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Introduction:
After the surrender of the Pakistani forces on 16 th December 1971, the government of the
Peoples Republic of Bangladesh formally took over the charge of the administration of the
territories now constitute Bangladesh. In order to rehabilitate the war devastated banking
system of Bangladesh, the government promulgated a law called Bangladesh Bank
(temporary) Order, 1971(Acting Presidents Order No 2 of 1971). By this order the State Bank
of Pakistan was declared as Bangladesh Bank and the offices, branches and assets of the said
State Bank was declared to be deemed as offices, branches and assets of Bangladesh Bank. It
was also declared by the aforesaid Order that all currency notes and coins issued by the said
State Bank and government of Pakistan and were in circulation in Bangladesh shall be
deemed to have issued by the Bangladesh Bank. By the steps stated above, the banking
system of Bangladesh started with a legal shape.
The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are
Nationalized Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign banks and
the rest five are Development Financial Institutions (DFIs). Sonali Bank is the largest among the
NCBs while Bank Asia is leading in the private ones. Among the 12 foreign banks, Standard
Chartered and HSBC has become the largest in the country. Besides the scheduled banks, Samabai
(Cooperative) Bank, Ansar-VDP Bank, Karmasansthan (Employment) Bank and Grameen bank are
functioning in the financial sector. Bangladesh Bank (BB) regulates and supervises the activities of all
banks.

Private sector banks started functioning during the year 1983-84 with the objective of
government policy to make sure effective and meaningful participation of the private sector
in the overall national economy.
The perception of Islamic banking has been bloomed from the inspiration of building up a
society on justice in accordance with basic socio-economic principles of Islam. The
difference between Islamic bank and conventional bank is on principles. The functions of this
type of bank are completely different. This bank is established on Islamic Shariah and all
types of transactions are free from interest. Justified profit is the basis of financial transaction
of this bank. This bank is committed to establish socio-economic justice. Islami Bank

Bangladesh Limited is the first interest free commercial bank in South-East Asia. The bank
has opened 176 branches covering important commercial areas.

Islami Bank Bangladesh is a financial institution whose status, rules and procedures expressly
state its commitment to the principle of Islamic Shariah. Consequently Islamic banks operate
on Islamic principles of profit and loss sharing, strictly avoiding interest, which is the root of
all exploitation and is responsible for large-scale inflation and unemployment. In this report, I
undertake microscopic analysis mainly on General Banking, Investment and Foreign

Exchange.

Origin of the Report:


This report is based on an internship program. IBTRA arranges internship program to gather
practical knowledge about banking 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). Each intern must carry out a
specific project, which is assigned by the IBTRA. Consequently a report based on the
projects is to be submitted to the authority of IBTRA. I select Islamic Bank Bangladesh
Limited (IBBL) for my internship & since then I have started our realistic orientation
program in General Banking, Investment & foreign exchange department. But I have
prepared my project paper on general banking, investment & foreign exchange modes as it is
assigned by IBTRA.

Hence I was placed in New Market Branch of Islami Bank Bangladesh Limited from 18 th
September to 20th December, 2007.
.

Objectives of the Study:


The first objective of writing the report is fulfilling the partial requirements of the BBA
program. In this report, I have attempted to give on overview of Islami Bank Bangladesh
Limited in general. Following are the main objectives

To familiar the history and operations of Islami Banking in Bangladesh.

To show the investment mechanism and product offerings in different modes of IBBL.

To show overall investment proposal, appraisal procedures, documentation system of


IBBL and Conventional Banks.

To show the differences with conventional banking regarding investments aspects

To identify strength and weakness of investments of IBBL.

To identify the problems related to investments faced by IBBL.

To recommend actions that may be necessary to redesign the investments of IBBL.

Justification of the Study:


In our economy, there are mainly three types of schedule commercial banks are in operation.
They are Nationalized Commercial Banks, Local Private Commercial Banks and Foreign
Private Commercial Banks. Islami Bank has discovered a new horizon in the field of banking
area, which offers different General Banking, Investments and Foreign Exchange banking
system. So I have decided to study on the topic General Banking, Investment and Foreign
Exchange. Because the Internship program of the university is an integral part of the BBA
program. So it is obligatory to undertake such task by the students who desirous to complete
and successfully end-up their BBA degree. This also provides an opportunity to the students
to minimize the gap between theoretical and practical knowledge. During the internship
program the teachers of the department are attached to actively and constantly guide the
students. Students are required to work on a specific topic based on their theoretical and
practical knowledge acquired during the period of the internship program and then submit it
to the teacher. That is why I have prepared this report.

Methodology of the study:


For carrying out this project paper I had to study the actual banking operations of IBBL.
In order to carry out this study, two sources of data and information have been used:

a) Primary data
I discussed with the executives & officials of the IBBL and found the approximate data,
which has been presented in the report. I also discussed with the officials of conventional
Banks & IBTRA regarding the issue and found necessary information, which has been
presented in the report.

b) Secondary data

Annual Reports of 2000-2007 of Islami Bank Bangladesh Ltd.

Desk report of the related department

Manuals of Islami Bank Bangladesh Limited (Bai-Murabaha, Bai-Muajjal,


Bai-Salam, Musharaka)

Training sheets which are provided by Islami Bank Training and Research Academy
(IBTRA)

Scope of the Report:


The scope of this paper is limited to the organizational structure, background, and
objectives, functions, and investment performance of IBBL as a whole. The scope is
also limited to different investment schemes, modes, mechanism, investment
proposal appraisal procedures, monitoring and documentation of IBBL.
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Limitation of the Study:


There are some limitations in our study. I faced some problems during the study which I am
mentioning them as below-

i) Lack of time:
The time period of this study is very short. I had only 8 weeks in my hand to complete this
report, which was not enough. So I could not go in depth of the study. Most of the times the
officials were busy and were not able to give us much time.

ii) Insufficient data:


Some desired information could not be collected due to confidentiality of business.

iii) Lack of monitory support:


Few officers sometime felt disturbed, as they were busy in their job. Sometime they didnt
want to supervise us out of their official work.

iv) Other limitation:


As we are newcomer, there is a lack of previous experience in this concern. And many
practical matters have been written from our own observation that may vary from person to
person.

Derivation of Islamic Bank:


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 cru in their hearts to fashion and design their economic lives in
accordance with the precepts of Islam. The establishment of Islami Bank Bangladesh Limited
on March 13, 1983, is the true reflection of this inner urge of its people, which started
functioning with erect from March 30, 1983. This bank is the first of its kind in South-East
Asia. It is committed to conduct all banking and investment activities on the basis of interest
fee 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.
With the active co-operation and participation of Islamic Development Bank (IDB) and some
other Islamic banks, financial institutions, government bodies and eminent personalities of
the middle east and the gulf countries, Islami Bank Bangladesh Limited has by now earned
the unique position of a leading private commercial bank in Bangladesh.
Banking plays an important role in the economy of any country. In Bangladesh Muslim
constituted more than 80% of its population. These people possess strong faith on Allah and
they want to lead their lives as per the constructions given in the holy Quran and the way
shown by the prophet Hazrat Muhammad (Sm). But no Islamic banking system was
developed here up to 1983. The Traditional banking is fully based on interest or "Riba". But
interest is absolutely prohibited by Islam. As a result the people of Bangladesh have been
experiencing such a non-Islamic prohibited banking system against their normal values and
faith.

