Executive Summary

Now a days Islamic Banking system is more popular than the conventional banking.
Islamic Banking is operated by the Islamic laws. Because of Islamic law this system is
acceptable by all. Every Muslim and Non-Muslim Country is following these banking
systems. This report consists of a short overview on Islamic Banking system. It also
consists of Islamic Banking Model and Islamic banking operation in Bangladesh. There
we also identify the difference between Islamic banking and conventional banking.
EXIM Bank Ltd. was incorporated as a public Limited company on the 2nd June
1999 under Company Act 1994, The Bank started commercial banking operations
effective from third august 1999. It obtained permission from Bangladesh Bank on
First July 2004 to commence its business. The Bank carries banking activities
through its 83 branches in the country. The commercial banking activities of the
bank encompasses a wide range of services including mobilizing deposits, providing
investment facilities, discounting bills, conducting money transfer and foreign
exchange transactions, and performing other related services such as safe keeping,
collections and issuing guarantees, acceptances and letter of credit. The report will
mainly focus on Ratio Analysis of Export Import Bank of Bangladesh LTD.. Find
out the problem by using ratio is the main objective of this report. Ratio analysis help to
show the result easily to the users of the annual report. Ratio is more effective and
efficient way to present the data into valuable information to the users. It also helps the
users to take their decision in time effective manner.

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Islamic banking and finance
Islamic banking or Islamic finance or sharia-compliant
finance is banking or financing activity that complies with sharia (Islamic law) and its
practical application through the development of Islamic economics. Some of the modes
of Islamic banking/finance include Mudarabah (Profit and loss
sharing), Wadiah (safekeeping), Musharaka (jointventure), Murabahah(costplus),and Ij
ar (leasing).
Sharia prohibits riba, or usury, defined as interest paid on all loans of money (although
some Muslims dispute whether there is a consensus that interest is equivalent to riba).
Investment in businesses that provide goods or services considered contrary to
Islamic principles (e.g. pork or alcohol) is also haraam ("sinful and prohibited").
These prohibitions have been applied historically in varying degrees in Muslim
countries/communities to prevent un-Islamic practices. In the late 20th century, as part
of the revival of Islamic identity, a number of Islamic banks formed to apply these
principles to private or semi-private commercial institutions within the Muslim
community. Their number and size has grown so that by 2009, there were over
300 banks and 250 mutual funds around the world complying with Islamic
principles, and around $2 trillion were sharia-compliant by 2014. Sharia-compliant
financial institutions represented approximately 1% of total world assets, concentrated
in the Gulf Cooperation Council (GCC) countries, Iran, and Malaysia.[11] Although Islamic
Banking still makes up only a fraction of the banking assets of Muslims, since its
inception it has been growing faster than banking assets as a whole, and is projected to
continue to do so.
The industry has been lauded for returning to the path of "divine guidance" in rejecting
the "political and economic dominance" of the West, and noted as the "most visible
mark" of Islamic revivalism. Its most enthusiastic advocates promising "no inflation, no
unemployment, no exploitation and no poverty" once it is fully implemented. But it has
also been criticized for failing to develop profit and loss sharing or more ethical modes
of investment promised by early promoters, and instead selling banking products that
"comply with the formal requirements of Islamic law, but use "ruses and subterfuges to
conceal interest, and entail "higher costs, bigger risks" than conventional (ribawi)
banks.

2
Principles of Islamic Banking
1. Prohibition of Interest or Usury

The principles of Islamic finance are established in the Qur'an, which Muslims believe
are the exact Words of God as revealed to the Prophet Mohammed. These Islamic
principles of finance can be narrowed down to four individual concepts.
The first and most important concept is that both the charging and the receiving of
interest is strictly forbidden. This is commonly known as Riba1 or Usury. Money, on its
own, may not generate profits. When Riba infects an entire economy, it jeopardises the
well-being of everyone living in that society. When investors are more concerned with
rates of interest and guaranteed returns than they are with the uses to which money is
put, the results can only be negative.
Adherents of Islam believe that the Qur'an is the final book of God's word following both
the Torah and the Bible. As a result, there are a number of similarities between the
Islamic, Christian and Jewish faiths.
Quoting Shaikh Saleh Abdullah Kamel, Chairman and Founder of Albaraka Banking
Group; Usury is forbidden in all the three religions, Judaism, Christianity and Islam, but
it is the people who forget the rules of Allah. All societies, nowadays - Muslims,
Christians and Jews - deal with Usury.

