role and contribution of IBBL to Bangladesh Economy

Islami Bank Bangladesh Limited has many success stories of achievements. These are Summarized
below:
IBBL is the pioneer institution for introduction of Islamic Banking in Bangladesh.
The success of IBBL has imbibed other sponsors at home and abroad to establish
Islamic Banking in Bangladesh. Four national, one international Islamic banks have
since been established in the country. A private sector traditional bank has also
established two full-fledged Islamic Banking branches. Several other existing and
proposed traditional banks have also expressed their intention to introduce Islamic
Banking.
IBBL has successfully mobilized deposits from a section of people who hither-to-
before did not make any deposit with interest-based banks.
The Islamic Banking products, which are offered by IBBL through its 196 branches,
located at important centers all over the country and spontaneous acceptance of those
products by the people proves the superiority of Islamic banking
IBBL market share of deposit investment and ancillary business is steadily
increasing.
IBBL, though still a tiny bank, handles more than 10% of countrys export and import
trade.
Among the contemporary commercial Banks IBBL position is first in respect of
mobilization of deposit, deployment of fund and earning profit.
Investment in industrial sector occupies nearly 33% of IBBL investment portfolio.
This is a unique example of industrial Finance by a commercial Bank.
More than 1.15,000 workers are employed in the industrial projects financed by
IBBL.
IBBL has thus made significant contribution to solving unemployment problem of
the country.
Dhaka- the capital of Bangladesh being a Mega city- has acute transport problem. IBBL has
joined hands with an enterprising group to introduce a fleet of Premium Bus service, which
has attracted the attention of all section of the people and mitigated transportation problem
of the city to some extent.
IBBL has introduced several other welfare oriented Investment schemes, such as Small
Transport Investment Scheme, Small Business Investment Scheme, Agriculture Implements
Investment Scheme, Poultry Investment Scheme, Household Durable Investment Scheme,
Housing Investment Scheme etc.
IBBL launched a Rural Development Scheme for providing finance to drown-trodden section
of the populace- an area where no other Commercial Bank has extended any finance. IBBLs
mission is to reach to all 68,000 villages of the country as early as possible.
IBBL has organized a good number of national and international Seminars on Islamic Banking
and Economics. Importantly, IBBL sponsored a Seminar at Dhaka with a view to forming an
Islamic Common. Market.

Due to constant persuasion of IBBL the Government has granted license for establishment of
an Islamic Insurance Company. By now two (2) Islamic Insurance Companies have started
business?
IBBL has earned reputation in the country as a corruption free institution.

IBBL is held in high esteem in the banking circle as a good managed bank.
Under the leadership of IBBL, Bangladesh Association of Banks (BAB) has been formed.
This is a platform to ventilate the standpoints on banking issues of the private sector banks.
An IBBL has taken initiative to form an Association of Islamic Banks in Bangladesh for
furtherance of the causes of Islamic banking.
2.12 Achievements:
National and international ratings of IBBL
IBBL past performances have been evaluated by Bangladesh Bank, several credit rating agencies
home & abroad and by the local press.
IBBL World rating
As per Bankers Almanac (January 2001 edition) published by the Reed Business Information,
Windsor Court, England, IBBL world Rank is 1771 among 3000 banks selected by them. This
position was 1902 among 4500 selected banks as on January 1999 edition.
IBBL country Rank is 5 among 39 banks as per ratings made by the above Almanac on the basis of
IBBL Financial Statements of the year 2001.
2.12.1 International Press

In the midst of a difficult Banking system known to be plagued by high non-performing loans
(NPLs), one could easily conclude that it would be difficult to find a bank that is different from norm.
However, IBBL provides a refreshing change and is, thus, a pleasant surprise. Although it does not
command the market share as the 4 public sector banks, IBBL, which claims to have little interference
in lending from the government, has nonetheless, managed to find a niche market of its own-says the
BANK ATCH a New York based international Credit Rating Agency in its January 30, 1998 issue.
As a market leader offering banking services based on the Islamic rule of Shariah, IBBLs
profitability trend has been quite impressive. The Banks ability to keep its return on asset (ROA)
well above the industrys average reflected its resilience to possible shocks in the banking system.
Concerns over massive NPLs and under provisioning are common amongst local banks. But this
seems well resolved in IBBL. IBBLs good performance and solid capital base have indeed provided
refreshing change found within a banking system saddled and held back by huge NPLs the above
agency continued to comment in the same issue.

2.12.2 National Press
It is one of a few local banks according to CAMEL (Capital, Assets, Management, and Earnings &
Liquidity) rating made by the Bangladesh Bank. It holds the highest amount of liquidity among all
banks and its ability to keep return on assets at 1.07 percent is well above the banking sectors average
of 0.33 percent- The Financial Express, Dhaka commented in its issue of May 28, 1998.
The Holiday in its 29th August, 1997 issue carried out a report under the heading Setting a
precedence of sound banking and commented While the countrys banking system is burdened with
bad debt portfolios and also suffers from a liquidity shortage, the Islami Bank Bangladesh Ltd. (IBBL)
has created a unique precedence by improving its reserve and deposit positions substantially, making
handsome profits, and offering attractive dividends to its share holders and depositors.
2.12.3 Award and Prizes: International & National Perspective

IBBL was awarded for several times by international & national organisations. The Global Finance,
a reputed London based quarterly magazine, awarded IBBL as the best bank of the country for the
year 1999 and 2000.IBBL has got the 2nd prize of National Export Fare for its pavilion of Service
Organization in 1985.
2.12.4 Membership of Different Organization / Chamber
2.12.4.1 Local:
1. Bangladesh Institution of Bank Management (BIBM)
2. The Institution of Bankers Bangladesh (IBB)
3. Bangladesh Association of Banks (BAB)
4. Bangladesh Foreign Exchange Dealers Association (BAFEDA)
5. Central Shariah Board for Islamic Banks of Bangladesh
6. International Chamber of Commerce- Bangladesh
2.12.4.2 Foreign:
1.International Association of Islamic Banks (IAIB), Jeddah, K.S.A.
2. Accounting and Auditing Organizations for Islamic Financial Institutions (AAOIFI), Manama,
Bahrain.
3. General Council of Islamic Banks & Financial Institutions (GCIBFI), Manama, Bahrain (IBBL is
a member of its Executive Council)
4. Society for Worldwide Inter-bank Financial Telecommunication (SWIFT)

Credit Rating Information and Services Ltd- CRISL (a joint venture rating agency of Rating Agency
Malaysia Berhad (RAM), JCR-VIS Credit Rating Company Ltd., Pakistan, Prime Commercial Bank
Ltd., Pakistan and Local Corporation/ Sponsors, Bangladesh) was engaged by the Bank.
The CRISL submitted its report on the financial year 2002, 2003, 2004, 2005 & 2006 and assigned
A++ (Adequate Safety) for long term rating scale for 2002 & 2003, and upgraded the same to AA-
(High Safety) for long term rating scale for 2004 & 2005 and further upgraded the same to AA (High
safety) for long-term rating scale in 2006.
Financial Institutions rated in this category are adjudged to be of high quality, offer higher safety and
have high credit quality. This level of rating indicates a corporate entity with a sound credit profile
and without significant problems. Risks are modest and may vary slightly from time to time because
of economic conditions.
CRISL assigned ST-2 (High Grade) for short term rating scale for 2002 & 2003, and upgraded the
same to ST-1 (Highest Grade) for 2004, 2005 & 2006.
Financial Institutions rated in this category means having highest certainty of timely payment. Short-
term liquidity including internal fund generation is very strong and access to alternative sources of
funds is outstanding, Safety is almost like risk free Government short-term obligations.

2.13 Organizational Hierarchy of IBBL
Figure 2-2: Organizational chart

2.14 Aims of IBBL
IBBL aims are

To conduct interest-free banking.
To establish participatory banking instead of banking on debtor-creditor relationship.
To invest on profit and risk sharing basis.
To accept deposits on Mudaraba & Al-Wadeah basis
To establish a welfare-oriented banking system.
To extend co-operation to the poor, the helpless and the low-income group for their
economic up liftmen.
To play a vital role in human development and employment generation
To contribute towards balanced growth and development of the country through

investment operations particularly in the less developed areas.
To contribute in achieving the ultimate goal of Islamic economic system.
2.15 Products and Services:

Under products and services Islami Bank Bangladesh Ltd. has below categories:
2.15.1 DEPOSIT SCHEMES:

Al-Wadiah Current Account (AWCA)
Mudaraba Savings Account (MSA)
Mudaraba Term Deposit Account (MTDR)
Mudaraba Special Notice Account (MSNA)
Mudaraba Hajj Savings Account (MHSA)
Mudaraba Special Savings (Pension) Account (MSSA)
Mudaraba Savings Bond (MSB)
Mudaraba Monthly Profit Deposit Account (MMPDA)
Mudaraba Mahr Savings Account (MMSA)
Mudaraba Waqf Cash Deposit Account (MWCDA)
Mudaraba NRB Savings Bond (MNSB) Account
Mudaraba Foreign Currency Deposit Account (MFCD)

Students Mudaraba Savings Account (SMSA)
Mudaraba Farmers Savings Account (MFSA)
2.15.1 Investment Modes
2.15.2.1 BAI- Modes

Bai-Murabaha
Bai- Muajjal
Bai- Istishna
Bai Salam
Bai-As-sharf
2.15.2.2 SHARE- Modes
Mudaraba
Musharakah
2.15.2.3 IJARA-Modes
Hire Purchase under Shirkatul Meelk (HPSM)
Under this mode Bank may supply implements/ equipment/goods on rental basis. The ownership of
the implements/equipment/goods will be with the Bank and the client jointly and the portion of the
client will remain to the Bank as mortgage until the closure of the investment account, but the client
will be authorized to possess the equipment for certain period. The client, after completion of the
installments, will be the owner of the implements/ equipment/goods.
2.15.3 INVESTMNET SCHEME

