Professional Documents
Culture Documents
Dhaka Campus
Internship Report
On
Role of RDS of IBBL in Poverty Alleviation
of Bangladesh
Prepared By:
Sabera
Matric no: B091871
Batch no-28th
Program: BBA
(Major in Finance and Banking)
Date of submission:
Letter of Transmittal
Date
Kazi Farzana
Dear Madam,
It gives me great pleasure to submit my report entitled Role of RDS of IBBL in Poverty
Alleviation of Bangladesh. In partial requirement of the degree for Bachelor of Business
Administration at the International Islamic university Chittagong. This was an excellent real
life exposure and work experience for me.
I tried my level best to gather all necessary and relevant information to prepare the report.
I would be very glad if you accept my Draft Report and allow me to submit the report for the
declared topic.
Yours Sincerely,
______________
Sabera
Matric no : B091903
Batch no: 28th
(Major in Finance and Banking)
Students Declaration
I am Sabera Matric no : B091903, hereby declare that presented report of Internship program
titled Role of RDS of IBBL in Poverty Alleviation of Bangladesh. is prepared 100% by
myself and all of the information, details, suggestions and statistical values are obtained from
the true resources that were given IBBL.
I also confirm that, this report is prepared by my only for academic requirements, not for any
other purpose. It might not be used with the interest of opposite party of the corporation.
This is an original work which is submitted only to the International Islamic University
Chittagong-Dhaka campus and no part of it has been published in any University or journal
or Magazine.
.....
Sabera
Dhaka campus
Approval
This internship report is prepared on the basis of study on Role of RDS of IBBL
in Poverty Alleviation of Bangladesh. This Report is Written by Sabera, Matric No:
B091903 Batch 28th, IIUC, Dhaka Campus, a student of Bachelor of Business
Administration (BBA) under supervision of mine. She has put untiring effort.
With utmost sincerity in preparing this report. The report is acknowledged as it
is acceptable.
Kazi Farzana
IIUC,DC
Acknowledgement
First of all I am very much grateful to almighty Allah who has enabled me to
accomplish the internship report successfully in due time. The most gracious and
merciful who enabled me to successfully accomplish the internship report on
Role of RDS of IBBL in poverty alleviation of Bangladesh .
I can never ever forget the continuous co-operation and help of Branch Officer of
IBBL for their many valuable insights and suggestions to make my report
informative and rich.
Keeping this idea in mind, Islami Bank Bangladesh Limited (IBBL) has
launched a program named Rural Development Scheme (RDS) in 1995. The
prime objective of this micro investment program is to uplift the overall
socioeconomic plight of the rural poor. Presently, the scheme is being
implemented through 153 branches in 11,482 villages under 61 districts. Some
0.6 million group members including 0.3 million investment clients of which 88
per cent are female are involved in this scheme.
The Bank has a plan to double the activities of RDS within next
twenty years and to expand it in 14000 villages with 1.3 million group
members within 2020. However, before going to further expansion to the
new areas, an assessment of the achievement of RDSs investment
programme and its impact on employment, income and livelihood of the
rural people is a prime need.
Finally, it can be concluded that the micro investment program
benefited the clients and clients were successful in bringing positive
changes in their lives. Micro investment program has played a significant
role in reducing rural poverty. Therefore, the program can be replicated in
other rural areas of Bangladesh in order to accelerate economic activities
of the poor.
TABLE OF CONTENT
Chapter 1: Introduction 1-5
Introduction 2
Objectives of the study 3
Methodology of the study
Scope of the report
Limitations of the study
Appendix Chapter-2
Profile of Islami Bank Bangladesh Limited
Introduction
Mission
Vision
Shariah Council of IBBL
Objectives of Shariah Council
Strategic Objectives
Core Values
Commitments
IBBL Milestone
SPECIAL FEATURES OF IBBL
MANAGEMENT OF IBBL
Organizational Structure of the Company
Products of IBBL
Corporate Information
Chapter 3: Review of micro finance
Literature Review of Micro finance
Background of IBBLs Microfinance Program
What is Micro credit
Who are the customer
Objectives of RDS
Mission & Vision of RDS
Target Area
Command Area and Baseline Survey
Targets of RDS
Rate of Return
Security Requirements
Sanction and Disbursement
Modes of Investment
Savings Plan
Centre Fund
Supervision, Follow-up and Monitoring
Micro Enterprise Investment Scheme(MEIS
Sectors and Ceiling of Investment
Sectors along with Ceiling of Investment
Modus Operandi of RDS
Investment Sanction Procedure & Risk
Risk associated when purchase goods
Performance of Rural Development Scheme(RDS
Chapter 4: Role of Rural Development scheme of IBBL
in poverty Alleviation of Bangladesh
Introduction
Chapter-01
Introduction
Introduction
Internship program of BBA under the Faculty of Business Administration of International
Islamic University Chittagong (Dhaka Campus) is an obligatory part for all students. The
report includes the practical knowledge and information observed and obtained during the
program.
The Organization of Islamic Conference (OIC) defines an Islamic bank is ''a financial
institution whose statutes, rules and procedures expressly state its commitment to the
principles of Islamic Shariah and to the banning of the receipt and payment of interest on any
of its operations.''
The task envisages identifying as effective approach to poverty alleviation through providing
micro-financial services as well as other development services to the poor and ultra poor.