The present world especially the third world is affected by unemployment socio economic
injustice inflation, inequitable distribution of income and wealth etc. The main aim of
traditional banking is to earn profit by borrowing and lending money in exchange of interest.
As a result there is an unfair competition among the bankers and among the customers.
Under conventional framework a bank borrows to lend and it mobilizes savings/deposits by
borrowing from savers and loans those deposits to productive interest on deposits and
advances respectively. The banks generally maintain a difference is known as interest spread,
which is the main income of an interest-based bank. There is no interest received by the
Islami Bank. In this case IB receives its entire deposits from the investment of the clients on
the basis of profit- sharing place it to the actual entrepreneurs on the basis of the profit
sharing. So, it is clear that in case of the traditional banking systems, a fixed percentage of
interest, irrespective of income earned is paid to the depositors. The depositors of IBBL are
never deprived of excess income, which the bank may make at the end of year, not only this
traditional bank give fixed interest rate even when they incur operational loss. The critics of
Islamic banking system are of the opinion that both are found same in terms of deposits
mobilization and advances investment.
Banking functions of IBBL is an important aspect in our economy as it has broken the
line of interest based traditional banking system through the introduction Islamic
Shariah based banking. Since its commencement in 1983, it has already gained a
good reputation in customers as well as the masses of people of Bangladesh.
Islamic Banking is especially important in the world countries, which are characterize
by unemployment, inequitable distribution of income and wealth, etc. But there are
so many constraints in our country in terms of functioning of the Islamic Bank
Bangladesh Ltd. (IBBL). The paper is an attempted to evaluate the modes of IBBL in
terms of productivity and effectiveness. Since it is difficult to measure the productivity
of a bank, especially the interest-free IBBL, as it does not any visible product. Some
specific indicators have been selected for the purpose of measurement of
productivity.

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,
Late President Ziaur Rahman 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 in order to facilitate their trade and commerce".
This statement of Late President Ziaur Rahman indicated favorable attitude of the
Government of the People's Republic of Bangladesh towards establishing Islamic banks and
financial institutions in the country. Earlier in November 1982, Bangladesh Bank, the
country's 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 Banker's Association (BIBA) mode significant contributions towards
introduction of Islamic Bank in the country.
They came forward to provide training on Islami Banking to top bankers and economists to
fill up the vacuum of leadership for the future Islamic banks in Bangladesh. They also help
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 to the then Muslim Businessmen society (now reorganized as industrialist &
Businessmen Association). The body concentrated mainly in mobilizing equity capital for the
emerging Islamic Bank.
At last, the long drawn struggle to establish an Islamic bank in Bangladesh becomes a reality.
Islamic 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 two eminent personalities of the
kingdom of Saudi Arabia Joined hands to make the dream a reality.

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Business Philosophy of IBBL

The philosophy of IBBL is to the principles of Islamic Shariah. The organization of Islamic
conference (OIC) defines an Islamic Bank as "a financial institution whose status, rules
and procedures expressly state its commitment to the principles of Islamic Shariah and to
the banking of the receipt and payment of interest on any of its operations. The sponsor,
perception is that IBBL should be quite different from other privately owned and
managed commercial bank operating in Bangladesh, IBBL to grow as a leader in the
industry rather than a follower. The leadership will be in the area of service, constant
effort being made to add new dimensions so that clients can get "Additional" in the
matter of services commensurate with the needs and requirement of the country growing
society and developing economy.

Mission and objective:

To conduct interest free banking.

To establish participatory banking instead of banking on debtor creditor


relationship.

To invest through different modes permitted under Islamic Shariah

To accept deposits on profit-loss sharing basis.

To establish a welfare-oriented banking system.

To extend co-operation to the poor, the helpless and the low-income group for
economic uplift.

To pay a vital role in human development and employment generation.

To contribute towards balanced growth and development of the country through


investment operations particularly in the less developed area.

To contribute in achieving the ultimate goal of Islamic economic system.

Objectives of Islami Bank:


It is a golden desire of every Muslim that his social and political lives should be in
accordance with the divine guides prescribed in the holy Quran and the Sunnah. In the same
tune of aspiration as above, he desires to follow a unified life in financial and business life.

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So, the objectives of the Islamic Banking may be derived from the broader objectives of the
Islamic economy. Two quotations may help us understand our objectives.
Ibn al- Qayyim says. The basis of the Shariah is the wisdom and welfare of the people in this
world as well as the hereafter. This welfare lies in complete justice, mercy, well-being and
wisdom. Anything that departs from justice to oppression, from mercy to harshness, from
welfare to misery and from wisdom to folly, has nothing to do with the Shariah Al-Ghazali
says, "The very objective of the shariah is to promote the welfare of the people which lies in
safeguarding their faith, their life, their intellect, their posterity and their property. Whatever
ensures the safeguard of these five serves public interest and is desirable."
However M. Umer Chapra, in his book "Towards a just Monetary System discussed some of
the most fundamental characteristics of Islamic money and banking system. Those are as
follows:
1. Broad-based economic well-being with full employment and optimum rate for economic
ground;
2. Socio-economic justice and equitable distribution of income and wealth;
3. Stability in the value of money to enable the medium of exchange to be a reliable unit of
account, a just standard of deferred payments, and a stable store or value.
4. Mobilization and investment of savings for economic development in an equitable manner
such that a just return is ensured to all parties concerned, and
5. Effective rendering of all services normally expected from the banking system.
Islamic economy including Islamic banking is now entering a new phase, which calls fore
more integrative as well as a more critical approach to meet the present day complex
financial needs. Now, the economists are faced with the challenging task of reviewing the
whole situation emerging at least in three areas.
Firstly, To bring together the works done by different economists into a comprehensive view
of the monetary system of Islam in its fullness, as against concentrating on specific,
sometimes even disjointed, elements of money and banking.
Secondly, To review critically the different models of Islamic banking presented over the
years in the context of the practice of Islamic banking with a view to refining the theory as
well as improving the practice.

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Thirdly, It is essential to put the whole theory and practice of Islamic banking in the
perspective of an Islamic economy and the Islamic moral and social order. Any element of the
Islamic system, however important, cannot produce the desired results, if it is allowed to
operate in isolation. It must lead to other complementary changes to complete the process.

Role of contribution of IBBL to Bangladesh Economy

Islami Bank Bangladesh Limited has many success stories of achievements. These are
summarized below:

IBBL is the pioneer institution of Islamic Banking in Bangladesh.

The success of IBBL has imbibed other sponsors at home and abroad to establish
Islamic Banking in Bangladesh. Four national, one international Islamic Banks have
since been established in the country. A private sector traditional bank has also
established two full-fledged Islamic Banking branches. Several other existing and
proposed traditional banks have also expressed their intention to introduce Islamic
Banking.

IBBL has successfully mobilized deposits from a section of people who hither-tobefore did not make any deposit with interest based banks.

The Islamic Banking products which are offered by IBBL through its 185 branches
located at important centers all over the country and spontaneous acceptance of those
products by the people proves the superiority of Islamic by the people proves the
superiority of Islamic banking.