Household Durables Scheme (HDS)
Investment Scheme for Doctors (ISD)
Transport Investment Scheme (TIS)
Car Investment Scheme (CIS)
Small Business Investment Scheme (SBIS)
Micro Industries Investment Scheme (MIIS)
Agricultural Implement Investment Scheme (AIIS)
Real Estate Investment Program (REIP)
Real Estate Investment (Commercial & Working Capital)

Agricultural Investment of IBBL
NRB (Non Resident Bangladeshi) Entrepreneurs Investment Scheme (NEIS)
Women Entrepreneurs Investment Scheme (WEIS)
RURAL DEVELPOMENT SCHEME
2.15.4 FOREIGN EXCHANGE BUSINESS SERVICES
Foreign Exchange Business plays a vital role in providing substantial reveneu in the bank income pool.
Like all modern Banks IBBL operates in the area of the foreign Exchange business. IBBL performs the
following tasks:
Opening letter of credit (LC) against commission for importing industrial, agricultural and other
permissible items under Islamic Shariah and Import policy.
Opening letter of credit on the principle of Mudaraba sale, on the principle of Musharaka sale and
under wage earner scheme.
Handling of export/import document.
Negotiation of export / import document when discrepancy occurs.
Financing in import under MPI (Mudaraba Post Import)
Financing to export on profit or loss sharing.
Handling Inward and outward remittance.
2.15.5 Special Services:

Locker Services
ATM Services
2.16 Investment
Various Islamic financial institutions, especially in Islamic countries offer various types of investment
products that are free of Riba or interest. An Islamic investment fund is usually one in which a number
of people pool their money and the money is in turn invested in an Islamic legal manner. Definition
of investment funds by the Accounting and Auditing Organization of Islamic Financial Institutions
(AAOIFI) is- Funds are investment vehicles, which are financially independent of the institutions
that establish them. Funds take the form of equal participating shares/units, which represent the
shareholders/unit holders share of the assets, and entitlement to profits or losses. The funds are
managed on the basis of either Mudaraba or agency contract.
Investment is the action of deploying funds with the intention and expectation that they will earn a
positive return for the owner (Brokington 1986, p.68). 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. 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.
2.17 Objectives and Principles of Investment

The objectives and principles of investment operations of the Bank are:
To invest fund strictly in accordance with the principles of Islamic Shariah.
To diversify its investment portfolio by the size of investment, by sectors (public &
private), by economic purpose, by securities and by geographical area including
industrial, commercial, and agriculture.
To ensure mutual benefit both for the bank and the investment-client by professional
appraisal of investment proposals, judicious sanction of investment, close and constant
supervision and monitoring thereof.
To make investment keeping the socio-economic requirement of the country in view.
To increase the number of potential investors by making participatory and productive
investment.
To finance various development schemes for poverty alleviation, income and
employment generation with a view to accelerating sustainable socio-economic
growth and uplift of the society.
To invest in the form of goods and commodities rather than give out cash money to
the investment clients.
2.18 Factors Related with Investment

Risk
Time
Interest Rate
Security Or Collateral
Operating Expense
Legal Considerations
Inflation Bai- Mechanism
2.19 Importance of Investment

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

It provides working capital for industrialization.
It helps to create employment opportunities.
Investment controls almost all kinds of production activities of the country.
It brings social equity.
Cash generation occurs for its successful performance.
Business cycle can run well only by the help of lending system.
Economic stabilization.
Raise standard of living.
2.20 Investment Policy of Islami Bank Bangladesh Limited (IBBL)

Generally Islami Bank as the name implies runs its business based on Islamic shariah. Whatever the
policy it imposes over its management; is justified in the light of The Holy Quran and Islamic shariah.
The policy of investment of IBBL is listed below:
Strict observance of Islamic shariah.
Investment to national priority sectors.
Diversified investment portfolio:
Diversified by size, sector, geographical area, economical
purpose, securities and mode of investment.
Preference to short term investment.
Preference to investment of small size
To insure the safety and security of investment.
To look profitability of investment
To give support to Govt. denationalization industrial program.
Investment to trade and commerce sector.
Investment to industrial sectors.
Investment to foreign trade (Import & Export)
Prohibition of investment in sectors that are Haram in the light of shariah.
All of this policy mentioned is strictly supervised by an Authority named

The Shariah Supervisory Committee (SSC)

SHARIAH
HONESTY ACCOUNTABILITY
TRANSPERANCY JUSTICE
FIGURE 2-3 : Responsibilities Of Shariah

2.21 Principles or Modes of Investment of IBBL
BAI MECH- ANISM
BAI
MURABAHA
BAI-
SALAM
BAI-AS-SARF
BAI- SHARE
MUAJJAL MECHANISM
ISTISNA
A
IJARA
MECHA
MUDARABA - NISM
MUSHARAKA
HPSM
FIRURE 2-4: Different Modes

2.21.1 Bai-Murabaha
Meaning & Definition:
The terms Bai-Murabaha have deprived from Arabic words Bai and Ribhun. The word Bai means
purchase and sale and the words Ribhun means an agreed upon profit. Bai Murabaha means sale
on agreed upon profit.
Bai-Murabaha may be defined 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 an agreed upon profit payable today or on some date in the future in lumpsum or by
installments. The profit may be either a fixed sum or based on a percentage of the price of the goods.
There are different types of Murabaha as given below:
2.21.1.1 Types of Murabaha

In respect of dealing parties Bai-Murabaha may be of two types-
Ordinary Bai-Murabaha:
Only two parties participate in this contract.
Bai Murabaha on order and promise:
There are three parties in Bai-Murabaha on order and promise. Mostly it is for
commercial use.
2.21.1.2 Important features:
It is permissible to take cash/collateral security to guarantee the implementation of the
promise or to indemnify any losses that may result.
The bank sells the goods at a price above the cost to obtain a profit. The sale price that
is charged by the bank is agreed upon in the Bai-Murabaha. The profit can be stated
in terms of a flat dollar amount or on a percentage of the purchase price. If a percentage
is used, the percentage shall never be expressed in terms of time, in order to avoid
confusion that the price is a form of interest (Riba), which is not allowed.
The price agreed to in the agreement is binding on both parties.
It is permissible for the bank to contract with a third party to buy and receive the goods
on its behalf. This agreement must be a separate contract.
2.21.1.3 Steps of Bai-Murabaha Practiced by Islami Bank:

Submission of proposal from the client
Signing a promise by the client to purchase
The first sale contract
Singing of Murabaha Sale Contract
Delivery and receipt the commodity
2.21.2 Bai-Muajjal (Deferred Sale)

Meaning & Definition
The terms Bai and Muajjal have been derived from Arabic words Bai and Ajjal. The word
Bai means purchase and sale and the word Ajjal means a fixed time or a fixed 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.
The 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 amount 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.
Bai Muajjal is treated as a contract between the bank and the client under which the bank sells to
the client certain specific goods, purchased as per order and specification of the client at an agreed
price payable with in a fixed future date in lump sum or by fixed installments.
Thus it is a credit sale of goods by which ownership of the goods is transferred by the bank to the
client but the payment of sale price by the client is deferred for fixed period.

It is permissible and in most cases, the client will approach the bank with an offer to
purchase a specific good through a Bai-Muajjal agreement.
It is permissible to make the promise binding upon the client to purchase the goods from
the bank.
It is also permissible to document the debt resulting from Bai-Muajjal by a Guarantor, or
a mortgage or both, like any other debt.
Mortgage/Guarantee/Cash security may be obtained prior to the signing of the Agreement
or at the time of signing the Agreement.

All goods purchased on behalf of a Bai-Muajjal agreement are the responsibility of the
bank until they are delivered to the client.
The bank must deliver the goods to the client at the time and place specified in the
contract.
The bank may sell the goods at a higher price than the purchase price to earn profit.
The price is fixed at the time of the agreement and cannot be altered.
The bank is not required to disclose the profit made on the transaction.
2.21.3 Bai- Salam

Meaning & Definition:
The terms Bai and Salam have been derived from Arabic words. The words Bai means sale
and purchase and the word Salam means Advance. Bai-Salam means advance sale and
purchase.
It is a sale in which an advance payment is made by the buyer, but the delivery is delayed to an agreed
date. In the Bai-Salam, a financial transaction happens in advance in cash as a price of commodity
whose delivery will be in a future date. It means deferred is the commodity sold (debt in kind) and
price of the commodity described is to be Bai-Salam, a financial transaction happens in advance in
cash as a price of commodity described is to be aid immediately in advance.

Generally, industrial and agricultural products are purchased sold in advance under Bai
Salam mode of investment to infuse finance so that product is not hankered due to shortage
fund/cash.
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(s), supply of low
quality commodity /product(s).
It is also permissible to obtain Mortgage and/or Personal Guarantee from a third party as
security before the signing of the Agreement or at the time to signing the Agreement.
The seller client may be made agent of the Bank to sell the goods delivered to the Bank
by her provided a separate agency agreement is executed between the bank and the client.
2.21.3.2 Rules of Bai-Salam:
It is a condition that the commodity known by both parties to the agreement.