IBBL is very keen to promote Islamic microfinance for the poverty alleviation so that poverty
reduction in Bangladesh is efficient, faster and exploitation free and that the poor and the
very poor can come out of poverty cycle early.
The Islami Banks 'Rural Development Scheme' has been introduced in 1995 to cater to the
investment needs of the agriculture and rural sector to create opportunity for generation of
employment and raising income of the rural people with a view to alleviate poverty. The main
objective of this report is to evaluate the overall performance of Islamic microfinance
program of Islami Bank Bangladesh Ltd. along with how efficiently the Bank is providing
services to alleviate the poverty of the rural area poor people.
The main limitations of the study involved lack clarity of the concept of Islamic finance and
Islamic microfinance among microfinance practitioners. Resources persons were difficult to
come by who can give appropriate interpretation of Islamic principles of finance.
Despite various problems and shortcomings, the Islamic Banks RDS have the
potentiality to grow and expand its area of activities to bring good to the
humanities. Microfinance has proved to be an effective tool to reduce poverty, if
not eliminate poverty. Since Microfinance alone can not alleviate poverty in its
entirety, Social Safety Nets in the form of Zakat and transfer fund in the form of
grant be initiated from the surplus generated out the commercial operation of
the respective MFIs and donation from well to-do people and institutions in the
locality and rich Muslim countries.
Despite hard competition among microfinance operating in Bangladesh, both
local and international, IBBLs RDS has made tremendous and remarkable
progress practically in every sphere of its activities. This success has been made
possible due to dynamic leadership of its management as well as devotion and
sincerity of all categories of Officers and Executives.
Critically analyze the functions and the operations of each level and to find
out the way how to expand the activities of the Scheme in future.
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 regarding the issue and found necessary information, which
has been presented in the report.
b) Secondary data
03. Training sheets which are provided by Islami Bank Training and Research
Academy (IBTRA) when I completed my foundation course as orientation.
04. Internet and official website of IBBL, circulars sent by head office and
Bangladesh Bank. Various Publications on Bank file, balance sheet and various
documents.
There is some limitation in our study. I faced some problems during the study
which I am mentioning them as below.
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 be able to
accommodate and spend enough time to make an in depth study for excessive in
my official works
The study has been conducted mostly at the Head Office and more or less at
other NGOs level and overall performance of branches could not be evaluated
for the time constraints.
Chapter-2
Profile of Islami Bank
Bangladesh Limited
Introduction
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 (246
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.
It is listed with Dhaka Stock Exchange Ltd. and Chittagong Stock
Exchange Ltd. Authorized Capital of the Bank is Tk. 20,000.00 Million ($
250.47 Million) and Paid-up Capital is Tk. 12,509.64 Million ($ 156.66
Million) having 60,302 shareholders as on 31st December 2012.
Mission
To establish Islamic Banking through the introduction of a welfare oriented
banking system and also ensure equity and justice in the field of all
economic activities, achieve balanced growth and equitable development
in through diversified investment operations particularly in the priority
sectors and less developed areas of the country. To encourage socio-
economic and financial services to the loss-income community particularly
in the rural areas.
Vision
Our vision is to always strive to achieve superior financial performance, be
considered a leading Islamic Bank by reputation and performance.Our
goal is to establish and maintain the modern banking techniques, to
ensure soundness and development of the financial system based on
Islamic principles and to become the strong and efficient organization with
highly motivated professional, working for the benefit of people, based
upon accountability, transparency and integrity in order to ensure stability
of financial systems.
We will try to encourage savings in the form of direct investment. We will
also try to encourage investment particularly in projects which are more
likely to lead to higher employment.
Shariah Council of IBBL
The Shariah Council of Islamic Bank generally consists of experts from the following
four areas:
Fuqaha: Persons representing this group must be well versed in the Quran,
Sunnah and fully conversant with the opinion of all schools of islami thought and
Islami law and jurisprudence. They must view Islam as a total way of life and a
living religion.
Banker: There must be a member who is fully conversant with banking law and
practices and has practical experiences in Banking business including foreign
trade.
Economist: A member from this group need not necessarily be an Islami
economist to start with. But if he is an Islami Economist it is an added
advantage. What is important is that he must be really proficient in modern
economies with an in depth study of the community, which a bank is going to
solve. He must have up to date knowledge in the development of the
contemporary world.
Lawyer: A member representing this group should be a successful practitioner
lawyer. He must be proficient in commercial law including company law. In
consultation with the Fuqaha and Economist members of the council, he should
be able to draft such innovating contracts, which will have the sanction of Islami
principles and a banking law of the land.
Objectives of Shariah Council
The functions of the council are to offer views and opinions on
matters related to the bank from time to time. The council may
require any paper document from the bank and examine the same
to see whether it is according to see whether it is according to
Islamic principles.
The shariah council assists the Board of Directors by advising them
on matters related to shariah.
The opinion of the majority of members is taken as the opinion of
the council provided that the said opinion is supported by at least
three Muftis of the council.
The council maintains its secretariat and a well-equipped library as
the Head Office of the bank where it keeps proper records of all of
its proceedings and decisions.
The council elects a chairman and a secretary from amongst them.
The chairman will normally preside over the meetings. In his
absence the members present elect one of them to preside over the
meetings.
The council may whenever it thinks necessary, constitutes a
subcommittee to help the council.
The council issues Shariah Certificate in the Annual Report of the bank.
Strategic Objectives
To ensure customers' satisfaction.
To ensure welfare oriented banking.
