ibbl internship report

8/13/2019 IBBL internship report

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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


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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


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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


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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.


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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


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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.


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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


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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


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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.


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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.


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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.


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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


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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


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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


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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.


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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.


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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)


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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)


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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


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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


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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


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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.


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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.


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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.


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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


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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.


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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.


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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


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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:


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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).


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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.


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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


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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


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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


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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


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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.


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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:


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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


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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.


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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.


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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.


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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.


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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.


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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.


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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


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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.


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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


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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


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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