The quality of the commodity is monitored closely, as very little variation from
specifications in the contract is allowable. The commodity is deliverable on the due date.
If there is uncertainty about the ability to deliver the commodity at the due date, a Salam
transaction is impermissible.
It is permissible to draw a Salam sale contract for a total to be delivered increments on
different specified future dates.
It is a condition that the commodity is a liability debt. The seller is obliged to deliver the
commodity when it is due, according to the specifications stipulated in the contract,
whether or not his firm produces the commodity or obtained from other firms.
2.21.4 Bai- Istishna

Definition:
Istishna is a contract between a manufacturer/seller and a buyer under which the manufacturer/seller
sells specific product(s) after having manufactured, permissible under Islamic Shariah and Law of
the Country after haying manufactured at an agreed price payable in advance or by go downs within
a fixed period or on/within a fixed future date on the basis of the order placed by the buyer.
2.21.4.1 Features of Istishna:
Istishna is an exceptional mode of investment allowed by Islamic Shariah in which product(s) can be
sold without having the same in existence. In the product(s) are ready for sale. Istishna is not allowed
is Shariah. Then the sale may be done either in Bai-Murabaha or Bai-Muajjal mode of investment. In
this mode, deliveries of goods are deferred and payment of price may also be deferred.
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 dales or by go downs.
Istishna is specially practiced in manufacturing and industrial sectors; however, it can be
practiced in agricultural and constructions sectors also.
2.21.4Ownership Mechanism
2.21.4.1 Hire purchase (Ijarah)
The term Ijarah has been derived from the Arabic words Air and Uirat which means
consideration, return, wages or rent. This is really the exchange value or consideration, return, wages,
rent of service of an asset. Ijarah has been defined as a contract between two parties, the Hiree and

Hirer where the Hirer enjoys or reaps a specific service or benefit against a specified consideration or
rent from the asset owned by the Hiree.
2.21.4.2 Element of Ijarah:

The Hire: the individual or organization hires/rents out the property of service is called the Hiree.
The Hirer: the individual of organization hires / takes the hire of the property or service against the
consideration.
The Rent: 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
Hire Purchase under Shirkatul Meelk (HPSM)
Shirkatul means partnership Shirkatul Meelk 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 Meelk contract.
Hire Purchase under Shirkatul Meelk made both the bank and the client supply equity in equal or
unequal proportion for purchase of an asset like land, building, machinery, transport etc.
Purchase the asset with that equity money, own the same jointly; share the benefit as per agreement
and bear the loss in proportion to their respective equity. The share part or portion of the asset owned
by the bank is hired out to the client partner for a fixed rent per unit of time for a fixed period. Lastly
the bank sells and transfers the ownership of its share/ part/ portion to the client against payment of
price fixed for that part either gradually part by part or in lump sum within the hire period or after the
expiring of the hire agreement.
2.21.4.3 Stages of Hire Purchase under Shirkatul Meelk

Hire Purchase under Shirkatul Meelk agreement has got three stages:
Purchase under joint ownership
Hire and
Sale and transfer of ownership to the other partner Hirer.
2.21.4.4 Rules of HPSM:

It is a condition that the asset to be hired must not be a fungible one which cannot be used more than
once or in other words the asset must be a non-fungible one which can be utilized more than once or
the service of which can be separated from the asset itself.

It is a condition that the subject of the contract must actually and legally be attainable.
The Hirer shall ensure that he will make use of the asset as per provisions of the
Agreement.
The hire contract is permissible only when the asset and the benefit derived from it is
with in the category as per Islamic Shariah.
It is permissible to advance, defer or install the rental in accordance with the agreement
as well as to make the Hirer to bear the cost of ordinary routine maintenance, because
this cost is normally known and can be considered as part of the rental.
If the hired asset is damaged or destructed by the act of Allah and if the Hiree offers a
substitute with the same specifications agreed upon in the hire contract the contract
does not terminate.
Under HPSM agreement, both the Hire and the Hirer must pay their respective equity
as agreed upon to purchase the demised asset under joint ownership.
2.21.5 Share Mechanism

2.21.5.1 Mudaraba
Definition:
It refers to a contact between two parties in which one party supplies capital to the other party for the
carrying on of some trade on the condition that the resulting profits are distributed in a mutually
agreed proportion while all loss is borne by the provider of the capital. Mudaraba is also known as
Qurad and Muqaradah.
Mudaraba is a contract of those who have capital with those who have expertise where the first party
provides capital and other party provides the expertise with the purpose of earring halal (Lawful)
profit which will be devised between them in ration agreed upon. This mode serves the business
interest of the capital owner and the Mudarib (agent).
2.21.5.2 Steps of Mudaraba:

The Results of Mudaraba
Payment of Mudaraba Capital
Distribution of wealth resulting from Mudaraba

2.21.5.3 Rules of Mudaraba:
It is a condition in Mudaraba that the capital be specific in nature. In other words, the amount of
capital must be known at the inception of the contract. The purpose of this rule is to ensure that there
is no uncertainty about the amount of capital and thus, no uncertainty about the division of profits.
It is also included in the condition that, capital must be in the form of currency in circulation.
However, merchandise can be contributed, so long as both parties to the business arrangement agree
upon its value. The capital of the Mudaraba must be delivered to the Mudarib. It is permissible for
the Mudarib to hire an assistant to perform difficult work that he is unable to perform on his own.
2.21.6 Musharakah (Partnership)

Meaning and definition:
The word Musharakah is derived from the Arabic word Shariah meaning partnership. Islamic jurists
point out that the legality and legality and permissibility of Musharakah is based on the injunctions
of the Holy Qurans, Sunnah, and Ijma (consensus) of the scholars. It may be noted that Islamic Banks
are inclined to use various forms of Shariakt-al-Inan because of its built on flexibility. At an Islamic
bank, a typical Musharakah transaction may be conducted on the following manner.
One two or more entrepreneurs approach an Islamic Bank for the finance required for a project. The
bank along with other partners provides complete finance. All partners, including the bank have the
right to participate in the project. They can also waive this right. The profits are to be distributed
according to an agreed ratio, which need not be the same as the different partners have provided the
finance for the project Musharakah may be of two types:
Permanent and
Diminishing Musharakah
Permanent Musharakah
The contributions of the partners under this mode may be equal or unequal ratios of capital to establish
a new income-generating project or to participate in an established one, whereby each participant
owns a share in the capital structure permanently and deserves his share of the profit income. In this
case the bank participates in the equity of a company and receives an annual share of the profits on a
pre-rate basis. The period of termination of the contract is not specified.
This financing technique is also referred to as continued Musharakah.

2.21.6.1 Diminishing partnership:
Diminishing Musharakah is an intention from the very beginning not to stay in and continue the
partnership up to the liquidation of the company. The Islamic bank can give the other partner the right
to purchase portion of the bank on the ownership [the form for full payment at a time or by installment
basis as per agreement with the partners (the client).
The bank participates as a financial partner, in full or in part, in a project with a given income forecast.
An agreement is signed by the partner and the bank through which the bank receives a share of the
profit as a partner. However, the agreement also provides payment of a portion of the net income of
the net income of the project as repayment of the principal financed by the bank. The partner is entitled
to keep the rest.
The bank gradually can relinquish share to the partner, in exchange the partner pays the price to the
bank periodically during a reasonable period to be agreed upon. After the discharge, the bank
withdraws it claims from the firm and it becomes the property of the partner. Decreasing partnership
is a mode innovated by the Islamic banks. It differs from the partnership. Those are mentioned below.
2.21.7 Welfare-oriented Investment Schemes of IBBL

In addition to the normal commercial and industrial investment operations, IBBL has 12 Special
Investment Schemes targeting different economic groups. The schemes are implemented
and expanded to meet the specific and welfare oriented needs of different groups of people
particularly the under-privileged downtrodden and the neglected section of the population of
the country. To uplift the lifestyle of these people, some welfare-oriented special investment
schemes as under have been undertaken:
Household Durable Investment Scheme: Low-income people involved in diverse

professions get benefit out of this scheme. They are provided with household products
like refrigerator, TV, motor-cycle, furniture, ornaments, computer etc. under this
financing scheme
Housing Investment Scheme: The bank has introduced this scheme to ease the serious
housing problem in the urban areas and to make arrangement for comfortable
accommodation of the fixed income group such as: officials of the defense services,

permanent officials of government, semi-government and autonomous organizations,
faculty members of the established universities, university colleges & medical colleges,
graduate engineers, doctors and established professionals, international financial
organizations, donor agencies, foreign embassies etc. officials of reputed local public
limited companies.
Transport Investment Scheme: To ease the existing transportation problem and

to accelerate the pace of economic growth and development of the country, particularly
through expansion of trade, commerce and industry, the bank has taken up this scheme.
Real Estate Investment Scheme: Real Estate Finance plays a pivotal role in
improving standard of living, empowering the middle-income and lower-income groups
and thereby promoting equitable growth in the society. It does not only provide physical
shelter but also upgrade the lives of the dwellers in terms of skills enhancement, income
generation, increased security, health, self-confidence and human dignity. IBBL has
steady growth in the Real Estate Sector.
Car Investment Scheme: To enable officials, business houses and business executives
and professionals to move by transports in discharging their responsibilities punctually,
IBBL has introduced car investment scheme for the mid and high ranking officials of
the 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.
Investment Scheme for Doctors: The scheme is meant for fresh medical graduates
intending to meet up medical centers. IBBL comes forward to their aid to help
them procure medical equipment or to set up diagnostic laboratory, pharmacy, clinic etc.
Small Business Investment Scheme: Small business persons and entrepreneurs
of different cities and villages get investment facilities from this scheme which is
contributing greatly to generate income and employment and to develop standard of
life of different segments of low income people. This bank provides different types of
agricultural instruments, equipment for operating small trade and finance, small shop,
light transport, photocopy machine, tailoring machine, machinery for small and cottage
industry etc. under this scheme.
Agricultural Implements Investment Scheme: Keeping the view of the people-

orientation and welfare objectives of the Bank, this scheme has been introduced to provide
powers tillers, power pumps, shallow tube-wells, thresher machines etc. on easy terms
to the unemployed rural youths for self-employment and to farmers to help them
augment production in the agriculture sector.
Micro-Industries Investment Scheme: To create a wider base for industries and

to encourage the establishment of micro-industries in different areas of the country by
the potential entrepreneurs and to diversify the Banks investment portfolio, the
bank has introduced Micro Industries investment Scheme. Different sectors including
food and agriculture based industries, plastic & rubber industries, forestry and furniture
industries, engineering industries, service industries, electrical accessories industries,
computer technology industries, paper products industries, handicraft industries, fishery
& livestock farming, hollow bricks, roof tiles and any other viable micro-industries
have been identified for financing under the scheme.
2.21.8 Investment Process of IBBL:

