8/13/2019 IBBL internship report
1/71
1 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Table of Contents
1.1 Origin of the Report ............................................................................................... 4
1.2 Objectives of the Study: ......................................................................................... 4
1.3 Scope of the Study ................................................................................................. 5
1.5 Methodology of the Study: .................................................................................... 5
1.6 Limitations and Restrictions of the Report: ............................................................ 6
2.1 Genesis of Islamic Banking in Bangladesh .............................................................. 7
2.2 What is Islamic Banking ........................................................................................ 7
2.3 Why Islamic Banking ............................................................................................. 8
2.4 Objectives of Islamic Banking ................................................................................ 8
2.5 Why interest is prohibited in Islamic banking system: ............................................ 8
2.6 Riba (Interest) VS. Profit ........................................................................................ 9
2.7 Historical Background of IBBL .............................................................................. 10
2.8 Chronological Events of Establishing Islami Bank ................................................. 11
2.9 Profile of the Bank ............................................................................................... 12
2.10 Management of IBBL: ........................................................................................ 15
2.11 Shariah Council of IBBL: ..................................................................................... 16
2.12 Features of IBBL ................................................................................................ 17
2.13 Functions of IBBL: .............................................................................................. 18
2.17.1 General Banking .................................................................................................... 18
2.17.2 Investment ............................................................................................................ 19
2.18 Equity ................................................................................................................ 20
2.19 Operating Results .............................................................................................. 21
8/13/2019 IBBL internship report
2/71
2 | I n v e s t m e n t M e c h a n i s m s o f I B B L
2.20 IBBLs World Rating: .......................................................................................... 22
2.21 Awards: ............................................................................................................. 23
3.1 Objectives and principles: .................................................................................... 25
3.2 Investment policy of IBBL:.................................................................................... 26
3.3 Investment Strategy of IBBL: ............................................................................... 27
3.4 Steps in Investment Operations: .......................................................................... 27
3.5 Investment Mechanisms of IBBL: ......................................................................... 34
3.5.1 Bai-Mechanism: ....................................................................................................... 34
3.5.1.1 Bai-Murabaha .......................................................................................................................... 343.5.1.2 Bai-Muajjal ............................................................................................................................... 34
3.5.1.3 Bai-Salam ................................................................................................................................. 35
3.5.1.4 Istishna: .................................................................................................................................... 36
3.5.2Share Mechanism: ............................................................................................. 36
3.5.2.1Mudarabah ............................................................................................................................... 36
3.5.2.2 Musharaka ............................................................................................................................... 36
3.5.3 Ijra Mechnism: ........................................................................................................ 37
3.5.3.1Hire purchase Under Sirkatul Melk ........................................................................................... 37
3.5.3.2 Stages of Hire Purchase Under Shirkatul Melk....................................................... 38
3.6 SPECIAL INVESTMENT SCHEMES OF IBBL: ............................................................. 39
3.6.1 Household Durable Investment Scheme: .................................................................. 39
4.6.2 Housing Investment Scheme .................................................................................... 40
3.6.3 Real Estate investment Program: ............................................................................. 41
3.6.4 Transport investment Program ................................................................................ 42
3.6.5 Car Investment Scheme ........................................................................................... 43
3.6.6 Investment Scheme for doctors ............................................................................... 44
3.6.7 Small Business Investment Scheme .......................................................................... 45
3.6.8 Agriculture Implements Investment Scheme ............................................................ 46
4.3.9 Micro Industries Investment Scheme ....................................................................... 47
8/13/2019 IBBL internship report
3/71
3 | I n v e s t m e n t M e c h a n i s m s o f I B B L
3.6.10Rural development Scheme ................................................................................... 49
4.1 Investment Growth of IBBL .................................................................................. 52
4.2 Trend of mode wise Investment ........................................................................... 53
4.3 Sector Wise Investment of IBBL ............................................................................ 54
4.4 Classification of Industrial Invesment ................................................................... 55
Analysis: I BBL plays a vital r ole through i nvesting 40 per cent of its total investment in
the industr ial sector. The IBBL invests maximum porti on of i ts industr ial investment in
Textil e-Spinning, Weaving & Dyeing industry. I t also invests huge amount in Agro
based industry, Steel. r e- Roll ing & Engineering industry and other industr y............. 55
4.5 Maturity wise classification of Investment ........................................................... 55
4.6 Geographical Location Wise Classification of Investment ..................................... 56
4.7 Division Wise Classification of Investment ........................................................... 56
4.8 SPECIAL INVESTMENT SCHEMES OF IBBL: ............................................................. 57
4.9 Income from investment and rate of return ......................................................... 62
4.11 Investment Scenario of Mirpur Branch ............................................................... 63
4.12 Investment Performance of IBBL with a Comparison to Other Islamic Banks ....... 65
CONCLUSION: ........................................................................................................... 70
8/13/2019 IBBL internship report
4/71
4 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Chapter 01: Introduction
1.1 Origin of the Report
Now a day, education is not just limited to books and classrooms. In todays world,
education is not just a tool to understand the real world and apply knowledge for
betterment of the society as well as business. From education the theoretical knowledge is
obtained from courses of study, which is only the half way of the subject matter. Practical
knowledge has no alternative. The perfect coordination between theory and practice is of
paramount importance in the context of the modern business world in order to resolve the
dichotomy between these two areas. Therefore, an opportunity is offered by Department
of Finance, University of Dhaka, for its potential business graduates to get one and a half
months practical experience in a business organization, which is known as Internship
Program. I have been assigned by the department to prepare my internship report on the
topic Investment Mechanisms of Islami Bank Bangladesh Limited.I have prepared the
same as the graduation prerequisite of the BBA program.
My internship program was conducted at the Islami Bank Bangladesh Limited,
Principal Branch, Mirpur-10 Dhaka. IBTRA (Islamic Bank Training and Research
Academy) arranges this internship program to gather practical knowledge about
banking activities. This is followed by practical experiences in the branches of IBBL.
This report is generated under the academic supervision of Dr. H. M. Mosarof Hossain,
Professor, Department of Finance, University of Dhaka and organizational supervision of
Hasan Mahmud Mithu, Officer, Islami Bank Bangladesh Limited.
1.2 Objectives of the Study:The main objective of this study is analysis of the Investment Portfolio of Islami Bank
Bangladesh Limited. To achieve this main objective the following sub-objectives have
been under taken.
To find out the overall pictures of investments of IBBL. To measure different moods of Investment of IBBL. To assess the performance of Investment scheme of IBBL.
8/13/2019 IBBL internship report
5/71
5 | I n v e s t m e n t M e c h a n i s m s o f I B B L
To recommend actions that may be necessary to redesign the investments ofIBBL.
To compare the investment policy of IBBL with other Islamic Banks.
1.3 Scope of the Study
In this report I have focused on all the qualitative which include profiles of IBBL,
investment modes like Murabaha , Musharaka etc, Profit & loss sharing, bearing mode,
Rent sharing mode, 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 scheme, rural development
scheme, etc. and lastly financial performances have been depicted.
1.4 Methodology of the Study:
This report has been prepared on the basis of experience gathered during the period of
internship. This study would require collection of primary as well as secondary data. But
especially emphasizes on primary data. Both quantitative and qualitative research
methods will be adopted to collect primary data.
Data collection:
Source of data of this report can be divided into two categories:
Primary Sources:
Face to Face conversation with the respective officers and staffs. Interviewing officers and staffs. Sharing practical knowledge of officials. Relevant file study provided by the officers concerned. In-depth study of selected cases.
Secondary Sources:
Annual Report of IBBL Audit Reports Website Relevant books, Research papers, Newspapers and Journals. Internet and various study selected reports. Files & Folders
8/13/2019 IBBL internship report
6/71
6 | I n v e s t m e n t M e c h a n i s m s o f I B B L
1.5 Limitations and Restrictions of the Report:
From the beginning to end, the study has been conducted with the intention to making it
as a complete and truthful one. However, many problems appeared in the way of
conducting the study. During the study it was not possible to visit the whole area coveredby the bank although the financial statements and other information regarding the study
have been considered. The study considers following limitations:
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. The time period for this study was short. All the branches of the sample bank were not physically visited. Investment Manuals are not available for all individuals. Another limitation of this report is Banks policy of not disclosing some data &
information for obvious reason, which could be very much useful.