To establish a set of managerial succession and adopting
technological changes to ensure successful development of an
Islamic Bank as a stable financial institution.
To prioritize the clients welfare.
To emerge as a healthier & stronger bank at the top of the banking
sector and continue stable positions in ratings, based on the
volume of quality assets.
To ensure diversification by Sector, Size, Economic purpose &
geographical location wise Investment and expansion need based
Retail and SME/Women entrepreneur financing.
To invest in the thrust and priority sectors of the economy.
To strive hard to become a employer of choice and nurturing &
developing talent in a performance-driven culture.
To pay more importance in human resources as well as financial
capital.
To ensure lucrative career path, attractive facilities and excellent
working environment.
To ensure zero tolerance on negligence in compliance issues both
shariah and regulatory issues.
To train & develop human resources continuously & provide
adequate logistics to satisfy 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.
To strengthen corporate culture.
To ensure Corporate Social Responsibilities (CSR) through all
activities.
Core Values
Trust in Almighty Allah
Strict observance of Islamic Shariah
Highest standard of Honesty, Integrity & Morale
Welfare Banking
Equity and Justice
Environmental Consciousness
Personalized Service
Adoption of Changed Technology
Proper Delegation, Transparency & Accountability
Commitments
To Shariah
To the Regulators
To the Shareholders
To the Community
To the Customers
To the Employees
To other stakeholders
To Environment
IBBL Milestone
Established on 13th March 1983
Certificate for Commencement of 27th March 1983
Business
Inauguration of 1st Branch 30th March 1983
Formal Inauguration 12th August 1983
Shariah Supervisory Committee 1983
CSR/Foundation activities 1983
IPO 1985
Listing in Dhaka Stock Exchange Ltd. 2nd July1985
Listing in Chittagong Stock Exchange 7th March1996
Ltd.
Accommodation of IBBL Head Office 10th March 2000
in its own Tower
1st Rights Share issue 1989
2nd Rights Share issue 1996
3rd Rights Share issue 2000
4th Rights Share issue 2003
Opening of 100th Branch 12th June 1997
Opening of 200th Branch 21st June 2009
Opening of 250th Branch 15th December 2010
Joining/Agreement with CDBL 29th December 2004
In-house Core Banking Software 2005
IBBL Mudaraba Perpetual Bond (MPB) 25th November 2007
Issue
Inauguration of Broker House 1st January 2008
Formation of Subsidiary Companies of
IBBL:
A. Islami Bank Securities Limited 22nd March 2010
(IBSL)
B. Islami Bank Capital Management 1st April 2010
Limited (IBCML)
1st Position of IBBL in Inward 2007, 2008, 2009 & 2010
Remittance
100% Branch Online Banking 7th January 2011
Launching of i-Banking 16th December 2011
Launching of Islami Bank m-Cash 27th December 2012
SPECIAL FEATURES OF IBBL:
The bank is committed to run all its activities as per Islamic 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 features of IBBL are as follows:
All activities are conducted on interest-free banking system in accordance with
Islamic Shariah.
Investment is made through different modes permitted under Islami Shariah.
Establishment of participatory banking instead of banking on debtor-creditor
relationship.
Investment income of the Bank is shared with the Mudaraba depositors according to a
ratio to ensure a reasonable fair rate of return on their depositors.
Its aims are to introduce a welfare-oriented banking system and also to establish
equity and justice in the field of all economic activities.
It extends Socio-economic and financial services to the poor, helpless and low-income
group of the people for their economic enlistment particularly in the rural areas.
It plays a vital role in human resource development and employment generation
particularly for the unemployment youths.
Its aim is to achieve balanced growth and equitable development of the county
through 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 for their
economic development
MANAGEMENT OF IBBL
Islami Bank Bangladesh limited is being managed by a board of directors
comprising foreigners and local. An executive committee is formed by the
board of directors for efficient and smooth operation of the Bank. Besides
a management committee looks after the affairs of the bank.
PRODUCTS OF IBBL
Al-Wadeeah current Account
Mudaraba Savings A/C
Mudaraba Term Deposit A/C
Mudaraba Special Notice
A/C
Mudaraba Hajj Savings A/C
Mudaraba Special Savings
A/C
DEPOSIT PRODUCT Mudaraba Savings Bond
Scheme
Mudaraba Monthly Profit
Deposit A/C
Mudaraba Mohor Saving A/C
Mudaraba Waqf Cash
Deposit A/C
Mudaraba School Student
Savings A/C
Mudaraba Farmers Savings
A/C
Household Durable Scheme
Housing Investment
Scheme
Real Estate Investment
Scheme
Transport Investment
Scheme
INVESTMENT PRODUCTS Car Investment Scheme
Small Business Investment
Scheme
Agriculture Implements
Investment Scheme
Rural Development Scheme
Micro Industries Investment
Scheme
Mirpur Silk Weavers
Investment Scheme
Doctors Investment Scheme
PRODUCTS OF IBBL
i. ATM Card
ii. Credit Card is on the
CARD
processing (Local,
International & Dual)
REMITTANCE PRODUCTS 4 Remittance Card
5 Mudaraba Foreign Currency
Deposit A/C
6 Mudaraba NRB Saving
Bond(MNSB)
SERVICES OF IBBL
BROKERAGE HOUSE Member, Dhaka Stock
Exchange Ltd.
Member, Chittagong Stock
Exchange Ltd.
Service Depository
Participant Full.
TREASURY SERVICES Primary dealer of Govt. Approved
Securities.
