Does Foreign Presence Foster Islamic Banks' Performance Empirical Evidence From Malaysia
Report on Foreign Exchange Practice of ICB Islamic Bank
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Foreign Exchange Practice
Internship Report
On
Foreign Exchange practice of
ICB Islamic Bank Ltd:
A study on inherent risk of Export LC
Submitted by
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Any academic course has a great value when it has practical application in the real life.
Only theoretical knowledge will be useless unless we apply it in the practical life. So we
need proper application of our knowledge to get some benefit from our theoretical
knowledge. When we are able to apply our theoretical knowledge to our working are we
come to know the true benefits of our knowledge. Internship program gives us such an
opportunity of applying our theoretical knowledge to our working life. When theoretical
knowledge is obtained from a course of study it is only the half way of the subject matter.
Internship implies the full application of the methods and procedures. he term paper istitled !Foreign Exchange Practice o IC! I"#amic !an$ %td& A Study on Inherent 'i"$
o Ex(ort %)C *. As a student of ""A this study will be more significant in my practical
life. I have worked for three months at #ead office of I$" Islamic "ank %imited to
complete the internship program as an academic re&uirement.
.
1.3 Objective of the Report:
Objective of the study acts as a bridge between the starting point and the goals of the study.
o illustrate the objectives properly' presented into two parts(
Genera#+
o get practical idea about Islamic banking activity.
o observe the )oreign *+change operation of I$" Islamic "ank %imited and their
services.
S(eciic+
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o observe the major outline of foreign business.
o observe credit line arrangement.
o observe the foreign correspondents of I$"I"%.
o observe the post import financing operations.
o analysis the e+pansion of )oreign rade business of the I$"I"%.
o identify the problems of it,s financing.
o recommend solutions of or solving the problems faced by I$"I"% in )oreign
e+change "usiness.
o adjust with business environment that will be helpful for my career.
1.4 Scope of the Report:
he main objective of the study is to obtain a clear idea about )oreign *+change business
of our banking operation i.e. how the %-$ is opened and how the import e+port is done.
he other objectives are as follows(
o fulfill the re&uirement of our ""A /rogram.
o evaluate the performance of the I$" Islamic "ank %imited import and e+port
business.
o recommend about foreign e+change business of the I$" Islamic "ank %imited.
1.5Methodology
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Ty(e o "tudy+
here are mainly three different types of researches. I should define my type from thesethree types of researches. he researches are(
Ex(#oratory 'e"earch+ he objective of e+ploratory research is to gather preliminary
information that will help define the problem and suggest hypotheses.
,e"cri(ti-e 'e"earch+In this type of research certain problem' operation and issue areanaly0ed in a descriptive manner and also focus on the finding and recommendations.
Cau"a# 'e"earch+he objective of such type of research is to test hypotheses about cause
and effect relationships.
After doing all the research work analy0e all those I can see that' I have done a
de"cri(ti-e ty(eof research.
Methodo#ogy or ,ata Co##ection+
The Primary "ource" o ,ata+
)ace to face conversation with the respective officer of the branch.
)ace to face conversation with the clients.
/ractical desk work.
elevant file study as provided by the officers concerned.
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Observation.
The Secondary "ource" o ,ata+
Annual eports of the I$"I"%.
/eriodicals published by the "angladesh "ank.
2ifferent books' articles etc. regarding )oreign *+change operations.
3arious brochures.
2aily summary sheet.
3arious type of statement.
3arious resister books.
3arious printed form.
Web page( www.icbislamic4bd.com.
1.6 Limitatio of the St!dy:
he report is written mainly on the basis of face4to4face conversation with the officer and
of the little practical e+perience in the bank. So' no perfect study is conduct to measure the
viability of the report. here are some other limitations such as(
ime constraint prohibited the preparation of an effective report.
3ast areas of tasks operated by the bank.
he heavy pressure of task on each desk therefore they could hardly provide little time to
discuss.
2ue to some risky monetary transaction.
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he secondary data that have been observed was in a form' which was not helpful for this
study. 2ue to the safety and security reasons' access to all the confidential data was not
obtained.
he information that is provided is the synopsis of the real volume of information' so the
complete pictures of the concerned aspects are not evident.
oo much of bulk data in the Internet' which made work more difficult.
%ack of self4knowledge concerning report preparation' was also a limiting factor in
preparing a better report.
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1." #trod!ctio
"angladesh is a developing country' whose economy is agro based. he Agricultural
system is primitive and fre&uently affected by natural disaster. /overty is the main problem
of this country. About 56.78 of its population is living below the poverty line and another
198 of the population is living below the hard4core poverty line :with consumption less
then 19;; calories per head per day
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Fi"ca#
ear
>S aka >S aka >S aka
?;;1 D7D 1=B=B D66 ?;DD? D5= 199;=
?;;? D7? ?;76D D6B ?1559 D56 1=9;B
he countryFs economy is based on agriculture. ice' jute' tea' sugarcane' tobacco' and
wheat are the major crops. "angladesh is the worldFs largest producer of jute. )ishing is
also an important economic activity' and beef' dairy products' and poultry are also
produced. *+cept for natural gas :found along its eastern bordernited States' India' and $hina are the main trading partners of "angladesh.
1.$ Overvie% of &iacial #'tit!tio' of (aglade'h:
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)rom the initial issuance of a license to operate a bank in #ungary in 1==5 :which was
disposed in Hay ?;;6
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he country of incorporation of I$" Islamic "ank is Swit0erland.
