Internship Report Overview of Islami Bank Bangladesh Limited
Transcript of Internship Report Overview of Islami Bank Bangladesh Limited
A S A U N I V E R S I T Y B AN G L A D E S H
A S A U N I V E R S I T Y B A N G L A D E S H
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A S A U N I V E R S I T Y B A N G L A D E S H
Introduction
Objective of the Study
Scope of the Study
Limitation of the Study
Methodology
Chapter One: Introduction
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Bangladesh is one of the largest Muslim countries in the world. The people of this
country are deeply committed to Islamic way of life as enshrined in the Holy Qur'an and
the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their
economic lives in accordance with the precepts of Islam. The establishment of Islami
Bank Bangladesh Limited on March 13, 1983, is the true reflection of this inner urge of
its people, which started functioning with effect from March 30, 1983. This Bank is the
first of its kind in Southeast Asia. It is committed to conduct all banking and investment
activities on the basis of interest-free profit-loss sharing system. In doing so, it has
unveiled a new horizon and ushered in a new silver lining of hope towards materializing
a long cherished dream of the people of Bangladesh for doing their banking transactions
in line with what is prescribed by Islam. With the active co-operation and participation
of Islamic Development Bank (IDB) and some other Islamic banks, financial institutions,
government bodies and eminent personalities of the Middle East and the Gulf countries,
Islami Bank Bangladesh Limited has by now earned the unique position of a leading
private commercial bank in Bangladesh.
The major objectives of the present study are:
1. To present the Dividend of IBBL.
2. To highlight the planning & policies of IBBL to their customers.
3. To focus on facilities provided by IBBL to their customers.
4. To find out the practices & policies for providing dividend to their shareholders of
IBBL.
5. To identify the problems in planning & polices of the Bank.
6. To recommend the possible lines of actions to overcome the problems & modify
the policies of the Bank.
Introduction
Objective of the Study
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There is a large scope for doing the report in any Bank. This report provides practical
knowledge to the students about Bank’s dividend policies & practices. The students have
a great opportunity to acquire knowledge about the Banks policies & practices. After
studying this report we will able to know about the Dividend processing, Mission, Vision,
Aim & objective & so on about Islami Bank Bangladesh Ltd. By the report one can get
information easily of this Bank.
This Bank is different from other traditional bank of Bangladesh for that their
information is difficult to understand.
The all information of IBBL isn’t available & somewhere their information
isn’t clear.
We all are student and we have to face financial difficulties.
We have to answer some questions about our University those make us
Confident less.
This paper has been prepared relying on primary and secondary information. Primary
information has been obtained through the annual reports of IBBL and Interviewing
concerned personnel of the bank with the help of a semi structured interview schedule.
Sources of pertinent secondary information included our analysis and various
publications of the Bank, journals, newspapers and websites.
Scope of the Study
Limitation of the Study
Methodology
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A S A U N I V E R S I T Y B A N G L A D E S H
Corporate Information
Mission & Vision
Aims and Objectives
Functions
Product & Services
Chapter Two: Organization Profile
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Corporate Information
(as on December 31, 2010) Date of Incorporation 13th March 1983
Inauguration of 1st Branch (Local office, Dhaka) 30th March 1983
Formal Inauguration 12th August 1983
Share of Capital
Local Shareholders 41.77%
Foreign Shareholders 58.23%
Authorized Capital Tk. 20,000.00 million
Paid-up Capital Tk. 7,413.10 million
Deposits Tk. 291,347.00 million
Investment (including Investment in Shares) Tk. 292084.00 million
Foreign Exchange Business:
Import Tk. 246,281.00 million
Export Tk.148,421.00 million
Remittance Tk. 214,629.00 million
Branches
Total number of Branches 251
Number of AD Branches 43
Number of Shareholders 52164
Manpower 10,068
Organizational Profile
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Mission To establish Islamic Banking through the introduction of a welfare oriented banking
system and also ensure equity and justice in the field of all economic activities, achieve
balanced growth and equitable development through diversified investment operations
particularly in the priority sectors and less developed areas of the country. To encourage
socio-economic uplift and financial services to the low-income community particularly in
the rural areas.