REMITTANCE SERVICES Correspondence arrangement
with more than 350 financial
institutions all over the world.
Corporate Information
Financial Information:
Authorized Capital Tk. 20,000.00 Million ($ 250.47 Million)
paid-up Capital Tk. 12,509.64 Million ($ 156.66 Million)
Deposits Tk. 417,844.14 Million ($ 5,232.87 Million)
Investment
(including Investment in Tk. 399,930.80 Million ($ 5,008.53 Million)
Shares)
Foreign Exchange Business:
Import Tk. 284,587 Million ($ 3,564.02 Million)
Export Tk. 197,095 Million ($ 2,468.32 Million)
Remittance Tk. 300,915 Million ($ 3,768.51 Million)
Branches:
Total number of Branches 246
Total number of SME Krishi
30
Branches
Total Branches 276
Number of AD Branches 43
Number of ATM Booth 267
Number of Shareholders 60,302
Manpower 12,188
Organization:
Name of Chairman Prof. Abu Nasser Muhammad Abduz Zaher
Name of Managing Director Mohammad Abdul Mannan
Company Secretary Abu Reza Md. Yeahia (C. P.)
Name of CFO Mohammad Nesar Uddin, FCA, ACMA
Chapter-03
However, all of these studies simply assessed the impact of interest based
microcredit programme which did not consider about shariah (Islami rules and
regulations) compliance for investment. Besides, most of the reviewed studies
have covered particular areas or zones of the country. The present study
assessed a fully shariah based business oriented microfinance undertaken by the
clients of rural development scheme (RDS) functioning across the country. Unlike
other microcredit programmes, this scheme (RDS) also has incorporated ethical
and moral development activities in its microcredit programme. Therefore, this
study assessed a different type of microcredit programme than the conventional
one, using modern econometric techniques.
Another point is that the size of the rural households in Bangladesh is generally
large and they have a low level of literacy. Rural development is hampered due
to lack of credit, lack of training, weak infrastructure and poor transport systems.
The weak resource base coupled with a faster growing population is aggravating
the poverty level of the country. Determination of the above factors which are
most relevant in explaining poverty alleviation will have important implications
for refining microfinance policy. This will also help to locate the clients more
appropriate for the RDS-microfinance. Therefore, the other objective was to
examine the linkage between income, expenditure and saving and clients
demographic and investment factors. This study also provided useful information
to formulate policy for Rural Development Scheme (RDS) of Islami Bank
Bangladesh Limited (IBBL).
Due to lack of capital poor people living in the rural areas have limited
opportunity to invest in productive activities and hence cannot get out of
poverty. With a view to rescuing this underprivileged and helpless section of the
population from the poverty trap, several NGOs, and some Government agencies
have formulated poverty alleviation as well as development programmes.
Commercial banks in the developing countries have failed to cater for the credit
needs of the poor because of perceived high risk and high transaction costs
associated with the small loans and saving deposits (Coleman, 2006).
Commercial banks in Bangladesh have failed to serve the need of the rural poor
mainly for three reasons: (i) bank requires collateral, which the poor people find
difficult to provide, (ii) their procedures for filling application forms and
completing other formalities for obtaining loans are too cumbersome for the
illiterate poor, and (iii) they prefer handling large amount of loans rather than the
petty loans that the poor need (Gofran, 1996).
The majority of the rural families in Bangladesh have limited access to the
institutional credit and thus they depend much on local money-lenders for credit
who charge a very high rate of interest. So, the poor people ultimately fail to
repay loan and therefore, become the victims of exploitation (Mahmud, 1999).
Failure of traditional financial institutions for extending credit facility to the poor
is the most important reason of perpetuations of poverty.
Keeping this idea in mind, Prof. Dr. Yunus began a pilot project in Jobra village in
1976 under Chittagong district of Bangladesh to provide credit to the landless
and the very poor people. Later, this project turned into a specialized bank
named Grameen Bank. Presently, this credit system is recognized as micro-credit
which provides collateral (the only collateral is the peer collateral) free credit to
the poor through an institutionalized mechanism. This credit is made available as
and when needed at the doorstep of the client (Bajwa, 2001) and offers
opportunities for the poor to eradicate their poverty through income-generating
activities (Yunus, 2000).
Considering the above mentioned factors, Islami Bank Bangladesh Limited (IBBL)
has launched a program named Rural Development Scheme (RDS) in 1995. The
main objective of this scheme is to alleviate rural poverty by providing small and
micro investment to the agricultural and rural sector for generating employment
and raising income of the rural poor. The scheme also provides welfare, moral
and ethical services to the rural people of the country. Presently, the scheme is
being implemented through 136 branches in 10,672 villages under 61 districts.
Some 0.6 million group members including 0.3 million investment clients of
which 88 per cent are female are involved in this scheme.
Micro credit is generally collateral free, group based, short term, small loan
targeted to poor people living below the poverty line (landless and assetless).
Micro credit is a noun, programs extend small loans to very people for self
employment projects that generate income, allowing them to care for them
selves and their families.
a. Able bodied & industrious rural poor having age between 18 to 50 years and the
permanent resident of the project area.
b. Farmers having cultivable land maximum 0.50 acres and the Sharecroppers.
c. Persons engaged in very small off-farm activities in the rural areas.
a. Destitute women and distressed people.
b. Persons having liabilities with other banks/institutions are not eligible for investment
under the Scheme.