T/ESE !AN0S INC%1,E+&
1 International $ommercial "ank Sh.A ' Albania
? International $ommercial "ank :2jibouti< S.A
D International $ommercial "ank :@ambia< %td
5 International $ommercial "ank %imited' @hana
B International $ommercial "ank S.A' epublic of @uinea
7 / "ank "umiputera Indonesia bk ' Indonesia
6 I$"4"anco Internacional de $omercio SA%' Ho0ambi&ue
9 International $ommercial "ank Senegal S.A
= International $ommercial "ank :Sierra %eone< %imited
1; International $ommercial "ank :an0ania< %td
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).) (-,/RO02 O& *+ #,( #SL-M#, (- L#M#*2
# (-/L-2S+
@overnment states the rule and regulation that should be followed by a private bank. he
initiative of government has paved the way to create new and dynamic financial
institutions. One such institution in our banking sector is 2IC! I"#amic !an$ %imited.
he bank has been incorporated in April' 1=96 as a public limited company under the
$ompanies Act' 1=1D to undertake carryout all kinds of banking' financial business
activities' transactions operations in strict compliance with the principles of Islamic law
:Shariah< relating to business activities in particular avoiding usury in credit sales
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transactions any practice which amounts to usury. $ertificate for commencement of
business has been issued to the bank on April' D;' 1=96.
he "ank has been authori0ed by the "angladesh "ank to carry on the banking business in
"angladesh with effect from Hay 5' 1=96. #oweverJ actual banking operations
commenced on Hay ?;' 1=96 emerged as ?nd Islamic "ank in the country under the
name !Al "araka "ank "angladesh %imited.
Initially bank has started its operation in the name of Al "araka "ank "angladesh %imited
but on D1st2ecember' ?;;? it was renamed as !he Oriental "ank %imited by the egister
of joint Stock $ompanies.
he Oriental "ank %imited had been going through financial crisis for years and the bank
gradually reached the verge of collapse at beginning of ?;;7. It became a serious issue by
following a report of 2aily /rothom Alo which brought the issue to all concern. )ollowing
the report of /rothom Alo and few other dailies' there were serious pressure of withdrawal
on the bank which was about to take a ruinous form. Horeover' unfavorable news
regarding the Oriental "ank %imited started influencing clients of other private banks to
withdraw their money. Observing this situation' for salvaging oriental and other private
banks as well' "angladesh "ank was considering number of options and finally opted to
takeover the responsibility of the "ank. As such' "angladesh "ank on 1=.;7.?;;7 removed
the Hanaging 2irector' dissolved the "oard of 2irectors and appoints an Administrator.
"angladesh "ank undertook the control of the bank on Cune 1=' ?;;7 as bank was in
e+treme li&uidity crisis due to many setbacks and irregularities in preceding years.
"angladesh "ank also confiscated shares of the owners later on. he "ank was listed at
2haka Stock *+change limited and $hittagong Stock *+change %imited.
On 5th Harch ?;;9' he Oriental "ank was took over by I$" "anking group.. I$" Islamic
"ank %td. operates in "angladesh with a total of D? branches across the country based on
Islamic Shariah. Its authori0ed $apital is k.1;.;; billion :>S2 ;.15 billion appro+.< and
/aid4up $apital is k.6.;; billion :>S2 ;.1 billion appro+.
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"ank 2r. #adenan A Calil was the former Auditor @eneral of Halaysia. he $hief
*+ecutive :Hanaging 2irector< Hr. Abdul %atif "in Kahaya was the former #igh Official
of the $entral "ank of Halaysia. he I$" "anking @roup is a member of %ondon Stock
*+change. $ommensurate with the global policy of I$" "anking @roup' I$" Islamic "ank
is committed to provide banking services of international standard to its clients in all areas
of banking to cater customer need. I$" dedicated substantial investments to ensure that
best people are employedJ the operating systems are technologically superiorJ proven
systems and methods are implemented consistently with best practicesJ strong internal
controls are entrenchedJ and proactive risk management is implemented and respected.
he principal place of business is the registered office at .G. "haban : 5th'15th' 1Bth' 17th
)loor
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).3 ).3 i'io
he vision of the "oard and the Hanagement is to lead the "ank to a new height with all
rounds of achievements and to make it a "ank for the new generation' for which all of us
will feel proud of.
IC! I"#amic !an$ %imited -i"ua#i3e" it"e# a"+
/roviding the greatest return to share holders by achieving sound profitable growth.
#aving staffs of the highest caliber.
Working together to make decisions' managing the change and getting things done
.
).4 M).4 Mi''io
o establish Islamic "anking by translating the Islamic economic principles into practice'
blending the progressive Islamic houghts of "anking latest financial services
technologies with commitment for D7 highest degree of accountability transparency with
all trust on Allah.
).5 O).5 Objective' of #,( #'lamic (a Limited
he mottoof I$" Islamic "ank %imited is42to ex(#ore a ne4 hori3on o inno-ati-e
modern ban$ing by creating an automated and com(uteri3ed en-ironment to the
(eo(#e on the ba"i" o Shariah*
he objectives of I$" Islamic "ank are4
Increase the number of branch.
Increase the $ustomer satisfaction'
o make profit always be in breakeven point'
Increase the /aid up $apital'
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/roper monitoring for giving loan'
Hake friendly nice relationship between the management and the employees.
).6 /).6 /oal
o develop consolidate a strong client base and ensure all kinds of modern banking
facilities. *+panding business service periphery to fulfill the e+pectations of the
shareholders and customers by following Islamic Shariah.
o e&uip prepare the "ank with modern up to date progressive Islamic banking
system' to achieve the target of becoming !he number one "ank of the country in
respect of profitability and service.
)." )." al!e of #,( #'lamic (a Limited
he value statement of I$" Islamic "ank %imited is !A /rogressive Islamic "ank.
I$" Islamic "ank %imited holds the following values(
)ocus on the customers to build relationships based on integrity' superior service and
mutual benefits.
Work as a team to serve the best interests of the group.
elentless in pursuing improvement.
espect people and make decisions based on report.
ecognition and rewards based on performance.
Open and honest communication.
esponsible' trustworthy and law abiding in every activity.
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).$ at!re).$ at!re of (!'ie''
he bank provides all kinds of commercial banking services to the customers observing the
provisions of the "ank $ompany Act 1==1' "angladesh "ank,s directions principles of
Islamic Shariah.
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). *he). *he Maagemet *eam of #,(#(L
Organogram of "ranches of I$"I"%(
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Head of Branch/ Chief
Manager
Manager (Foreign Exchange &
Investment Div.) wi act as!eationshi" Manager
#enera
Ban$ing
Cash Financia
Contro Div.