8/13/2019 IBBL internship report
7/71
7 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Chapter 02: Profile of The Bank
2.1 Genesis of Islamic Banking in Bangladesh
Bangladesh is one of the largest Muslim countries in the world. The people of
this country are deeply committed to Islamic way of life as enshrined in the Holy Quran
and the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design
their economic lives in accordance with the precepts of Islam. Bangladesh is the third
largest Muslim country in the world with around 135 million populations of which 90
percent are Muslim. The hope and aspiration of the people to run banking system on the
basis of Islamic principle came into reality after the OIC recommendation at its Foreign
Ministers meeting in 1978 at Senegal to develop a separate banking system of their own.
After 5 years of that declaration, in 1983, Bangladesh established its first Islamic bank. At
present, out of 49 banks in Bangladesh, 7 full fledged Islamic Banks and 19 Islamic
Banking branches of 9 conventional banks are working in the private sector on the basis
of Islamic Shariah.
2.2 What is Islamic Banking
Islamic bank is a financial Institution that operates with the objective to
implement and materialize the economic and financial principles of Islam in the banking
area.
The organization of Islamic conference (OIC) defines an Islamic bank as a financial
institution whose statutes, rules and procedures expressly state its commitment to the
principals of Islamic Shariah and to the banning of the receipt and payment of interest on
any of its operation.
According Islamic banking Act 1983 of Malaysia Islamic bank is a company, which
carries on Islamic banking business. Islamic banking business means banking business
whose aims and operations do not involve any element which is not approved by
the religion of Islam.
It appears from the above definitions that Islamic banking is system of financial
intermediation that avoids receipt and payment of interest in its transactions andconducts its operations in a way that it helps achieve the objectives of an Islamic
8/13/2019 IBBL internship report
8/71
8 | I n v e s t m e n t M e c h a n i s m s o f I B B L
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 banks are often
known as PLS banks.
2.3 Why Islamic Banking
The 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. Islamic banks operate on
Islamic principles of profit and loss sharing, strictly avoid interest, which is the
root of exploitation and is responsible for large scale information and unemployment.
An Islamic bank is committed to do away with disparity and establish justice in the
economy, trade, commerce and industry, build socio-economic infrastructure and creating
working opportunity.
2.4 Objectives of Islamic Banking
The primary objective of establishing Islamic banks all over the world is to promote,
foster and develop the application of Islamic principles in the business sector. More
specifically, the objectives of Islamic banking when viewed in the context of its role
in the economy are listed as following:
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; and to help ensure equitabledistribution of income.
2.5 Why interest is prohibited in Islamic banking system:
The word used by the Quran concerning interestis Riba. The literal meanings of
Riba are money increase, increase of anything or increment of anything from its
8/13/2019 IBBL internship report
9/71
9 | I n v e s t m e n t M e c h a n i s m s o f I B B L
original amount (Maududi 1979, p.84). However, all increases are not considered as Riba
in Islam. Money may increase in business activities as well. This increase is not
at all considered as Riba. Islam prohibits only those increases that are charged on the loan
with a prefixed rate.
Interest transfers wealth from the poor to the rich, increasing the inequality in the
distribution of income & wealth. Islam stands for cooperation & brotherhood. Interest
creates an idle class of people who receive their income from accumulated wealth. The
society is deprived of the labor & enterprise of these people. Besides interest on
productive loan raises the cost of production, hence the prices of goods increase. The
income generated by the process of production in form of wages, profits & profit-share
are more equitably distributed.
2.6 Riba (Interest) VS. Profit
The differences between riba and profit are as follows:
Riba Profit
1. By definition, Riba is the premium paid
by the borrower to the lender along with
principal amount as a condition for the
loan.
1. By definition, profit is the difference
between the value of production and the
cost of production.
2. Riba is prefixed, and hence there is no
uncertainty.
2. Profit is post determined, and hence its
amount is not known until the activity is
done.
3. Riba cannot be negative, it can at best be
very low or zero.
3. Profit can be positive, zero or even
negative.
4. From the view point of Islamic Shariah,
it is Haram.
4. From Islamic Shariah point of view, it is
Halal.
5. Riba is not related with the result of
business.
5. Profit is related with business.
8/13/2019 IBBL internship report
10/71
10 | I n v e s t m e n t M e c h a n i s m s o f I B B L
2.7 Historical Background of IBBL
In August 1974, Bangladesh signed the Charter of Islamic Development Bank and
committed itself to reorganize its economic and financial system as per Islamic Shariah.
In January 1981, the President of Peoples Republic of Bangladesh While addressing thethird Islamic conference held at Mecca and Taif suggested The Islamic countries should
develop a separate banking system of their own in order to facilitate their trade and
commerceThis statement of the president indicated favorable attitude of the government
of the Peoples Republic of Bangladesh towards establishing Islamic banks and financial
institution in the country.
In early November 1980, Bangladesh bank, the countrys Central Bank, sent a
representative to study the working of several Islamic Banks abroad.
In November 1982, a delegation of IDB visited Bangladesh and showed keen interest to
participate in establishing a joint venture Islamic bank in the private sector. They found a
lot of work had already been done and Islamic banking was in a ready from for immediate
introduction. Two professional bodies of Islami Economics Research Bureau (IERB) and
Bangladesh Islami Bankers Association (BIBA) made significant contribution towards
introduction of Islami banking in the country.
They came forward to provide training of Islamic banking to top bankers and economists
to fill up the vacuum of leadership for the future islami bank in Bangladesh. They also
had seminars, symposiums and workshops on islami economic and banking throughout
the country to mobilize public opinion in favor of Islami banking.
Their professional activities were reinforced by a number of Muslim entrepreneurs
working under the support of the then Muslim Businessmen society (now reorganized as
Industrialist & Businessmen Association). The body concentrated mainly in mobilizing
equity capital for the emerging islami bank.
At last, the long drawn struggle to establish an Islami bank in Bangladesh become a
reality and islami bank Bangladesh limited was established in march 1983 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 made the dream a reality.
8/13/2019 IBBL internship report
11/71
11 | I n v e s t m e n t M e c h a n i s m s o f I B B L
2.8 Chronological Events of Establishing Islami Bank
1978
The Islamic Foreign Ministers' Conference held in Dakar, Senegal in April,
recommended to the members of the OIC to make systematic efforts to
establish Islamic banks gradually,. Bangladesh participated there and subscribed
to the recommendation.
1980
Bangladesh Bank conducted a study on the operations of Islamic banks
abroad
1981
The President of Bangladesh made suggestions to the Islamic countries to
develop a separate banking system In the 3rd OIC Summit held at Makhah
and Taef
1982 Islamic Development Bank came forward to participate in a joint venture
Islamic bank in Bangladesh.
1983
IBBL came into being as the first Islamic bank in the South-east Asia.
8/13/2019 IBBL internship report
12/71
12 | I n v e s t m e n t M e c h a n i s m s o f I B B L
2.9 Profile of the Bank
Islami Bank Bangladesh Limited is a Joint Venture Public Limited Company engaged in
commercial banking business based on Islamic Shari'ah with 63.09% foreign shareholding
having largest branch network (276 Branches & 30 SME/Krishi Branches i.e. total 276
Branches) among the private sector Banks in Bangladesh. It was established on the 13th March
1983 as the first Islamic Bank in the South East Asia.
This is the first Islami bank in south East Asia who operates its banking activities on the basis
of 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.
It is listed with Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. Authorized
Capital of the Bank is Tk. 20,000.00 Million ($244.87 Million) and Paid-up Capital is Tk.
10,007.71 Million ($122.53 Million) having 60,550 shareholders as on 31st December 2011.