Objective of RDS
The Management has taken up a 5-year action plan up to 2010 for RDS. As per
said plan, number of village to be covered by the year 2012 is 15,900 and about
1.23 million members (i.e. 1.23 million families) are expected to bring under the
fold of RDS. Banks investment will rise to the tune of Tk. 10,315.21 (in Million)
by the end of 2012.We have a vision of reaching out to all the villages of the
country through RDS program by the year 2020 if we can expand our branch
network to each and every Upazilla (thana) head quarter by that time. We have
also conceived a tentative plan of Integrated Area Development for the villages.
According to the plan, all the villages will be served by the Bank under its normal
Banking services including RDS.
The non-financial services in the field of health & sanitation and primary &
elementary religious education shall be rendered by Islami Bank Foundation
(IBF)a 100% owned subsidiary of the Bank. Infrastructure development program
shall be taken jointly by local individuals/beneficiaries and IBF.
Target Area
Initially the Scheme was started as a Pilot Scheme in the rural areas of certain districts under
the direct supervision of the nearby Branches of the Bank. At present, it is extended to all the
61 suitable districts out of 64 districts of the country through 207 Branches of the Bank. The
metropolitan and the hill tract areas are kept outside of the Scheme.
Each designated Branch selects villages within a radius of 16 kilometres of the Branch
premises. Following criteria is being followed in selecting a village:
a. Easy communication;
b. Availability of agriculture and other off-farm activities;
c. Abundance of low-income people;
d. Predominance of Islamic values and ideas.
After primary selection of a project area consisting of 4 to 6 villages, Branch conducts
detailed Baseline Survey to identify the target group people and the verities of economic
activity in the area. The concerned Branch has to ensure the availability of at least 400 target
group people in the selected area.
Targets of RDS
The rate of return is determined by the authority from time to time. At present, the rate of
return is 10%. Timely repayment is encouraged by offering 2.5% rebate.
Security Requirements
Generally, collateral security is not required against investment under the Scheme, as the
Scheme has been drawn taking into account the social welfare objective of the Bank for up
liftmen of the socially down-trodden and economically backward and weaker section of the
population of the society. However, Group discipline should be strictly followed and
complied with so that only the right persons are selected and included as members of the
Group.
However, each member of the Group gives personal guarantee for other
members of the same Group and the members are jointly and severally liable
and responsible for payment of investment.
Modes of Investment
The Branch selects any of the following modes depending upon the sector and purpose of
investment :
a. Bai-Muajjal
c. Bai-Salam
d. Murabaha TR
e. Mudaraba
f. Musharaka
Savings Plan
a. The members of the Group have to open Mudaraba Savings Account (RDS) in
their individual names with the Branch from the very inception of the Group
activity.
c. This savings may, however, be withdrawn by the member if he does not have
any other liability with the Branch in any way.
Centre Fund
Each member of the Group has to deposit minimum Tk.2.00 per week in the Centre Fund.
This Fund is kept by opening a Mudaraba Savings Account in the name of the respective
centre. This Fund is utilised for the welfare of the members by way of Quard as per decision
of the Centre in the weekly meeting. This account is operated by Centre Leader & Deputy
Centre Leader jointly. This fund is refundable.
One each Field Officer is appointed for 400 investment clients and one or more Assistant
Officer/Officer is engaged in the Branch as Project Officer to supervise the activities of the
Field Officers. One official from each Zonal Office is assigned to supervise RDS activities of
the Branches under the Zone. The RDS Zone Officers visit the Branches under their
respective Zone at least twice in a year. Head Office Officials also visit the activities in the
Branch level once in a year. Moreover, weekly, monthly, quarterly and annual statement of
RDS activities of the Branches are prepared and sent to the higher authority to monitor and
evaluate regularly.
Micro Enterprise Investment Scheme(MEIS)
To satisfy the graduated clients who already availed highest limit of investment under off-
farm activities, a special scheme has been formed from Tk. 50,000/- to Tk. 200,000/- has
been introduced in the name and style of Micro Enterprise Investment Scheme (MEIS). Local
small traders may also be provided with investment facilities under this limit.
The existing Field Officers and Project Officer explore the possibilities of
investment in the area under the aforesaid Schemes and recommend to the
Branch for sanction. If the Branch is designated to handle the proposal under the
above Schemes, the Branch may sanction within the business discretionary
power of the Branch Incumbent, but if it is beyond the discretionary of the
Branch incumbent, the Branch may send the same to Zonal Office/ Head Office
for sanction. The entire Scheme has been chalked out in such a way so that all
the persons within the command/ target area may be brought within the fold of
Bank's Investment Scheme for productive economic activities.
There are different types of investment sectors where the Bank finance to the
members of RDS. Major sectors are as under:
a. Agriculture Production
01. Cereal crops (rice, wheat, maize, corn, sugarcane, potato etc.)
02. Pulse crops (lentil, mug, khesari, gram, orhor, pea, chick pea, beans
etc.)
03. Oil seeds (mustard, soybean, sunflower, sesame, nut, coconut oil
etc.)
01. Nursery
c. Agricultural Equipment
d. Live stock
05. Other
e. Poultry/Bird
03. Hatchery
f. Fisheries
04. Hatchery
g. Rural Transport
03. Others
h. Rural Housing
i. Off-farm Activities
03. Peddling
05. Other
03. Others
Sl. No Sectors
Investment
Duration
Ceiling(Tk.)