Manager (%"eration) wi act as enior
Credit 'dministration %fficer &Com"iance %fficer of the Branch
Common
ervice Faciit
Division
Investment
Mar$eting &
Monitoring
*rade ervice &
Foreign
!emittance
Foreign
Exchange ret+rn
& statement
!ecover
Fig+re, %rganogram of Branches of ICB Isamic Ban$ -imited
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).17 M--/M* +#R-R,+8
C/AI'MAN
!OA', OF ,I'ECTO'S
MANAGING ,I'ECTO'
,EP1T MANAGING ,I'ECTO'
SENIO' E5EC1TI6E 6ICE P'ESI,ENT
E5EC1TI6E 6ICE P'ESI,ENT
SENIO' 6ICE P'ESI,ENT
6ICE P'ESI,ENT
SENIO' ASSISTANT 6ICE P'ESI,ENT
ASSISTANT 6ICE P'ESI,ENT
E5EC1TI6E OFFICE'
ASSISTANT E5EC1TI6E OFFICE'
SENIO' OFFICE'
OFFICE'
ASSISTANT OFFICE'
).11 9).11 9rod!ct' Service' of #,( #'lamic (a Ltd.
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Bank
Retail Banking Corporate Banking
Financing Deposit Funde Non-FundedScheme)CF) 0ersonaoan1)Cash credit
) MD) CD1) M*D2) M*D3) M*D!) Instament4ased) M0*D1) Ho+sing2) HigherEd+cation3) Marriage5) Ha667) Chidren8) F+t+re de"osit
)BM) *!1) M9#2) H03) ndication ) -/C) Bid Bond1) 0#2) '0#
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3.1 ;orig Sector of #,( #'lamic (a Limited:
o perform these functions simultaneously the bank divides its operations in four parts that
is @eneral "anking' %oan and Advances' )oreign *+change and Account section.
3.)&oreig
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4.1 #trod!ctio of &oreig
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In terms of section ?:d< of the foreign e+change regulations 1=56' as adopted in
"angladesh' )oreign *+change means foreign currency and includes any instrument drawn'
accepted or issued under clause :1D< of article 17 of the "angladesh "ank order' 1=6?' all
the deposits' credits and balances payable in any foreign currency and draft che&ue' letter
of credit and bill of e+change e+pressed or drawn in "angladeshi currency but payable in
any foreign country.
In e+ercise of the power conferred by section D of the foreign e+change regulation' 1=56'
"angladesh "ank issues license to schedule bank to deal with e+change. hese banks are
known as Authori0ed 2ealers. %icense to firms and persons are also issued by "angladesh"ank to e+change foreign currency instruments such as .$' currency notes and coins.
hey are known as Authori0ed moneychangers.
4.3 &!ctio' of &oreig
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Im(ort"+
Opening of letter of credit :%-$nder this arrangement' the seller submits the documents of the shipment to the accepting
bank :nominated by the issuing bank for acceptance< accompanied by draft drawn on the
bank at the specified tenor. After being satisfied with the documents' the bank accepts the
documents' draft and at maturity the repayment will be obtained in the pre4agreed manner.
Sett#ement by Negotiation+
his settlement procedure starts with the submission of documents by the seller to the
negotiating bank. After scrutini0ing the documents the negotiating bank sends the
documents to the issuing bank as usualJ reimbursement will be obtained in the pre4agreed
manner.
4.6.6 ,acellatio of a L>,
he %etter of $redit :%-$< $ancellation function shall allow the user to cancel or close a
%etter of $redit-2ocumentary $redit :Islamic
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(b) Able to refund cash margin deposit and credit customer,s current account at time of on4
line cancellation. System shall prompt a message to inform the users' if there is any
outstanding %-$ margin deposit pending refund to the customer.
(c) o update credit line utili0ation and reinstate unutili0ed credit balance after approval of
%-$ cancellation.
(d) o automatically default - calculate charges as stated in the M$harges, section' at selling
e+change rate :if applicable
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(d) $reate a history or record for each %-$ cancellation performed by system.
:e< eport the auto4canceled %-$ in the 2aily ransaction-Activity %ist.
4.6.$ 9aymet proced!re' of the #mport 2oc!met':
his is the most sensitive task of the Import 2epartment. he officials have to be very
careful while making payment.
,ate o Payment+
>sually payment is made within =;' 1?; or 19; days :must be specified< after the
documents have been received. If the payment is deferred' the negotiating bank may claim
interest for making delay.
Pre(aring Sa#e Memo+
A sale memo is made at "$ rate to the customer. As the 22 rate is paid to the
International 2epartment' the difference between these two rates is e+change trading.
)inally' an Inter "ranch *+change rading $redit Advice is sent to International
2epartment.
'e;ui"ition or the oreign Currency+
)or arranging necessary fund for payment' a re&uisition is sent to the International
2epartment.
Tran"mi""ion o Te#ex+
A tele+ is transmitted to the correspondent bank ensuring that payment is being made.
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2oc!metary ,redit:
In simple terms' a documentary credit is a conditional bank undertaking of a payment.
*+pressed more completely' it is a written undertaking by a bank :issuing bank< given to
seller :beneficiary< at the re&uest' and in accordance with the instructions of the buyer
:applicant< effective for payment :that is' by making a payment' or accepting or negotiating
bill of e+change< up to a stated sum of money' within a prescribed time limit and against
stipulated documents. he customary clauses contain in a %-$ are the followings(
A clause authori0ing the beneficiary to draw bills of e+change up to certain amount on
the opener.
%ist of shipping documents' which are to accompany the bills.
2escription of the goods to be shipped.
An undertaking by the opening bank that bills drawn in accordance with the conditions
will be dully honored.
Instructs the negotiating banks for obtaining reimbursement of payments under the credit.
Liability of #''!ig (a:
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As per Article =:a< of >$/2$ B;;' An Irrevocable $redit constitutes a definite
undertaking of the issuing "ank' provided that the stipulated documents comply with the
terms and conditions of the credit.