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.
Generally a bank takes certain steps to deliver its proposed investment to the client. But the process
takes deep analysis. Because banks invest depositors fund, not banks own fund. If the bank fails to
meet depositors demand, then it must collapse. So, each bank should take strong concentration on
investment proposal. However, Islami Bank Bangladesh Limited (IBBL) makes its investment
decision through successfully passing the following crucial steps:

(1) (2
)
OF THE ION
CLIENT STAGE
(3)
STAG
E
Proces
s
(4 (6
) )
- STAGE
STAGE
(7 (8
) )
STAGE
STAGE
Figure 2-5: Overall Process

2.21.8.1 Selection of the client:
First of all, client approaches to any of the branches of Islami Bank Bangladesh Limited (IBBL).
Then, he talks with the manager or respective officer (Investment). Secondly, bank considers five
Cs 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 banks rules & regulations before availing investment. Generally, bank analyses the
following five Cs of the client
Character
Capacity
Capital
Collateral
Condition

2.21.8.2 Application stage
At this stage, the bank will collect necessary information about the prospective client. For this reason,
bank informs the prospective client to provide and/or fill duly respective information which is crucial
for the initiation of investment proposal. Generally, here, all the required documents for taking
investment have to prepare by the client himself. Documents that are necessary for getting investment
of IBBL are prescribed here:
Trade License photocopy (for proprietorship);
Abridged pro forma income statement;
Attested copy of partnership deed (for partnership business);
Prior three (03) years audited balance sheet (for joint stock company);
Attested copy of the Memorandum of Association (MOA) & Articles of Association
(AOA) for the joint stock company;
Attested copy of the Tax Identification Number (TIN)- including final assessment;
Tenders of the proposed assets (in case of HPSM);
Detailed summary of the sundry debtors and creditors (including both time & schedule);
Summary of the personal movable & immovable assets; and others.
2.21.8.3 Appraisal stage:

At this stage, the bank evaluates the client and his/her business. It is the most important stage. This is
because; bank usually goes for sanctioning the proposed investment limit/proposal on the basis of this
stage. 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:
Companys/Clients Information.
Owners 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 Bankers Information.
Details of Sister/Allied Concerns.
Allied Deposit as on.
Business/Industry Analysis.
Relationship Analysis.
Asset-Liability position of the client as per Audited Balance Sheet.
Working Capital Assessment.
Risk Grade.
Particulars of the go down for storing MPI/Murabaha goods.
Insurance Coverage.
Audit Observation.
Security Analysis.
2.21.8.2 Sanctioning stage

At this stage, the bank officially approves the investment proposal of the respective client. In this case
client receives banks 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.
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.
TR (Trust Receipt): Without cash security.
Collateral: Immovable Properties
2.21.8.2.1 Cash / Goods securities: 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 banks investment and clients cash security is pledged to the bank, kept under
banks custody before its delivery to the client on payment. If for a Murabaha investment cash security
is fixed at 25% Banks investment stands 75% on the total goods purchased. For example, if cost of total
goods purchased is tk. 100000 bank investment will be tk. 75000 and clients cash security will be tk.
25000.
2.21.8.3 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 asset statement
AungykarNama
GhosonaPatra
Three (03) years net income & Business transactions
Performance report with the Bank
Account statement of from the bank
2.21.8.3.1 Valuation Certificate :
Particulars of the proposal
Particulars of the mortgage
Particulars of the properties
Outstanding liability position of the bank
CIB (Credit Information Bureau) report.
2.21.8.4 Disbursement Stage: At this stage, bank decides tom pay out the 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 need to be physically verified.

2.21.8.5 Monitoring & recovering Stage: At this stage of investment processing of islami
bank Bangladesh limited (IBBL), bank will contact with the client continually, for example- bank can
obtain monthly stock report of 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 it tries to recover its investment fund from the client.
Cash
Disbursement
Stage of
Monitoring
Recording
2.21.9 Investment Classification

After the date of expiry, if the borrowers do not adjust their loan, IBBL at first gives a notice to
them. The period of giving notice depends on the nature of the loan. For continuous loan, IBBL
gives notice for three months. For five-year term loan, IBBL gives notice for six months. And for
more than five-year term loan, IBBL gives notice for more than 12 months.
After giving notice, if the borrower does not repay the loan, the loan will be considered as
classified. Pursuant to Bangladesh Bank's Banking Regulation and policy Department's Circular
No. 16 (1998), loans and advances are classified both on aging and functional criteria as follows:

Investment
Classification
Unclassified Classified
Investment Investment
2.21.9.1 Unclassified Investment:
The loan account is performing satisfactorily in the terms of its installments and no overdue
is occurred. This type of loan and advances are fall into this class.
Classification Status Length of Overdue Rate of Provision

Unclassified Below 3 months 1%
2.21.9.1.1 Special Mention Account (SMA)
When loan installment is first missed by the borrower, the loan account is classified as a special
mention account (SMA). The tenure of SMA varies with the category of loans.
2.21.9.1.2 Sub-Standard
If a loan is not repaid of reschedule within the SMA period, it becomes sub-standard loan.
From this stage the loan is treated as defaulted. Interest is treated the same way as in
SMA. This classification contains where irregularities have occurred but such irregularities.
The main criterion for a substandard advance is that despite these technicalities or irregularities
no loss is expected to rise for the bank. These accounts will require close supervision by
management to ensure that the situation does not deteriorate further.
2.21.9.1.2 Doubtful
This classification contains where doubt exists on the full recovery of the loan and advance along
with a loss is anticipated but cannot be quantifiable at this stage.
If a loan is not repaid or reschedule within the sub-standard period, it becomes a doubtful loan
interest will be treated as before in this stage.
2.21.9.1.3 Bad and Loss

A particular loan and advance fall in this class when it seems that this loan and advance is not
collectable or worthless even after all the security has been exhausted.
If a loan is not repaid or reschedule within the doubtful stage, it is termed as bad and loss.
Serious doubts exist as to the recovery of such loans.

Chapter-3
ANALYSIS OF REPORT

3.1 Outcomes
Some of the companys key financial and non-financial outcomes include the following:
Total assets have grown by 9.90% in 2016 from 2015.
Deposit base have grown by 10.72% in 2016 from 2015.
General Investment increased by 16.26% in 2016 from that of previous year.
Classified investment to general investment reduced to 3.83% in 2016 from 4.25% in 2015.
3.2 Deposit Products

Any financial institution especially a Bank can hardly prosper and compete with other banks effectively
without multidimensional and diversified products. Keeping this in view, IBBL has introduced 25
deposit products so far. Historical trend of the deposit mobilization shows doubling its deposit base in
every 4 years.
3.2.1 Bank of Crore Depositors

Total number of Depositors of IBBL increased to 10,262,879 in 2016 from 9,926,354 of the preceding
year, registering an increase of 336,525 accounts in 2016, with 3.39% growth over 2015.
Figure 3-1: Account opening trend from 2012 to 2016

Interpretation: A banks main vision is to collect the deposit from others. And they collect deposit
through some procedure and account opening is one of them. The amount of account opening is
increasing rapidly from 2012 to 2016. Growth rate is decreasing but account is opened fastly.
3.2.2 Mobilization of Deposits

In the year 2016, total Deposit stood at TK. 681,352 million as against Tk.615359 million of the
preceding year registering a growth of Tk. 65,993 million, i.e. 11.72% growth.
Figure 3-2:Deposit Trend

Interpretation: The graph is showing that the amount of deposit taka is increasing in a chronological
order. This is a good sign for a bank. And is also states the efficiency of a bank. From 2012 to 2016,
deposit taka is increased by 263508 million taka.
3.3 General Investment

Total General Investment of the Bank increased to Tk.616,419 million as on 31.12.2016 from
Tk.530,194 million as on 31.12.2015 showing an increase of Tk.86,225 million, i.e. 16.26% growth.
The trend of investment shows near doubling of the figure in 5 years.