1 Crop Production 15,000/- 1 year
Nursery, Flower &
2 30,000/- 1 year
Fruits production
Agricultural 1 to 3
3 30,000/-
Equipment years
1 to 2
4 Animal Husbandry 30,000/-
years
5 Poultry/Bird 20,000/- 1 year
1 to 2
6 Fisheries 30,000/-
years
7 Rural Transport 10,000/- 1 year
1 to 3
8 Rural Housing 20,000/-
years
9 Off-farm Activities 30,000/- 1 year
Health Support
10 Program (IBF) 2500/1000 1 year
(Tubewell/Sanitation)
11 MEIS(All sectors) 2,00,000/- 1 year
The cardinal principle of the Scheme is the 'Group Approach', Allah loves those 'who conduct
their affairs by mutual consultation' (Al-Quran 42:38). For all decision-making activities, this
mutual consultation is given high priority. The salient features of the Group formation are the
following:
The risk associates with handling cash by the Field Officers in making the
aforesaid purchaser by themselves have made the buying-selling more difficult.
For example-while the V are carrying cash after receiving the sane from the Bank
branch and going to the markets, the Field Officers may indulge in fraudulent
activities by themselves or the cash may be stolen or lost or might be snatched
away by the miscreants. In that case who will be made responsible.
In order to comply with the Shariah principles, we are making our Micro Finance
clients as buying agents of the Bank.
Islami Bank Bangladesh Limited launched its Rural Development Scheme (RDS)
in 1995. In the mean time, 207 Branches of the Bank have been brought under
the Scheme in their respective areas. These Branches are working among the
poor in 15,900villages covering 1,218 Unions under 303 thanas of 61 districts of
the country. Present number of members are 7,33,520.
Since beginning of the scheme, the members are provided investment facilities
of an amount of Tk.29,791.53 million up to 30.12.2012 against which present
outstanding is Tk.10,315.21 million. Rate of recovery under the Scheme is more
than 99%.
The Management has introduced a special Scheme under the fold of RDS for the
graduated clients named MEIS in 2005. Present number of clients is 53,434
where cumulative disbursement is Tk.4,149.80 million up to 30.09.2012 against
which the present outstanding is Tk.10,393.16 million.
Number &
Sl.
Areas of performance Volume/Amou
No.
nt
Area Coverage
11 Overdue 42.21
Manpower Position
Bangladesh is a larger Muslim country, although, huge natural recourses are available in
Bangladesh, but 40% people live under poverty line. Per capita income of Bangladesh has
reached $750 from $ 676 last fiscal year.
The Millennium Development Goals emphasize the role of developed countries in aiding
developing countries, as outlined in Goal Eight. Goal Eight sets objectives and targets for
developed countries to achieve a global partnership for development by supporting fair
trade, debt relief for developing nations, increasing aid and access to affordable essential
medicines, and encouraging technology transfer. Thus developing nations are not seen as left
to achieve the MDGs on their own, but as a partner in the developing-developed compact to
reduce world poverty.
1 Bangladesh with its 40% people living below poverty line and 18% living below
hardcore poverty is suffering from acute rural-urban economic disparity coupled with
illiteracy, lack of proper health and sanitation facilities.
2 The country's economy is basically an agrarian one with vast majority living in rural
areas. The agriculture sector is unable to provide any further scope for employment
resulting in influx of rural population towards urban areas.
4 The vast human resources have remained unutilized due to lack of education, proper
training and concerted efforts to help grow the rural economy.
5 It results in an uneven distribution of income which causes serious set back in the
balanced economic development as well as growth of GDP.
The Rural Development scheme (RDS) has important play role to reduce poverty
in the various ways.
Role Towards Employment Creation
To make the rural poor people self-reliant, IBBL has initiated Rural Development
Scheme. During FY 2012 RDS performance got better than ever, which is
operating in around 15,900villages among more than 5 Lac members of around
23,000 centers of the country and will expand this business to all over the
Bangladesh in the coming years. The amount of present outstanding investment
through this Scheme stood at Tk. 4505 Crore up to December, 2012. Through
RDS IBBL operates Humanitarian Assistance Program, Education Program,
Capacity Building Program and Health & Medicare Program. A study conducted
by Rahman, Jafrullah and Islam analyzed many facts of the RDS and they
concludes that IBBLs RDS is a successful project. They also identified that
household income and expenditure of the RDS participants had increased
significantly and clients had a positive opinion towards the micro investment
program as it improved their overall standards of living .
Sanitation
Plantation
In the rainy season, the RDS members are encouraged for plantation. The Bank gives each of
the RDS member one small plant free of cost on condition to plant at least three. During the
natural calamities like flood, storm etc. the Bank also distribute relief among the affected
RDS members.
Creation of entrepreneur
RDS play important role to create new entrepreneur by disbursing investment.
RDS employee make investment by purchasing and delivering required goods of
entrepreneur. Field officers supervise the investment to increase sell and earn
profit. 90% Entrepreneurs adjusted their investment in due time and their capital
is increasing day by day.
Savings Plan
a. The members of the Group have to open Mudaraba Savings Account (RDS) in
their individual names with the Branch from the very inception of the Group
activity.
c. This savings may, however, be withdrawn by the member if he does not have
any other liability with the Branch in any way.
Most of the people of Bangladesh live in rural area and 80% people are
dependant on agriculture. Fertilizer, insecticide and seeds are needed to firmer
of villages during cultivation. Rural development scheme of IBBL provided
investment to cultivate properly and timely. So, the field of firmers are filled with
corn and it helps to reduce poverty.
