Anda di halaman 1dari 53

CHAPTER ONE

INTRODUCTION

Page

1
1

1.1 Introduction This report is based on an internship program. IBTRA arranges internship program to gather practical knowledge about baking activities followed by IBBL for University students as Universities conducted with different organization after the completion of theoretical courses of program of Bachelor of Business Administration (BBA). A group of interns must carry out a specific project, which is assigned by the IBTRA. In this particular report, I am a internee of the previously mentioned program and the concerned organization is Islamic Bank Bangladesh Limited (IBBL) which is a prominent private and the first Bank of Bangladesh that based on Islamic Shariah. Hence I am placed in IDB Branch of Islami Bank Bangladesh Limited from April 7 to june 5. In way of delegation, responsibility of carrying out the study has conferred upon the concerned interns. 1.2 REPORT BACKGROUND The practical orientation in different organization is the final term requirement of BBA program. Hence I am selected for the Islamic Bank Bangladesh Limited (IBBL). As instructed by Zillur Rahman Patwary I am assigned to work in Islamic Bank Bangladesh Limited, IDB Branch. And since then I had started our practical orientation program in Investment department of that particular branch of IBBL and successfully complete with lots of solid work experience. And based on that I prepared this report where I tried to mention every single point that I gather from there.

1.3 The Objectives of the Study The main objective of the study is to know the different modes of investment of IBBL. To satisfy the main objective we are setup the following specific objectives: 1. to assess different types of investment of selected bank; 2. to understand the different mechanism and modes of investment of IBBL and 3. to understand various forces those have impact on investment operation.

Page

2
2

1.4 Rational of the report The Internship report titled on Different modes of investment of IBBL is submitted in practical requirement for the fulfillment of the degree of Masters of Business Administration (MBA) under Department of Business Administration of Jagannath University, Dhaka. Internship program is the systematic process of gathering; recording; analyzing and presenting data about the subject that a student goes to learn on the program. The aim of this report is connect practical knowledge with theoretical knowledge since everyone must be expert in both theoretical and practical knowledge to survive in the competitive world. 1.5 Methodology of the Report For moving out this project paper I had to study the actual banking maneuver especially Modes of investment of IBBL. For the purpose of the study, data have been collected both from the primary and secondary sources. 1.5.1 Secondary sources data I discussed with the executives & officials of the IBBL and found the approximate data which have been presented in the report. The study have been conducted through the assistance International Banking Wing (IBW), Head Office of IBBL as per their monitoring / formulating policy issues for enhancing their Investment business through applying modern and technological means. I have been also physically visited to observe the effectiveness of the efforts relating Investment effectively and efficiently managed by IBBL. The researcher has collected secondary data from the following sources: Annual Reports of Islami Bank Bangladesh Ltd. Synopsis and training materials provided by Bangladesh Bank and Islami Bank Training and Research Academy (IBTRA). Manuals of Islami Bank Bangladesh Ltd. Statement affairs of IDB Branch. Islami Bank Bangladesh Limited, Website- http://www.islamibankbd.com. Bangladesh Bank, Web site- http://www.bangladeshbank.bd.org.
Page

3
3

1.6 Scope of the further studies: Objective of the practical orientation program is to have practical exposure for the students. My permanent status was for only two month which was somehow not sufficient enough to gather adequate experience of such vast banking business .after working whole day in the office it was very much difficult and also impossible to study again the theoretical aspect of banking on the other hand to prepare my internship report I have faced some limitation as follows: Eight weeks of time is not enough for the study. I could not go in depth of the study. The staffs of the branch were some time so busy that they could not help us all time. Preparing internship report is really troublesome. Collection of data was not smooth. Analyzing with financial data is much more confusing and complicated than any other data. Unavailability to required published documents. To collect data and information it is a common tendency of any department to keep back their departmental data and information. Lack of my experience and efficiency to prepare the standard report.

Page

4
4

CHAPTER TWO

PROFILE OF THE ORGANIZATION INVESTMENT OF IBBL

Page

5
5

2.1 Historical background of IBBL: In August 1974, Bangladesh signed the Charter of Islamic Development Bank and committed itself to reorganize its economic and financial systems as per Islamic Shariah. In January 1981, the president of Bangladesh, the then, while addressing the 3rd Islamic Summit Conference held at Macca and Taif suggested, The Islamic countries should develop a separate banking system of their own to facilitate their trade and commerce. This statement of the president indicated favorable attitude of the government of the Peoples Republic of Bangladesh towards establishing Islamic banks and financial institutions in the country. Earlier in November 1982, 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 form for immediate introduction. Two professional bodies Islamic Economics Research Bureau (IERB) and Bangladesh Islamic Bankers Association (BIBA) made significant contributions towards introduction of Islamic banking in the country. They came forward to provide training on Islamic banking to top bankers and economists to fill up the vacuum of leadership for the future Islamic banks in Bangladesh. They also held seminars, symposia and workshops on Islamic economics and banking throughout the country to mobilize public opinion in favor of Islamic banking. Their professional activities were reinforced by a number of Muslim entrepreneurs working under the aegis of the then Muslim Businessmen in society (now reorganized as industrialist & Businessmen Association). The body concentrated mainly in mobilizing equity capital for the emerging Islamic Banks At last, the long drawn struggle, to establish an Islamic bank in Bangladesh becomes a reality. Islami Bank Bangladesh Limited was established in March 1983. In which 19 Bangladeshi nationals, 4 Bangladeshi institutions and 11 banks, financial institutions and government bodies of the middle east and Europe including IDB and eminent personalities of the kingdom Saudi Arabia joined hands to make the dream a reality.

Page

6
6

2.2 Mission of IBBL To establish Islami Banking through the introduction of a welfare oriented banking system and also ensure equality and justice in the field of all economic activities, achieve balanced growth and equitable development through diversified investment operations particularly in the priority sectors and less development areas of the country to encourage socio-economic enlistment and financial services to the low-income community particularly in the rural areas.