General Investment In Millione(tk)
700000
616419
600000
530195
500000
463475
403195
400000 372911
300000
200000
100000
0
1
2012 2013 2014 2015 2016
Figure 3-3: General Investment In million
Interpretation: In 2012 general investment is 372911. And in 2013 it is increased by 30284 and growth
percentage is 8.12%. In 2014 it is increased to 14.96%. In 2015 it is 14.40%. And in 2016 it is 16.26%.
The graph is showing that the general investment is increasing gradually.
3.4 Sector wise investment

Sl SECTOR 2013 2014 2015 2016
NO
01 Industrial(Excluding 155,432 172,591 172,591 219,377
SME)
02 Commercial 36,854 42,352 36,854 43,873

03 Real estate 41,778 37,680 44,159 47,972
04 Agriculture 10,638 11,354 10,638 15,425
05 Transport 6,820 6,435 7,207 7,592
06 SME 229,864 181,918 229,864 244,713
07 Others 31,649 28,304 28,881 37,467
TOTAL 463,475 530,194 530194 616419
Sector wise investment

2013 2014 2015 2016
300,000
250,000
200,000
150,000
100,000
50,000
Figure 3-4: Sector wise investment
3.5 Mode-wise Investment

Sl MODE 2013 2014 2015 2016
NO
01 Bai-Murabaha 281,556 331,239 331,239 382,176
02 HPSM 109,941 123,856 123,856 139,567

03 Bai Muajjal 15,443 34,818 34,818 54,387

04 Bill Purchased & 30,424 15,004 15,004 14,204
Negotiation
05 Quard 15,478 14,564 14,564 14,047
06 Bai- Salam 4,808 5,320 5,320 6,436
07 Musharaka 2,825 393 393 602
08 Mudaraba 3,000 5,000 5,000 5,000
TOTAL 463,475 530,194 530,194 616,419
Mode-wise Investment
2013 2014 2015 2016
Bai-Murabaha HPSM Bai Muajjal

Bill Purchased & Negotiation Quard Bai- Salam
Musharaka Mudaraba
Figure 3-5: Mode-wise Investment
3.6 SME Investments

SME INVESTMENTS
244713
229864
201127
170356
149214
108670
78456
49337
37154
22614
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Figure 3-6: SME Investments
Interpretation: This is the data of SME investment and showing the concerns of IBBL to SME sector.
They invest more money to SME sector From 2007 to 2016.
3.7 Contribution of IBBLs SME Exposure to National SME

Exposure:

SME EXPOSURE OF IBBL VS NATIONAL
IBBL
27%
NATIONAL
EXPOSURE
OTHER THAN
IBBL
73%
Figure 3-7: Contribution of IBBLs SME Exposure to National SME Exposure:
Interpretation: There are several kinds of Banks in Bangladesh. Almost 60 banks are conducted their
business operation. Among them only IBBL invest 27% (out of hundred) and other banks invest
73%(out of hundred). This is a big investment operation towards to nation. General public who wants
to do business but holds a low capital will be benefited.
3.8 Scheme-wise Investment

SL NAME OF 2016 2015 2014 2013 2012
NO SCHEME
i. Rural Development 24477 20799 17380 13731 10390
Scheme (RDS)
ii. House-hold Durables 1755 1545 1392 1048 955

Scheme

iii. Investment Scheme for 49 58 55 37 32
Doctors
iv. Transport Investment 7962 7207 6832 7057 6887

Scheme
v. Car Investment Scheme 212 124 69 75 113

vi. Small Business 4515 4094 3817 3202 2774
Investment Scheme
(SBIS)
vii. Micro-Industries 18 54 22 29 36
Investment Scheme
viii. Agricultural 4330 2929 882 337 278

Implements Investment
Scheme
ix. Housing Investment 135 166 209 261 316

Scheme
x. Housing Investment 24184 23350 20780 15903 15860

Program (HIP)
xi. Palli Griha Nirman 3441 3260 2717 2059 1483

Beniyog Prakalpa
(PGNBP)
Sub-Total 71078 63486 54155 43739 38924

Total Investment 616419 530194 463475 403195 372921
% to total 11.53% 11.97% 11.68% 10.85% 11.73%
investment
Interpretation: It is a chart of several kinds of investment. Here we can see the

percentage is almost same from 2012 to 2016. This statement states that the investment
section is diversified and IBBL try to keep the percentage almost same.

3.9 Performance under the Schemes at a glance as on 31.12.2016
Amounts In Million(Tk)
SL PARTICULARS RDS UPDS TOTAL
NO
1. No. of Branch 228 24 252
2. No. of Employees 2458 115 2573
3. No. of Member 970750 28390 999140
4. No. of Client (members 564873 17979 582852
availing investment)
5. Total disbursement during the 30348.61 1097.55 31446.16

year
6. Investment Outstanding 23573.73 939.26 24476.99

7. Overdue 98.34 13.04 111.38
8. Savings 7758.18 194.46 7952.64
3.10 Expansion of RDS & UPDS in the last 5 years is shown in the
following table

1200000
1000000
800000
600000
999,140
947,305
911,470
836,227
400000
733,520
200000
0
2012 2013 2014 2015 2016
Figure 3-8: Comparative Position of RDS & UPDS
Interpretation: The graph is showing the Rural development scheme and Urban poor development
scheme of IBBL. It is one kind of their CSR activities. And their investment amount is increasing
consecutively from 2012 to 2016.
3.11 Investment Program

3.11.1Types of investment product
There are 02 types of investment facilities are being provided to the beneficiaries namely (a) Micro
investment (collateral-free investment maximum Tk.75,000/- for the RDS members) and (b) Micro-
enterprise Investment (Investment with collateral security maximum Tk.500,000/- for the graduated
micro-clients and newly inducted local micro-entrepreneurs). We also extend Quard-al-hasana to the
eligible RDS clients for setting up tube-well, sanitary latrine. Quard-al-hasana is also extended for
rehabilitation purposes on account of natural and social disasters up to Tk.10,000/- .and rehabilitation
of the hardcore poor who are not the member of RDS under welfare activities up to Tk.5,000/-.

700000
600000
500000
400000
300000
200000
532235
474766
559544
569820
582852
100000
0
2012 2013 2014 2015 2016
Figure 3-9: Increase of MI & MEI Clients

Interpretation: The graph shows the increasing number if clients who has taken investment for Micro-
investment and Micro enterprise investment or the number of people attached with IBBL for investment
purpose.
3.12 Growth of investment

Cumulative disbursement among the beneficiaries was Tk.161,89128 million up to December-2016;
outstanding of which is Tk.24,476.99 million. A comparative position of growth of investment under
micro-investment (MI) and Micro Enterprise Investment (MEI) of the schemes is shown in the
following table:

Figure 3-10:Investment outstanding Position
Interpretation: The investment outstanding position is higher than others year. This is risky for a
company. In others word this can bring more profit than others year if the lender repays the money
properly. The more fame of IBBL spreads the more company is interested to take investment.
3.13 Non-Financial (welfare) Programs under the Schemes

Since poverty alleviation needs a combination of financial and non-financial programs. In this
perspective, different non-financial welfare services have been extended under the Schemes from the
year 2012 to the areas of (1) Education, (2) Training, (3) Health, (4) Relief & Rehabilitation and (5)
Environment.

3.13.1 Performance of welfare activities at a glance during the Year 2016
3.14 Non-performing Investment.
Interpretation: IBBLs position was better than national non-performing Investment position.
Classified investment of the Bank as on 31.12.2016 was Tk.23602 million which is 3.83% of general
investment as against 4.25% at the close of the year 2015.

Classified Investment To General Investment
3.83% 3.81%
3.71%
4.25%
4.92%
2012 2013 2014 2015 2016
Figure 3-11: Classified Investment To General Investment
Interpretation: Most of the investments of IBBL are classified because they emphasize on it. Other
banks emphasize on unclassified investment sector. IBBL does not invest in all sector such as(Bar,
Tobaco products, Night club etc). For this reason their investment is classified. The graph is showing
that IBBL maintains almost same percentage of classified investment to general investment from 2012
to 2016.
Figure 3-12: Classified Investment Trend From 2012 to 2016

3.15 Ratio Analysis
3.15.1 Current Ratio

The current ratio is a liquidity and efficiency ratio that measures a firms ability to pay off its short-
term liabilities with its current assets. The current ratio is an important measure of liquidity because
short-term liabilities are due within the next year. This means that a company has a limited amount of
time in order to raise the funds to pay for these liabilities. Current assets like cash, cash equivalents,
and marketable securities can easily be converted into cash in the short term. This means that companies
with larger amounts of current assets will more easily be able to pay off current liabilities when they
become due without having to sell off long-term, revenue generating assets.
Particulars 2013 2014 2015 2016

Current Assets 526,085,399,002 631,897,446,056 707,402,266,048 779,215,100,613
Current Liabilities 475,121,971,348 557,371,080,772 635,643,596,576 700,965,504,409
Current ratio 1.11 1.13 1.11 1.11
CURRENT RATIO
1.13
1, 1.13
1.125
1.12
1.115
1, 1.11 1, 1.11
1.11
1.105
1, 1.1
1.1
1.095
1.09
1.085
1
2013 2014 2015 2016
Figure 3-13: CURRENT RATIO

Interpretation: The current ratio helps investors and creditors understand the liquidity of a company
and how easily that company will be able to pay off its current liabilities. This ratio expresses a firms
current debt in terms of current assets. So a current ratio of 1.11 would mean that the company has 1.11
times more current assets than current liabilities. A higher current ratio is always more favorable than
a lower current ratio because it shows the company can more easily make current debt payments. The
current ratio also sheds light on the overall debt burden of the company. If a company is weighted down
with a current debt, its cash flow will suffer. The ratio is same in 2013,2015 and 2016. In 2014 the ratio
was 1.13.
3.15.2 Earnings Per share:

Earnings per share (EPS), also called net income per share, is a market prospect ratio that measures
the amount of net income earned per share of stock outstanding. In other words, this is the amount of
money each share of stock would receive if all of the profits were distributed to the outstanding shares
at the end of the year. Earnings per share is also a calculation that shows how profitable a company is
on a shareholder basis.
Particulars 2016 2015 2014 2013
Attributable 4,464,978,021 3,290,754,668 4,013,025,106 4,948,584,592

profit for the
year
Weighted 1,609,990,668 1,609,990,668 1,609,990,668 1,609,990,668

average number
of ordinary share
during the year
EPS 2.77 2.04 2.49 3.07

EARNINGS PER SHARE
3.5
2.5
1.5
0.5
0
2016 2015 2014 2013
Figure 3-14: Earnings Per share
Interpretation: Earning per share is the same as any profitability or market prospect ratio. Higher
earnings per share is always better than a lower ratio because this means the company is more profitable
and the company has more profits to distribute to its shareholders. In 2013 the EPS was 3.07. It
decreased in 2014 and again decreased in 2015. In 2016 it has increased to 2.77. This is positive sign
for the Bank.
3.15.3 Consolidated earnings per share

Consolidated earnings per share means that the net amount of EPS which is only owned by the
company. In broad sense it can be told that when all tax and shareholders equity are subtracted from
net profit then it is called consolidated earnings per share.