2. Ethical Standards

The second guiding principle concerns the ethical standards. When Muslims invest their
money in something, it is their religious duty to ensure that what they invest in is good
and wholesome. It is for this reason that Islamic investing includes serious
consideration of the business to be invested in, its policies, the products it produces, the
services it provides, and the impact that these have on society and the environment. In
other words, Muslims must take a close look at the business they are about to become
involved in.
In all facets of the financial system, Islam has certain rules, certain regulations as to how
Muslims should go about participating in these activities. For example, in share trading
or the securities market, Islam looks at the activities of the companies, to establish
whether or not the companies are involved in activities which are in line with Sharia'a.

3. Moral and Social Values

The third guiding principle concerns moral and social values. The Qur'an calls on all its
adherents to care for and support the poor and destitute. Islamic financial institutions
are expected to provide special services to those in need. This is not confined to mere
charitable donations but has also been institutionalised in the industry in the form of
profit-free loans or Al Quard Al Hasan.
An Islamic bank's business includes certain social projects, as well as charitable
donations. Islamic banks provide profit-free loans. For example, if an individual needs
to go to hospital or wants to go to university, we give what is called Quard Al Hasan.
This Quard Hasan is normally given for a short period of one year and the Islamic bank
does not charge anything for that.
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 4. Liability and Business Risk
The final principle concerns the overarching concept of fairness, the idea that all parties
concerned should both share in the risk and profit of any endeavor. To be entitled to a
return, a provider of finance must either accept business risk or provide some service
such as supplying an asset, otherwise the financier is, from a Sharia'a point of view, not
only an economic parasite but also a sinner. This principle is derived from a saying of
the Prophet Mohammed (May Peace be upon Him) "Profit comes with liability". What
this means is that one becomes entitled to profit only when one bears the liability, or
risk of loss. By linking profit with the possibility of loss, Islamic law distinguishes lawful
profit from all other forms of gain.

In order to insure that these principles are followed, each Islamic institution must
establish and provide itself with an advisory council known as a Sharia'a Board. The
members of Sharia'a Boards can include bankers, lawyers or religious scholars as long
as they are trained in the Islamic law, or Sharia'a.
In 2001, the Industry witnessed a remarkable development in this regard by the
initiative of the
Accounting and Auditing Organization for the Islamic Financial Institutions or AAOIFI.
At that time, AAOIFI's standards were enhanced to include elements that aim at
broadening the role of the external auditor. Now according to these new developments
the external auditor is also required to look for compliance with Sharia'a rules as
defined by the Sharia'a supervisory board of each bank and in accordance with the
Sharia'a standards AAOIFI has begun to issue.

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Model of Islamic Banking
Mudarabah

Mudarabah or "Sharing the profit and loss with venture capital",is a partnership or trust
financing contract (similar to western equivalent of General and Limited Partnership)
where one partner, (rabb-ul-mal or "silent partner"/financier) gives money to another
(mudarib or "working partner") for investing in a commercial enterprise. The rabb-ul-
mal party provides 100 percent of the capital and the mudarib party provides its
specialized knowledge to invest the capital and manage the investment project. Profits
generated are shared between the parties according to a pre-agreed ratio. If there is a
loss, rabb-ul-mal will lose his capital, and the mudarib party will lose the time and effort
invested in the project. The profit is usually shared 50%-50% or 60%-40% for rabb ul
mal-mudarib.

In mudarabah:

Investment is the sole responsibility of rabb-ul-maal, not all partners.

The rabb-ul-maal has no right to participate in the management which is carried
out by the mudarib only.
The loss, if any, is suffered by the rabb-ul-mal only, because the mudarib does
not invest anything. His loss is restricted to the fact that his labor has gone in
vain and his work has not brought any fruit to him, unless losses are due to the
mudarib's misconduct, negligence, or breach of the terms and conditions of the
contract.
All the goods purchased by the mudarib are solely owned by the rabb-ul-maal,
and the mudarib can earn his share in the profit only in case he sells the goods
profitably. Therefore, he is not entitled to claim his share in the assets
themselves, even if their value has increased.

Musharakah

Musharakah is a joint enterprise in which all the partners share the profit or loss of the
joint venture. The two (or more) parties that contribute capital to a business divide the
net profit and loss on a pro rata basis.
Musharakah is often used in investment projects, letters of credit, and the purchase or
real estate or property. In the case of real estate or property, the bank assesses
an imputed rent and will share it as agreed in advance. All providers of capital are
entitled to participate in management, but not necessarily required to do so. The profit
is distributed among the partners in pre-agreed ratios, while the loss is borne by each
partner strictly in proportion to respective capital contributions. This concept is distinct
from fixed-income investing (i.e. issuance of loans).
Musharaka is an approach used in business transactions. Islamic banks lend their
money to companies by issuing floating rate interest loans. The floating rate of interest
is pegged to the company's individual rate of return. Thus, the bank's profit on the loan

5
is equal to a certain percentage of the company's profits. Once the principal amount of
the loan is repaid, the profit-sharing arrangement is concluded

In musharakah:

unlike mudarabah, investment comes from all the partners

unlike mudarabah, all the partners can participate in the management of the
business and can work for it.
all the partners share the loss to the extent of the ratio of their investment
as soon as the partners mix up their capital in a joint pool, all the assets of the
musharakah become jointly owned by all of them according to the proportion of
their respective investment. Therefore, each one of them can benefit from the
appreciation in the value of the assets, even if profit has not accrued through
sales.