2.3 Vision of IBBL Vision of IBBL is to always strive to achieve superior financial performance, be considered a leading Islami Bank by reputation and performance. Goal of IBBL is to establish and maintain the modern banking techniques, to ensure the soundness and development if the financial system based on Islami principles and to become the strong and efficient organization with highly motivated professionals, working for the benefit of people, based upon accountability, transparency and integrity in order to ensure the stability of financial system. IBBL will try to encourage saving in the form of direct investment. IBBL will also try to encourage investment particularly in projects, which are more likely to lead to higher employment.

2.4 Special 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 to Islamic Shariah. Establishment of participatory banking instead of banking on debtorPage

creditor relationship.

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 establish equity and justice in the field of all economic activities. It extends Socio-economic and financial services to the poor, helpless and low-income group of the people for their economic up liftmen particularly in the rural areas. It plays a vital role in human resource development and employment generation particularly for the unemployed youths. It extends co-operation to the poor, the helpless and the low-income group for their economic development. Its aim is to achieve balanced growth and equitable development of the country through diversified investment operations particularly in the priority sectors and in the less developed areas.

2.5 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; To accept deposits on Mudaraba& Al- Wadeah basis. To extend co operation to the poor the helpless and the low income group for their economic enlistment.
Page

8
8

2.6 Commitments: TO Shariah To the Regulators To the Shareholders To the Community To the Customers To the Employees To the Stakeholders To Environment 2.7 Conventional and Islamic banking: The distinguishing features of the conventional banking and Islamic banking are shown in terms of a box diagram as shown below: Banks Islamic Banks

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

2. The investor is assured of a 2. In contrast, it promotes risk sharing predetermined rate of interest. between provider of capital (investor) and the user of funds (entrepreneur). 3. It aims at maximizing profit without 3. It also aims at maximizing profit but any restriction. 4. It does not deal with Zakat. subject to Shariah restrictions. 4. In the modern Islamic banking system, it has become one of the service-oriented functions of the

Islamic banks to collect and distribute Zakat.

Page

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

with

interest

is

the

fundamental is the fundamental function of the Islamic banks.

function of the conventional banks.

6. Its scope of activities is narrower 6. Its scope of activities is wider when when compared with an Islamic bank. compared with a conventional bank. It is, in effect, a multi-purpose institution. 7. It can charge additional money 7. The Islamic banks have no provision (compound rate of interest) in case of to charge any extra money from the defaulters. defaulters.

8. In it very often, banks own interest 8. It gives due importance to the public becomes prominent. It makes no effort interest. Its ultimate aim is to ensure to ensure growth with equity. growth with equity. it is

9. For interest-based commercial banks, 9. For the Islamic banks, borrowing from the money market is comparatively relatively easier. difficult to

borrow

money from the money market.

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

appraisal and evaluations. 11.

The conventional banks give 11. The Islamic banks, on the other

greater emphasis on credit-worthiness hand, give greater emphasis on the of the clients. viability of the projects.

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

Page

10
10

2.8 Shariah Council of IBBL: The Shariah Council of Islamic Bank generally consists of experts from the following four areas: Fuqaha: Persons representing this group must be well versed in the Quran, Sunnah and fully conversant with the opinion of all schools of Islami thought and Islami law and jurisprudence. They must view Islam as a total way of life and a living religion. 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. 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. 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.

2.9 Objectives of Shariah Council: The functions of the council are to offer views and opinions on matters related to the bank from time to time. The council may require any paper document from the bank and examine the same to see whether it is according to see whether it is according to Islamic principles. The shariah council assists the Board of Directors by advising them on matters related to shariah. The opinion of the majority of members is taken as the opinion of the council provided that the said opinion is supported by at least three Muftis of the council. The council maintains its secretariat and a well-equipped library as the Head

11

Office of the bank where it keeps proper records of all of its proceedings and decisions.
11

Page

The council may whenever it thinks necessary, constitutes a sub-committee to help the council. The council elects a chairman and a secretary from amongst them. The chairman will normally preside over the meetings. In his absence the members present elect one of them to preside over the meetings. The council issues Shariah Certificate in the Annual Report of the bank.

2.10 Functions of IBBL: The operation of Islamic Bank Bangladesh limited can be divided into three (3) major categories: General Banking: it includes: Receipts and payment of cash. Mobilization of deposits Handling transfer transaction. Operations of clearing house Maintenance of accounts with Bangladesh bank and other banks. Collection of cheques and bills. Issue and payment of Demand Draft,Telegraphic Transfer and Payment order. Executing customers standing instructions. Maintenance of internal accounts of the bank. Maintenance of safe deposit lockers.

While doing all the above noted work IBBL issue cheque-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.

Page

12
12

2.11 Corporate Information:

Date of Incorporation

13th March 1983

Inauguration of 1st Branch (Local Office, 30th March 1983 Dhaka)

Formal Inauguration Authorized Capital Paid-up capital Share of capital:Local Share holders Foreign share holders Zones Branches(Including SME/Agricultural Br.) SME/Agriculture Branch equity Deposit Invest F.Ex Manpower No. of Share Holder No. of Share ATM No. of Own ATM

12th August 1983 TK = 20,000.00 Million TK=12,509.64 Million

41.43% 58.57% 14 276 TK= 33,512.00Million TK=335,578.00Million TK=329,906.00Million TK=610,199.00Million 12,188 60,302 1400 192

Page

13
13

2.12 Milestone of IBBL: IBBL established on 13th march 1983.From establish unite now IBBL deals different types of business and deals different Banking service. IBBL milestone are given below: Established on Certificate for Commencement of Business Inauguration of 1st Branch Formal Inauguration Shariah Supervisory Committee CSR/Foundation activities IPO Listing in Dhaka Stock Exchange Ltd. Listing in Chittagong Stock Exchange Ltd. 13th March 1983 27th March 1983 30th March 1983 12th August 1983 1983 1983 1985 2nd July1985 7th March1996