Particulars 2016 2015 2014 2013
Consolidated 4,479,338,303 3,412,042,793 3,981,383,358 5,030,758,795
net profit after
tax
Less: Profit 37,062 2,487 1,578 1,738
attributable to
non-controlling
interest
Attributable 4,479,301,241 3,412,040,306 3,981,381,780 5,030,757,057
profit for
distribution to
shareholders of
IBBL
Weighted 1,609,990,668 1,609,990,668 1,609,990,668 1,609,990,668
average number
of ordinary
share during
the year
EPS 2.47 1.96 2.46 3.12
Consolidated earnings per share

3.5
3.12
3
2.47 2.46
2.5
1.96
2
1.5
0.5
0
2016 2015 2014 2013
Figure 3-15: Consolidated EPS

Interpretation: Higher consolidated earnings per share is always better than a lower ratio because
this means the company is more profitable. It is the Banks EPS which is completely owned by the
bank. The graph is showing that the EPS is fluctuated in several times. In 2013 it was 3.12 next it
decreased to 2.46 then it again decreased to 1.96. After 2015 the Consolidated EPS increases to
2.47.
3.15.4 Debt Ratio

Debt ratio is a solvency ratio that measures a firms total liabilities as a percentage of its total
assets. In a sense, the debt ratio shows a companys ability to pay off its liabilities with its assets.
In other words, this shows how many assets the company must sell in order to pay off all of its
liabilities. This ratio measures the financial leverage of a company. Companies with higher levels
of liabilities compared with assets are considered highly leveraged and more risky for lenders.
Particulars 2016 2015 2014 2013
Current 700,965,504,409 635,643,596,576 557,371,080,772 475,121,971,348

Liabilities
Current Assets 779,215,100,613 707,402,266,048 631,897,446,056 779,215,100,613
Debt Ratio 0.90 0.89 0.88 0.6

DEBT RATIO
1
0.9
0.9 0.89 0.88
0.8
0.7
0.6
0.6
0.5
0.4
0.3
0.2
0.1
0
1
2016 2015 2014 2013
Figure 3-16: Debt Ratio

Interpretation: The debt ratio is shown in decimal format because it calculates total liabilities as
a percentage of total assets. As with many solvency ratios, a lower ratios is more favorable than a
higher ratio. A lower debt ratio usually implies a more stable business with the potential of
longevity because a company with lower ratio also has lower overall debt. Each industry has its
own benchmarks for debt, but .5 is reasonable ratio. A debt ratio of .5 is often considered to be
less risky. This means that the company has twice as many assets as liabilities. Or said a different
way, this companys liabilities are only 50 percent of its total assets.. A ratio of 1 means that total
liabilities equals total assets. In other words, the company would have to sell off all of its assets in
order to pay off its liabilities. The debt ratio is a fundamental solvency ratio because creditors are
always concerned about being repaid. When companies borrow more money, their ratio increases
creditors will no longer loan them money. Companies with higher debt ratios are better off looking
to equity financing to grow their operations. In the figure we can see that the ratio belongs to
almost same line in 2016, 2015, 2014. In 2013 it was only 0.6. Here we can say that IBBL is in
risky position due to their debt.
3.15.5 Cash Ratio

The cash ratio or cash coverage ratio is a liquidity ratio that measures a firms ability to pay off its
current liabilities with only cash and cash equivalents. The cash ratio is much more restrictive than
the current ratio or quick ratio because no other current assets can be used to pay off current debt

only cash. This is why many creditors look at the cash ratio. They want to see if a company
maintains adequate cash balances to pay off all of their current debts as they come due. Creditors
also like the fact that inventory and accounts receivable are left out of the equation because both
of these accounts are not guaranteed to be available for debt servicing. Inventory could take months
or years to sell and receivables could take weeks to collect. Cash is guaranteed to be available for
creditors.
Particulars 2016 2015 2014 2013
Cash + Cash 102,424,568,790 78,022,398,248 68,418,709,671 56,618,835,283
Equivalents
Total current 475,121,971,348 557,371,080,772 635,643,596,576 700,965,504,409
liabilities
Cash Ratio 0.22 0.14 0.11 0.08
CASH RATIO
2016 2015 2014 2013
0.22
0.14
0.11
0.08
Figure 3-17: Cash Ratio

Interpretation: The cash ratio shows how well a company can pay off its current liabilities with
only cash and cash equivalents. This ratio shows cash and equivalents as a percentage of current
liabilities. A ratio of 1 means that the company has the same amount of cash and equivalents as it
has current debt. In other words, in order to pay off its current debt, the company would have to
use all of its cash and equivalents. A ratio above 1 means that all the current liabilities can be paid
with cash and equivalents. A ratio below 1 means that the company needs more than just its cash

reserves to pay off its current debt. As with most liquidity ratios, a higher cash coverage ratio
means that the company is more liquid and can more easily fund its debt. Creditors are particularly
interested in this ratio because they want to make sure their loans will be repaid. Any ratio above
1 is considered to be a good liquidity measure. All the ratio was below 1 it is increasing day by
day. This is happened because the deposit amount is too much for this reason the ratio is below 1.
3.15.6 CAGR
CAGR stands for Compound Annual Growth Rate and is a financial investment calculation that
measures the percentage an investment increases or decreases year over year. You can think of
this as the annual average rate of return for an investment over a period of time. Since most
investments annual returns vary from year to year, the CAGR calculation averages the good years
and bad years returns into one return percentage that investors and management can use to make
future financial decisions. Its important to remember that the compound annual growth rate
percentage isnt the actual annual rate of return. Its an average of all the annual returns the
investment has produced. It evens all the years rates out to make it easier compare the returns to
other investment opportunities. For example, a company might fund a capital project that loses
money for five straight years and makes a huge profit on the sixth year. This CAGR would even
out first five years worth of negative returns with the sixth years positive return.
Particulars 2016 2015 2014 2013

Ending 670,612,215,159 623,501,592,933 560,062,868,019 469,093,758,604
Investment
Value
Beginning 623,501,592,933 560,062,868,019 469,093,758,604 398,480,787,345
Investment
Value
CAGR 2% 3% 4% 4%

COMPOUND ANNUAL GROWTH RATE
2%
4%
3%
4%
1 2 3 4
Figure 3-18: CAGR

Interpretation: The compound annual growth rate helps management and investors compare
investments based on their returns. It doesnt matter what the investment is in or how much the
original investment is. As with any investment, management should seek opportunities that will
yield the highest return rate. A larger CAGR percentage is always better than a lower percentage.
The graph is showing that the growth rate is increasing year by year from 2013 to 2016. This can
create a positive impression towards the clients.
3.15.7 Debt To Equity Ratio:

The debt to equity ratio is a financial, liquidity ratio that compares a companys total debt to total
equity. The debt to equity ratio shows the percentage of company financing that comes from
creditors and investors. A higher debt to equity ratio indicates that more creditor financing (bank
loans) is used than investor financing (shareholders).

Particulars 2016 2015 2014 2013
Total Liabilities 749,080,105,283 678,213,793,931 604,985,120,564 502,605,294,822
Total Equity 48,846,454,931 47,554,322,223 46,584,557,352 43,764,070,533
Ratio 15.34 14.26 12.99 11.48
DEBT TO EQUITY
16
14
12
10
0
1 2 3 4
1 2 3 4
Figure 3-19: DEBT TO EQUITY
Interpretation: Each industry has different debt to equity ratio benchmarks, as some industries
tend to use more debt financing than others. A debt ratio of .5 means that there are half as many
liabilities than there is equity. In other words, the assets of the company are funded 2-to-1 by
investors to creditors. A debt to equity ratio of 1 would mean that investors and creditors have an
equal stake in the business assets. A lower debt to equity ratio usually implies a more financially
stable business. Companies with a higher debt to equity ratio are considered more risky to creditors
and investors than companies with a lower ratio. Creditors view a higher debt to equity ratio as
risky because it shows that the investors havent funded the operations as much as creditors have.
In other words, investors dont have as much skin in the game as the creditors do. This could mean
that investors dont want to fund the business operations because the company isnt performing
well. Lack of performance might also be the reason why the company is seeking out extra debt
financing. Here we can say IBBL is in good position

3.15.8 Defensive Interval Ratio:
DIR is a useful ratio to measure the liquidity risk of a company. The use of defensive assets ensures
that the ratio measures the most conservative (yet realistic) situation of a companys liquidity. The
ability of the company to survive on liquid assets signals towards a strong company, which doesnt
need external support to run its operations. Hence a high DIR is considered good, however, it needs
to be looked at more holistically (more on that later). A company can monitor this ratio regularly
across the business cycle to understand the liquidity situation during different periods. Many
businesses are cyclical across a year or over an economic cycle; for example in the tourism industry
customers book their holiday early in the year, but they take the trip only during the holiday season.
In the booking season the company receives a lot of cash but it is still contingent on customers
actually making the trip. Hence during the booking season, the revenues are very low and they
need to manage operations via internal sources. However, this trend changes during the holiday
season, when the company starts recognizing revenue for the bookings. It is very important for the
company to measure the liquidity situation through the period and compare it with previous years.
Particulars 2016 2015 2014 2013

Defensive Assets 130,648,345,579 153,653,172,037 145,896,760,392 110,390,477,246
Daily 48566719.03 36986049.84 33159642.35 30314907.34