-ddig ,ofirmatio:
he confirming bank does the job of adding $onfirmation. $onfirming bank is a bank that
adds its confirmation to the credit and it is done at the re&uest of the issuing bank. he
advising bank usually does not do it if there is not a prior arrangement with the issuing
bank. "y being involved as a confirming agent the advising bank undertakes the power to
negotiate beneficiary,s bill without recourse to him.
o Issue %-$ and re&uest to add confirmation.
oeview the %-$ terms.
o/rovide reimbursement.
o2rafts to be drawn on %-$ opening bank.
oAvailability of credit facilities.
o%ine allocation from the business and ownership units in the importer,s country.
o$onfirm and advise %-$.
4."
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sale. *+port rade plays a vital role in the development process of an economy. With the
earnings from e+port we meet up out import bills.
Although e+port trade is always encouraged' any body cannot e+port anything to any place.
%ike importer the e+porters are also re&uired to get them registered before entering into
e+port trade. *+port egistration $ertificate :*$< given by $$I * is re&uired for this
purpose. he re&uired documents to obtain *$ are also same as I$.
When a bank :Authori0ed dealer< receives a %-$ :cable or original< it ascertains the
correctness of the test number and the authori0ed signature. hen the bank sends the
original copy of the %-$ to the beneficiary.
he e+porter presents the relative documents to the negotiating bank after the shipment of
the goods. he %-$ issuing bank undertakes to honor obligation only if the beneficiary
fulfills the conditions stipulated in the %-$' Hay namely' the submission of stipulated
documents within the stipulated time. *ven a slide deviation of the documents from
specified in the %-$ may give an e+cuse to the negotiating bank. So the negotiating bank
must be careful' promote' systematic and bias4free while scrutini0ing the tender documents.
After careful and through e+amination of the documents' the banker has to list out thediscrepancies which may be classified as major or minor' irremovable or removable. he
removable discrepancies can be corrected by future losses' which may arise due to non4
repatriation of proceeds.
Ex(ort Forma#itie"+
/rocedure for registration of *+porterJ
"ook and register ledger re&uired for e+portJ
*+port %-$ checking and advisingJ
)ormalities of back to back %-$ openingJ
Accounting of back to back %-$J
"." "ill checking- %odgmentJ
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Hechanism of acceptanceJ
/re4shipment financingJ
*+port document checking and negotiation under reserve - collection basisJ
$alculation of offering sheet for fund disbursement systemJ
/roceeds reali0ation correspondentsJ
)ormalities of back to back payment systemJ
/ayment from "ai4Huajjal Inv. bill A-$ :if e+port fails
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Chec$ing and ad-i"ing o Ex(ort %)C+
On receipt of *+port %-$ it has to be recorded in the banks inward register and then the
signature on the %-$ or test number for tele+ %-$ is to be verified by an authori0ed officer
of a bank and finally it is to be forwarded to the beneficiary under forwarding schedule.
4.$ (ac?to?(ac Letter of ,redit:
"ack L to L back %-$ is a secondary %-$' opened by the advising "ank in favor of a
domestic - foreign supplier on the basis of an e+port %-$. "ack L to L back %-$ is opened
for procuring raw materials - finished goods for e+ecution of shipment order. he
beneficiary of back Lto L back %-$ is generally paid on negotiation of the final documents
submitted by the e+porter.
Although ""%$ is normally opened at nil margin but "rach may ask for margin and
collateral security or new clients or special cases.
he following points will be considered for allowing ""%$4
Only recogni0ed units of readymade garments' speciali0ed e+tiles under bonded
warehouse system will be e+tended ""%$ facility. herefore' "ranch must satisfy that
the client has a valid bonded warehouse license.
he genuineness of the e+port %-$ must be valid with the advising bank.
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he validity of the e+port %-$ will be for a reasonable time so that after receiving of
goods under ""%$' it may be processed - manufactured comfortably keeping in view thevalidity of shipment period of muster %-$ and production capacity of the factory.
he value addition by the e+porter will be at least 9;8 of the net )O" value of the e+port
%-$ :in some cases 6B8 are also allowed' subject to "angladesh bank restrictions
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)ull particulars of bank account.
"alance sheet.
Statement of assets and liabilities.
rade license.
3alid bonded ware house license.
Hembership certificate.
Income ta+ declaration.
Hemorandum of articles.
/artnership deeds.
esolution.
/hotographs :all directors
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designated bank which also works as an agreement between the importer and the bank. he
form is to be stamped under the stamp act as adapted in "angladesh. he importer must
submit the %$A)' IH/ Insurance $over Eote and indent - contract - purchase order - pro4
forma invoice :duly accepted by the importer< or more whenever re&uired.
he %-$ application must be completed - filled in and signed by the authori0ed person of
the importer giving the following particulars L
)ull name and address of the suppliers or beneficiary or importerJ
"rief description of the goodsJ
%-$ amount :$) value< which must not e+ceed the %$A) valueJ
he unit price' &uantity' &uality of the goodsJ
Origin of the goods' port of loading' and destination port must be mentioned.
Hode of shipmentJ
%ast date of shipment and negotiation timeJ
Insurance cover note number and name of the companyJ
enor of draftJ
Hode of advising %-$J
Whether shipment - transshipment is allowedJ
Instruction to add confirmation if re&uiredJ
%$A) numberJ
*+port %-$ number and dateJ
Any other relevant information and instructions if any must be mentioned in the %-$
application form.
Procedure+
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An e+porter desires to have an import %-$ limit under back to back arrangement' must
apply to designated bank in prescribed forms to authori0e opening of back to back %-$. In
that case the following information is to be furnished by the applicant4
)ull particulars of bank account.
ype of business' in case of limited company' balance sheet of last three years and the
name of directors.
#istorical background.
Amount of limit re&uired.
erms of payments.
@oods to be imported.
Security to be offered.
epayment schedule and source of fund.
Other liabilities of the customer with the bank.
Statement of assets and liabilities.
rade license.
Hembership certificate.
Income ta+ declaration with IE.