IBBL's market share of deposit investment and ancillary business is steadily


increasing

IBBL, through still a tiny bank, handless more than 10% of country's export and
import trade.

Among the contemporary commercial Banks IBBL's position is first in respect of


mobilization of deposit, deployment of found and earning profit.

Investment in industrial sector occupies nearly 49.19% of IBBL's investment


portfolio. This is a unique example of industrial finance by a commercial Bank.

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More than 1.15,000 workers are employed in the industrial projects financed by
IBBL. IBBL has thus made significant contribution to solving unemployment problem
of the country.

Dhaka-the capital of Bangladesh being a Mega city has acute transport


problem. IBBL has joined hands with an enterprising group to introduce a fleet
of Premium Bus service, which has attracted the attention of all section of the
people and mitigated transportation problem of the city to some extent.

Opportunity & Threats of IBBL

Despite tremendous popular support spectacular success in terms of mobilization of deposit


and distribution of profit Islamic banking in Bangladesh yet to achieve the desired level
of success due to the absence of appropriate legal framework for carrying out Islamic
Banking operations in the country. All the government- approved securities in
Bangladesh are interest bearing, Besides, Islamic Money Market in Bangladesh is yet to
develop. As a result the Islamic banks, which are committed to avoid interest, cannot
invest the permissible part of their Statutory Liquidity Reserve and short Term Liquidity
in those securities.

Inspire of the present limitations, Islamic -banking system has tremendous potentiality and
prospect in Bangladesh, Firstly, the successful launching and needs to an Islamic Money
Market in the country. Secondly Islamic banks have brought together many depositors and
entrepreneurs under their fold and coverage. These depositors and entrepreneurs so long
avoided interest-based banking on grounds of religious injunctions.

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The gradual and successful globalization of Islamic banking coupled with growing
awareness of the people about its financial and social benefits makes it clear that the
next century is going to be the century of Islamic banking.

Special features of the IBBL:


Islami Bank Bangladesh Limited (IBBL) was incorporated on13.03.1983 as a public
company with limited liability under the companies act, 1913. The bank started functioning
with effect from 30.03.1983 as the first Shariah based interest-free bank in South-East Asia.

The bank is committed to run all its activities as per Islamic Shariah. IBBL
through its steady progress and continuous success has, by now, earned the
reputation of being one of the leading private sector banks of the country. The
distinguishing features of IBBL are as under:

All its activities are conducted on interest-free system according to Islamic


Shariah.

Investment is made through different modes permitted under Islamic Shariah.

Investment income of the bank is shared with the Mudaraba depositors according
to a ratio to ensure a reasonably fair rate of return on their deposits.

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 lowincome group of the people for their economic enlistment particularly in the rural
areas.

It plays a vital role in human resource development and employment generation


particularly for the unemployed youths.

Its aim is to achieve balance growth & equitable development of the country
through diversified investment operations particularly in the priority sectors and in
the less developed areas.

Functions of IBBL
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The operation of Islamic Bank Bangladesh limited can be divided into three (3) major
categories:

General Banking
Investment
Foreign Exchange Business
Other activities
The IBBL performs the following task for the welfare of the society:
Income generating scheme is for the unemployed youth of the nation.
Standard sales center for marketing home made garments, handicrafts and other items.
Education scheme for assisting poor scholar student to case and help them to continue 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 river erosion and
for marriage of poor girls.
Energy relief operations are provided to the people affected by natural calamities.
Contribution to Mosque for construction, repair and renovation.

Corporate information
As on 31st December 2007
Date of Incorporation

: 13th March 1983

Inauguration of 1st Branch

30th March 1983

(Local office, Dhaka)


Formal Inauguration

Share of Capital

16

12th August 1983

Local Shareholders

42.64%

Foreign Shareholders

57.36%

Authorized Capital

Tk.5, 000.00 million

Paid-up Capital

Tk.3, 801.60 million

Deposit

Tk.166, 325.29 million (As on 31-Dec-2007)

Investment

Tk. 188,848.85 million (As on 31-Dec-2007)

Foreign Exchange Business

Tk. 286,017.00 million (As on 31-Dec-2007)

Number of Branches

196

Zone

Number of Shareholders

26,715

Manpower

9,273

Capital position from 2000 2007


(In million Taka)

Particulars
Authorized
capital
Paidup
Capital
Reserve fund

2000

2001

2002

2003

2004

2005

2006

2007

1000

1000

1000

3000

3000

5000

5000

5000

320

640

640

1920

2304

2764.80

3456

3801.60

1759.65

1998.04

2852.07

3280.37

4329.92

5450.92

6551.23

8039.74

17

Equity

Total equity of the bank as on 31st December 2006 was at 10,435.96 million as against tk
8,331.14 million as on 31st December 2005 comparative position equity of the year 20012007 is given below:(In million)
Particular

2001

2002

2003

2004

2005

2006

2007

Core Capital:

Taka

Taka

Taka

Taka

Taka

Taka

Taka

i)

640

640

1920

2304

2764.80

3456

3801.60

1.99

1.99

1.99

1.99

1.99

1.99

1.99

528.3

727.11

887.51

1256.12

1688.60

2270.33

3026.49

241.75

447.37

278.37

462.62

464.76

419.61

140.41

644.43

644.43

644.43

644.43

644.43

644.43

644.43

---

32.00

32.00

32.00

32.00

160.00

160.00

384.00

460.80

691.20

2216.47

2652.90

4148.30

5161.96

6287.78

355.20

448.83

572.93

773.97

1060.17

Paid

up

capital

ii) Share
Premium
iii) Statutory
Reserve
iv) General
reserve
v) Investment
Loss-Offsetting
Reserve

vi) Dividend

32.00

32.00

Equalization
Account

vii)

864.00

1572.09

Distributable
reserve

Total

core

7688.36

9219.02

capital

Supplement
capital:
i) Provision
classified
18

1568.96

2005.72

investment
ii) Assets
Revaluation

386.06

400.38

506.83

716.78

35.51

38.41

38.41

38.41

reserves

944.78

1140.23

1137.98

iii)
Exchanges
Equalization

38.41

38.41

38.41

Sub Total

776.77

887.62

1118.17

1529.16

2043.36

2747.60

6546.92

Total

2993.24

3540.52

5266.47

6691.12

8331.14

10435.96

15765.94

Total risk-

32387.79

40973.23

55851.30

72628.26

88230.30

110664.24

140971.58

Based assets

As per new Capital Adequacy Policy prescribed by Bangladesh Bank, the Central Bank of the
country, banks are to maintain 9.74(p) % capital on its Risk-Weighted Assets against
which present total equity of the Bank as on December 31, 2006 stood at Taka 10435.96
million.
This was Taka 8,331.14 million in 2005,Taka 6,691.12 million in 2004, Taka 5,266.47 million
in 2003, Taka 3,540.52 in 2002, Taka 2,993.24 million in 2001,Taka 2,671.06 million in
2000.