Vision Our vision is to always strive to achieve superior financial performance, be
considered a leading Islamic Bank by reputation and performance.
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. We 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.
1. To conduct interest-free banking. 2. To establish participatory banking instead of banking on debtor-creditor
relationship. 3. To invest on profit and risk sharing basis. 4. To accept deposits on Mudaraba & Al-Wadeah basis.
Mission & Vision
Aims and Objectives
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5. To establish a welfare-oriented banking system.
6. To extend co-operation to the poor, the helpless and the low-income group for
their economic upliftment.
7. To play a vital role in human development and employment generation.
8. To contribute towards balanced growth and development of the country through
investment operations particularly in the less developed areas.
9. To contribute in achieving the ultimate goal of Islamic economic system.
The functions of Islami Bank Bangladesh Limited are as under:
1. To maintain all types of deposit accounts. 2. To make investment.
3. To conduct foreign exchange business. 4. To extend other banking services.
5. To conduct social welfare activities through Islami Bank Foundation.
Al-Wadeeah Current Account
Mudaraba Savings Account
Mudaraba Term Deposit Receipt
Mudaraba Special Notice Account
Mudaraba Special Savings (Pension ) Account
Mudaraba Hajj Savings Account
Mudaraba Savings Bond Scheme Account
Functions
Products & Services
Deposit Scheme
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Mudaraba Foreign Currency Deposit Scheme (Savings)
Mudaraba Waqf Cash Deposit Account
Mudaraba Monthly Profit Deposit Scheme
Mudaraba Muthor Savings Deposit Scheme
Bai-Muajjal Bai-Murabaha Hire Purchase under Shirkatul Meelk Murabah Musharaka Bai-Salam Equity & Entrepreneurship Fund Of Bangladesh Bank
Household Durable Scheme Housing Investment Scheme Real Estate Investment Program Transport Investment Program Car Investment Scheme Investment Scheme For Doctors Small Business Investment Scheme Agriculture Implements Investments Investment Scheme Micro Industries Investment Scheme Mirpur Silk Weavers Investment Scheme
Investment Modes
Rural Development Scheme
Special Schemes
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Facilities Getting IBBL ATM Card Cash Withdrawal Procedure Issuing Branches Location Of ATM Booths BTTB Bill Payment Procedure IBBL Schemes-Installment payment Procedure
Locker Service SWIFT Reuter
ATM Services
Special Service
Foreign Exchange Business
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A S A U N I V E R S I T Y B A N G L A D E S H
Dividend
Dividend Policy
Analysis of Dividend policies of IBBL
Chapter Three: Dividend & Dividend Policy
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Dividend:
Dividend refers to that portion of a firm’s earnings which are paid out to the
shareholders.
Forms of Dividends:
Cash dividend
Dividend can be paid in the forms other than cash:
Stock Dividend
Stock Repurchases
Stock Dividend (Bonus Share):
The payment of dividend to the existing shareholders in the form of stock.
Often firm pay stock dividends as a replacement for or a supplement to cash dividend.
Firm find the stock dividend a way to give owners something without having to use cash.
Generally, when a firm needs to preserve cash to finance rapid growth, a stock dividend
is used.
Stock Repurchase:
The repurchase by the firm of outstanding common stock in the market
place. Stock repurchase enhance shareholders value by;
o Reducing the number of share outstanding and thereby raising earnings
per share,
o Sending a positive signal to investors in the market place that management
believes that the stock is undervalued, and
o Providing a temporary floor for the stock price, which may have been
decline.
Right Share:
Existing shareholders will get priority to purchase share at the time of
issuing of new common stock. This right is known as “Pre-emptive Right”.