Hemorandum of articles.
egistered partnership deed :if partnership firmnder the back4to4back concept' the seller' as beneficiary of the credit' offer it as security
to the advising bank for the issuance of the second credit. As application for this second
credit the seller is responsible for reimbursing to make payment under it and it does not
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matter whether he makes payment under first credit or not. here is' however' no
compulsion for the bank to issue the second credit' and in fact' many banks will not do so.
Ater 'ecei-ing !! ,ocument again"t !ac$ to !ac$ %)C the o##o4ing -oucher "hou#d
be (#aced+
%iability as per contra :""%-$< 2r.
Asset as per contra :""%-$pto >S ?;;.;; or e&uivalent )oreign $urrency k B;;-4
Above >S ?;;.;; or e&uivalent )oreign $urrency k 1;;;-4
Issuance of ( cash dollar is charged k ?B;-4 and
ravelers, che&ue k ?;;-4
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4.11 2ifferet &oreig ,!rrecy -cco!t
here are some accounts where customers can deposit and withdraw foreign currency L
FC 8Foreign Currency9 account+
*+porters or importers for the purpose of their business may open it.
'FC, 8'e"ident Foreign Currency ,e(o"it9+
Any person of our country who is working and staying in abroad can open it.
NFC, 8Non& 'e"ident Foreign Currency ,e(o"it9+
ravelers or visitors who are traveling in other countries may open it.
I$" Islamic "ank %imited has diversified activities in retail banking' corporate banking
and international trade. )rom the very beginning it has obtained a solid foundation in
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respect of foreign trade. I$" Islamic "ank %imited has established a modern dealing
opportunity for foreign trade and money management. It has handful number of authori0ed
branches for dealing with foreign e+change business. SWI) has already been introduced
and installed at = A.2 branches to speed up international transactions and it will be
installed at all the A.2 branches of the bank shortly.
&ive year' progre'' of #,(#(L at a glace:
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Particu#ar"
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22epo'it 9o'itio
he deposit base of the "ank continues to register steady growth and stood at k. ?5';59
million as on 2ecember D1' ?;;5 against k. ?;'?D1 million of preceding year. he
increase is 19.96 percent. 2eposits mi+ i.e. time deposits and demand deposits of the "ank
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have also improved. he time deposits stood at =?.57 percent and demand deposits stood at
6.B5 percent during the year ?;;5. he cost of fund also came4down from =.11 percent in
?;;D to 9.D7 percent in ?;;5.
Figure+ Gro4th o ,e(o"it
he "ank has' in the meantime' introduced the following deposit schemes to encourage and
mobili0e the deposits as well as for the welfare of the people. hese deposit schemes have
been appreciated by the general people and have received huge response.
Honthly profit on H2 Scheme
Harriage Savings Scheme
#igher *ducation Savings Scheme
Savings Scheme of $hildren
)uture 2eposit Savings Scheme:B yearsB #oan rate i" rea"onab#e
)re&uency /ercent
$umulative
/ercent
3alid Strongly disagree ?; 1;;.; 1;;.;
#ere about 1;;8 e+porters strongly disagreed in that !178 loan rate is reasonable
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.B Fre;uency ana#y"i" 8actor"9
Dua#ity good"
)re&uency /ercent
$umulative
/ercent
3alid 3ery low 6 DB.; DB.;
%ow ? 1;.; 5B.;
Average ? 1;.; BB.;
#igh 5 ?;.; 6B.;
3ery high B ?B.; 1;;.;
otal ?; 1;;.;
#ere about DB8 e+porters thought that the impact of &uality of goods in cancellation of e+port
%-$ is very low' ?B8 e+porters thought that the impact of &uality goods in cancellation of e+port
%-$ is very high'?;8 e+porters thought it is high' 1;8 e+porters thought it is low and 1;8
e+porters thought the impact is average.
Duantity good"
)re&uency /ercent
$umulative
/ercent
3alid 3ery low 9 5;.; 5;.;
%ow 6 DB.; 6B.;
Average D 1B.; =;.;
3ery high ? 1;.; 1;;.;
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otal ?; 1;;.;
#ere about 5;8 e+porters thought that the impact of &uantity goods in cancellation of e+port
%-$ is very low' DB8 e+porters thought that the impact is low' 1B8 e+porters thought that the
impact is average and 1;8 e+porters thought that the impact is very high.
Mode o "hi(ment
)re&uency /ercent $umulative/ercent
3alid 3ery low 7 D;.; D;.;
%ow B ?B.; BB.;
Average 7 D;.; 9B.;
#igh ? 1;.; =B.;
3ery high 1 B.; 1;;.;
otal ?; 1;;.;
#ere about D;8 e+porters thought that the impact of mode of shipment in cancellation of e+port
%-$ is very low' D;8 e+porters thought that the impact is average' ?B8 e+porters thought that
the impact is low' 1;8 e+porters thought that the impact is high and B8 e+porters thought that
the impact is very high.
E#ectricity
)re&uency /ercent
$umulative
/ercent
3alid 3ery low 1 B.; B.;
#igh 1? 7;.; 7B.;
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3ery high 6 DB.; 1;;.;
otal ?; 1;;.;
#ere about 7;8 e+porters thought that the impact of electricity in cancellation of e+port %-$ is
high' DB8 e+porters thought that the impact is very high and B8 e+porters thought that the
impact is very low.
0nitting and dying
)re&uency /ercent $umulative/ercent
3alid 3ery low 7 D;.; D;.;
#igh 1? 7;.; =;.;
3ery high ? 1;.; 1;;.;
otal ?; 1;;.;
#ere about 7;8 e+porters thought that the impact of knitting and dying in the cancellation of
e+port %-$ is high' D;8 e+porters thought that this impact is very low and 1;8 e+porters
thought this impact is very high.
Po#itica# (rob#em"
)re&uency /ercent
$umulative
/ercent
3alid 3ery low D 1B.; 1B.;
%ow 1 B.; ?;.;
Average ? 1;.; D;.;
#igh 9 5;.; 6;.;
3ery high 7 D;.; 1;;.;
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otal ?; 1;;.;
#ere about 5;8 e+porters thought that the impact of /olitical problems in cancellation of e+port
%-$ is high' D;8 e+porters thought this impact is very high' 1B8 e+porters thought this impact is
very low' 1;8 e+porters thought this impact is average and B8 e+porters thought this impact is
low.