2.9. IBBL at a Glance
Date of Incorporation 13thMarch 1983
Local share holders 36.91%
Foreign Share holders 63.09%
Authorized Capital 20,000.00
Paid up Capital 10,007.71 Million
Deposits 400337 core taka
Number of Branches 276
Number of Shareholders 60,550
Listed in Dhaka Stock
Exchange Limited
1985
8/13/2019 IBBL internship report
13/71
8/13/2019 IBBL internship report
14/71
14 | I n v e s t m e n t M e c h a n i s m s o f I B B L
To ensure zero tolerance on negligence in compliance issues both shariah andregulatory issues.
To train & develop human resources continuously & provide adequate logistics tosatisfy customers need.
To be excellent in serving the cause of least developed community and area. To motivate team members to take the ownership of every job. To ensure development of devoted and satisfied human resources. To encourage sound and pro-active future generation. To achieve global standard.
2.9.4 Core Values
Trust in Almighty Allah Strict observance of Islamic Shariah Highest standard of Honesty, Integrity & Morale Welfare Banking Equity and Justice Proper Delegation, Transparency & Accountability
8/13/2019 IBBL internship report
15/71
15 | I n v e s t m e n t M e c h a n i s m s o f I B B L
2.10 Management of IBBL:
A 24 member Board of Directors manages Islami bank Bangladesh Limited, 8 areforeigners and 16 are local. The Board of director for efficient operation of the
bank forms a 9 member Executive Committee. Besides, a management Committeelooks after the affairs of the bank. The chronology of the management of the
IBBL are given as under:
Source : Annual Report-2011
8/13/2019 IBBL internship report
16/71
16 | I n v e s t m e n t M e c h a n i s m s o f I B B L
2.11 Shariah Council of IBBL:
2.11.1 Profile of Council Members:
The Shariah Council of Islamic Bank generally consists of experts from the following
four areas:
1. Fuqua: 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.
2.11.2 Objective of Shariah Council:
The shariah council assists the Board of Directors by advising them on mattersrelated to shariah.
The opinion of the majority of members is taken as the opinion of the councilprovided that the said opinion is supported by at least three Mufti of the council.
The council elects a chairman & secretary from amongst them. The chairman willnormally preside over the meetings. In his absence the members present elect one
of them to preside over the meetings.
8/13/2019 IBBL internship report
17/71
17 | I n v e s t m e n t M e c h a n i s m s o f I B B L
The council may whenever it thinks necessary, constitutes a subcommittee to helpthe council.
The council issues Shariah Certificate in the Annual Report of the bank.
2.12 Features of IBBL
The bank is committed to run all its activities as per Islami Shariah. IBBL through its
steady progress and continuous success has earned the reputation of being one of the
leading private sector banks of the country. The distinguishing feature s of IBBL is as
follow:
All its activities are conducted on interest-free banking system according toIslamic Shariah.
Establishment of participatory banking instead of banking on debtor-creditorrelationship.
Investment is made through different modes permitted under islami shariah Investment income of the Bank is shared with the Mudaraba depositors according
to a ratio to ensure a reasonable fair rate of return on their depositors.
Its aims are to introduce a welfare-oriented banking system and also to establishequity 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 liftmen particularly in the rural
areas.
It plays a vital role in human resource development and employment generationparticularly for the unemployed youths.
Its aim is to achieve balanced growth and equitable development of the countrythrough diversified investment operations particularly in the priority sectors and in
the less developed areas.
It extends co-operation to the poor, the helpless and the low-income group fortheir economic development.
8/13/2019 IBBL internship report
18/71
18 | I n v e s t m e n t M e c h a n i s m s o f I B B L
2.13 Functions of IBBL:
The functions of Islamic Bank Bangladesh limited can be divided into three (3) major
categories:
2.13.1 General Banking
It includes:-
Mobilization of deposits Receipts and payment of cash. Handling transfer transaction. Operations of clearing house Maintenance of accounts with Bangladesh bank and other bank. Collection of cheque and bill. Issue and payment of Demand Draft, telegraphic transfer and payment
Order.
Executing customers standing instructions. Maintenance of safe deposit lockers. Maintenance of internal accounts of the bank.
While doing all the above noted work IBBL issue cheques-book, Deposit account
operating form, SS card, Ledgers, Cash book, Deposit account ledgers, preparation
statement of accounts, Pass book, Balance of different accounts and calculates profits.
IBBL offers to open the following account to the depositors:
1. Al-Wadeeah Current Account.
2. Mudaraba Savings Account.
3. Mudaraba term deposit Account. (3 month / 6 month / 12 month / 36 months term)
4. Mudaraba Special notice Account
5. Mudaraba Hajj Savings Account (1 year to 25 year term)
6. Mudaraba Special savings (pension) Account (5 year to 10 year term)
7. Mudaraba Savings bond Scheme (5 year & 8 year term)
8. Mudaraba Foreign Currency Deposite Account.
9. Mudaraba Monthly Deposite Account.
10. Mudaraba Moharana Account.
11.Mudarba waqf cash Deposit Account (MWCDA)
8/13/2019 IBBL internship report
19/71
19 | I n v e s t m e n t M e c h a n i s m s o f I B B L
12. Mudaraba School Student Savings Account.
13. Mudaraba Femal Savings Account.
2.13.2 Investment:
IBBL invests its money in various sectors of the economy through different modes
permitted by shariah and approved by Bangladesh Bank. The modes of investment are as
follows:
Bai-Mechanism
Bai-Murabaha Bai- Muzzal Bai-Salam Istishna
Leasing, Ijara,
Hire Purchase (HP), Hire Purchase under shirkatul melk (HPSM)
Shirkat Mechanism(Share)
Musaraka Mudaraba
2.13.3 Foreign Exchange Business:
Foreign Exchange Business plays a vital role in providing substantial revenue 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 principleof 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)
8/13/2019 IBBL internship report
20/71
20 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Financing to export on profit or loss sharing. Handling Inward and outward remittance.
2.13.4 Other activities
The IBBL performs the following task for the welfare of the society:
Income generating scheme for the unemployed youth of the nation. Monorom sale center for marketing homemade garments, handicrafts and other
items.
Education scheme for assisting poor scholar student to case and help them tocontinue their study.
Health scheme for fulfillment of health needs of rural people. Islamic bank hospital was established to extend first hand modern and
contemporary medical service to the people on non-profit business.
Humanitarian assistance is being provided to the poor, families affected by rivererosion and for marriage of poor girls.
Energy relief operations are provided to the people affected by natural calamities.Assistance to mosque for construction, repair and renovation.
2.14 Equity
As per Capital Adequacy Policy, prescribed by Bangladesh Bank, banks are to maintain
10% capital on its Risk-weighted Assets, against which present total equity of the Bank as
on September 2012 stood at Tk. 38,803.30 million. Total equity of the Bank has doubled
during the last five years. Equity of IBBL has an average growth of 22.5% time since
2007.
14,95818,572
23,62028,400
33,717
0
10,000
20,000
30,000
40,000
2007 2008 2009 2010 2011
Taka in million
Fig-2: Equity Movement: 2007 to 2011
2011
8/13/2019 IBBL internship report
21/71
21 | I n v e s t m e n t M e c h a n i s m s o f I B B L
2.15 Operating Results
The bank earned huge profit every year since it came into being. Operating profit for the
Bank for the year 2011 stood at Tk.14, 067 million demonstrating an increase by 29%
over 2010. This achievement testifies to the strength of Banks core business and its
prudent management.
Dividends provided during the earlier years were also attractive. Rate of return on equity
of the bank has always been satisfactory.