Performance of IBBL for last 7 years

19

(Amount in million Taka)

Particulars

2001

2002

2003

2004

2005

2006

1,000.00

1000.00

3000.00

3000.00

5000.00

5000.00

640.00

640.00

1920.00

2304.00

2764.00

3456

1.99

1.99

1.99

1.99

1.99

1.99

1,998.04

2852.07

3280.37

5450.94

6551.23

160

160

384

691.20

864.00

2,993.24

3540.51

5266.47

8331.14

10,435.96

41,640.94

56,246.37

70,552.65

88,452.18

10,7779.42

1,32,419.40

37,648.75

49,185.92

62,755.90

83,893.63

97,178.31

1,17,132.83

Import Business

25907.00

33,788.00

46,237.00

59,804.00

74,525.00

96,870.00

Export Business

16082.00

16,673.00

21,738.00

29,192.00

36169.00

51,133.00

Remittance

9879.00

14,670.00

16,668.00

23,669.00

36948.00

53,819.00

Total Foreign Exchange Business

51868.00

65,131.00

84,643.00

112,665.00

14,7642.00

2,01,822.00

Total Income

4,259.55

5,234.07

6,841.29

8024.62

10586.78

14,038.30

Total Expenditure

3,683.43

4,240.02

6039.28

6419.74

8424.36

11,129.63

802.01

1842.99

2162.42

2,908.67

373.25

829.35

973.09

1,490.12

Authorized Capital
Paid-up Capital
Share Money Deposit
Reserves Fund

Retained Earnings

Total Equity

Total

Deposits

(Including bills payable) Gross


Total Investments (Including Inv
in Share) Gross

Net Profit before Tax

576.12
Payment to Government (Income
Tax)

275.52

994.05

450.55

4329.92

460.80

6691.12

Dividend

25%
Total Assets (including Contra)
Total Assets (Excluding Contra)

Fixed Assets

No. of deposit account holder


No. of investment account holder

58,644.46
49,551.87

1,276.89

25%

20% (Bonus)

77,463.12

65,080.12

1725.53

20% (Bonus)

25% (Bonus)

25% (Bonus)

98,046.85

125,776.94

150959.66

1,88,115.27

81,704.74

102149.28

122880.35

1,50,252.82

2036.65

2552.70

3067.99

3,724.69

13,55,053

16,51122

19,94266

22,91269

27,05,180

32,07,131

176,138

1,96295

22,3954

26,4863

29,4888

33,27,500

20

Cumulative

amount

of

disbursement from RDS


Outstanding Investment of RDS
RDS no. of A / C holder
RDS no. of village
Number

of

Foreign

Correspondents

1323.87

2,029.67

2923.60

4216.77

6033

9303

371.1

432.1

570.9

789.97

1,107

2,242

100,470

107,225

130,465

163,465

217,445

409,575

2,214

2875

3700

4230

4560

8059

840

850

860

870

14,196

15,892

17,201

20960

5306

6,202

815

830

Number of Shareholders

9,917

10,747

3,060

3,297

Number of Branches

121

128

141

151

169

176

Book value per Share (Taka)

4677

5532

2743

2904

3013

3019.66

Cost of fund %

10.78

10.20

10.89

9.08

858

9.34

.86

.81

.88

.78

.80

.79

Return on Equity (ROE)%

13.18

16.85

7.43

15.15

16.15

13.42

Return on Assets (ROA) %

.80

.92

.53

1.10

2.10

1.03

Price earning ratio

5.12

4.24

23.26

9.32

9.24

10.97

Earning per Share (Taka)

617

932

195.92

518.00

487.57

368.42

Price equity Ratio

.69

.72

1.66

1.76

1.85

1.57

3,205

3956

4548

5110

5580

4749

9.43%

9.21%

9.44%

9.43%

Number of Employees

Cost income ratio

Market Value per Share (Taka)


(Highest)
Capital Adequacy Ratio

9.24%

4673

8.64%

(Note: One Million = Ten Lac)

Trend of IBBL Operating Result

21

7459

Trend of Net Profit

22

Retained Earnings

Trend of foreign exchange business of IBBL


Items

2001

2002

2003

2004

2005

2006

2007

Remittance

9,879

14,670

16,668

23,669

36,948

53,819

84,143

Import

25,907

33,788

46,237

59,804

74,525

96,870

1,37,086

Export

16,082

16,673

21,738

29,151

36,169

51,133

66690

23

24

Introduction
General Banking is the heart of Banking. Here money collection procedure occurs. Other
services, like cheque encashment, account transfer; account closing, bills and remittance are
given here. So general banking is the most important thing in banking service.

Procedures
1. Issuance of token, Maintenance of subsidiary day Book, writing of day Book, balancing of
Ledger.
2. Opening of A/c Mudaraba Savings A/cs Mudaraba term deposit A/c Al-Wadiah current
A/cs, Mudaraba Hajj saving A/cs, writing of A/c opening registers and issuance of pass book
and cheque Book.
3. Maintenance of current A/c ledgers, deposit ledger and TDR ledger and operation of
computer.
4. Writing of transfer scroll, statement of current A/cs and deposit A/c and Hajj deposit A/c
pass book.
5. Bills: Outward & inward Bills (OBC & IBC) and clearing.
6. Remittance: Issuance and payment of DD, TT, PO etc.
7. Writing of clean cash Book and posting of General Ledger and checking of computer final
sheets with General Ledger.
8. Maintenance of charges, suspense and sundry deposit A/c, maintenance of dead stock and
stationery articles registers.
9. Schedule Telegram and preparation of General ledger A/c statement.
10. Establishment: Preparation of Salary, pay sheet, LPC, maintenance leave register,
personal files and method of correspondence and payment of income tax.
11. Reconciliation of General A/c.

25

Dispatch:

Inward

OUTWARD

General Characteristics of Deposit Account:

Bank receive deposit by different accounts.


Those are two types:
i)

Al Wadiah --- Client A/C is conducted under Al - Wadia system.

ii)

Mudaraba Mode :- Client- Sahib Al Mal


Bank-- Mudarib

Under this arrangement - profit distribution under agreed ratio and loss (if any) will be borne by
Saheb-Al-Maal.
Under Mudaraba mode:- there are many accounts as under:
i)

MSA - Mudaraba Savings Account

ii)

MHSA - Mudaraba Hajj Savings Account

iii) MSB - Mudaraba Savings Bond


iv) MSS - Mudaraba Special Scheme
v)

MTDR - Mudaraba Term Deposit Receipt

vii) MMS - Mudaraba Mahor Savings A/C


viii) MSNA - Mudaraba Short Notice A/C

Al-Wadiah Current A/C (AWCA)

Account Opening Eligibility

a) Persons over 18 years (except some restricted persons)


b) Account of Club
c) Association
d) Agent
e) Govt.
26

f) Semi Govt.
g) Organization
h) Liquidators
i) Minor
j) Married Women
k) Pordanshil Ladies
l) Illiterate Persons

Account Closing

Account Transfer

General Practice at Regarding Accounts, in Account Opening Register

The principles of calculation and distribution of profit to Mudaraba Depositors generally


followed by different Islami Banks are as under:

Mudaraba Depositors share income derived from investment activities i.e. from the use
of fund.

Mudaraba Depositors do not share any income derived from miscellaneous banking
services where the use of fund is not involved, such as commission, exchange, service
charges and other fees realized by the Bank.