%abor di"(utation
)re&uency /ercent $umulative /ercent
3alid 3ery low 1 B.; B.;
#igh 1? 7;.; 7B.;
3ery high 6 DB.; 1;;.;
otal ?; 1;;.;
#ere about 7;8 e+porters thought that the impact of labor disputation in cancellation of e+port
%-$ is high' DB8 e+porters thought this impact is very high and B8 e+porters thought this impact
is very low.
%abor di"(utation
)re&uency /ercent
$umulative
/ercent
3alid 3ery low 16 9B.; 9B.;
%ow ? 1;.; =B.;
#igh 1 B.; 1;;.;
otal ?; 1;;.;
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#ere about 9B8 e+porters thought that the impact of labor disputation in cancellation of e+port
%-$ is very low' 1;8 e+porters thought this impact is low and B8 e+porters thought this impact
is high.
Changing buyer beha-ior
)re&uency /ercent
$umulative
/ercent
3alid 3ery low ? 1;.; 1;.;
3ery high 19 =;.; 1;;.;
otal ?; 1;;.;
#ere about =;8 e+porters thought that the impact of buyer behavior in cancellation of e+port
%-$ is very high and 1;8 e+porters thought this impact is very low.
O(ening bac$ to bac$ %)C more than i" -ery much ri"$y but acce#erate" the ex(ort
bu"ine""
)re&uency /ercent $umulative /ercent
3alid #ighly agree 1 B.; B.;
Agree 15 6;.; 6B.;
Average 1 B.; 9;.;
2isagree 1 B.; 9B.;
#ighly disagree D 1B.; 1;;.;
otal ?; 1;;.;
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#ere about 6;8 bankers disagreed in that opinion thatOpening back to back %-$ more than 6B8
is very much risky but accelerates the e+port business' 1B8 bankers highly agreed with that
opinion' B8 bankers highly disagreed and B8 bankers disagreed with that opinion.
An ex(ort %)C i" ri"$y
)re&uency /ercent
$umulative
/ercent
3alid #ighly agree D 1B.; 1B.;
Agree 1? 7;.; 6B.;
Average 5 ?;.; =B.;
2isagree 1 B.; 1;;.;
otal ?; 1;;.;
#ere about 7;8 bankers agreed in that opinion that an e+port %-$ is risky' ?;8 banker average
with this opinion' 1B8 bankers highly agreed with this opinion and B8 bankers disagreed with
this opinio
. /y(othe"i" te"ting 8actor"9
>. One&Sam(#e Stati"tic"
E Hean
Std.
2eviation
Std.
*rror
Hean
Advantage ?; 1.=;;; 1.B19D1 .DD=B;
One&Sam(#e Te"t
est 3alue Q 5
t df Sig. :?4 Hean =B8 $onfidence
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tailedpper
Advantage 47.19B 1= .;;; 4?.1;;;; 4?.91;7 41.D9=5
#ere null hypothesis Q Agree
#ere null hypothesis should be rejected.
*+porters don,t agree that 6B8 back to back facilities are reasonable for them.
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?. One&Sam(#e Stati"tic"
E Hean
Std.
2eviation
Std.
*rror
Hean
*+port %-$ is risky ?; D.9;;; 1.1=75= .?76B5
One&Sam(#e Te"t
est 3alue Q 5
t df
Sig. :?4
tailedpper
*+port %-$ is risky 4.659 1= .575 4.?;;;; 4.67;; .D7;;
#ere null hypothesis Q Agree
#ere null hypothesis should be rejected.
*+porters don,t agree that e+port %-$ is risky.
@. One&Sam(#e Stati"tic"
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E Hean
Std.
2eviation
Std.
*rror
Hean
"earing higher
risk?; 5.;B;; 1.1=;=6 .?77D1
One&Sam(#e Te"t
est 3alue Q 5
t df
Sig. :?4
tailedpper
"ear higher risk .199 1= .9BD .;B;;; 4.B;65 .7;65
#ere null hypothesis Q Agree
#ere null hypothesis should be rejected.
*+porters don,t agree that e+porters bear higher risk than the advising bank against the e+port
%-$.
>. One&Sam(#e Stati"tic"
E Hean Std. Std.
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2eviation
*rror
Hean
Tuality ?; ?.=;;; 1.79?6D .D67?6
One&Sam(#e Te"t
est 3alue Q 5
t df
Sig. :?4
tailedpper
Tuality 4?.=?D 1= .;;= 41.1;;;; 41.996B 4.D1?B
#ere null hypothesis Q #igh
#ere null hypothesis should be rejected.
*+porters don,t think that the impact of &uality goods is high in cancellation of *+port %-$.
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2eviation
*rror
Hean
Tuantity ?; ?.;B;; 1.?D5D9 .?67;1
One&Sam(#e Te"t
est 3alue Q 5
t df
Sig. :?4
tailedpper
Tuantity 46.;7B 1= .;;; 41.=B;;; 4?.B?66 41.D6?D
#ere null hypothesis Q #igh
#ere null hypothesis should be rejected.
*+porters don,t think that the impact of &uantity goods is high in cancellation of *+port %-$.
?. One&Sam(#e Stati"tic"
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E Hean
Std.
2eviation
Std.
*rror
Hean
Hode of shipment ?; ?.DB;; 1.19?1; .?75DD
One&Sam(#e Te"t
est 3alue Q 5
t dfSig. :?4tailedpper
Hode of
shipment47.?5? 1= .;;; 41.7B;;; 4?.?;D? 41.;=79
#ere null hypothesis Q #igh
#ere null hypothesis should be rejected.
*+porters don,t think that the impact of mode of shipment is high in cancellation of *+port %-$.
@. One&Sam(#e Stati"tic"
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E Hean
Std.
2eviation
Std.