3,7816,348 6,518
8,45510,347
13,91917,409 18,886
21,674
28,054
17,000
23,75625,404
30,129
38,401
2007 2008 2009 2010 2011Taka in million
Fig-3: Operating Results of IBBL
Net Profit before tax
Total Expenditure
Total Income
0%
10%
20%
30%
40%
2007 2008 2009 2010 2011
25%
30% 30%
35%32%
Fig-4: Dividend Trend of IBBL
8/13/2019 IBBL internship report
22/71
22 | I n v e s t m e n t M e c h a n i s m s o f I B B L
2.16 IBBLs World Rating:
As per Bankers Almanac (January 2009 edition) published by the Reed Business
information, Windsor Court, England, IBBLs World rank is (among) 4500 banks
selected by them. IBBLs country rank is (among) 39 banks as per ratings, made by theabove Almanac on the basis of IBBLs financial statements of the year 2009.
World ranking of IBBL amongst top 3000 International Banks.
Year World
rating
2001 1902
2002 1771
2003 1755
2004 1581
2005 1658
2006 1620
2007 1490
2008 1591
2009 1550
2010 1600
2011 1000
Source: The bankers Almanac: World Ranking, 2011, Reed Business Information, U.K.
Fig-02 World ranking of IBBL
0
500
1000
1500
2000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fig-5: World rating
World rating
8/13/2019 IBBL internship report
23/71
23 | I n v e s t m e n t M e c h a n i s m s o f I B B L
2.17 Awards:
IBBL is the pioneer institution for introduction of Islamic Banking in Bangladesh. The
success of IBBL has embedded other sponsors at home and abroad to establish Islamic
Banking in Bangladesh. Several existing and proposed traditional Banks have alsoexpressed their intention to introduced Islamic Banking. Achievements of IBBL can be
given as under:
South Asian Federation of Accountants (SAFA) declared IBBL as Joint Winnerin the Corporate Governance Disclosure Award-2010. SAFA also awarded
IBBL with Certificate of Merit in Banking Sector in the Best Presented
Accounts Award for the year 2010.
The Instituted of Cost and Management Accountants of Bangladesh (ICMAB)glorified IBBL with the ICMAB National Best Corporate Awa4d-2010 (First
Position among the Private Commercial Banks in Islamic Operation), ICMAB
Best Corporate Performance Award -2008 (Second Position among the Private
Commercial Banks) and the ICMAB National Best Corporate Award-2007 (First
Position among the Local Banks).
The Institute of Chartered Accountants of Bangladesh (ICAB) awarded IBBL with3rd position under banking category in the best published accounts and also
reports for the year 2010, the Certificate of Merit for the year 2008 and the
Certificate of Appreciation for the year 2001.
Goldman Sachs, the leading wealth management institution of the world, haschosen IBBL as proper place for investment. IBBL has secured seventh in the top
ten companies ranked by Goldmans Sachs in its portfolio GSN-11.
The Global Finance, a reputed USA based quarterly Financial Magazinerecognized IBBL as the best Islamic Financial Institution of the country for the
years 2008, 2009, 2010 & 2011. The Global Finance also recognized IBBL as the
best bank of the country for the year 1999, 2000, 2004 and 2005.
ICIC Bank, Hog Kong, awarded IBBL with The Quality Recognition Award -2009 for U.S. Dollar Clearing (2009).
IBBL has been enlisted as the only bank from Bangladesh in top 1000 (onethousand) banks in the world by a UK based century old financial magazine, The
Banker published the list in its July 2012 issue.
8/13/2019 IBBL internship report
24/71
24 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Bankers Forum recognized IBBL as the Best Bank for Corporate SocialResponsibility for the year 2008 and 2009.
The Bank-Bima Patrika, a Fortnightly Magazine, awarded IBBL with the BestIslami Banking Award 2007.
Exclusive economic weekly The Industry awarded IBBL with the Best RatedBank Award-2010 & 2011.
The Citi Bank NA recognized IBBL as the Largest Contributor in Foreign TradeOperations in Europe-Bangladesh coridor in 2009.
the UAE Exchange awarded IBBL for mobilizing around 30% of total foreignremittance of the country.
8/13/2019 IBBL internship report
25/71
25 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Chapter 03: Investment Mechanisms of IBBL
Conventional and Islamic bank operate to earn profit but they differ in the way of
operation. Islami Bank emphasizes on the legitimate (Halal) business. On the other hand
traditional bank is not operated by the following rules and regulations approved by Islam
that is the most powerful contradiction between them. Islamic Bank does not invest in
loans and fixed interest securities. It can invest in ordinary share only while interest based
bank can invest in loans and different kinds of securities. Islami Bank establishes and
participate projects with its client as a partner and bears the risk along with the client on a
proportionate basis. The bank takes deposits and invests the same based on the profit-loss
sharing. Bank go for the investment mainly which are long term and profitable in nature.
IBBL also give high concentration on the investment that will generate more
employment. As investment is one of the most priority areas for the IBBL, so it needs to
cautious in investment decision. To ensure proper investment IBBL always go with in-
depth study before making the investment.
The special feature of the investment policy of Islamic Banks is to invest based on profit-
loss sharing system in accordance with the tenets and principles of Islamic Shariah.
Earning of the profit is not the only motives and objectives of the Islamic Banks
investment policy rather emphasis is given in attaining social good and in creating
employment opportunities.
3.1 Objectives and principles:
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 size of investment portfolio by sectors
(Public &Private), by economic purpose, by securities and by geographical area
including industrial, commercial & agricultural.
To ensure mutual benefit both for the bank and the investment client byprofessional appraisal of investment proposals, judicious sanction of investment,
close and constant supervision and monitoring thereof.
8/13/2019 IBBL internship report
26/71
26 | I n v e s t m e n t M e c h a n i s m s o f I B B L
To make investment keeping the socio economic requirement of the country inview.
To increase the number of potential investors by making participatory andproductive investment.
To finance various development schemes for poverty alleviation, income andemployment generation with a view to accelerate sustainable socio-economic
growth and uplift of the society.
To invest in the form of goods and commodities rather than give out cash moneyto the investment clients.
To encourage social uplift enterprises. To ensure avoid all the investment forbidden by the Islami shariah. The bank extends investment under the principles of Bai-murabaha, Bai-Muajjal,
Hire Purchase under Shirkatul Melk and Musharaka.
3.2 Investment policy of IBBL:
Investment policy of Islamic Bank and non-Islamic bank are fully different. The
investment policies of Islamic bank are:
Strict observance of Islamic Shariah principles. Investment to national priority sectors. Diversified investment portfolio: Diversification by size, sector, geographical
area, economic purpose, securities and mode of investment.
Preference to short-term Investments. Preference to investment of small size. To ensure safety & security of investments To look profitability of investments. To give support to government denationalization industrial program. Investment to trade and commerce sector. Investment to industrial sectors. Investment to Foreign Trade (import & export). Exploration of the possibility of investment in the existing Money & capital
Market and help organization of Islamic Money & Capital Market
8/13/2019 IBBL internship report
27/71
27 | I n v e s t m e n t M e c h a n i s m s o f I B B L
3.3 Investment Strategy of IBBL:
Investment strategy of Islamic Bank and interest-based bank are contradictory.The investment strategies of Islamic Bank are:
To check exodus of investment clients. To induct new investment clients. To induct good investment clients of other Banks. To enhance existing limits of good investment clients. Extension of investment transport sector. Extension of investment to backward as well as forward linkage industries. Extension of investment to real Estate Sector. Extension of investment to Jute sector; particularly for trading and export purpose. Strengthening supervision, control and monitoring mechanism. Training and motivation of manpower to handle increased and diverse volume of
investment s.
To give due consideration to high risk, high return and low risk, low returninvestment proposals.
Adaptation of modern technology
3.4 Steps in Investment Operations:
Induction of client:
Preliminary discussion with the prospective client regarding his investment needs,business experience, viability of the project and Shariah permissibility of the
assets the business and the uses of the assets.
Brief him on the salient features of Hire Purchase under Shirkatul Milk mode ofInvestment. Apprise, in particular, the usual terms and conditions under which the
Bank made such investment. Discuss about Clients equity participation and its
immediate availability.
Look to the past performance of the Client, Check-up Head Office CurrentInvestment Policy and Branchs track record of Hire purchase under Shirkatul
Melk Investment of the item(s).