Accommodation of IBBL Head Office in its 10th March 2000 own Tower 1st Rights Share issue 2nd Rights Share issue 3rd Rights Share issue 4th Rights Share issue Opening of 100th Branch Opening of 200th Branch Opening of 250th Branch Joining/Agreement with CDBL In-house Core Banking Software 1989 1996 2000 2003 2003 21st June 2009 15th December 2010 29th December 2004 2005

IBBL Mudaraba Perpetual Bond (MPB) 25th November 2007 Issue Inauguration of Broker House . Islami Bank Securities Limited (IBSL 1st January 2008 22nd March 2010

Islami Bank Capital Management Limited 1st April 2010

14

(IBCML) 1st Position of IBBL in Inward Remittance 2007, 2008, 2009 & 2010

Page

14

100% Branch Online Banking Launching of i-Banking Launching of Islami Bank m-Cash

7th January 2011 16th December 2011 27th December 2012

2.13 Board of Directors: The board of director consists of 17 non-executive member .The number of board members is within the maximum limit set by the central bank. The board is composed of experienced members with devised professional experiences. The board members are independent who express their views and opinions free from any influence. The decision making process and practices are based on free exchange of views to make effective directions for the management which is one of the key responsibilities of the board. Member of Board of Director Prof. Abu Nasser Muhammad Abduz Zaher Yousif Abdullah Al-Rajhi Engr. Mustafa Anwar Abdullah Abdul Aziz Al-Rajhi Engr. Md. Eskander Ali Khan Dr. Abdul HameedFouad Al Khateeb Md. AbulHossain Dr. AreefSuleman Mohammad Abdullah Al Jalahma Mominul Islam Patwary Hafizul Islam Mian Md. Shahidul Islam Mohammed Nazrul Islam Salauddin Ahmed Chairman Vice Chairman Vice Chairman Director Director Director Director Director Director Director Director Director Director

15

Md. Abdus Salam, FCA, FCS HumayunBokhteyar, ACPA, FCA


15

Depositor Director Depositor Director

Page

Professor NRM Borhan Uddin, PhD Mohammad Abdul Mannan

Independent Director Managing Director

2.14 Executive Committee of IBBL Engr. Md. Eskander Ali Khan Dr. Abdul Hameed Fouad Al Khateeb Md. Abdus Salam, FCA, FCS Md. Abul Hossain Humayun Bokhteyar, ACPA, FCA Director Member Member Member Member

2.15 Sponsors of IBBL Foreign Sponsors: Islamic Development Bank, Jeddah, K.S.A. Kuwait Finance House (K.S.C.), Kuwait Jordan Islamic Bank, Jordan Islamic Investment & Exchange Corporation, Doha, Qutar Bahrain Islamic Bank, Bahrain Islamic Banking System International Holding S. A. Al-Rajhi Company For Currency Exchange & Commerce, Sheikh Ahmed Salah Jamjoom, Jeddah, K.S.A Fouad Abdul hameed Al-Khateeb (Late), K.S.A Dubai Islamic Bank, Dubai, U.A.E. The Public Institution For Social Security, Safat, Ministry of Awqaf And Islamic Affairs Kuwait Ministry of Justice, Department of Minors Affairs, Local Sponsors: Mohammad Abdur Razzaque Lasker (Late)

16
Page

Mofizur Rahman (Late) Barrister Tamizul Haque

16

Mohammad Younus (Late) Mohammad Shafiuddin Dewan (Late) Mohammad Bashiruddin Mohammad Hussain (Late) Nashiruddin Ahmed (Late) Mohammad Mosharraf Hossain Mohammad Malek Minar (Late) Zakiuddin Ahmed M. A. Rashid Chowdhury Engr. Mustafa Anwar Mohammad Abdullah Sirajuddowla Mohammad Nuruzzaman (Late) Abul Quasem A. K. Fazlul Huq Engr. Muhammad Dawood Khan Baitush Sharaf Foundation Ltd. Ibn Sina Trust Bangladesh Islamic Centre Islamic Economics Research Bureau

2.16 Products & Services: Main product & service of IBBL are as follows: Deposit Schemes. Investment. Special Scheme. ATM Services. Online services. I-banking. SMS Service.

Page

17
17

2.16.1 IBBL offers to open the following account to the depositors: Al-Wadeeah Current Account. Mudaraba Savings Account. Mudaraba Term Deposit Account. (3 month / 6 month / 12 month / 36 months) Mudaraba Special Notice Account Mudaraba Hajj Savings Account (1 year to 25 year term) MudarabaWaqf cash Deposit Account Mudaraba Special Savings (pension) Account (5 year to 10 year term) Mudaraba Savings Bond Scheme (5 year & 8 year term) Mudaraba Foreign Currency Deposit Account. Mudaraba Monthly Profit Deposit Account. Mudaraba Moharana Account. Mudaraba School student saving Account Mudaraba farmer saving account Mudaraba NRB saving bond (MNSB) 5 years &8 years.