*rror
Hean
*lectricity ?; 5.?;;; .9=55D .?;;;;
One&Sam(#e Te"t
est 3alue Q 5
t df
Sig. :?4
tailedpper
*lectricity 1.;;; 1= .DD; .?;;;; 4.?197 .7197
#ere null hypothesis Q #igh
#ere null hypothesis should be rejected.
*+porters don,t think that the impact of electricity is high in cancellation of *+port %-$.
. One&Sam(#e Stati"tic"
E Hean
Std.
2eviation
Std.
*rror
Hean
Gnitting and dying ?; D.?;;; 1.B;696 .DD616
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One&Sam(#e Te"t
est 3alue Q 5
t df
Sig. :?4
tailedpper
Gnitting
and
dying
4?.D6D 1= .;?9 4.9;;;; 41.B;B6 4.;=5D
#ere null hypothesis Q #igh
#ere null hypothesis should be rejected.
*+porters don,t think that the impact of knitting and dying is high in cancellation of *+port %-$
B. One&Sam(#e Stati"tic"
E Hean
Std.
2eviation
Std.
*rror
Hean
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/olitical problems?;
D.7B;
;1.D97=6 .D1;15
One&Sam(#e Te"t
est 3alue Q 5
t df
Sig. :?4
tailedpper
/oliticalproblem
s
41.1?= 1= .?6D 4.DB;;; 4.===1 .?==1
#ere null hypothesis Q #igh
#ere null hypothesis should be rejected. *+porters don,t think that the impact of political
problems is high in cancellation of *+port %-$.
. One&Sam(#e Stati"tic"
E Hean
Std.
2eviation
Std.
*rror
Hean
%abor disputation ?; 5.?;;; .9=55D .?;;;;
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One&Sam(#e Te"t
est 3alue Q 5
t df
Sig. :?4
tailedpper
%abor
disputati
on
1.;;; 1= .DD; .?;;;; 4.?197 .7197
#ere null hypothesis Q #igh
#ere null hypothesis should be rejected.
*+porters don,t think that the impact of labor disputation is high in cancellation of *+port %-$
. One&Sam(#e Stati"tic"
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E Hean
Std.
2eviation
Std.
*rror
Hean
$ustoms rules ?; 1.?B;; .617DB .17;19
One&Sam(#e Te"t
est 3alue Q 5
t df
Sig. :?4
tailedpper
$ustoms
rules 416.179 1= .;;; 4?.6B;;; 4D.;9BD 4?.5156
#ere null hypothesis Q #igh
#ere null hypothesis should be rejected. *+porters don,t think that the impact of customs rules is
high in cancellation of *+port %-$
H. One&Sam(#e Stati"tic"
E Hean
Std.
2eviation
Std.
*rror
Hean
"uyer behavior ?; 5.7;;; 1.?D116 .?6BD;
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One&Sam(#e Te"t
est 3alue Q 5
t df
Sig. :?4
tailedpper
"uyer
behavior
?.16= 1= .;5? .7;;;; .;?D9 1.167?
#ere null hypothesis Q #igh
#ere null hypothesis should be rejected.
*+porters don,t think that the impact of changing buyer behavior is high in cancellation of
*+port %-$.
. /y(othe"i" Te"ting 8O(inion9
>. One&Sam(#e Stati"tic"
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E Hean
Std.
2eviation
Std.*rror
Hean
Accelerates. ?; ?.BB;; 1.1=;=6 .?77D1
One&Sam(#e Te"t
est 3alue Q ?
t df
Sig. :?4
tailedpper
Accelerates. ?.;7B 1= .;BD .BB;;; 4.;;65 1.1;65
#ere null hypothesis Q Agree
he null hypothesis should be rejected. So the bankers don,t agree that opening back to back %-$
more than 6B8 is risky but it accelerates the e+port business.
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isky ?; ?.1B;; .65B17 .1777?
One&Sam(#e Te"t
est 3alue Q ?
t df
Sig. :?4
tailedpper
isky. .=;; 1= .D6= .1B;;; 4.1=96 .5=96
#ere null hypothesis Q Agree
he null hypothesis should be rejected.
So the bankers don,t agree that an e+port %-$ is risky.
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5. #/S
he $AH*% rating marks indicate that I$" Islamic "ank %imited is a Mproblem bank,
for its lack of corporate governance' insider lending' increased amount of default
fictitious loans provision deficit' among other things.
I$" Islamic "ank %imited has failed to generate new ideas for technological
improvement' without using modern technology bank can not even think of remaining in
business in near future.
Harketing policies of this "ank are very poor.
Such a big share of classified loan indicates weakness in the lending policy of the bank.
"ank cannot provide new facility to the e+isting employees as bonus or other benefits.
So' in the competitive banking environment skilled employees are leaving this bank as
they get more suitable opportunities from other banks.
Eo new appointment can be undertaken.
he processing systems of some services are lengthy more time consuming.
%ack of sufficient skilled manpower.
Sometimes I$" Islamic "ank %imited cannot invest their deposit in proper portfolio.
Investment is the heart of the bank it,s the main source of income for a bank. "ut lack
of sufficient investment scope is creating a large amount idle money. As a result' profit is
not increasing.
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he #ighest :about 7;8< respondents :*+porters< of my survey were knit producers
:shirt' 4shirt etc
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178 loan rate is not sound for the e+porters.
Tuality of goods' electricity' changing buyer behavior' political problems and mode ofshipment impact very much in cancellation of e+port %-$.
he banks don,t open back to back %-$ more than 6B8.
*+porter is mostly responsible for the cancellation of e+port %-$.
"anks create )orce loan account to settle the %-$ procedure.
A cancelled e+port %-$ decreases the deposit of the bank and bank,s e+port volume.
"anks face legal comple+ity and political influence problem when go to li&uidate the
securities.
he bank can forecast before an e+port %-$ is cancelled by the business trend and
business attitude of e+porter.
)or the cancelled e+port %-$' "angladesh is losing reputation about the e+port business.
5.17 Recommedatio':
On the basis of overall analysis' I would like to briefly say a few words on the overallpolicy and performance of the "ank. If following steps can be taken' it will help to develop
the "ank,s performance.