Beside the financial activities, Bank has also program to develop their moral values and to get
them aware about their social rights and responsibilities. For the purpose, in the weekly
centre meetings the Field Officers deliver lectures on different important topics. They also
speak on health & hygiene to develop their health consciousness.
Area Coverage
31748
9 Cumulative disbursement (since inception)
million
10,315.21
10 Present outstanding
million
11 Overdue 42.21
Manpower Position
A comparative position along with growth of progress of RDS for last Five years
is shown in the following table
Percentage of
87% --- 84% ---
Female Clients 82% --- --- 85% ----
83%
Milion
Sl
Grameen Bureau
N Features BRAC ASA RDS(IBBL)
Bank BD
o
Nature of
Specializ
2 Organizatio NGO NGO NGO Bank
ed Bank
n
No. of
3 2705 2565 393 3294 207
Branch
No. of
4 villages
69,421 84,237 13,950 72,204 15,900
Coverage
Command
7 5 Km 5 Km 8 Km 5 Km 16 Km
Area
Cumulative
33174
9 disburseme 374556 445109 23811 24239
3
nt
Present
1
outstandin 45745 46125 3475 31973 10,315.21
0
g
12.5% flat
with 2.5%
1 Rate of 20% 14.8% 14.6%
15% flat rebate in
1 return decline flat flat
timely
repayment
1 Rate of
99% 98% 98% 96% 99%
2 recovery
Amount of
1
Full 457 880 70 1278 37
3
overdue
Balance of
1
Personal 16306 36649 1230 6930 1489
4 Savings
4 The RDS Field Officers discuss in the There is no scope to discuss the
centre meeting about moral same, the main function of the
development and the responsibility of centre meeting is Loan
his/her families & neighbors. disbursement and recovery.
5 The Tube-well and Sanitary Latrine are In the NGOs, there is no option
provided on Quard basis to the RDS to provide Tube-well and
clients who have not the same facilities. Sanitary Latrine on the basis of
Quard.
6 The profit rate of RDS is 12.50%, Timely The actual rate of return of
repayment is encourage by offering NGOs is high i.e 30% to 40%
2.5% rebate.
8 Integrated Area Development approach The NGOs dont have any plan
is the main objective of the RDS. Out of to Integrated Development of
the target group provided investment the rural area.
facilities from the other schemes of the
Bank.
9 Under RDS, there is no admission fees All the NGOs realized admission
& cost of pass book. fees & cost of pass book from
the members.
10 In RDS, the client weekly deposits Tk.20 Most of the NGOs realized 10%
in their personal savings account. of lending amount from the
client at the time of
disbursement as their savings.
GENERAL FINDINGS
Though the entry of Islamic Microfinance into the field of different NGOs
microfinance markets in Bangladesh, it is difficult to sustain and develop the
system. Islamic banks have to strive to solve all the problems, which stand in the
way of their growth and survival. Some findings are as under:
Though the entry of Islamic Microfinance into the field of different NGOs
microfinance markets in Bangladesh, it is difficult to sustain and develop the
system. Islamic banks have to strive to solve all the problems, which stand in the
way of their growth and survival.
i. Conventional micro credit, over a period of three hundred years, has taken the
present shape. Islamic microfinance has been developed to work in the
environment created by this system. To achieve the objectives of Islamic
economics, the Islamic Banks Rural Development Scheme need a distinct
organization & management structure to suit their purposes.
ii. Distributive efficiency of Islamic Banks RDS is lost when an Islamic bank starts
operation under conventional banking framework. Any shift from PLS modes
leads the system to break the direct relationship between the income of the
entrepreneurs, the bank and the depositors.
iii. Most of the Islamic Banks microfinance operate on Bai Muazzal, and HPSM
modes of investment, which substitutes the Hypothecation modes of conventional
banking.
iv. Mudaraba and Musharaka are the unique & ideal modes of operation of Islamic
banking along with microfinance, which do not correlate with or substitute the
conventional modes. These two are yet to be widely introduced in Islamic Banks
financial Institutes.
v. Most of the Islamic NGOs are working along with the interest-based
financial system system. Therefore it requires close observation of the
Shariah performance of the bank by any independent house of
authority.
vi. Islamic microfinance system came into existence in an environment
where the laws, institutions training and attitude are set to serve the
economy based on the principles of interest.
vii. It is evident from the research findings that Islamic microfinance & banking could
be the most efficient system if it were allowed to operate as a sole system in an
economy.
2. Need for Islamic Microfinance expert & Bankers
i. Islamic banks have a high regard of training for their workers to give a broader
outlook about Islamic banking for enhancing Attitude, Skill and Knowledge about
the system so that they can better serve the needs of the community.
iv. Many Islamic banks also lack the necessary expertise and
institutional capacity for Research and Development (R & D) that is
not only necessary for the realization of their full potential, but also
for its very survival in this age of fierce competition in the
sophisticated markets and an informed public.
vi. There is and will be tendency in the bankers practicing in Islamic banks to
mould or modify the Islamic principles to suit the requirement for transactions
at hand. Whereas, the main goal of the Islamic banks is to comply totally with
the Islamic principals in all their financial dealings. They will have to get
accustomed with carrying out their job remaining within the bounds laid by
Islamic Shariah.