2.16.2 Investment Mechanisms 1) a) b) c) d) e) f) Bai-Murabaha Bai-Istijrar Bai-Muajjal Bai Salam Istisnaa Bai-As-Sarf 2) a) b) Mudaraba Musharaka 3) a) IJARA-MODES SHARE-MODES BAI-MODES

18

Hire Purchase Under Shirkatul Melk

Page

18

2.16.3 Special Scheme: Islamic Bank Bangladesh Ltd. being welfare oriented institution has now designed and implemented schemes keeping in view the needs of different sectors and various sections of people for their socio-economic uplift and to improve their quality of life. The special scheme is as follows: I. II. III. IV. V. VI. VII. VIII. IX. X. XI. Household Durables Scheme (HDS) Investment Scheme for Doctors (ISD) Transport Investment Scheme (TIS) Car Investment Scheme (CIS) Small Business Investment Scheme (SBIS) Micro Industries Investment Scheme (MIIS) Agricultural Implement Investment Scheme (AIIS) Real Estate Investment Program (REIP) Real Estate Investment (Commercial & Working Capital) Agricultural Investment of IBBL NRB (Non Resident Bangladeshi) Entrepreneurs Investment Scheme(NEIS)

2.16.4 ATM Service IBBL has introduced its ATM Banking service since 2000. Being the largest in online connectivity among the branches we are capable of providing the better customer service to our clients. Services

Cash Withdraw Fund Transfer Mini Account Statement Balance Inquiry

Transaction Limit

For Cash Withdrawal maximum amount is Tk. 50,000 in a calendar date.

2.16.5 Internet Banking Service:

19
Page

Islami Bank Bangladesh Limited has been devoted to serving its customers since inception. We are committed to introduce new services and to make existing services

19

faster and better than ever, iBanking is a cornerstone of our strategy, designed to accelerate our commitment to green banking and to enable customers to do banking at their own convenience. We have introduced two new services to all iBanking customers that reflect our continuous endeavor to put the strategy into action. Wherever you are, using iBanking, you can now

Transfer funds (iTransfer) between IBBL accounts Purchase airtime / Recharge account (iRecharge) from all mobile operators in Bangladesh, except Teletalk.

WiMax Recharge

2.16.6 SMS Banking Service: IBBL SMS Banking IBBL has introduced its SMS banking service since 2008. Registration is required. For registration please contact to your branch. SMS Facilities are applicable only for our Online Branches. Services

Multiple Account Registration International Push- Pull Facility Account Balance (BAL ) Mini Account Statement (STM) Account Information (ACI)

Page

20
20

2.16 Organization Structure of IBBL:

Page

21
21

CHAPTER THREE

DIFFERENT MODES OF INVESTMENT OF IBBL

Page

22
22

3.1 Investment The special feature of the investment policy of the Islamic Banking is to invest on the basis of profit-loss sharing system in accordance with the tents and principles of Islamic Shariah. Earning profit is not the only motive and objective of the Banks investment policy rather prominence is given is attaining social good and in creating employment opportunities Pursuant to the investment policy adopted by the bank a 7 year perspective investment plan has been drawn up and put into implementation. The plan aims at diversification of the investment portfolio by size, sector, geographical area, economic purpose and securities to bring in phases all sectors of the economy and all types of economic groups of the society within the fold of banks investment operations. Accordingly the plan envisages composition of the investment profit-folio with for agriculture and rural investment, 16% for industrial term investment, 14% for industrial working capital, 6% for housing and real estate, 6% for transport and communication, 2% for electricity, gas, water and sanitation services, 2% for storages 40% for import, export and local trade and trade related activities and 1% for other productive purposes by the end of the plan period, i.e. the year 2002Further, in order to diversify investment profitfolio, the bank engaged itself in investment operations through special schemes introduced during the years. The Bank is planning to introduce yet other new investment schemes in addition to welfare oriented investment schemes viz., Rural Development scheme.Transport investment schemes, car investment scheme, small business investment schemes, Doctors investment scheme, Household Durables investment scheme, Housing investment scheme and agricultural implements investment scheme etc. Besides, the bank is financing various economic groups in different sectors in both urban and rural areas for recruitment of their economic condition.

3.2 The objectives and principles of investment operations of the banks

The investment fund strictly in accordance with the principles of Islamic Shariah. To diversifies its portfolio by size of investment, by sectors (public and private) by economic purpose, by securities and by geographical area including industrial,

23

commercial and agricultural.

Page

23

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

To make investment keeping the socio-economic requirement of the country in view.

To increase the number of potential investors by making participatory and productive investment.

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

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

To encourage social uplifting enterprises. To shun even highly profitable investment in fields forbidden under Islamic Shariah and is harmful for the society.

The Bank extends investments under the principles of Bai-Marabaha, BaiMuazzal, Hire Purchase under Shirkatul Melk and Musharaka. The bank making sincere efforts to go for investment under Mudaraba principle in near future.

3.3 Investment Modes of IBBL: When money is deposited in the IBBL, the bank, in turn, makes investments in different forms approved by the Islamic Shariah with the intention to earn a profit. Not only a bank, but also an individual or organization can use Islamic modes of investment to earn profits for wealth maximization. Some popular modes of IBBLs Investment are discussed below. Bai-Mechanism Sharing Mechanism Ijara Mechanism

Bai- Murabaha Bai-Muajjal Bai- Salam Bai- Istisna

Mudarabah Musharaka

Hire purchase under shirkatul Melk. Hire purchase

24
Page

Bai- as sarf

24

3.4 Bai- Mechanism: Under Bai- Machanism Islami Bank Bangladesh Limited practiced different kinds of investment Modes. These are given below:
1. BAI-MURABAHA (Contract Sale on Profit):

A. Meaning of Murabaha Bai-Murabaha means sale for an agreed upon profit. Bai-Murabaha may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods permissible under Islamic Shariah and the Law of the land to the buyer at a cost plus an agreed upon profit payable today or on some date in the future in lump-sum or by installments. The profit may be either a fixed sum or based on a percentage of the price of the goods. B. Important Features of Murabaha 1. A client can make an offer to purchase particular goods from the bank for a specified agreed upon price, including the cost of the goods plus a profit. 2. A client can make the promise to purchase from the bank, that is, he is either to satisfy the promise or to indemnify any losses incurred from the breaking the promise without excuse. 3. It is permissible to take cash/collateral security to guarantee the implementation of the promise or to indemnify any losses that may result.