Strengthen gro4th+
he bank continues to maintain its leading role to strengthen growth initiative in the private
sector. his being the age of competition' the bank has to bring in gradually the use of more
modern technology in their operations as well as to introduce innovative practices.
Improving operational skill into management of the "ank,s affairs is also a major step to
strengthen the growth of the bank. his is very much necessary to meet the re&uirements of
e+panding client and to ensure them full range of banking services.
Strength 'e#ation"hi(+
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2espite of many constrains' the "ank continues to move ahead with steady growth of
business. It gives top priority to strengthen relationship with the members of trade'
commerce and industry so as to e+pand the arena of business as well as to earn greater
confidence of the customers. o this end' greater public relationship activities are being
channeled from both #ead Office and branch level to further enhance the image of the bank
to the general people.
Cu"tomer "ati"action+
$ustomer satisfaction will continue to remain the first priority in our professional
perception. In all of their business activities' they should recogni0e their operation to
establish an even greater benefit for their customers by providing &uality banking services.
Inno-ati-e Ser-ice"+
he financial service market around the world is being reshaped due to change of policy
measures of the bigger economies of developed countries and globali0ation. In
consideration of all these factors they have to develop new policies and action plans to
further strengthen the working methodology that go well with the need of new era and to
adjust with prevailing situation.
Per"ona# !an$ing+
o attract more clients towards I$" Islamic "ank %imited. he bank has to create a new
marketing strategy' which will increase the total' e+port4 import business.
o survive in this competitive market' bank needs to provide modern customer services
to its valued customer like(
/lobal -cce'' ,ard
A safe and convenient way to have access to your money.
*njoy local and international access to your money ?5 hours a day' 6 days a week. ake
your bank wherever you go.
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lectroic baig Sy'tem
AH service
/oint of Sales Outlets
Internet "anking
#ave access to information relating to your accounts at anytime' anywhere in the world
?5 hours a day.
/hone "anking
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5.11 S;O* -aly'i':
Strength+
Eetwork of D? branchesJ
Supportive role of the central bankJ
@lobal marketing reactionJ
Improve information sharingJ
echnology and knowledge transferJ
*arning foreign e+change for economic wealth of the countryJ
Well relationship between customer and staffJ
Tualitative management.
Wea$ne""+
/oor asset &ualityJ
Eegative network and negative profitabilityJ
Shortfall re&uired loans loss provision and capital ade&uacy.
Scope of working sector is manually and so' overall banking system is slow.
O((ortunity+
Scope of e+ploring the market with the supportive role of "angladesh bankJ
egulatory environment favoring private sector developmentJ
Opportunities for development in travel and tourismJ
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Opportunity in employment.
Threat"+ Overall banking system of other banks are fasterJ
Other banks are having effective banking systemJ
Other banks are generating new ideas for modern technological improvementJ
Skilled manpower of other banks is more efficient.
5.1) 9olicy #mplemetatio
%ack of $orporate @overnance' insider lending' increasing amount of defaulters and
fictitious loans' provision deficit and some other similar factors are contributing in making
I$" Islamic "ank immensely incompetent in the commercial banking sectors.
According to my personal observationJ I$" should improve its Harketing policies' cancel
giving out big share of classified loans' improve facilities for the e+isting employees so as
not to loose out &ualified bankers and suffer critical loss through the process of having a
great deficiency in skilled man power. I$" should focus on investing their deposit in
proper portfolio and also in different sectors to increase annual profit scale.
I strongly believe that I$" should provide a more intensive technical support to its
customers and in this tech era providing some necessary features like AH services'
Internet banking etc is very important for a developing bank. "ank should also develop
various new schemes which will definitely raise interest among customers and bring
strengthen ties between the "ank and the customers' strengthening relationship should now
be a number one priority. elationship cannot be reinforced until customer satisfaction is
reached its prime' providing &uality banking services not only benefit the customers but
actually it benefits the bank by bringing large amount of customers who stay loyal to the
bank and form a close affiliation with it. o increase the total e+port4import business I$"
should implement new marketing strategy which is necessary to compete with other "anks
who are already providing such efficacies and targeting the contemporary customers of this
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age bracket. Eowadays customers living abroad re&uire ?5hr services from their banks' on
top of that )oreign *+change "anking with attractive W*S' to increase remittance' newer
strategically shaped incentive packages will help in providing necessary means for the bank
to hold on their foreign customers and add new names to the directory. I$" can provide
foreign market reports' which enables them to e+port and evaluate their products in foreign
countries.
I$" has a genuine network of more than D? branches across the country providing a
supportive role for the central bank of "angladeshJ it is earning a chunk amount of foreign
e+change which in turn is helping to strengthen economic wealth of the nation. echnicale&uipment those being installed are new and much more efficient then the e+isting setup in
our country. And now only if regularity in preserving a proper relationship is maintained
then hopefully we will observe a favorable environment for private sector development'
opportunities for newer employment will provide fresh thinking tactic into the system and
will eventually help to raise the standards of service.
6.7 ,ocl!'io:
I$" Islamic "ank %imited being a leading member of private sector in Islamic banks in the
country endeavored to adjust itself to this new situation by adopting pragmatic policies and
strategies. he "ank faces the challenges as new banks are arising and many foreign banks
start their journey. $ontinued efforts have been made to enhance the growth and
development through the realistic policy pursued by the "oard of 2irectors and
Hanagement. In addition to that determined and dedicated professional efforts of the
*+ecutives' Officers and *mployees helped the "ank to merge ahead to fulfill the
commitment.
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/roper financial system of a country can contribute towards the development of that
country,s economy. In our country' banks have a leading power to contribute in financial
system. )or this reason' the banks should have a potential role to make our financial system
stronger. In this arena' private commercial banks are playing a vital role in the development
of our economy. "ut @ovt. and "angladesh "ank play a crucial role to the private
commercial banks through imposition of deposit restriction' lending role and other banking
operations. In recent years of banking business' I$" Islamic "ank %imited has shown
better performance comparing with other first generation banks.
We e+pect that I$" Islamic "ank %imited may hold its prospect in future and can play a
vital role in the socio4economic prospective.