If the Proposal is found permissible under Islamic principles and suitable, advisethe Client to submit formal Application. If not found suitable, regret politely.
8/13/2019 IBBL internship report
28/71
28 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Request potential Client to open an Al-Wadeeah Current account. Let himmaintain the Current account. Let him maintain the current Account satisfactorily
for a reasonable period. (This will generally mean six month).
Application: Obtain application in triplicate from the client of F-167A and record the same in the
Investment Proposal Received and Disposal Register (B-53).
Obtain and affix attested photograph(s) of the Proprietor /Partner/Directors/ Trustee/Administrator on the top right hand corner of the application.
Processing and Appraisal:
Checkup credit Restriction schedule of Bangladesh Bank and Head office currentinvestment policy guideline. Reject the proposal, if it conflicts with the existing credit
restrictions of Bangladesh Bank and Head Office Policy Guidelines.
Visit the Business Establishment of the Client. Tally/briefly the securities, particulars,information and figures given in the Application form with the original
Documents/Papers and are sanguine about its genuineness and correctness. Obtain
additional information, particulars, and facts and figures, if required.
Talk to his business and important personalities of the locality to ascertain thehonesty, integrity and business dealings of the Client.
Request for Confidential Report of the Client from local bank branches is received. Confidential Reports should also be obtained from local Financial, Credit and
Leasing Institutions, if felt necessary.
Obtain Report from Credit information Bureau (CIB) of Bangladesh Bank throughHead Office Investment division as per Circular issued by H.O from time to time in
this regard.
Obtain declaration of the client about his liability (both contingent and real) withother Banks/financial Institutions/Leasing Companies etc. including any other
branches of IBBL.
Obtain financial statement /Balance Sheet of the concerned application for last threeconsecutive. Accounting years for investment proposals of Tk. 50 lac and above or as
per Head office instruction. This is to be furnished by all clients irrespective of their
status.
Forward the documents, title deeds and other relevant papers to the approved lawyerof the Bank for examination and furnishing his opinion.
8/13/2019 IBBL internship report
29/71
8/13/2019 IBBL internship report
30/71
30 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Letter of Hypothecation for the asset(s) and Clients stock in Trade/work-in-process.
Letter of Disclaimer, (if stored in Clients/Partys own/hired Godown. Insurance policy (If stored in Clients/Partys Godown/yard under Banks
effective control) duly recorded in insurance register.
Letter of guarantee. Balance confirmation letter. Letter of installments. Letter of Disbursement.
If the investment is made collaterally secured by Mortgage of property, obtain the
following documents:
In case equitable mortgage, Memorandum of Deposit of Title Deep (MDTD)signed by the owner of the property.
In case of Legal Mortgage, Registered Mortgage Deed should be obtained. Personal Guarantee of the owners of the property on. Original Title Deeds with CS, RS, SA, Mutation Parcha, DCR of the property and
Mutation record.
Up-to-date Rent Receipt. Non-encumbrance Certificate along with Search Fee Paid Receipt of the
concerned Registry/Sub-Registry office.
Site plan (Map/Naksha) of the Mortgaged property. Valuation Certificate countersigned by the Manager certifying the Market value
and the Forced sale value.
Legal opinion should be self-contained, without any ambiguity and clean in allrespects.
Where the Investment is secured by pledge/Hypothecation of Stock-in-Trade,
Machineries etc., also obtain the following Document:
Letter of Pledge asset & goods security, for Clients stocks in Trade/work-in-Process etc. if any.
Letter of Hypothecation for Clients stocks, stores, Work-in-Process etc. Legal Mortgage of Machineries with full details of each machinery
8/13/2019 IBBL internship report
31/71
31 | I n v e s t m e n t M e c h a n i s m s o f I B B L
In case the investment Collaterally/ Additionally secured by Pledge of Shares of reputed
Public Limited Company on Banks approved list and quoted in the Stock Exchange, the
following additional documents are to be obtained:
Agreement for Pledge of share along with original share certificates (No share inthe name of minor shall be accepted as security).
Blank Share Transfer Deed in Duplicateon copy signed, dated and another copysigned and undated.
Share Delivery letter addressed to the Bank. Letter to the concerned Company to register Line in Banks favor. This notice
shall be sent be registered acknowledgement due post (registered A/D post) and
confirmation of recording the Line shall be obtained from the concerned company.
Letter of authority in Banks favor duly signed by the shareholder.
In case of investment to Private or public Limited Company, obtain the following
additional document:
Obtain certified copy of the Memorandum and Articles of Association of thecompany to ensure that the company has necessary power to borrow/avail
investment from any Bank.
Resolution of the board Directors of the Company to availInvestment/Facility/Borrow, do Business with IBBL and authorizing the office
bearers to execute necessary Documents.
Personal Guarantee of the Directors of the Company. If the investment is allowed on Hypothecation of assets. Certificate issued by the registrar of Joint Stock Companies under section 114 of
The Companies Act-1994 in respect of creation of charges.
Copies of Memorandum and Articles of Association with the latest amendments A copy of the Certificate of Incorporation duly attested by the Incumbent-In-
Charge of the Branch.
A copy of the certificate of commencement of Business duly attested by theIncumbent-In-Charge of the Branch.
In case of investment to a trust organization obtain the following Document in addition to
other charges Documents:
8/13/2019 IBBL internship report
32/71
32 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Copy of trust deed duly attested by a 1st class Gazette officer and verified by theincumbent-in-charge of the branch with the original copy. The Trust Deed must
contain a clause authorizing the Trustees to do Business with banks and to avail
investment facilities /borrow from banks.
Resolution of the Board of Trustees to do business with IBBL and availinvestment/borrow from IBBL.
The charge documents and all other agreements shall be signed /executed bypersons authorized by all the members of the board of Trustees, in Trustees are
authorized to delegate their powers by the trust Deed; otherwise all the Trustees
must sign/execute the charge documents and all other agreements.
Personal guarantee of all the members of the board of trustees must be obtained.
In case of investment to co-operative security, obtain the following documents also:
Clearance from the register of co-operative societies for doing business and availfaculties / investment from IBBL within the annual borrowing limit of the society.
Litter to be issued to; the concerned registrar of co-operative societies underregistered A/D Mail informing about allowing investment /facility to the
concerned society by the bank as per clearance accorded by him.
Personal guarantee of the office Bearers of the society if their personal capacity. A copy of the byelaws of the society duly certified by the registrar of the co-
operative societies.
Purchase of Goods by the Bank:
i. The goods desired by the Client are first purchased by the Bank and theownership of the Bank on the goods is established, i.e. Bank must transform its
money into goods.ii. That after purchase of the goods, the risk of the goods is borne by the
Bank
until the possession of the Merchandise has been passed on the Client.
iii. That the specification of the goods, delivery schedule and other terms ofcontract are fulfilled.
iv. Open investment account in Investment Account Opening Register (B 102).v. Enter the Account Particulars in the Investment Ledger (B 105).
8/13/2019 IBBL internship report
33/71
33 | I n v e s t m e n t M e c h a n i s m s o f I B B L
vi. In case purchase of Bai Murabaha goods by the Bank on Credit/deferredpayment basis, the Bank shall execute a Credit Purchase Agreement with
the seller to that effect mentioning date of delivery of Goods to the bank and that
ofpayment by the Bank.
Taking Delivery of Goods by the Bank:
When bank purchase the goods on behalf of the client the following procedures are
maintained:
After finalization of purchase of Bai Murabaha Goods either by theBank officials or through any Agent from the local or out station
market the Bank shall request the seller to deliver the goods purchased to the
Banks Authorized official /Agent or to the Bank godown against proper
acknowledgement.
After taking delivery of the goods by the Bank, the Bank shall makepayment of the price of the goods to producers /sellers /supplier through
DD/TT/PO against Cash memo.
Sales and delivery of goods to the client:
After completing all the formalities when goods come to the ownership of the Bank,
goods are given to the client on the basis of payment. Client can pay the full amount and
take delivery of all the goods or can take delivery of partial goods through partial
payment.