Profit and loss resulting from the use of funds are separately maintained in the accounts
from other income and expenditure relating to other activities and services offered by the
Bank.

Mudaraba Deposits get priority in the matters of investment over Bank's equity and other
cost free funds.

Mudaraba Depositors do not share any income derived from investing Bank's equity and
other cost free fund.

27

The amount of the statutory cash reserve and the liquidity reserve, which are required to
be maintained with Bangladesh Bank, is deducted from the aggregate balance of
Mudaraba Deposits to arrive at the net balance of profit sharing deposit.

The gross income derived from investments during the accounting year is, at first,
allocated to Mudaraba Deposits and cost-free-funds according to their proportion in the
total investment.

The share of gross investment income of Mudaraba Deposits as worked out in terms of
principle shown against serial No 7 above is distributed as under:

The Banks Management at its discretion to rationalize the Rates of profit to Mudaraba
Depositors might further raise Mudaraba Depositors share of 65% of gross investment
income but it would not be reduced during any accounting year without giving prior
declaration

The rest amount of gross investment income is retained by the Bank as management fee
for managing the investment & for making reserve for Bad & doubtful investments.

Islami Bank Bangladesh Ltd, at present, applies the following weightages to Mudaraba
Deposits:

Sl. no.

Particulars of Deposits

Weightages

1.
2.
3.
4.
5.
6.
7.
8.
9
10.
11.
12.
13.
14.
15.
16.

Mudaraba Hajj Savings A/C : 11 to 12 years


Mudaraba Hajj Savings A/C : Upto 10 years
Mudaraba Special Savings (Pension) A/C (MSS): 10 years
Mudaraba Special Savings (Pension) A/C (MSS) : 5 years
Mudaraba Muhur Savings Account (MMSA) : 10 years
Mudaraba Muhur Savings Account (MMSA) : 5 years
Mudaraba Savings Bond (MSB) : 8 years
Mudaraba Savings Bond (MSB) : 5 years
Mudaraba Monthly Profit Deposit A/C (MMPDS)
Mudaraba Term Deposit Account (MTDA) : 36 months
Mudaraba Term Deposit Account (MTDA) : 24 months
Mudaraba Term Deposit Account (MTDA) : 12 months
Mudaraba Term Deposit Account (MTDA) : 6 months
Mudaraba Term Deposit Account (MTDA) : 3 months
Mudaraba Savings A/C (MSA)
Mudaraba Foreign Currency Deposit A/C (MFCDA)

1.35
1.30
1.30
1.10
1.30
1.10
1.25
1.10
1.20
1.00
0.98
0.96
0.92
0.88
0.75
0.75

28

17.
Mudaraba Special Notice A/C
Source : Diary 2005, IBBL, Page 13-14.

0.55

Differential rates of weightages have been assigned to Mudaraba Depositors on account


of the following factors:

a) Period of Deposits
The longer the period of deposit, the greater the risk they bear with regard to fluctuation
of the rates of profit and erosion of the value of deposit due to inflation. The Term
Depositors have also to forgo profit in case of premature encashment.
b) Banking Facilities
The Term Depositors do not enjoy any banking facility such as, operating accounts by cheques,
transfer of account from one branch to another, collection of cheques and other instruments,
executing standing instructions through their accounts and so on and so forth. On the other hand,
the PLS Savings Depositors have freedom to get the above services through their accounts. PLS
Short Notice Depositors enjoy still greater facilities in regard to making deposits in and
withdrawal from their accounts.
c) The pattern of Rates of Return on various types of cost bearing deposits of the
traditionalBanks in our Money Market have also an important bearing on allocation of
weightage a different rates.
d)

In consideration of the above factors, full weightage has been assigned to our Mudaraba
Deposits of 36 months and relatively lower Weightages have been given to Mudaraba
Deposits of lower periods, Mudaraba Savings and Mudaraba Short Notice Deposits.

Local Remittance

Pay Order (PO)

Issuing of a pay order (PO)

29

A customer can purchase pay order in different ways:


By Cash A/C.............................................................................

Dr

By account Client A/C .............................................................

Dr

By transfer head office/other departments client A/C .............

Dr

Bills Payable (PO) A/C ............................................................

Cr

Income A/C commission on Remittance .........................

Cr

Demand Draft (DD)

Telegraphic Transfer (TT)

Electronic Transfer (ET)

Clearing

Transfer Delivery

Cheque is of a same branch of IBBL

Outward Bills for Collection (OBC)

Inward Bills for Collection (IBC)

Bills Collected Through Branch

H.O. A/C concerned branch..................................................... Dr


Customer A/C........................................................................... Cr
Income A/C commission; postage.................................................. Cr
In this case commission will be charged by the collecting branch, not the agent branch.

Bills Collected Through Drawer's Bank

Accounting treatment for the collecting branch will be


a. Clearing............................................................................... Dr
30

b. Customers A/CC................................................................. Cr
Inward Bills For Collection (IBC)

31

INTER BRANCH GENERAL ACCOUNT (IBG A/C)


Originating Branch
Credit Transaction

Debit Transaction

Responding Branch

Debit Transaction

Credit Transaction

Cash

Vault

Teller Customers Relationship

Cash Packing and Handling

Evening Banking

32

33

Investment System of IBBL


The most important difference between the Conventional and Islamic bank is that both the banks
operate to earn profit but they differ in the way of operation. Islami Bank emphasis on 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. Besides, other conventional banks sometimes finance projects but
do not bear risk. Finally, the concept of Islamic Bank is to establish on egalitarian society based
on principles of social justice and equity. Whereas traditional banks pay a fixed interest on
savings, time deposit and grant loans with interest for any purpose. We have gathered the fact
that investment management is the theme of IBBL. 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.

Investment Objectives of IBBL

The objectives and principles of investment operations of the Banks are:

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,
commercial and agricultural.

To ensure mutual benefit both for the Bank and the investment client by professional
appraisal of investment proposals, judicious sanction of investment, close and
constant supervision and monitoring therefore.

34

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 finance various developments schemes for poverty alleviation, income and


employment generation with a view to accelerating sustainable socio-economic
growth and upliftment of the society.

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

To encourage social upliftment 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, Bai-Muazzal


Hire purchase under Shairkatul Melk and Musharaka. The Bank is making sincere
efforts to go for investment under Mudaraba principle in near future.

Investment Policy of IBBL


Investment operation of a Bank is very important as the greatest share of total revenue is
generated from it, maximum risk is centered in it and the very existence of a Bank mostly
depends on prudent management of its Investment Port-folio.
For efficient deployment of mobilized resources in profitable, safe and liquid sector a sound,
well-defined and appropriate Investment Policy is necessary.
The important feature of the investment policy of the Bank is to invest on the basis of profit-loss
sharing system in accordance with the tenets and principles of Islami Shariah. Earning of profit is
not the only motive and objective of the Banks investment policy rather emphasis is given in
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 for the year 1995 to 2002 and put into implementation. Recently a further 5-year
perspective investment plan has been drawn up for the year 2003 to 2007 and put into
35

implementation. The plan aims at diversification of the investment port-folio 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.
A sound well defined, well planned and appropriate investment policy frame work is a prerequisite for achieving the goal of the Bank i.e. implementation and materialization of the
economic and financial principles of Islam in the Banking area and justice in trade, commerce
and industry and to build socio-economic infrastructure, create opportunity for income and
sustained economic growth of the country.