Steps of Bai-Murabaha First Step: The client submits a proposal regarding his requirements of the bank. The client sends a proposal with the specifications of the commodity to be acquired from the bank. The proposal also indicates details regarding the date, time and place of delivery as well as price and form of payment information. The bank responds by sending a counter proposal either accepting the buyers price or stipulating a different price. Second Step: The client promises to buy the commodity from the bank on a Bai-

25
Page

Murabaha basis, for the stipulated price. The bank accepts the order and establishes the terms and conditions of the transaction.
25

Third Step: The bank informs the client (ultimate buyer) of its approval of the agreement to purchase. The bank may pay for the goods immediately or in accordance with the agreement. The seller expresses its approval to the sale and sends the invoice(s). Fourth Step: The two parties (the bank and the client) sign the Bai-Murabaha Sale contract according to the agreement to purchase. Fifth Step: The Bank authorizes the client or its nominee to receive the commodity.The seller sends the commodity to the place of delivery agreed upon. The client undertakes the receipt of the commodity in its capacity as legal representative and notifies the bank of the execution of the proxy. D. Application of Bai-Murabaha Murabaha is the most frequently used form of finance in IBBL throughout the world. It is suitable for financing the different investment activities of customers with regard to the manufacturing of finished goods, procurement of raw materials, machinery, and other required plant and equipment purchases. It is used widely about 53%.

2. BAI-MUAJJAL (Deferred Sale): A. Meaning of Bai-Muajjal The Bai-Muajjal may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods, permissible under Shariah and law of the country, to the buyer at an agreed fixed price payable at a certain fixed future date in lump sum or in fixed installments B. Important Features of Bai-Muajjal 1. It is permissible and in most cases, the client will approach the bank with an offer to purchase a specific good through a Bai-Muajjal agreement. 2. It is permissible to make the promise binding upon the client to purchase the goods from the bank. 3. It is permissible to take cash/collateral security to guarantee the implementation of the promise or to indemnify the bank for damages caused by non-payment.
Page

26
26

3. BAI-SALAM (Advance payment): A. Meaning of Bai-Salam Bai-Salam is a term used to define a sale in which the buyer makes advance payment, but the delivery is delayed until sometime in the future. Usually the seller is an individual or business and the buyer is the bank. B. Steps of Bai-Salam 1. Cash sale or Sale on Credit The bank pays the agreed upon price at the time of the contracts inception. The seller agrees to the delivery of the commodity some specified date in the future. 2. Delivery and Receipt of the Commodity on the Specific due Date: There are several options for delivery available to the bank. a) The bank may receive the commodity and resell it to another party for cash or credit b) The bank may authorize the seller to find another buyer for the commodity. c) The bank may direct the seller to deliver the commodity directly to a third party with whom the bank has entered into another agreement. 3. The Sale Contract: The bank agrees to sell the commodity for cash or a deferred price, which is higher than the Salam purchase price. The buyer agrees to purchase and to pay the price according to the agreement. C. Application of Bai-Salam Salam sales are frequently used to finance the agricultural industry. Banks advance cash to farmers today for delivery of the crop during the harvest season. Thus banks provide farmers with the capital necessary to finance the cost of producing a crop. Salam sale are also used to finance commercial and industrial activities. Once again the bank advances cash to businesses necessary to finance the cost of production, operations and expenses in exchange for future delivery of the end product. In the meantime, the bank is able to market the product to other customers at lucrative prices. In addition, the Salam sale is used by banks to finance craftsmen and small producers, by supplying them with the capital necessary to finance the inputs to production in exchange for the future delivery of

27
Page

products at some future date.

27

4. Bai-ISTISNAA: A. Definition of Istisnaa Sale The 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. It is a contract with a manufacturer to make something and it is a contract on a commodity on liability with the provision of work. IBBL can utilize Istisnaa in two ways. B. Steps of Istisnaa Sale Istisnaa Sale Contract: The Buyer expresses his desire to buy a commodity and brings a request to purchase the commodity to the bank. The method of payment, whether cash or deferred is set forth in the agreement. The bank agrees to deliver the commodity to the buyer at some agreed upon time in the future. C. Application of Istisnaa Sale The Istisnaa contract allows IBBL to finance the public needs and the vital interests of the society to develop the Islamic economy in accordance with Islamic teachings. For example Istisnaa contracts are used to finance high technology industries such as the aviation, locomotive and ship building industries. In addition, this type of business transaction is also used in the production of large machinery and equipment manufactured in factories and workshops. Finally, the Istisnaa contract is also applied in the construction industry such as apartment buildings, hospitals, schools, and universities to whatever that makes the network for modern life. One final note, the Istisnaa contract is best used in those transactions in which the product being purchased can easily be measured in terms of the specified criteria of the contract.

3.5 Share Mechanism: 1. MUDARABA (Investment made by the entrepreneur): A. Definition of Mudaraba The term Mudaraba refers to a contract between two parties in which one party supplies capital to the other party for the purpose of engaging in a business activity with the understanding that any profits will be shared in a mutually agreed upon. Losses, on the

28
Page

other hand, are the sole responsibility of the provider of the capital. Mudaraba is also known a Qirad and Muqaradah.
28

B. Steps of Mudaraba The bank provides the capital as a capital owner. The Mudarib provides the effort and expertise for the investment of capital in exchange for a share in profit that is agreed upon by both parties. 1. The Results of Mudaraba: The two parties calculate the earnings and divide the profits at the end of Mudaraba. This can be done periodically in accordance with the terms of the agreement, subject to the legal rules that apply. 2. Payment of Mudaraba Capital: The bank recovers the Mudaraba capital it contributed before dividing the profits between the two parties because the profit is considered collateral for the capital. 3. Distribution of wealth resulting from Mudaraba: In the event a loss occurs, the capital owner (the bank) is responsible for the entire loss. In the event of profits, they are divided between the two parties in accordance with the agreement between them, subject to the capital being recovered first. C. Rules of Mudaraba There are some legal rules that govern the business relationship Mudaraba which are as follows. 1. It is a condition in Mudaraba that the capital be specific in nature. In other words, the amount of capital must be known at the inception of the contract. The purpose of this rule is to ensure that there is no uncertainty about the amount of capital and, thus, no uncertainty about the division of profits. 2. It is a condition that capital must be in the form of currency in circulation. However, merchandise can be contributed, so long as both parties to the business arrangement agree upon its value. 3. It is a condition that the capital cannot be subject to indebtedness.