Dividend
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Stock Splits:
Stock split has no effect on firms capital structure. A stock split is a method
commonly used to lower the market price of a firm’s stock by increasing the number of
shares belonging to each shareholder. The reason for stock split is that, the firm believes
that its stock is priced too high and that lowering the market price will enhance trading
activity.
Reverse Stock Split:
Sometimes it can also happen .For example: 1-for-4 split, one new share is
exchanged for four old shares. Reverse stock splits are initiated to raise the market price
of a firm’s stock when it is selling at too low price.
Cash dividend payment procedures:
1. Board of Directors Meeting:
Dividend decision- whether to declare dividend and what amount to pay
cash dividends to stockholders is decided by the board of directors of a corporation.
2. Amount of Dividend:
What amount or percentage of net income will be declared as dividend and
payment period is a key decision of the board meeting.
3. Relevant Date:
If the directors of the firm declare a dividend, they also typically issue a
statement indicating the dividend decision, the record date and the payment date.
4. Record Date:
All persons whose names are recorded as stockholders on the date of
record, receive a declared dividend at a specified future time.
5. Ex dividend Date:
Period, beginning 4 business days prior to the date of record, during which
a stock is sold without the right to receive the current dividend. This 4 days remain for
updating or transfer of ownership.
6.Payment Date:
The actual date on which the firm mails the dividend payment to the
holders of the record.
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#Owner Considerations:
Before establishing the dividend policy, the firm must consider some subject
which are related to its majority of shareholders.
(1) Tax status: If a firm has a large percentage of wealthy stockholders who are in
high tax bracket, it may decide to pay out a lower percentage of its earnings.
(2) Owner’s investment opportunities: A firm should not retain funds for
investment in projects yielding lower returns than the owners could obtain from
external investments of equal risk.
(3)Potential dilution of ownership:
If a firm pays out a high percentage of earnings, new capital will have to be
raised with common stock. The result of a new stock issue may be dilution of both
control and earnings for the existing owners.
# Market Consideration:
Shareholders often view a dividend payment as a signal of the firm’s future success.
A stable and continuous dividend is a positive signal, conveying the firm’s good health.
Shareholders are likely to interpret a passed dividend payment due to loss or to very low
earnings as negative signal
Types of Dividend Policies:
The firm’s dividend policy must be formulated with two basic
objectives in mind: providing for sufficient financing and maximizing the wealth of the
firm’s owners.
Constant-Payout-Ratio Dividend Policy:
The dividend payout ratio indicates the percentage of each dollar
earned that is distributed to the owners in the form of cash. It is calculated by dividing the
firm’s cash dividend per share by its earnings per share .With a constant-payout-ratio
dividend policy, the firm establishes that a certain percentage of earnings is paid to
owners in each dividend period.
Dividend Policy
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Regular Dividend Policy:
The regular dividend policy is based on the payment of a fixed dollar
dividend in each period. This policy provides the owners with generally positive
information thereby minimize their uncertainties .Under this policy dividends are almost
never decreased.
Low-Regular-and-Extra Dividend Policy:
Under this dividend policy, a firm is paying a low regular dividend,
supplemented by an additional dividend when earnings are higher than normal in given
period. By giving the low regular dividend the firm gives investors a stable income
necessary to build confidence in the firm, and the extra dividend permits them to share in
earnings from an especially good period. The extra dividend should not be regular event.
Factors Affecting Dividend Policy: Some factors affecting dividend policy. These are given bellow:
1. Legal Constraints:
An earnings requirement limiting the amount of dividends is sometimes
imposed. With this restriction, the firm cannot pay more in cash dividends than the sum
of its most recent and past retained earnings. However, the firm is not prohibited from
paying more in dividend than its current earnings.
2. Contractual Constraints:
Often the firm’s ability to pay cash dividends is constrained by restrictive
provision in a loan agreement. Constraints on dividends help to protect creditors from
losses due to the firm’s insolvency.
3. Internal Constraints:
The firm’s ability to pay cash dividends is generally constrained by the
amount of liquid assets (cash and marketable securities) available. Although it is possible
for a firm to borrow funds to pay dividends.