SALIENT FEATURES OF INVESTMENT OF IBBL

Observance of the legal investment limit of the bank.

Observance of the legal investment limit of the client.

Optimum utilization of investible fund.

Profitability of the investments.

Safety and security of the investments.

Investment at minimum possible risk.

Liquidity of investments.

Conform to central banks investment restrictions.

Preference to short term investments.

Preference to the investments for small size.

Satisfactory return on investments.

To take in view, inter alias, the following points while considering an investment
proposal.

Sector and sect oral performance.

36

Management of the company.

Location of the company.

Market demand/supply gap, import/export position, consumption trend.

Cash flow position.

Financial or internal rate of return.

Infrastructural facilities in and around the proposed project.

37

Strategies
Risk in the investments and return thereon are interrelated. An investment policy that emphasizes
a high return must accept relatively high risk. Conversely, an investment policy that will tolerate
only small amount of risk must be prepared to accept a relatively low return.
As such, it is really difficult whether to select a high return port-folio on high risk or low risk
port-folio with a low return.
Nevertheless, considering all aspects following guidelines shall be followed as strategy for banks
investments.
i.

If two port-folios have the same risk but different returns, the port-folio having higher
return shall be preferred.

ii.

If the two port-folios have the same expected returns, but different degrees of risk, the
port-folio with lower risk shall get preference.

iii.

If one port-folio has both a higher return and a lower risk than another, the first portfolio shall be preferred.

iv.

Keeping in view the risk factor, the bank shall maintain flexibility in determination of
rate of return on investments on case to case basis in consideration of the risk element
involved in the respective investment.

v.

Emphasis is given for expansion and strengthening cottage and small industries sector
and rural industries. This immensely potential industrial sub-sector shall create
employment opportunities to rural and semi-urban population and shall have positive
contribution in employment and income generation and poverty alleviation of the
low-income group.

vi.

Investment facilities shall be extended for establishment and expansion of export


oriented forward / back ward linkage and import substitute industries.

vii.

The bank requires retaining 10% of its total deposit liability as Statutory Liquidity
Ratio (SLR) including 4% Cash Reserve Ratio (CRR) with the Central Bank. The
bank may go for investments up to 90% of its total deposit. The perspective
investment plan is being formulated quantifying the allocation of investments size-

38

wise, sector-wise, geographical area-wise, economic purpose-wise, security-wise and


mode-wise keeping in view 20% projected growth of deposit each year.
viii.

Taking into consideration the broad objectives of the bank, national priority, socioeconomic need, growth level of the economy, the investments port-folio of the bank
may gradually be diversified and allocated in term of size, sector, geographical area,
economic purpose, security and mode.

ix.

Safety, security, profitability and liquidity of Banks investments.

x.

Each branch invests, at least 50% of its deposits locally.

xi.

Enhance of extending limit of good investment clients.

xii.

Adopting of modern technology

So, banks investment policy, investment planning and investment budgeting, till situation
changes / improves, shall aim at promotion of quality general investment.

39

Investment Mechanism Of IBBL


Bai- Mechanism

Share Mechanism

a) Bai-Murabaha
b) Bai-Muajjal
c) Bai-Salam
d) Istishnaa

a) Mudaraba
b) Musharaka

Investment Instrument of IBBL


Trading modes (Bai-Mechanism)

Bai-Murabaha

40

Ijara Mechanism

a) Hire Purchase
b) Hire Purchase
Under shirkatul Melk

Types of Murabaha
In respect of dealing parties Bai-Murabaha may be of two types.
Ordinary Bai-Murabaha
Bai-Murabaha on Order and Promise
Bai Muajjal Meaning

Bai - Salam
Bai-Istishna Meaning
Leasing mode (Ijarah mechanism)

Hire purchase /Ijarah

Hire Purchase Under shirkatul Melk

Stages of Hire Purchase under Shirkatul Melk

Thus Hire Purchase under Shirkatul Melk Agreement has got three stages:

Purchase under joint ownership.

Hire and

Sale and /or transfer of ownership to the other partner Hirer.

Types of sale contract in hire purchase under shirkatul melk

Hire Purchase under Shirkatul Melk through gradually transfer (sale) of legal
title/ownership of the hired asset/property

Hire Purchase under Shirkatul Melk through transfer of legal title by gifts (for no
consideration)

Taking delivery of asset by the bank (hiree) and the (client) hirer:
Hire, Delivery, Sale and Transfer of Title of Asset to the Client
41

Musharaka

List of The IBBLs Special Schemes:

Household durable scheme(HDS)

Investment scheme for doctors(ISD)

Small business investment scheme(SBIS)

Housing investment scheme(HIS)

Real estate investment program(REIP)

Transport investment scheme(TIS)

Car investment scheme(CIS)

Rural development scheme (RDS)

Agricultural implements investment scheme(AIIS)

Micro industries investment scheme(MIIS)

Mirpur Silk Weavers Investment Scheme (MSIS)

42

Meaning of Foreign Exchange

Foreign Exchange means currency & trade exchange say conversion of one to another. This is a
part of economic & Science. This is a big deal divided into different currencies instrument such
as Draft, Traveler Cheque, Bill of Exchange business including sell, purchasing of currency notes
& TC etc.
43

Currency Exchange means the conversion of one Currency into another.

Foreign Exchange Market:

Foreign Exchange market means the places where foreign currency is bought & sold. In this
more that supply, currency value.
Alternately following are the features of foreign exchange market:
1.

Bank & client.

2.

Different Banks in the same foreign exchange market.

3.

Different Bank & Schedule Bank of the same country.

4.

Different Control Bank.

Islami a Bank follows the following the two craters in respect & payment of foreign exchange:
1. Local currency market value &
2. Foreign currency market value.
Exchange is being controlled:
1. To stabilize the rate of exchange.
2. To protect domestic industries.
3. For proper implementation of plans.
4. To increase the bargaining strength
5. To check over invoicing & Under invoicing
6. To check the Blank marketing and smuggling
7. For regulating the international movements of goods
Authorized Dealer Branch
Arbitrage of Foreign Exchange
Foreign Exchange Regulation Items
1. Bangladesh Bank Manual.
2. Foreign Exchange Circular.
3. Public Notice
4. Import & Export Policy Gazette
5. Ministry of Commerce Circular
6. BCD circular.
7. Guide lines for foreign exchange regulation.

44

8. Other authorization (i.e. NBC Dept)

Methods of effecting payment of IBBL

Islami Bank follows the following methods to make payments between countries.
1. Telegraphic Transfer (TT)
2. Electronic Trnsfer (ET)
3. Mail Transfer (MT)
4. Drafts & Cheque: A draft is pay order issued by one Bank to another Bank or its branch.

Some common terms used in Foreign Exchange:


Over Bought: This position known as long position.
Over Sold: This position known as short position.
LIBOR: London Inter Bank Offer Rate.
SWIFT: Society for World Wide Inter Bank Financial Telecommunication.
CHIPS: Clearing House Inter Bank Payment System.
NOSTRO A/C: Our A/C with you i.e. out A/C with American Express.
VOSTRO A/C: Their A/C with us, Al- Raji A/C with IBBL.
LORO A/C: This A/C i.e. third Bank Relationship.
ACU: Asian Clearing Union.