2. MUSHARAKA (Partnership based investment) A. Meaning of Musharaka The word Musharaka is derived from the Arabic word Sharikah meaning partnership. At

29
Page

an IBBL, a typical Musharaka transaction may be conducted in the following manner.

29

One, two or more entrepreneurs approach an IBBL to request the financing required for a project. The bank, along with other partners, provides the necessary capital for the project. All partners, including the bank, have the right to participate in the project. They can also waive this right. The profits are to be distributed according to an agreed ratio, which need not be the same as the capital proportion. However, losses are shared in exactly the same proportion in which the different partners have provided the finance for the project.

3.6 Ijara Mechanism: Shirkatul Melk: Shirkatul 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. Ijarah: The term Ijarah has been derived from the Arabic words Air and Uirat which means consideration, return, wages or rent. This is really the exchange value or consideration, return, wages, rent of service of an asset. Ijarah has been defined as a contract between two parties, the Hiree and Hirer where the Hirer enjoys or reaps a specific service or benefit against a specified consideration or rent from the asset owned by the Hiree, it is a hire agreement under which a certain assert is hired out by the Hiree 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 made both the bank and the client supply equity in equal or unequal proportion for purchase of an asset like land, building, machinery, transport etc. Purchase the asset with that equity money, own the

30
Page

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
30

and transfers the ownership of its share/ part/ portion to the client against payment of price fixed for that part either gradually part by part or in lump sum within the hire

period or after the expiring of the hire agreement. 3.7 Consumers Investment Schemes of IBBL: Housing Investment Schemes: The bank has introduced this scheme recently to case the serious housing problem in the urban areas and to make arrangement for comfortable accommodation of the fixed income group. Officials of the defense forces; permanent officials of government, semigovernment and autonomous organization; teachers of established universities, university colleges and medical colleges; graduate engineers, doctors and established professionals; Bangladesh, officials and reputed multinational companies, international financial organizations, donor agencies, foreign embassies etc., officials of local established and reputed public limited companies; wage earner professionals like doctors, engineers, accountants, teachers and any other profession doing good job abroad with handsome pay package shall be eligible to apply for availing investment facilities under the scheme. Transports Investment Scheme: To case the existing transportation problem and ensure speedy economic growth and development of the country particularly the expansion of trade, commerce and industry, the bank has taken up this scheme, under this scheme investment is being allowed to the existing successful businessmen and potential entrepreneurs in this sector for all types of road and water transport like bus, mini-bus, track, launch, cargo-vessel, transport for renta-car service; and baby-taxi, tempo, pick-up van for self employment; and ambulance for clinic and hospital. The bank is also extending investment facilities to multinational companies, established business houses and well to do officials and professionals for acquisition of private cars, microbus and jeeps. Investment Scheme for Doctors: The bank has been taken up this scheme to help unemployed qualified doctors to go for self-employment and to provide latest medical equipments to specialist doctors to extend modern medical facilities throughout the country.
Page

31
31

Small Business Investment Scheme: This scheme has been taken up for self-employment of educated unemployed youths of rural and urban areas and to provide investment to small businessmen and entrepreneurs. Investment is extended for about 200 economic activities in sectors as live stock fishing, agro-farming processing and business, manufacturing, trading/shop-keeping,

transportation, agricultural implements, forestry and services viz., laundry, signboard painting etc. under this scheme small businessmen and entrepreneurs are given investment up to take one lac on easy terms and conditions. Agricultural Investment Scheme: In keeping with the view of the people oriented and welfare objective of the bank this scheme has be introduce to provide power tillers, power pump, shallow tube-welter, thresher machines etc. on easy terms to unemployed rural youths for self-employment and to the farmer to help augment production in agriculture sector. Rural Development Scheme: Bangladesh is predominantly an agriculture country with vast majority living in rural areas. More than 60% of the people live below the poverty line. Seasonal unemployment and under employment is so acute that may people remain idle and without job in most of the time of the year. As a result people in large number are migrating to urban areas, particularly in metropolis in branch of employment thereby creating social and environmental hazards. Islami Bank has, therefore, taken up a scheme to reactive the rural economy and develops model villages through integrated approach. The objective of the scheme is to care income generating and productive self-employment opportunities through extension of investment for the development of rural areas and thereby contribute in alleviating rural poverty. Initially the scheme was introduced in 18 districts through 21 branches of the bank, which was extended to 712 villages in 38 districts through 52 branches of the bank on 30-6-99. This will gradually be extended throughout the country. Investment will be allowed for the purpose of, amongst, others, production of 21 types of main crops viz Food, Creates and Cash crops, off-farm activities like doing, but fattening goat rearing poultry, shop keeping, padding etc, rural transport like Rickshaw, Rickshaw-

32
Page

Van, Cart etc., irrigation equipment, hand tube-well, housing materials, in all covering about 343 types of economic activities. Islami Bank foundation, a subsidiary of the bank,
32

engaged in social welfare activities shall side by side, take care of the requirement of sanitation, and medicate and education of the villages through integrated area development approach under Islamic Model.