8/13/2019 IBBL internship report
34/71
34 | I n v e s t m e n t M e c h a n i s m s o f I B B L
3.5 Investment Mechanisms of IBBL:
There are three investment mechanisms of IBBL. Under these mechanisms Islami Bank
Bangladesh Ltd practiced different kinds of investment modes. These are given below.
Fig-03: Investment Mechanisms of IBBL
Source:Investment Manual of IBBL.
3.5.1 Bai-Mechanism: Under Bai-Mechanism of Islami Bank Bangladesh Ltd
practiced different kinds of investment modes. These are given below.
3.5.1.1 Bai-Murabaha
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 agreed profit payable in cash or on any fixed future date
in lump-sum or by installments. The profit marked-up may be fixed in lump-sum or in
percentage of the cost price of the goods.
3.5.1.2 Bai-Muajjal
Bai-Muajjal 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
country), to the buyer at an agreed fixed price payable at a certain fixed future date in
lump-sum or within a fixed period by fixed installments. The seller may also sell the
goods purchased by him as per order and specification of the buyer.
a) Bai-Murabaha
b) Bai-Muajjal
c) Bai-Salam
d) Bai- Istishna
a) Mudaraba
b) Musharaka
a) Hire Purchase Under
shirkatul Melk
Bai- Mechanism Share Mechanism Ijara Mechanism
8/13/2019 IBBL internship report
35/71
8/13/2019 IBBL internship report
36/71
36 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Salam sales are impermissible on existing commodities because damage anddeterioration cannot be assured before delivery on the due date.
Salam is impermissible on land lots and real estates. Salam is permissible on a commodity of a specific locality if it is assured that it
is almost always available in that locality and it rarely becomes unavailable.
It is a condition that the purchase price in salam is specified and advanced to theseller at the time of signing of contract.
It is a condition in a salam sale that the due date is known to avoid confusion,which may lead to a dispute.
It is a condition that the place of delivery be stated in the contract if thecommodity requires special handling and delivery arrangement.
It is permissible to take a mortgage on salam debt to guarantee that the sellersatisfies his obligation by delivering the commodity on the due date.
3.5.1.4 Istishna:
Istisnaa sale is a contract in which the price is paid in advance at the time of the contract
and the object of sale is manufactured and delivered later. The majority of the jurist
consider Istisnaa as one of the divisions of Salam ,therefore, it is subsumed under the
definition of Salam. But the Hanafie school of Jurisprudence classifies Istisnaa as an
independent and distinct contract. The purchaser is called Mustasnia contractor and the
seller is called Sania maker or manufacturer and the thing is called Masnooa
manufactured, built, made.
3.5.2Share Mechanism:
3.5.2.1Mudarabah
It is a form of partnership where one party provides the funds while the other provides the
expertise and management. The first party is called the Sahib-Al-Maal and the latter is referred to
as the Mudarib. Any profit accrued is shared between the two parties on a pre-agreed basis, while
capital loss is exclusively borne by the partner providing the capital
3.5.2.2 Musharaka
The terms Shirkat and Musharaka have been derived from Arabic worlds Shairkah
and Sharika. The world shirkah means a partnership between more than one partner.
Thus the word Musharaka and Shirkat mean a partnership established between two or
8/13/2019 IBBL internship report
37/71
37 | I n v e s t m e n t M e c h a n i s m s o f I B B L
more partners for purpose of a commercial venture participated both in the capital and
management. Thus, it embraces different types of profit and loss sharing partnership. The
partners (entrepreneurs, bankers, etc.) share both capital and management of a project so
that profits will be distributed among them as per ratios, where loss is shared according to
ratios of their equity participation. In this case of investment, Musharaka meaning a
partnership between the bank and the client for a particular business in which both the
bank and the client provide capital at an agreed upon ratio and manage the business
jointly. Share the rent as per agreed upon ratio
and bear the loss, if any, in proportion to their respective equity. Bank may move itself
with the selected client for conducting any Shariah permissible business under Musharaka
mode.
Main features:
Bank and client both supply capital unequally/equally. Profit is divided as per agreement and actual loss is divided as per equity. Client will maintain all accounts properly bank or its agent may verify or audit it. Banks can advice the client in such a business in respect of the business.3.5.3 Ijra Mechnism:
3.5.3.1Hire purchase Under Sirkatul Melk
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 theimplements/ equipment/goods.
Meaning and Definition
Hire Purchase under Shirkatul Melk is a Special type of contract which has been
developed through practice. Actually, it is a synthesis of three contracts:
Shirkat
Ijara Sale
8/13/2019 IBBL internship report
38/71
38 | I n v e s t m e n t M e c h a n i s m s o f I B B L
These may be defined as follows:
Shirkatul Melk
Shirkat means partnership. Shirkatul Melk means share in ownership. When two or more
persons supply equity, purchase an asset, own the same jointly, and share the benefit as
per agreement and bear the loss in proportion to their respective equity, the contract is
called Shirkatul Melk contract.
Ijarh
The term Ijarah has been derived from the Arabic works (Air) and (Ujrat) which means
consideration, return, wages or rent. This is really the exchange value or consideration,
return, wages, rent of service of an ASSET. Ijarah has been defined as a contract betweentwo parties, the Hire 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 Hire. It is a
hire agreement under which a certain asset is hired out by the Hire to a Hirer against fixed
rent or rentals for a specified period.
Sale:
This is a sale contract between a buyer and a seller under which the ownership of certain
goods or asset is transferred by seller to the buyer against agreed upon price paid / to be
paid by the buyer. Thus, in Hire Purchase under Shirkatul Melk mode both the Bank and
the Client supply equity in equal or unequal proportion for purchase of an asset like land,
building, machinery, transports 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 expiry of the hire agreement.
3.5.3.2 Stages of Hire Purchase Under Shirkatul Melk
Thus Hire Purchase under Shirkatul Melk Agreement has got three stages:
Purchase under joint ownership. Hire and
8/13/2019 IBBL internship report
39/71
39 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Sale and /or transfer of ownership to the other partner Hirer.
3.6 SPECIAL INVESTMENT SCHEMES OF IBBL:
3.6.1 Household Durable Investment Scheme:In a developing country like Bangladesh people of middle and lower class especially
service holders with limited income find it difficult to purchase articles like refrigerator,
television, cot, Almirah, wadrobe, sofa-set, pressure cooker, sewing machine etc. which
are part of modern and decent living. They cannot enhance the standard and quality of life
to the desired level due to constrain of their limited income. Islami Bank Bangladesh
Limited has, therefore, introduced Household Durables Investment Scheme that has
already created great enthusiasm among the people and received tremendous response
from them.
Eligibility:
Interested permanent officials of the following organizations may apply for
investment:
Government Organizations. Semi-Government Organizations and Autonomous Bodies. Banks and Financial Institutions. Armed Forces, BDR, Police and Ansars. Teachers of Universities, Government Colleges, School and Senior
Madrashas.
Officers of International Financial & Relief Organization. Officers of the multinational companies. Officers of the local established and renowned public limited companies. House Owners. Investment clients of IBBL. Deposit client of IBBL.
Mode of Recovery:
The Banks investments and profit thereon shall be recovered in 24 monthlyinstallments within a period of 2 (two) years.
8/13/2019 IBBL internship report
40/71
40 | I n v e s t m e n t M e c h a n i s m s o f I B B L
The monthly installment shall be payable by the first week of every month. Thefirst installment shall be due for payment in the first week of the subsequent
month of the disbursement/ delivery of goods/articles.
4.6.2 Housing Investment Scheme
One of the basic human needs is to have a house to live in. A house is an abode of peace
and happiness. Housing has now become an acute problem in the country, especially in
the towns, cities and metropolis. With their limited income, it has become almost
impossible on the part of the lower middle class, middle class and sometimes, even for
upper middle class to solve their housing problem. To meet this basic human need, Isalmi
Bank Bangladesh Limited is committed to contribute to this end to provide a peaceful and
happy living. The Bank has introduced Housing Investment Scheme with the objective
to ease and minimize the housing problem and assist service holders and professionals
with limited income in materializing their dream of becoming owner of housing.