4. Growth Prospects:
The financial requirements are directly related to how much it expects to
grow and what assets it will need to acquire. A large, mature firm has adequate access to
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new capital, whereas a growing firm may not have sufficient funds available. A growing
firm like to have to depend on internal financing, so it is likely to pay out less amount of
income as dividend. On the other hand, a more established firm is in better position to
pay out large amount of income as dividend.
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By the information of Islami Bank Bangladesh Ltd. we are not able to get information
about what type of dividend policy they maintaining. So we have analyzed the financial
statement of IBBL of the last 5 years. The working is given bellow:
Particulars 2006 2007 2008 2009 2010
Cash Dividend 15% - - 10% -
Stock Dividend 10% 25% 30% 20% 35%
Total 25% 25% 30% 30% 35%
Amount of dividend in
TK. 86,40,00000 95,04,00000 142,56,00000 185,32,80,000 259,45,90,000
Net Income 140,05,90000 142,73,60,000 267,48,00000 340,35,50,000 446,34,70,000
Div. % of Earning 61.69 % 66.58% 53.30% 54.45% 58.13%
No. of Share 34,56,000 3,80,16,000 4,75,20,000 6,17,76,000 7,41,31,200
Dividend per Share 250* 25 30 30 35
*In 2006 the value of share was 1000 tk. & the number of share was
low.
Analysis of Dividend policies of IBBL
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Result of Analysis
2006: In 2006 the number of share was 34,56,000 & the value of per share were
tk.1,000. They issued 15% cash and 10% stock dividend which was 61.69% of their total
earnings. In 2006 their dividend per share was 250 tk.
2007: In 2007 the number of share was 3,80,16,000 & the value of per share were
tk.100. They issued 25% stock dividend which was 66.58% of their total earnings. In
2007 their dividend per share was 25 tk.
2008: In 2008 the number of share was 4,75,20,000 & the value of per share were
tk.100. They issued 30% stock dividend which was 53.30% of their total earnings. In
2008 their dividend per share was 30 tk.
2009: In 2009 the number of share was 6,17,76,000 & the value of per share were
tk.100. They issued 10% cash and 20% stock dividend which was 54.45% of their total
earnings. In 2009 their dividend per share was 30tk.
2010: In 2010 the number of share was 7,41,31,200 & the value of per share were
tk.100. They issued 35% stock dividend which was 58.13% of their total earnings. In
2010 their dividend per share was 35 tk.
By measuring the last 5 years financial statement, we can say that IBBL pay
nearly same amount of dividend per year. So that IBBL follows regular dividend
policy depending on DPS.
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Total Dividend (%)
Dividend per Share (Tk.)
250
25 30 30 35050
100150200250300
2006 2007 2008 2009 2010
0%
5%
10%
15%
20%
25%
30%
35%
2006 2007 2008 2009 2010
25% 25%
30% 30%
35%
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Findings
Conclusion
Recommendation
Chapter Four: Findings, Conclusion, Recommendation
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# IBBL maintain Islamic banking systes.
# A lot of services provided by IBBL.
# Their website isn’t improved.
# Their services are very difficult to understand.
# Their dividend policy isn’t mentioned.
# Their banking system is better than others.
IBBL introduce different types of banking system in Bangladesh. They provided banking
services according to Islam. IBBL provided a regular amount of dividend to their
shareholders and their service is better than other some banks of Bangladesh. Although
they have some problems but those are very easy to overcome. If IBBL able to overcome
those problems than it may be the best Bank of Bangladesh.
# They should mention their dividend policy on their annual report.
# They should modify their website.
# They should make easy the name of their services.
# IBBL should inspire their employees to be more co operative with their customers.
Conclusion
Findings
Recommendation
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Web Site: www.islamibankbd.com
Report: Annual report of IBBL 2006
Annual report of IBBL 2007
Annual report of IBBL 2008
Annual report of IBBL 2009
Annual report of IBBL 2010
Reference