Page

33
33

CHAPTER FOUR

FINDINGS & ANALYSIS

Page

34
34

4.1 Introduction This report is based on IBBL overall activities specially IDB Branch activities I will try to find out the IDB Branch performance of IBBL specially try to find out the IDB Branch performance and how much contribute to IDB Branch of overall activities of IBBL. All performance and contribute are given below in graphically with comments. Total deposit and investment of IBBL during the period 2003to 2012 of IDB Branch (Figure in millions)
Particulars Year 2003 Total deposit &invest. 923.65 Invest. 209.76 988.5 253.33 1023.33 303.98 1055.8 334.76 1150.64 365 1196.5 400 1246.54 440.15 2087.08 542.9 1401.6 739.55 1883.61 755.75 2004 2005 2006 2007 2008 2009 2010 2011 2012

Sector wise investment Industries Commerce Transport Real est. Others 89.9 156.98 .43 173.9 4.86 94.87 167 .34 179 8.76 101 173 .41 186 6.98 112.75 181 .49 212 4.98 121.87 189.92 .54 221.17 5.82 233.51 2.91 92.13 118.12 109.78 189.12 .57 242.76 6.34 111.44 225.2 1.27 292 12.68 174.04 285.18 2.08 409.43 42.11 107.6 286.82 1.18 394.55 63.65

Modes wise investment Muajjal Murabaha .44 177 .54 187 .62 198 .77 206 .81 249.16 .81 17.07 .66 189.77 11.72 223.72 .46 284.3 .52 294.44

Ijara Mechanism HPSM HPSM staf. 165 180.98 176 11067 163 12.12 198 12.87 207.95 13.74 202.02 31.49 212.89 30.44 257.04 34.68 346.1 65.54 395.73 61.59

From the above study and table I able to understand and find out the IBBL overall performance and specially performance of IBBL (2003-2012).I also find out that IBBL able to keep how much contribute to the economy of our country .overall performance of IBBL and IDB Branch I have tried to show in graphically below.

Page

35
35

Figure 4.1 Trend of the shareholders equity of IBBL during the period 2008 to 2012(in million taka)

From the above graph we can see that IBBL shareholders equity is increase in every year. Smoothly run from 2008 to 2011, but shareholders equity highly increases from 2011 to 2012.

Page

36
36

Figure 4.2: Total Income of IBBL during the period 2007 to 2012(Figure in millions)

The Bank earned Total Income of Tk 50346 million during the year 2012 as against taka 38401 million preceding year registering 31% growth over the year.

Page

37
37

Figure 4.3: Total Deposit of IBBL during the period 2007to 2012(Figure in millions)

From the Above graph we can say that overall position of IBBL under deposit collection. .And we also forecast that how much growth of Investment of IBBL in future from the trend of above graph. If this consecutive remain in future, so we can forecast that in the next year IBBL deposit collection will be increase in .0995 million. I think it is well position for sustaining the any organization.

Page

38
38

Figure 4.4: Total Investment of IBBL during the period 2007 to 2012(Figure in millions)

From the Above graph we can say that overall investment position of IBBL .And we also forecast that how much growth of Investment of IBBL in future from the trend of above graph. If this consecutive remain in future, so we can forecast that in the next year IBBL investment will be increase in .0995 million. I think it is well position for sustaining the any organization.

Page

39
39

Figure 4.5: Total Deposit of IDB Bhaban Brach During the period 2003-2012 (Figure in millions)

From the above graph we can see that the position of IDB Bhaban Branch of IBBL during the period 2003-2012.we see that deposit is smoothly run by year to year. But 2009 to 2010 deposit growth is very high than previous year.

Page

40
40

Figure 4.6: Total Investment of IBBL IDB Bhaban Branch During the period of 2003 to 2012(Figure in millions taka)

From the above graph we can see that the position of IDB Bhaban Branch of IBBL during the period 2003-2012.we see that from 2003 to 2009 investment growth is slow and 2009 to 2012 investment growth is well than previous year

Page

41
41

Figure 4.7: Sector wise Investment of IDB Bhaban Branch During the period 2007 to 2012 (Figure in millions)

From the above graph we can see that a lot of amount invested to the Real estate sector and 2011 real estate sector investment highly increase than previous. After Real estate sector commercial sector investment positions then others side. And we also see that a few amount invested to the transportation sector

Page

42
42

Figure 4.8: Growth of Import, Export &Remittance of IBBL during the period 2008 to 2012(Figure in millions taka)

From the above graph we can see that import position is very well without 2009.In 2009 import is reduce than previous year and next years has been increased .And 2008 to 2009 export growth is very slow and 2010 export is highly increase but 2011 is decrease but remittance was highly increase . So IBBL should take different steps for improving the export section.

Page

43
43

Figure 4.9: Performance of IBBL Vs National under SME Investment in 2012(Figure in millions taka)

From the above graph we can say that IBBL keep highly contribute to the society for eliminating the poverty from Bangladesh. IBBL contribute at 18% under SME investment in overall country. Nationally contribute 82% under SME investment. So if IBBL can contribute to the SME investment, I think that IBBL able to keep highly contribute to the national economy.

Page

44
44

Figure 4.10: Performance of IBBL Vs Other PCBs under SME Investment in 2012(Figure in millions taka)

From the Above graph we can say that IBBL SME investment is very good .IBBL contribute 25%SME investment in Bangladesh and all others private Banks contribute 75%.So we can say that IBBL highly contribute to the society for elimination poverty from the Bangladesh.