Eligibility:
Initially the following categories of people shall be eligible to apply for availing
investment facilities under this Scheme: Officials of the Defense Forces, Permanent
Officials of Government, Semi-Government and Autonomous Organizations, Teachers of
the established Universities, University Colleges & Medical Colleges etc.
Target Area:
At the initial stage, the Scheme is being implemented in all divisional area
Period of investment:
The maximum period of investment shall be generally 15 years. Reasonable gestation period for construction be allowed considering the size of
construction and Banks investment.
Disbursement Procedure of Investment:
Bank will pay the sanctioned money through Pay-Order directly or through investment
client to the supplier of construction materials/owner of the built house. However, the
following points shall be taken into consideration in disbursing the investment:
8/13/2019 IBBL internship report
41/71
41 | I n v e s t m e n t M e c h a n i s m s o f I B B L
In case of purchase of apartment/flat/built house, the client shall have to depositthe equity money in the Branch of produce documentary evidence in support of
his investment up to the satisfaction of the concerned Branch.
In case of construction of house on the clients own land or for extension of theexisting house, the valuation of the Bank as regards clients investment shall be
consideration final.
The client shall have to submit to the Bank, the construction plan approved by thecompetent authority and also the required permission to mortgage the property,
where necessary.
The client must execute all necessary documents including mortgage deed andcomplete all necessary documentation formalities to avail the investment. Related
documents of mortgage, agreement of sale and other documents must be vetted by
the penal lawyer of the Bank.
Recovery of Banks Investment:
The client shall have to pay the Banks dues by monthly installment immediately afterthe expiry of the period of construction.
The Bank shall realize the amount of monthly installment by depositing the cheque ofa particular month on the first week of every month.
The client shall have to execute irrevocable power of attorney in favor of the Bankauthorizing the Bank to collect monthly rent from the tenants in case of failure of the
client to pay the monthly installment.
3.6.3 Real Estate investment Program:Professionals, Service-holders, Businessmen, Real Estate developer and other categories
of people who are not entitled for availing investment facilities under Housing Investment
Scheme, shall be eligible under this program. Investment is to be extended to build new
houses and for extension / completion of the house already constructed, commercial
building, shopping complex, flat/apartment etc
8/13/2019 IBBL internship report
42/71
42 | I n v e s t m e n t M e c h a n i s m s o f I B B L
3.6.4 Transport investment Program
The role modern communication is most vital for the socio-economic growth and uplift of
a developing country like Bangladesh. A sound and efficient communication network is
the pre-requisite for sustained development through the expansion of trade, commerceand industry. In this backdrop the demand for road and water transport has increased
manifold throughout the country. Moreover, the use of modern transports has increased
keeping pace with the rise of standard of living of professionals. Considering all these
facts, Islami Bank Bangladesh Limited has introduced Transport Investment Scheme
Under this scheme investment on easy terms is being extended to the existing successful
businessmen in road and water transports and potential entrepreneurs in this sector for
different types of road and water transport. Besides, Multinational companies, established
business house and well to do officials and professionals can become owner of various
kinds of transports through Hire Purchase under scheme.
Mode of Transports:Road Transports, Water Transport..
Target Group
Bus/Truck/Minibus Private car/Microbus/ Jeep Auto Rickshaw/ Tempo/ Pick-up van Ambulance. Water transport
Period of Investment:Maximum 3 years from the date of delivery of the vehicle.
Mode of disbursement:
Banks sanctioned amount shall be disbursed directly to the supplier of thevehicles.
The client shall have to complete all documentation formalities includingmortgage of property before disbursement of the Banks investment.
The cost of chassis and bodybuilding shall be taken into consideration inascertaining the price.
8/13/2019 IBBL internship report
43/71
43 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Recovery of Banks Investment
The client shall have to repay the dues to the Bank in monthly installment statingimmediately after the expiry of the gestation period fixed by the Bank.
The Bank shall collect the monthly installment of a particular month throughencashment of the cheque in the first week of the concerned month.
If a client fails to pay 3 consecutive installments, the Bank can take back thepossession of the vehicle from the client and sell or transfer it to another client.
3.6.5 Car Investment Scheme
Islami Bank, being and welfare oriented banking institution, has now deigned and
implemented a good number of investment schemes keeping in view the needs of
different sectors and various sections of the people for their socio-economic uplift and to
improve their quality of life. The investment schemes including the Transport
Investment scheme and the Household Durables Investment scheme so far introduced
have gained popularity and received wide response from the people.
Car is considered as on essential mode of transport in the modern society, particularly by
a section of the officials, business houses and business executives and established
professionals for movement in discharging their duties and responsibilities punctually and
efficiently. Many of these categories of people cannot purchase a car on payment of entire
purchase value at a time out of their own sources. To meet this need Islami Bank has
introduced the Car Investment Scheme for the mid and high ranking officials of
government and semi-government organizations, corporations, executive and directors of
big business houses and companies and also for persons of different professional group
on easy payment terms and conditions.
Eligibility
Permanent senior officers/executives of the following organizations: Government
Organizations, Semi-Government Organizations/Autonomous Bodies/Corporations,
Banks, Commissioned Officer of Armed forces, BDR, Police and Ansars, Teachers of the
Universities, Government Colleges, Executives/ Directors of big companies and business
houses of repute, Members of all other professional groups having good income.
8/13/2019 IBBL internship report
44/71
8/13/2019 IBBL internship report
45/71
45 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Specialized and consulted physicians who are willing to procure latest andspecialized type of medical equipment.
Newly passed medical graduates who are willing to from groups in order toestablish clinic.
Priority is given to specialist and consultant physicians like dentists, childspecialists, and ophthalmologists etc.
Equity:Newly graduated doctors under self-employment scheme 10%, Established
doctors 20%, Established Clinics 30%
Mode of repayment
Investment of the Bank is to be repaid on monthly installment basis. Re-payment of the 1st installment will start after three months from the date of
investment.
If the client fails to pay back three consecutive installments without anysatisfactory reasons, the bank may take possession and control of the machinery
and equipment etc. supplied by the Bank.
3.6.7 Small Business Investment SchemeThe Bank, to make effective contribution in this respect, has taken-up a special program
and introduced Small Business Investment Scheme to make the small traders,
entrepreneurs and neglected unemployment youth of urban and rural areas self-reliant by
providing them required financial support
Eligibility of the Clients
Investment clients must be permanent residents of the command area of thebranch
They must have valid trade license and shops or selling centers. Small business man and entrepreneurs, who has the shortage of fund/capital, will
also be eligible to avail investment facilities under the Scheme.
Investment shall also be extended to those poor and asset-less unemployed youths,especially those who have ability to run business.
Besides the above categories, investment facilities under this Scheme shall also beextended to small and cottage industries and service sector.
8/13/2019 IBBL internship report
46/71
46 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Sectors of Investment:
Livestock, Fishery, Agro-processing, Manufacturing, Trading/shop keeping, Transport,
Services, Agriculture Implements and Forestry.
Mode of Investment
Hire purchases Shirkatul Meelk: For all kinds of machineries i.e. equipments &transport sector.
Bai-Muajjal-TR: For trading shop keeping, agro-processing and raw materials formanufacturing purposes.
Period of Investment:
In case of HPSM: Maximum 24 months, In case of Bai-Muajjal-TR: Maximum 12
months.
Clients Equity:
For HPSM Investment: Maximum 20% on cost price of the machineries/vehicles, For
Baimuajjal-TR: Nil.
Recovery Procedure:
For HPSM investment: Monthly installment basis For Bai-Muajjal-TR: Monthly/Quarterly/Half-yearly installment/ lump-sum/ at a
time-within the date of expiry.