Uniform Customs and Practices for Documentary Credits (UCPDC

Activities of Foreign Exchange

There are three kinds of foreign exchange transaction


1. Import
2. Export &
3. Remittance.
In the following these are discussed in brief.

IMPORT

Important Policy Order


Duration
45

Import related fees


Four categories of importer registration renewal fees are as under
Categories

Yearly

A
B
C
D

import
5.00
15.00
50.00
Above 50.00

heights Registration
Fees (Taka)
500/1500/3000/5000/-

Renewal
500/1500/3000/5000/-

2. Surcharges for different years are as under:


1 year late TK 50/2 year late TK 100/3 year late TK 200/

Regulations of Import

Import of goods under this policy shall be regulated as under:


Regulations of Import::
L/C: may be open under deferred payment basis.
Direct Payment in Abroad
Time Limit Opening of L/C:
Validity of LCA for Shipment:
Document required to be submitted along with LCA Form

Classification of L/C:
1. Revocable Credit:
2. Irrevocable Credit:

Classification of importer:
Importers are those who ate authorized by the import Trade authority i.e. & CCI & E for import
of goods essential for consumption or for production purposes.
There are mainly three types of importers.
1.

Commercial Importer

2.

Industrial Importer

3.

Importers under Wage Earner Scheme

1. Commercial Importer:

46

2. Industrial importers:
3. Importers under WES:
L/C application & Procedure for Opening L/C :
Accounting procedure.
Dr. Partys A/C.
Cr. Commission A/C.
Cr. Postage & Telegraph A/C.
Liability:
If the amount of L/C increased the liability voucher is to be passed as under:
Dr. Liability as per contra (WES L/C).
Cr. Asset as per contra (WES L/C).
Dr. Asset as per contra (WES L/C).
Cr. Liability as per contra (WES L/C).
A fresh Liability is to be passed including amount of increase on the date of amendment.
Back to Back L/C
Problems of Back to back L/C
1.

Shipment time gap: Sometime time is shorted for exporting against import L/C,
kit may be caused.

2.

Terms and rules violations: IBBL cannot violate the rules & term of Shariah
council.

3.

Selling violation: Out of agreement IBBL cannot receive excess wanted.

4.

Payment of back to back L/C bill: No stock bills are supported against Shariah.

5.

Gaps of International rules & regulations.

Prospects of back to back L/C


1.

It is Garment oriented readily.


47

2.

Backward lender (must have)

3.

To continuous quality improvement.

4.

To exchange customer facilities.

5.

To be continuous of our authorized.

L/C Opening functions

The following functions are maintained for opening L/C.


1.

Opening the L/C.

2.

L/C Lodgment.

3.

L/C Retirement.

Lodgment of L/C
Retirement of L/C
When the parties retire the documents by cash payment or by MPI/LIM arrangement is known as
retirement.
Kinds of Bill:
a. At sight
b. Collection (30 cash/ Loan? Barter
Check up the document:
Before lodgment, documents must be checked with L/C file. Check up as under:
1. Invoice
2. Bill of Lading
3. Draft
4. Bank forwarding date.
1. INVOICE:
a) The invoiced amount tallied with draft amount.
b) The invoice is shown by the beneficiary ad s signed by him.

48

c) Description of goods in the invoice and bill of Lading are identical.


2. Bill of Lading:
Retirement Procedure for Deferred Payment of issuance Bills/ BB Bills :
When the draft is returned by the draw (importer) after duly accepted by him the following
procedure to be maintained.
1.

The maturity date is to be worked out and noted in the bill Register and also in due date
diary. The due date diary may be maintained by the dealing officer ad the Manager incharge of foreign Exchange Determent.

2.

The Foreign Correspondent should be advised the due date maturity and be authorized to
debit the NOSTRO account or to claim reimbursement on due date as per L/C terms.

3.

All the documents delivered to the importer except accepted bill of exchange/ draft.

For liability of issuance bill reversed the following vouchers are to the assed be the Bank.
Dr. Liability as per contra, When retired the documents, the as Cr. Assets as per contra. Voucher
under:Dr. Partys A/C.,Cr. H.I., I.D A/C.Cr. R & T A/C.Cr. F.C.C. A/C.Cr. Commission A/C.
Checking & Advising of Export L/C Processing of Opening of BB L/C

49

Meaning of Export:
Export means lawful carrying out of anything from one country to another country for sale

Definition of Exporter

The importers and exports trade of the country is regulated by the Imports Exports Control Act
1950. No person /firm is allowed to export any thing from Bangladesh unless he is registered
with CCI and E under the registration order (Importer and Exporter) 1952. To become an
exporter an ERC (export Registration Certificate) must be obtained from the office of CCI & E.

Export under L/C

Exporters are allowed to export the commodity under irrevocable letter of credit. Under this type
of export, exporter will ship the goods as pr terms of the credit and will get payment as per
arrangement of the credit.

General Rules for Export

There are some rules, which are mandatory for export of any goods form Bangladesh. The rules
are as under:
(1) No Person can export any goods from Bangladesh, unless he is duly registered as an exporter
with the CCI & E.
(2) All export must be declared on the EXP form, which is consisting of 4 copies.
(3) Export mush is against any of the following:
a) Export L/C.
b) Firm Contract.
c) Advance Payment.
(4) Transport documents related to land route or sea and any other Author8ized Dealer. The
Airway Bill and any other documents of title to car4go may be drawn to the order of a Bank in
the country of import. However in case of advance payment, transport document may be drawn

50

to the order of Foreign Importer Bank endorsement of transport documents is prohibited.


Directions under Sl. No. shall not apply in the following cases:

Stages & Mechanism of Export

1) Exporter will make the goods ready for shipment.


2) Arrangements have to be taken for inspection of the goods by the competent authority as per
credit terms.
3) Exporter will declare on EXP form against export L/C/Firm Contract/ Advance payment.
4) Exporter have to arrange approval for export from custom authority on EXP from by
submitting Export L/C, Export permission from CCI & E, Quota clearance from EPB, U.D. in
case of garments, invoice, packing list along with shipping bill prepared by C&F agent.
5) After completion of custom formalities, shipping company will receive the goods and will
issue B.L.
6) Exporter will collect visa/ license and certificate of origin for final documentation.
7) Exporter will submit the full set of documents to the negotiating bank for negotiation.
8) Negotiation bank will dispatch the documents to the issuing bank for clearance of the goods
from destination against payment as per credit terms.

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Meaning of Remittance
The word Remittance originates from the word remit which means to transmit money/ fund.
In banking terminology, the work remittance means transfer of fund one place to another. When
money transferred from one country to another is called Foreign Remittance
Types of Remittance:
Foreign remittance may be classified into.

Inward Foreign Remittance.

Outward Foreign Remittance.

Mechanism of Remittance
FCAD- Foreign currency A/C Dollar.
MFCD- Mudaraba foreign currency deposits.
PFC- Private foreign currency.
FCAD- Exp.- Foreign currency A/C dollar export.
NRT- No residence Taka.
PDAP- properly development A/C pound.
Instruments of Foreign Remittances:
Cash for

: Dollar, Pound, France Fr. Riyal or any other currency.