Page

45
45

CHAPTER FIVE

CONCLUSION & Recommendations

Page

46
46

Conclusion: Islam is a complete way of life and Allahs guidance extents into all areas of our lives. Islam has g i v e n d e t a i l r e g u l a t io n s fo r o u r e c o no m i c l i f e . T he r e fo r e , I s l a m i B a n k B a n g l a d e s h L i m it e d (IBBL) is trying to establish the maximum welfare of the society by maintaining the principles of Islamic Shariah which is based on Quran and Sunnah. Since 1983, IBBL is the pioneer in welfare banking in this subcontinent and it is trying to do all its activities for the betterment of its depositors. For the greater interest of the depositors the investment policy of IBBL is to invest on the basis of profit and loss sharing in accordance with the tents and principles of Islamic Shariah. P r o f it e a r n i n g i s no t t he o n l y mo t i v e a nd o b j e c t i v e o f t he ba n k s i n v e s t m e nt p o l i c y r a t he r emphasis is given in attaining social good and in creation employment opportunities. IBBL is not secular in its orientation. IBBL does not finance any project which conflicts with the mo r a l va l u e s ys t e m o f I s l a m . I B B L d o e s no t s t r ic t l y c o ns i d e r t he c r e d it w o r t h i n e s s o f t he entrepreneur. IBBL receives a return only if the project succeeds and produces a profit. IBBL considers the soundness of the project and business acumen and managerial competency of the entrepreneur. Therefore, the rate of return of investment of IBBL is greater comparing to that of conventional banks. Finally, Islami Bank Bangladesh Limited (IBBL) has been established wit h a view to conduct interest free banking to establish participatory banking instead of debtor-creditor relationship and finally to establish welfare oriented banking through its investment operations that would lead to a just society

Page

47
47

Recommendations: Though Islami Bank Bangladesh Ltd. (IBBL) is performing well but it has some crucial areas to improve which are prescribed below: 1 . I t is a mo d e r n b a nk i n g e r a . E a c h a n d e ve r y c o m m e r c i a l b a nk i s p r o p e r l y u t i l i z i n g technological innovations. So, IBBL needs to utilize these modern technologies to keep pace with the modern time. 2. IBBL needs to recruit skilled human resources which can turn the bank ahead. 3. The bank should offer facilities such as Credit card, Visa card. 4. IBBLs investment processing should become easier than other conventional banks. 5 . I B B L s ho u l d m a k e it s i n v e s t m e nt s c h e m e s mo r e a t t r a c t i v e fo r a va i l i n g h i g h - r e t u r n projects. 6. IBBL should consider utilizat ion of rural potent ials from both efficiency and equit y grounds in the context of the present -day socio-economic condit ions of Bangladesh. S t r o ng c o m m it m e nt s a nd s t e p p i n g u p t hr o u g h e xp e r i m e nt a nd i m p l e m e nt a t io n o f innovative ideas are the appropriate ways to do that 7. IBBL should deserve immediate attent ion in the promot ion of the image of Shariah based banks as PLS (profit-loss-sharing) banks. 8. IBBL can diffuse it s scope of invest ment through focusing sh ariah concept regarding i n v e s t m e nt a mo ng t h e ba n k o f f i c e r s ; e m p l o ye r a n d t he c l i e nt s b y s t r o ng t r a i n i n g , workshops. 9. IBBL should init iate different invest me nt modes according to changing or diverse needs of clients by conducting huge research and study.

Page

48
48

End Matter

Page

49
49

Bibliography
Annual Report of Islami Bank Bangladesh Ltd 2012 References: Internet: Website http://www.islamibankbd.com www.ibtra.com
Web site http://www.bangladeshbank.bd.org.

Books references from Chapra, M.U. (1985): Towards a Just Monetary System, published by Islamic Foundation, London, UK Hornby, A.S.(1974 ). Oxford Advanced Learners' Dictionary. Oxford University Press.

Koch, Timothy, W., Bank Management, Second ed. (The Dryden Press, N.Y.) Mirakhor, A. (1995). "The Theory Of Islamic Financial System". In Encyclopedia of Islamic Banking,
London: Institute of Islamic Banking and Insurance.

Ziauddin Ahmed, Munwar Iqbal and M. Rahim Khan (Eds) (1992), Fiscal Policy and Resource
Allocation in Islam, Islamic Development Bank. K.S.A.

Akkas, S.M. (1991).

Relative Efficiency of Conventional and Islamic Banking System in Financing Investment, Unpublished Ph.D. Thesis, Dhaka University, Bangladesh.

Mannan, M.A. Trade and Commerce in Islam. Jarhi and Ziauddin (1983). A Monetary and Financial Structure of an Interest-Free Economy: Institutions

Page

50
50

Appendix

Page

51
51

Appendix:
Members of the Board of Directors of IBBL:
Chairman: Prof. Abu Nasser Muhammad Abu Zaher Vice Chairman: Yousif Abdullah Al-Rajhi

Directors:
Engr. Md. Eskander Ali Khan Md. Abul Hossain Dr. Abdulhameed Fouad Al-Khateeb Mohammad Abdul Mannan Shari`ah Supervisory Committee Chairman: Sheikh Moulana Mohammad Qutubuddin Vice Chairman: Mufti Sayeed Ahmad Member Secretary: Prof. Dr. Abu Bakr Rafique Members: Principal Md. Serajul Islam Abdur Raquib Mufti Shamsuddin (Zia) Dr. Md. Manzur-e-Elahi

Abbreviations:
IBBL IBTRA IBW K.S.C. HDS ISD Islami Bank Bangladesh Limited Islami Bank Training & Research Academy International Banking Wing Kuwait Finance House Household Durables Scheme Investment Scheme for Doctors Transport Investment Scheme Car Investment Scheme

52
Page

TIS CIS
52

SBIS MIIS AIIS REIP

Small Business Investment Scheme Micro Industries Investment Scheme Agricultural Implement Investment Scheme Real Estate Investment Program

NRB (Non Resident Bangladeshi) Entrepreneurs Investment Scheme (NEIS) IBanking BAL
STM ACI ATM

Internet banking Account Balance Mini Account Statement Account Information


Automated Teller Machine

Page

53
53