Operational
Expenses
Days 2691 4155 4000 3642

Defensive Interval Ratio
4155
4500 4000
3642
4000
3500
2691
3000
2500
2000
1500
1000
500
0
2016 2015 2014 2013
Figure 3-20: Defensive Interval Ratio
Interpretation: There is no perfect answer to the number of days over which existing assets will
provide sufficient funds to support company operations. Instead, analysts need to review the ratio
over time to see if the defensive interval is reducing; this may indicate that the companys buffer
of liquid assets is gradually declining in proportion to its immediate payment liabilities. Generally,
a higher DIR is better as it provides more liquidity for the company. However, sometimes too
much liquid assets could be negative as it could imply that the company is not employing capital
efficiently to generate higher returns. Analyst need to look at this ratio from the industry in which
the company operates. In capital intensive industries, the company might have deployed its capital
in large scale projects, which can be long-term value creative. Further, in certain industries it might
be a common practice to avail short-term loans to manage operations (like working capital loans)
as it might be cheaply available. Analyst need to be aware about all these dynamics before
commenting on the DIR of a company. In 2013 it was 3642 then it was increasing for two years
but in 2016 it decreased to 2691 due to the consecutive increase of assets.
3.15.9 Net operating profit after tax(NOPAT)

Net Operating Profit after Tax (NOPAT) is a profitability measurement that calculates the
theoretical amount of cash that a company could distribute to its shareholders if it had no debt. In
other words, this is the amount of profits that a company makes from its operations after taxes

without regard to interest payments. Both investors and creditors use this financial ratio to gauge
how profitable a companys operations are and how able they are to pay shareholders and debt
obligations. The accrual method of accounting typically creates timing difference between when
earnings are recognized for book purposes and when they are recognized for tax purposes. Thus,
there is usually a difference between the actual money that can be distributed to shareholders and
the amount calculated. Analysts also use this calculation as a measure of operating efficiency since
it calculates how profitable a companys operations are without considering its financing structure.
For this reason, NOPAT is typically considered the most accurate measure of operating efficiency
for leveraged companies. Analysts also tend to use this in other free cash flow and economic value
added calculations.
Particulars 2016 2015 2014 2013

NOPAT 4,479,338,303 3,412,042,793 3,967,416,860 5,030,758,795
NOPAT
6,000,000,000
5,000,000,000
4,000,000,000
3,000,000,000
2,000,000,000
1,000,000,000
0
1
2016 2015 2014 2013
Figure 3-21: NOPAT

Interpretation: Any ratio or number may not be very useful on a standalone basis. It has to be
compared to the companys own history and others within its industry. Historical analysis will tell
is if the company has improved its performance or not. While peer analysis will tell us how the

company stakes within the peer set in terms of operational efficiency. Here we can see that the
operating profit after tax is increased in2016 after a consecutive down word level from 2013 to
2015.
3.15.10 Financial Leverage or Equity Multiplier

The equity multiplier is a financial leverage ratio that measures the amount of a firms assets that
are financed by its shareholders by comparing total assets with total shareholders equity. In other
words, the equity multiplier shows the percentage of assets that are financed or owed by the
shareholders. Conversely, this ratio also shows the level of debt financing is used to acquire assets
and maintain operations. Like all liquidity ratios and financial leverage ratios, the equity multiplier
is an indication of company risk to creditors. Companies that rely too heavily on debt financing
will have high debt service costs and will have to raise more cash flows in order to pay for their
operations and obligations.
Particulars 2016 2015 2014 2013
Total Assets 797,926,560,214 725,768,116,154 651,579,483,721 546,369,365,355
Total Equity 48,846,454,931 47,554,322,223 46,584,557,352 43,764,070,533

Financial 16.33 15.26 13.98 12.48
Leverage
Financial Leverage
18
16
16.33
14 15.26
13.99
12
12.48
10
8
6
4
2
0 2016 2015 2014 2013
1
Figure 3-21: Financial Leverage

Interpretation: The equity multiplier is a ratio used to analyze a companys debt
and equity financing strategy. A higher ratio means that more assets were funding by debt than by
equity. In other words, investors funded fewer assets than by creditors. When a firms assets are
primarily funded by debt, the firm is considered to be highly leveraged and more risky for investors
and creditors. This also means that current investors actually own less of the company assets than
current creditors. Lower multiplier ratios are always considered more conservative and more
favorable than higher ratios because companies with lower ratios are less dependent on debt
financing and dont have high debt servicing costs. Financial leverage is increasing in every year
because of the increasing number of liabilities from 2013 to 2016. This should be controlled by
IBBL.
3.15.11 Long term Debt To Total Assets:

The long-term debt to total asset ratio is a solvency or coverage ratio that calculates a companys
leverage by comparing total debt to assets. In other words, it measures the percentage of assets that
a business would need to liquidate to pay off its long-term debt. A company can have two types of
liabilities on its balance sheet: Short-term (due within 1 year) and long-term (due in more than 1
year). Long-term debt ratio is a ratio which compares the amount of long-term debt to the value of
total assets on the books of a company. In other words, it gives a sense of financial leverage of a
company. A company can build assets by raising debt or equity capital. The ratio of long-term debt
to total assets provides a sense of what percentage of the total assets is financed via long-term debt.
A higher percentage ratio means that the company is more leveraged and owns less of the assets
on balance sheet. In other words, it would need to sell more assets to eliminate its debt in the event
of a bankruptcy. The company would also have to generate strong revenue and cash flow for a
long period in the future to be able to repay the debt. This ratio provides a sense of financial
stability and overall riskiness of a company. Investors are wary of a high ratio, as it signifies
management has less free cash flow and less ability to finance new operations. Management
typically uses this financial metric to determine the amount of debt the company can sustain and
manage the overall capital structure of the firm.

Particulars 2016 2015 2014 2013
Total Assets 797,926,560,214 725,768,116,154 651,579,483,721 546,369,365,355
Long-Term Debt 47,868,380,209 42,260,131,023 34,220,763,730 27,289,134,160
Ratio 0.06 0.06 0.05 0.05
Long term Debt To Total Assets

0.062
0.06 0.06 0.06
0.058
0.056
0.054
0.052
0.05 0.05 0.05
0.048
0.046
0.044
2016 2015 2014 2013
Figure 3-21: Long term Debt To Total Assets
Interpretation: Typically, a LT debt ratio of less than 0.5 is considered good or healthy. Its
important to analyze all ratios in the context of the companys industry averages and its past. For
capital intensive industry the ratio might be higher. Normally, lower the ratio better it is. But that
is not the absolute truth. LT debt ratio provides a theoretical data point and can act as a discussion
starter. Analyst need to understand the underlying causes of the ratio changes. For risk adverse

investors a low LT debt ratio is preferable while investors with high-risk appetite may tolerate
higher financial leverage. The choice of the level of ratio will also depend on the industry and the
industry cycle. Analyst should also understand the ideal capital structure that management is
seeking. Suppose the management has guided towards a LT debt ratio of 0.5x in next 5 years as
part of achieving its optimal capital structure, than analyst should track the movement of the ratio
in the next five years to gauge the execution capability of the management. Analyst could also
forecast the financial statements 5 years out, to predict if the desired capital structure (as measured
by LT debt ratio) is achievable or not. The ratio was good in 2013 and 2014 but it was increased
in 2015 and remain stable in2016. This is not bad for IBBL as it is a banking organization.
3.15.12 Return on Assets:

The return on assets ratio, often called the return on total assets, is a profitability ratio that measures
the net income produced by total assets during a period by comparing net income to the average
total assets. In other words, the return on assets ratio or ROA measures how efficiently a company
can manage its assets to produce profits during a period. Since company assets sole purpose is to
generate revenues and produce profits, this ratio helps both management and investors see how
well the company can convert its investments in assets into profits. You can look at ROA as a
return on investment for the company since capital assets are often the biggest investment for most
companies. In this case, the company invests money into capital assets and the return is measured
in profits.
Particulars 2016 2015 2014 2013
Net Income 4,479,338,303 3,412,042,793 3,981,383,358 5,030,758,795
Average Total 398,963,280,107 362,884,058,077 325,789,741,860 273,184,682,677

Assets
ROA 0.011 0.01 0.012 0.018

ROA
0.018
0.016
0.014
0.012
0.01
0.008
0.006
0.004
0.002
0
2016 2015 2014 2013
Figure 3-22: ROA
Interpretation: The return on assets ratio measures how effectively a company can earn a return
on its investment in assets. In other words, ROA shows how efficiently a company can convert the
money used to purchase assets into net income or profits. It only makes sense that a higher ratio is
more favorable to investors because it shows that the company is more effectively managing its
assets to produce greater amounts of net income. A positive ROA ratio usually indicates an upward
profit trend as well. ROA is most useful for comparing companies in the same industry as different
industries use assets differently. In the time of 2013 the return on asset was higher but the next
year it decreased then again decreased at the time of 2016 is increased slightly. And this process
of increasing should be continued.
3.15.13 Return on Equity:

The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to generate
profits from its shareholders investments in the company. In other words, the return on equity ratio shows
how much profit each dollar of common stockholders equity generates. So a return on 1 means that every
Taka of common stockholders equity generates 1 taka of net income. This is an important measurement
for potential investors because they want to see how efficiently a company will use their money to

generate net income ROE is also and indicator of how effective management is at using equity financing
to fund operations and grow the company.
Particulars 2016 2015 2014 2013
Net Income 4,479,338,303 3,412,042,793 3,981,383,358 5,030,758,795
Total Equity 48,846,454,931 47,554,322,223 46,584,557,352 43,764,070,533
ROE 0.09 0.07 0.08 0.11
ROE
0.12
0.1
0.08
0.06
0.04
0.02
0
1
2016 2015 2014 2013
Figure 3-23: ROE
Interpretation: Return on equity measures how efficiently a firm can use the money from
shareholders to generate profits and grow the company. Unlike other return on investment ratios,
ROE is a profitability ratio from the investors point of viewnot the company. In other words,
this ratio calculates how much money is made based on the investors investment in the company,
not the companys investment in assets or something else. That being said, investors want to see a

high return on equity ratio because this indicates that the company is using its investors funds
effectively. Higher ratios are almost always better than lower ratios, but have to be compared to
other companies ratios in the industry. Since every industry has different levels of investors and
income, ROE cant be used to compare companies outside of their industries very effectively.
IBBLs return on equity is good being a banking organization. The chart shows that the amount is
fluctuated every year from 2016 to 2013.
3.15.14 Return on Operating Asset:

Return on assets used in operations measures the ability of a companys general business
operations to produce revenue by comparing the net income produced with the current value of
assets employed in operations. In other words, it shows profitability from day-to-day production
resources. Some examples of operating assets include cash, accounts receivable, inventory and
the fixed assets that contribute to everyday operations. The revenue producing assets are required
to carry out business functions, but the return on these assets can let company management know
how much value these necessary assets add. After all, if a particular piece of expensive equipment
makes little or no marginal increase in revenue, it would be wise to find a less expensive piece of
equipment that can do the same job. Comparing the return on operating assets to the return on total
assets can also provide some insight on which assets are truly beneficial to own. Total assets would
include long-term assets and investments outside general revenue production that may not be as
liquid. By focusing solely on the operating assets, where a company has more control over costs,
income can be boosted by process improvements.
Particulars 2016 2015 2014 2013
Net Income 4,479,338,303 3,412,042,793 3,981,383,358 5,030,758,795
Total Assets 797,926,560,214 725,768,116,154 651,579,483,721 546,369,365,355
ROOA 0.6% 0.5% 0.6% 0.9%

ROOA
1
0.9
0.9
0.8
0.7
0.6 0.6
0.6
0.5
0.5
0.4
0.3
0.2
0.1
0
2016 2015 2014 2013
Figure 3-24: ROOA
Interpretation: The more ROOA percentage will be, the more investors will come. Because the
higher percentage states that the company is more stable in its business operation and it also
declares the efficiency of the management. Here we can see that the ROOA percentage is good
though it is fluctuated every time from 2013 to 2016. It is good for a bank. Because they have to
conduct their business operation by taking deposit from the customers.

Chapter 4
FINDINGS AND
RECOMMENDATIONS

4.1 Findings:
I have identified some problems and limitations in Islami Bank Bangladesh Limited while working
in Mirpur-10 branch. For these problems IBBL cannot provide best services to its customers as
well as customers are not getting ultimate service from IBBL. These problems are given follows:
IBBL, Mirpur-10 Branch cannot invest in Shariah prohibited sector, so its
investment scope is narrow in Bangladesh.
Most of the times entrepreneurs have no clear concept about Shariah and
investment mode. As a result, they do not want to make investment easily.
There is a lack of sufficient investment scope of IBBL, Mirpur-10 Branch. So, a
large amount of money is being idle, as a result, target for profit is not fulfilled
accordingly.
Due to the lack of sufficient & skilled manpower IBBL, Mirpur-10 Branch cannot
invest their asset in proper portfolio.
It is observed that major Investment of Mirpur-10 Branch is on commercial and
Industrial sectors and minimum amount of investment is on agricultural sector.
Maximum amount of investment of this branch occurs at Dhaka division.
Clients are not fully satisfied with the services provided by mirpur-10 Branch.
Office space for the investment department is not satisfactory. Clients some time
do not feel comfortable during the time of meet with officers.
4.2 SWOT ANALYSIS OF IBBL
Strengths:
IBBL provides its customer excellent and consistent quality in every service.
IBBL is a financially sound company.
IBBL utilizes state-of-the art technology to ensure consistent quality and operation.
IBBL provides its works force an excellent place to work.
IBBL has already achieved a good will among the clients.
IBBL has a research division.
Weaknesses:
IBBL lacks well-trained human resource in some area.
IBBL lacks aggressive advertising
The procedure of credit facility is to long compare to other banks.
Employees are not motivated in some areas.

Opportunities:
Emergence of E-banking will open more scope for IBBL.
IBBL can introduce more innovative and modern customer service.
Many branches can be open in remote location.
IBBL can recruit experienced, efficient and knowledgeable work force as it offers good
working environment.
Threats:
The worldwide trend of mergers and acquisition in financial institutions is causing
problem.
Frequent taka devaluation and foreign exchange rate fluctuation is causing problem.
Lots of new banks are coming in the scenario with new service.
Local competitors can capture huge market share by offering similar products.
4.3 Recommendations:
Islami Bank Bangladesh Limited has achieved outstanding success during last twenty six years,
but competition is being increased simultaneously. Lots of banks are being opened and many banks
are opening Islami banking division. To survive as number one position IBBL has to do lots of
things. Some of these are suggested below:
IBBL, Mirpur-10 Branch should concentrate on minimizing the disbursement time of
investment schemes to provide better services.
IBBL, Mirpur-10 Branch should create new investment mode by research & study
which will help them to increase their profit.
By arranging various seminars, it can be possible to communicate with people about
Halal, Haram & Shariah and influence them to go for Halal business.
The management of disburse the investment should be easier for the clients.
IBBL, Mirpur-10 Branch should appoint women Interpreter, who will deal with women
customer and aware of them about their activities.
IBBL should increase investment in agricultural sector because Bangladesh is an
agricultural country.
The branch should improve the customer services.
A large office space should immediately be allocated for this branch as well as for the
dept.

4.4 Conclusion:
Once upon a time, most of the people didnt understand interest-free banking system. They never
thought that it is possible to provide banking facilities without interest but in passage of time, now
it is clear that in Islam there as a banking procedure though profit / less sharing basis. In course of
time problems have reduced but not delaminated. This bank is trying to operate their activities
according to Islami Shariah. If the Govt. becomes conscious to solve these problems and the banker
become cordial and cooperative, the problems may be reduced to a greater extent
The Gradual and successful globalization of Islami Banking coupled with growing awareness of
the people about its financial and social benefits makes it clear that the next century is going to be
the century of Islami Banking.
It would be very difficult for them to survive as a number one position, if their service qualities
remain constant. Big clients are switching to other bank for this reason bank is losing huge market
share.
They should pay more attention to big clients. It is also true that maintain Sheridan and pay special
attention to particular person is very difficult.
Innovative product should be launched by Islami bank Bangladesh limited such as credit card,
investment in education sector to cope with present situation. This project will help IBBL to get
advantage over others. Special training should be given to employees to develop their behavior.

Chapter-5
Appendices

Appendix-1: Islami Bank Bangladesh Limited the first islami bank in Bangladesh in banking
sector.
Appendix-2: It is fully conducted by Islami Sariah
Appendix-3: It has several kinds of moods and mechanism for investment.
Appendix-4: Its investment system is classified.
Appendix-5: It does not invest in the sector which is prohibited in The Holy Quran. In short Haram
sector
Appendix-6: It has three mechanism for investment
Bai-Mechanism
Share-Mechanism
Ijara-Mechanism
Appendix-7: Interest is strictly prohibited in Islam so Islami Bank does not take any interest from
the clients.
Appendix-8: They just doing their business by taking profit but in this sector people have many
misconception regarding this. They think the profit and interest is same. But money can not bring
money in legal way. They convert the money into commodities or goods then they sell it to the
customer. When the exchange in happened like this is haram or illegal.
Money Money
But if the exchange is happened like this is Halal or legal.
Money Goods Money
Appendix-9: This is the most profitable bank in Bangladesh. And overall profit is 72 thousands
crore taka.
Appendix-10: Its overall position is good.
Appendix-11: The csr activities of IBBL is too much strong.
Appendix-12: According to ratio analysis we can say that it is in good position.

Bibliography:
Investment Manual, published by IBBL.
Annual Report 2013 to 2016 of IBBL.
Financial statemrnt-2013 to 2016 of IBBL
Modern Islami banking by Abdur Rakib
Marketing research by Naresh Kumar Malhotra
www.islamibankbd.com
Rahman, A. A. M. Habibur , Islamic Banking, Dhaka.
Web Sites: www.islamibankbd.com
http://www.islamibankbd.com/Page/Shariah.htm

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INTERNSHIP REPORT

A STUDY ON MIRPUR-10 BRANCH

Daffodil International University

FATEMA NUSRAT CHOWDHURY

Subject: Submission of Internship Report on Investment Modes and procedures of Islami

Daffodil International University I

I wish his every success in life.

FATEMA NUSRAT CHOWDHURY

Daffodil International University II

Daffodil International University III

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IBBL Islami Bank Bangladesh Limited

IBCA Inter Branch Credit Advice

IBDA Inter Branch Debit Advice

L/C Letter of credit

LCA Letter Of Credit Authorization

TIN Tax Identification Number

B/E Bill Of Exchange

B/L Bill Of Lading

FCC Foreign Currency Clearing

FDD Foreign Demand Draft

FDR Fixed Deposit Rate

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INTRODUCTION OF THE REPOERT

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1.4 Objectives of the study

1.4.3 OTHER OBJECTIVES

1.5.1 Data Collection

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OVERVIEW OF ISLAMI BANK

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2.2 History of Islami Bank of Bangladesh Limited

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2.3 Concept of Islamic Banking

2.3.1 What is Islamic Banking?

2.3.2 Objective of Islamic Banking

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2.3.3 Features of 'Islamic Banking

2.4 Mission and Vision of IBBL

2.4.1 Vision of IBBL

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2.4.2 Mission of IBBL

2.5 Shariah Council of IBBL

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2.6 SPECIAL FEATURES OF IBBL

2.7 Distinguishing Features of Islamic Banking against Commercial

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Figure 2-1: Program of IBBL

2.9.1 General banking

2.11 Role and contribution of IBBL to Bangladesh Economy

IBBL has earned reputation in the country as a corruption free institution.

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2.12.1 International Press

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2.12.3 Award and Prizes: International & National Perspective

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