study of islamic banking system

Study Of Islamic Banking System

Presented by :Abdinasir Ahmed Ali

Presented to :

Mr. Md. Shahnur Azad Chowdhury

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CONTENTS• INTRODUCTION• FUNCTIONS & SERVICES• FINANCIAL PERFORMANCE ANALYSIS• CONCLUSION

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Islamic banking is a banking activity that follows the principles

of shariah and its practical application through the development

of Islamic economics.

INTRODUCTION

INTRODUCTION• First security islami bank limited (FSIBL)• Incorporated in Bangladesh on 29 august 1999 • Started islamic banking system in 2008

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INTRODUCTION

Vision of the FSIBL• To be a unique modern islami bank in Bangladesh • To make significant contribution to the national

economy

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Functions & Services of FSIBL

Functions of FSIBL

General Banking

Account opening section

Clearing section

Cash section

Remittance

Investment

Functions of FSIBL

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Current Account [CD A/C] or Al-Wadiah Current

Al-Wadiah means to receive something for safe custody.

Receiving money by banks from the clients for safe custody with the

condition to return the money on demand.

The bank can use the money at its own risk. So the Depositor(s) does

not share any profit or loss on funds kept in the AWCA.

Functions of FSIBLProducts of FSIBL

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Saving Account [SB A/C] or Mudarabah Saving A/C

Al-Mudarabah as a contract between two parties‖, in which one party

is called Sahib-Al-Maal, i.e. owner of the fund, and the other party is

called Al-Mudarib, the investor/entrepreneur.

But the entire financial losses, if any, shall be carried only by the

Sahib-Al-Maal .

A minimum balance of Tk. 500/= must be maintained all the time in

the account.


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Mudarabah Fixed Deposits Account [FDR A/C] It is fixed deposit.

Repayable after the expiry of a predetermined period fixed by the client.

Period varies from one month to 12 months.

Fixed Deposit Accounts for

•One month and above but less than 3 months ––8% .

•Three months –11.5% .

•Six month and above -12% .


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Mudarabah Monthly Deposit Scheme (MMDS) Encourage all class of people for building an important habit of

saving.

One can save a fixed amount of money every month.


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Mudarabah Double Benefit Scheme (MDBS) Keep for a period of five years & nine month.

The total amount will be double in the following period.


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Mudarabah Triple Benefit Scheme Kept for a period of nine years & six month.

The total amount will be triple.


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Mudarabah Fourth Terms Growth Kept for a period of eleven years & nine month.

Total amount will be fourth.


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Musharakah (joint venture) Musharakah is a relationship between two parties or more that

contribute capital to a business and divide the net profit and loss pro

rata.

The profit is distributed among the partners in pre-agreed ratios,

while the loss is borne by each partner strictly in proportion to

respective capital contributions

Functions of FSIBLInvestment scheme of FSIBL

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Murabahah This concept refers to the sale of good (such as real estate,

commodities or a vehicle) where the purchase and selling price,

other costs, and the profit margin are clearly stated at the time of the

sale agreement

With a fixed rate of profit determined by the profit margin for the

purchase of a real asset, this is a fixed-income loan. The bank cannot

charge additional profit on late payments. However, the asset

remains as a mortgage with the bank until the default is settled.


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Mudarabah "Mudarabah" or Profit-and-loss sharing contract is a kind of

partnership where one partner gives money to another for investing it

in a commercial enterprise.

Profits generated are shared between the parties according to a pre-

agreed ratio. If there is a loss, the first partner "rabb-ul-mal" will lose

his capital, and the other party "mudarib" will lose the time and effort

invested in the project


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Bai' muajjal (credit sale) Literally bai' muajjal means a credit sale.

Technically, it is a financing technique adopted by Islamic banks that

takes the form of murabahah muajjal. It is a contract in which the

bank earns a profit margin on the purchase price and allows the buyer

to pay the price of the commodity at a future date in a lump sum or in

installments.

The price fixed for the commodity in such a transaction can be the

same as the spot price or higher or lower than the spot price.

Bai' muajjal is also called a deferred-payment sale.


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Bai Salam Bai salam means a contract in which advance payment is made for

goods to be delivered later on.

The seller undertakes to supply some specific goods to the buyer at a

future date in exchange of an advance price fully paid at the time of

contract.

The objects of this sale are goods and cannot be gold, silver, or

currencies based on these metals.


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Istisna Istisna (Manufacturing Finance) is a process where payments are

made in stages to facilitate the work of manufacturing / processing /

construction. An installment of Istisna, for example, may enable a

construction company to finance construction of sections of a

building or help manufacturers pay for an order of raw materials.

Istisna helps use of limited funds to develop higher value

goods/assets in different stages / contracts.


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Ijarah Ijarah means lease, rent or wage. Generally, the Ijarah concept refers

to selling the benefit of use or service for a fixed price or wage.

Under this concept, the Bank makes available to the customer the use

of service of assets / equipment such as plant, office automation,

motor vehicle for a fixed period and price.


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Performance indicators for last five years

Financial Performance Analysis

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Financial Performance AnalysisPerformance indicators for last five years

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ConclusionSWOT analysis of FSIBL

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Strengths:– Bank reputation– Islamic banking Concept– Modern branches– Team work at mid-level and lower level

Conclusion

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Conclusion

Weaknesses:− Advertising and promotion of their new product− Low reward package− Time wastage− Lack of online Service

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Conclusion

Opportunities:– Diversification– Promotion of new Products– Market share

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Conclusion

Threats:– Many competitors in the market– Many of the competitor banks are well equipped & also

providing better online services – Changing customers needs – The growth rate of competitors in the market.

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Conclusion

Discussion:– It has established goodwill through innovative products and services.

– We have tried to present the functions of First Security Islami Bank

Limited and its products & services

– finally tried to give some suggestion for the improvement of First

Security Bank Limited

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