3.6.8 Agriculture Implements Investment Scheme
Islami Bank Bangladesh Limited is a welfare oriented Bank. It can play positive and
important role in the economic development, progress and uplift of the country by
investing in the agriculture sector. The Bank has, therefore, introduced Agriculture
Implements Investment Scheme to provide power tillers, power pumps shallow tube
wells, thrasher machine etc. on easy terms to the unemployed youths for self-employment
and to the farms to help augment production in agricultural sector.
Type of Agriculture Implements:
Power tillers, Thrasher Machine, Any other agricultural implements proposed by the
branch and which has local demand.
8/13/2019 IBBL internship report
47/71
8/13/2019 IBBL internship report
48/71
48 | I n v e s t m e n t M e c h a n i s m s o f I B B L
due to shortage of funds and insufficient collaterals. The scheme has been prepared with
easy terms and conditions to encourage the small entrepreneurs, educated unemployed
youths and skilled/semi skilled persons to come forward for establishment of micro
industries commensurate with the local demand.
Eligibility
The eligibility criteria for the selection of the entrepreneurs under the scheme will be as
under:
Engineering diploma or degree holders, or persons having diploma or certificatefrom any Technical/Vocational Training Institutes and willing to set up micro
industries.
Educated unemployed youths having initiative and knowledge regarding theproposed industry.
Skilled and semi-skilled persons having practical knowledge and experience inindustrial operations.
Persons already engaged in micro-industries as owners and willing for BMRE oftheir enterprises.
Wage earners who want to establish micro industries having workexperience/training in the particular field of industry.
The proposed enterprise must be exclusively owned by Bangladeshi Nationals thatuse indigenous raw materials or imported raw materials not exceeding 25% of the
total requirement of raw materials.
Defaulters and persons/enterprises having outstanding liabilities with other Banksand Financial Institutions will not be eligible for availing investment under the
scheme.
Sectors of Investment
Different sectors including food and agriculture based industries, plastic & rubber
industries, forestry and furniture industries, engineering industries, lather industries,
chemical industries, textile industries, recycling 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.
8/13/2019 IBBL internship report
49/71
49 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Period of Investment
Capital Machinery: 5(five) years including reasonable gestation period.
Raw materials: One year from the date of 1st disbursement.
Mode of Investment
Capital Machinery: Hire-Purchase Shirkatul Melk (HPSM)
Raw Materials: Bai-Muajjal.
Recovery of Banks dues:
Hire Purchase: In monthly/fortnightly/weekly installment basis. Bai-Muajjal: In Lump sum at the end of the tenure of investment.
Command Area
Investment under the Scheme shall be made within the 20 Km. radiuses from the branch.
3.6.10Rural development SchemeIslami Bank Bangladesh Limited has been founded with the major objective of
establishing Islamic economy for balanced economic growth by ensuring reduction of
rural-urban disparity and equitable distribution of income. In view of the above, Branches
of the Bank have been encouraged to invest their deposits in their respective areas and in
particular for the economic uplift of the rural people.
Accordingly, a Scheme in the name and style of Rural Development Scheme has been
introduced to cater investment needs of the agricultural and rural sector to create
opportunity for generation of employment and raising income of the rural people with a
view to alleviate poverty.
Command Area:
Each designated Branches will select villages initially within a radius of 10 kilometers of
the Branch.
Target Group:
Farmers having land of maximum 0.50 acres. Sharecroppers with consent from the landowners.
8/13/2019 IBBL internship report
50/71
50 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Persons engaged in off-farm activities having no land or land up-to maximum0.50 acres.
Persons/farmers permanently residing in the selected villagers. Persons having derelict pond will be eligible for investment for re-excavation and
fish cultivation.
Destitute women and distressed people will be provided investment for millscows/poultry birds/ducks/goats etc. and other suitable off-farm activities for
raising their supplementary income.
Persons having liabilities with other banks/institutions including defaulters willnot be eligible for the investment under the Scheme.
Rate of Return, Supervision Charge and Risk Fund
Banks rate of return will be @ 11% per annum (approximate).
Risk Fund contribution of the client will be @ 1% per annum, on the net disbursement.
Sanction and Disbursement
On the basis of the list submitted by the field officer, the Investment Committee of the
Branch will carefully scrutinize the applications and sanction the investment at the
Branch level. The members of the Committee will consist of Manager, Project Officerand the field officer. After sanction of the investment the Branch will complete
documentation formalities and then disburse the amount with the help of the Investment
Officer and field officers.
Modes of Investment
The Branch will select any of the following modes depending upon the sector and
purpose of investment:
Bai-Muajjal TR Hire-Purchase under Shirkatul Melk (HPSM) or Leasing Mudaraba Musharaka Bai-Salam Murabaha TR
8/13/2019 IBBL internship report
51/71
51 | I n v e s t m e n t M e c h a n i s m s o f I B B L
Recovery of Investment
To ensure recovery of investment in time, the Branch will determine the investments
judiciously. Installments should be fixed in the following manner, keeping in view the
income generation capacity of the investment and time thereof:
In case of off-farm activities installments should be fixed on weekly basis. In case of agricultural/crop production, installment should be fixed on quarterly
basis or on the basis of harvesting period of the crop in each of the investment
area. A token installment may however be realized on weekly basis.
8/13/2019 IBBL internship report
52/71
8/13/2019 IBBL internship report
53/71
53 | I n v e s t m e n t M e c h a n i s m s o f I B B L
4.2 Trend of mode wise Investment
Analysis: Maximum investment of IBBL is in Bai murabaha and Hire purchase under
Shirkatul Melk modes. The underlying reason is the modes involve risk lower than others.
Although Musharaka is most desirable mode to IBBL, due to dishonest, indiscreet,
hypocritical nature of people investment in this mode is very minimal.
0
50000
100000
150000
200000
250000
300000
350000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Taka in million
Fig-7: Mode Wise Investment
Bai murabaha
Musharaka
Bai Muajjal
Hire Purchase under Shirkatul
Melk
Purchase & Negotiation
Others
Total
8/13/2019 IBBL internship report
54/71
54 | I n v e s t m e n t M e c h a n i s m s o f I B B L
4.3 Sector Wise Investment of IBBL
Analysis:
Before 2001 maximum portion of investment of IBBL was in Commercial sector and next
in industrial sector. But the scenario has been reversed after 2000. From 2001 to at
present major portion of IBBLs investment is in industrial sector. Although after 2008
industrial sector investment has a decreasing trend and at the same time others sector
investment has a positive trend .
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Taka in million
Fig-8: Sector wise investment
Commercial
Industrial
Agriculture
Real Estate
Transport
Others
8/13/2019 IBBL internship report
55/71
8/13/2019 IBBL internship report
56/71
56 | I n v e s t m e n t M e c h a n i s m s o f I B B L
4.6 Geographical Location Wise Classification of Investment
Fig-11:Location Wise Classification of Investment ( Taka in million)
Analysis:Bangladesh is a predominantly an agrarian economy having a vast majority of
people living in rural areas. More than 40% of the people live below the poverty line. So
to alleviate rural poverty investment in rural area is very much important. IBBL invests
huge amont in rural area. Although their investment in rural area compared to urban area
is very minimal. But it has an increasing trend. As on 2011 investment in rural area by
IBBL was 39545 million against 22889 million as on 2010.
4.7 Division Wise Classification of Investment
Fig-12:DivisionWise Classification of Investment (Taka in million))
Analysis: As far as division of Bangladesh is concerned, maximum investment of IBBL is
in Dhaka division. The above figure show More than 50% of total investment of IBBL is
made in this division. The underlying reason is that maximum mills, factories and
industries of the country situate in Dhaka.
39545.1
8482
266295.
3784
2011
In Rural
Areas
In Urban
Areas
22889.2
6461
240335.
8664
2010
In Rural
Areas
In Urban
Areas
18345
6.543
61255
26656
129892774586712840
30584
0
2011Dhaka
Division
Chittagon
g Division
Khulna
Division
Rajshahi
Di
Top Related