T.C.

: Travelers Cheque.

F.D.D

: Foreign Demand Draft.

T.T

: Telegraphic Transfer, Cable transfer or swift transfer.

M.T

: Mail Transfer.

I.M.O

: International Money Order.

Cheque

: By any person & institution..

P.O

: Payment Order.

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PROBLEMS & RECOMMENDATION

PROBLEMS

Islamic Banking is a new phenomenon in our country during last two decades. So
majority of our people have no proper knowledge about the activities of Islamic Banking
as well as its investment mechanism hamper large scope of investment of IBBL.

Most of the people in our country have a bad impression of IBBLs operations regarding
indirect generation of interest which meaning no difference between investment of IBBL
loan / Credit / advance of conventional banks for this reason, they are not too much
interested to make investment with IBBL.

Because of improper insufficient application of Islamic Banking rule in our country. The
investment operations of IBBL can't run smoothly.

IBBL, which is committed to avoid interest, cant invest the permissible part of its
statutory liquidity Reserve and short Term liquidity surplus in those securities.

This Bank can't invest in all economic sectors, which are prohibited by the law of Islam.

IBBL has no strong promotional activities to increase motivate its present and potential
investment client.

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54

1. IBBL should increase skilled manpower to do its financial activities more efficiently. So that
many of the employees do not have to do extra work.
2. The Bank should go aggressive advertising and promotional activities to get a broad
geographic coverage.
3. The authority of IBBL should introduce more innovative and modern customer service.
4. Practice amount of doubtful income declined substantially during the year as compared to the
past few years, indicating more carefulness of the Management in complying with Shariah.
As a result, idle money will be invested to increase potential profit of this Bank.
5. Inclusion of more subjects based on the Quran and Sunnah in the Training courses of the
Islami Bank Training & Research Academy in order to develop human resources having
morally.

55

Bangladesh is a developing country. Without developing banking sectors this countrys business
sector is not possible to progress rapidly. In such conditions IBBL is trying to develop banking
sector through welfare and servicing to the people. Islami economy and banking are bound
together. This economy and Banking is not possible to establish without Tauhid, Reshalat and
trust of Akhirat. This economy and banking are suitable to operate as a Muslims country. But our
Government is not aware to establish such system. IBBL has emerged facing the many obstacles
yet. This bank is trying to operate their activities according to Islami Shariah. Islam is a religion
for human welfare as well the social welfare. All the steps of Islam are only for the welfare for
human being. Above discussion also proves that interest is a curse and in the banking transaction
only Islamic bank can help people to relieve of this curse. Islamic banking is the superior
banking system. We have to take necessary steps to remove all problems that stand as a great
obstacle before Islamic banks as early as possible for the development of Islamic banks.

Performance of IBBL:
Particulars

2004

2005

56

2006

2007

2008

Authorized Capital

3,000

5,000.00

5,000.00

5,000.00

10,000.00

Paid-up Capital

2304

2764.00

3,456.00

3,801.60

6,177.00

Reserved Fund

4329.92

5450.94

6,551.00

8039.74

9023.00

Total Equity

6691.12

8331.14

10,435.96

15,765.94

14060.49

Deposits (including Bills Pay.)

87841.01

1,07,779.42

1,32,419.40

1,66,325.29

200343.41

Investments (Gross)

79392.72

97,178.31

1,17,132.83

1,44,920.61

180053.93

Import Business

59,804.00

74,525.00

96,870.00

137086.00

180,020.00

Export Business

29,151.00

36,169.00

51,133.00

66690.00

83993.00

23,669

36,948.00

53,819.00

84143.00

90176.00

Total Foreign Ex. Business

1,12,624

14,7642.00

2,01,822,00

22,01,822.00

Total Income

8,262.73

10,586.78

14,038.30

17699.52

Total Expenditure

6,419.74

8,424.36

11,129.63

14856.19

Net Profit before Tax

1,842.99

2,162.42

2,908.67

3780.82

829.35

973.09

1,490.12

2049.05

Remittance

Payment to Govt.(Income Tax)


20%

25%

(Bonus)

(Bonus)

Total Assets (including Contra)

1,25,776.94

1,50,959.66

1,88,115.27

250634.48

Total Assets (excluding Contra)

102149.28

1,22,880.35

1,50,252.82

191362.35

2552.70

3,067.99

3,724.69

3987.23

850

860

870

884

15892

17,201

20,960

26,488

51931

5306

6,202

7,459

8,426

9616

155

169

176

186

210

2904

3,013.00

3,020

4,147

519

487.57

368.42

539

5,110

5,580

4,749

6,999

9.21%

9.44%

9.43%

11.18%

Dividend

Fixed Assets
No. of Foreign Correspondents
Number of Shareholders
Number of Employees
Number of Branches
Book Value per Share (Taka)
Earnings per Share (Taka)
Market Value per Share (Taka)
Capital Adequacy Ratio

Note: Tk. in (Million)

57

25% (Bonus)

25%(Bonus)

Source: Economic Trends published by Bangladesh Bank.

Growth of Foreign Exchange Business :


2000-2007
350000
300000
Tk. in Million

250000
Remittance

200000

Export

150000

Import

100000
50000
0
2000

2001

2002

2003

2004

2005

Year

Total Growth of Foreign Exchange Business:


2000-2007

58

2006

2007

59

Import, Export & Remittance of IBBL :


(Tk. in Thousand)

Year

2000

2001

2002

2003

2004

2005

2006

2007

Import

25327

25907

33788

46237

59804

74525

96870

137086

Export

16889

16082

16673

21738

29192

36169

51133

Remittance

7644

9879

14670

16668

23669

36948

53819

66690
84143

Total Foreign Exchange Business of IBBL :

Year
(Tk. in Thousand)

Total

2000

2001

2002

2003

49860

51868 65131 84643 112624

Books:
60

2004

2005

2006

2007

147642

201822

287919

1. A.A.M. Habibur Raman; Islami Banking.


2. Md. Haider Ali; A Hand Book of Islami Banking & Foreign Exchange Operation.
3. Bangladesh Bank; Guide lines for Foreign Exchange Transactions.
4. Howard R. Goldsmith; Import / Export
(A Guide to Growth, Profits and Market Share).
5. Sayed Ashraf Ali; Foreign Exchange & International Finance.
6. A.K. Chatterjee ; Principles of Foreign Exchange.
7. M. Omar Chapra; Review of Islami Economics.sssss

Reports:
1. Annual Report of IBBL, 2000 To 2007.
2 Branch Managers Conference Report 2007
3. Islami Bank Bangladesh Ltd. Parichiti-2001
4. Economic Trends published by Bangladesh Bank
Class Lecture:
1. Asheque Ahmed Jebal, SVP,OW,IBBL,HO.
2. M.Jafrullah, Director General, IBTRA
3. Md. Rafiqul Islam, SVP & Director (Training), IBTRA
4.Md, Habibur Rahman,DMD,IBW,IBBL,HO.
5. Md.Omar Faruk Khan , VP & FM (Course Co-coordinator), IBTRA

Web Site: www.islamibankbd.com

61