Islamic banks have so far ignored the use of media. Even the Muslims in many areas
remain in dark about Islamic banking & Islamic microfinance that is being practiced
in different parts of the world. Sadly, Islamic banks have failed to use the media
effectively to publicize their activities. The authorities, concerned in Islamic banks
should address these issues on a priority basis.
Basic operational procedure of RDS is more or less similar to Grameen Bank and other big
NGOs, however, they have some unique characteristics in its operation including ensuring of
shariah practice (buying and selling) in investment activities that makes them different from
others. The mentionable unique features are as follows:
i. Supply of pass-books and other ancillary papers to the members free of cost;
iv. Full waiver of dues without any deduction from members in the name of insurance, risk
fund etc. in case of following incidence:
SWOT Analysis:
Fig. in million
2008 2009 2010 2011 2012
Deposit 202,155. 244,292. 291,934. 3,41,853. 417,844.
45 14 60 67 14
Investm 187,586. 225,752. 275,493. 322,772. 399,930.
ent 50 41 94 83 79
Operati 2,674.80 3403.55 4463.47 4841.45 5524.44
ng Profit
Recommendation:
RECOMMENDATIONS
Despite various problems and shortcomings, the Islamic Banks have the
potentiality to grow and expand its area of activities to bring good to the
humanities. Some suggestive measures are appended below:
i. Since Microfinance alone can not alleviate poverty in its entirety, Social
Safety Nets in the form of Zakat and transfer fund in the form of grant be
initiated from the surplus generated out the commercial operation of the
respective MFIs and donation from well to-do people and institutions in the
locality and rich Muslim countries.
iii. IDB should take initiative to build-up the proposed Poverty Reduction Fund
(PRF) at the earliest possible time determining the time frame.
iv. IDB may take initiative for establishment of MFIs in the LDMC (Least
Developed Member Countries) with its equity participation so that rapid
expansion of branch network is possible with the permission of regulatory
authority.
v. All such MFIs established at the initiative of IDB be provided with technical
know how in the light of Best Practices in the Industry.
vi. Special scholarship for the deserving wards of the members for
prosecuting higher studies may be introduced.
vii. Educational institutions may introduce 'Islamic Finance & Banking' & other
ix. Scope for training, motivation & orientation programs for Islamic Bankers
xiv. The clients of the Islamic Banks be equipped with knowledge of Islamic
banking through discussions, seminars, symposia etc.
xv. Islamic banks can develop unanimous Shariah Manual or guidelines for
day-to-day consultation and clientele motivation.
xvi. The research and development (R & D) for Islamic Economics, Banking and
Finance be geared up.
xvii. Islamic Banks in Bangladesh may expand their network in the rural areas.
xviii. Investment of the Islamic bank portfolio be diversified and extended for
long term financing under Musharaka and Mudaraba.
xx. The central banks of the Muslim countries can help creation of
environment for Islamic Banking with more responsibilities.
xxii. New and innovative products be designed for financing under Profit and
Loss sharing basis.
Microfinance, originated in Bangladesh has spread all over the globe. Today
within the global coverage of Microfinance Bangladesh's achievement stands out
prominently. Despite hard competition among MFIs/NGOs operating in
Bangladesh, IBBLs RDS has made tremendous and remarkable progress
practically in every sphere of its activities. This success has been made possible
due to dynamic leadership of its management as well as devotion and sincerity
of all categories of officers and executives. The Islami Bank Bangladesh Limited
operates Microfinance somewhat on Shariah principle through its Rural
Development Scheme. It has currently 733520 members that include 319,079
borrowers having investment outstanding at Tk10315.21 million as on dec-2012.
The year wise data shows that the number of members and investment is
significantly increasing over the years. All these imply that Islamic Microfinance
has strong potential in the country. RDS wants to go for expansion of its program.
By the end of 2012, its member size will be 8 times higher than 2008. It wants to
reach 474.766 million clients by the end of 2012 where the investment
outstanding would stand at Tk.10315.21 million. This evidently shows that RDS
has the potentiality to capture a large-chunk of the existing market and thereby
emerge as a large MFI program on the country. Banks doing microfinance are not
to be regulated by MRA.
All these boil down to the fact that there is a growing Islamic finance
environment in the country. It is true that Microfinance is a quasi banking activity.
It is expected that the current enabling environment of Islamic Banking system
will proactively influence the Islamic Microfinance in the country. The policy
makers have recognized the importance of Microfinance in Bangladesh and the
present government has pledged its support to this program.
IDB has proposed to establish a Micro-Finance Investment Company at its
initiative together with IBBL and IBBLs High Valued Clients for integrated
village development under private public partnership subject to due diligence
and approval by the relevant authorities in IDB and Bangladesh. IBBL will
introduce 5 to 10 High Valued Clients of IBBL for consideration as strategic
partner in the proposed Microfinance Investment Company. In this connection
IDB has requested to resolve all the above issues after having discussion with
Bangladesh Bank and all other concerned authorities as soon as possible.
Books:
Chapra, M.U, (1995). Towards a Just Monetary System. Leicester: The Islamic
Foundation.
http://www.islamibankbd.com
www.grameen.net
Annual Report of 2008-2012 of IBBL.
Others:
Various types of publications of IBBL.
Islami Bank Porichety.
Various lecture sheets of IBTRA.
Bangladesh orthonaitick shamikha
Bangladesh Bank report
Appendix
7 .Steady Growth: IBBL has got a smooth growth of over the years in
terms of deposit, investment and profit.