Murabaha

Murabaah, murabaa or murbaah is a term of fiqh (Islamic jurisprudence) for a sale

where the buyer and seller agree on the markup (profit) or "cost-plus" price for the
item(s) being sold.[2] In recent decades it has become a term for a very common form of
Islamic (i.e. "shariah compliant") financing, where the price is marked-up in exchange
for allowing the buyer to defer payment (a contract with deferred payment being
known as bai-muajjal). Murabaha financing is similar to a rent-to-own arrangement in
the non-Muslim world, with the intermediary (i.e. the lending bank) retaining
ownership of the item being sold until the loan is paid in full.
The purpose of murabaha is to finance a purchase while not paying any interest, which
most Muslims (particularly most scholars) consider riba (usury) and thus haram
(forbidden). Murabaha has come to be "the most prevalent" or "default" type of Islamic
finance.
A proper murbaah transaction differs from conventional interest-charging loans in
several ways. The buyer/borrower pays the seller/lender at an agreed upon higher
price, instead of interest charges, but makes a religiously permissible "profit on the sale
of goods. The seller/financer must take actual possession of the good before selling it
to the customer; and must assume "any liability from delivering defective goods.
Sources differ as to whether the seller is permitted to charge extra when payments are
late, with some authors stating any late fees ought to be donated to charity, or not
collected unless the buyer has "deliberately refused" to make a payment. For the rate of
markup, murabaha contracts "may openly use" riba interest rates such as LIBOR, "as a
benchmark", a practice approved of by no less a scholar than Taqi Usmani.
Conservative scholars promoting Islamic finance consider murabaha to be a "transitory
step" towards a "true profit-and-loss-sharing mode of financing", and a "weak" or
"permissible but undesirable" form of finance to be used where profit-and-loss-sharing
is "not practicable." Critics/skeptics complain/note that in practice most "murabaah"
transactions are merely cash-flows between banks, brokers and borrowers, with no
buying or selling of commodities; that the profit or mark-up is based on the prevailing
interest rate used in haram lending by the non-Muslim world; that "the financial
outlook" of Islamic murabaha financing and conventional debt/loan financing is "the
same", as is most everything else besides the terminology used.

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Example of Murbaah:

An example of a murabaha contract is: Adam approaches a Murabaha Bank in order to

finance the purchase of a $10,000 automobile from Cash-Only-Automobiles. The bank
agrees to purchase the automobile from Cash-Only-Automobiles for $10,000 and then
sell it to Adam for $12,000 which is to be paid by Adam in equal installments over the
next two years.
While the cost to Adam is approximately that of a 10% per year loan, Islamic banks
using this transaction maintain it is different because the amount that Adam owes is
fixed and does not increase if he is delinquent on payments. Therefore, the finance is a
sale for profit and not riba.

Leasing

Leasing is an agreement that permits one party (the lessee) to use an asset or property
owned by another party (the lessor) for an agreed-upon price over a fixed period of
time. It is a form of asset finance which has the benefit of using assets without the
requirements of ownership. The lessee acquires the asset he needs without borrowing
on interest and receives the benefits of use while the lessor receives the value of regular
rental payments for a specified period plus the residual value of the asset. The lease
may be written either for a short-term or for a long-term and its rules is similar to those
governing sale because in both cases there is a transfer of one thing between two
parties for valuable consideration. However, leasing differs from sale as its mechanism
allows the separation between ownership and use; in fact, it does not involve
transferring the corpus or ownership of an asset, which remains with the lessor.

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Differences between Islamic Bank
and Conventional Bank
One must refrain from making a direct comparison between Islamic banking and
conventional banking (apple to apple comparison). This is because they are extremely
different in many ways. The key difference is that Islamic Banking is based on Shariah
foundation. Thus, all dealing, transaction, business approach, product feature,
investment focus, responsibility are derived from the Shariah law, which lead to the
significant difference in many part of the operations with as of the conventional
The foundation of Islamic bank is based on the Islamic faith and must stay within the
limits of Islamic Law or the Shariah in all of its actions and deeds. The original meaning
of the Arabic word Shariah is the way to the source of life and is now used to refer to
legal system in keeping with the code of behaviour called for by the Holly Quran
(Koran). Amongst the governing principles of an Islamic bank are :

* The absence of interest-based (riba) transactions;

* The avoidance of economic activities involving oppression (zulm)
* The avoidance of economic activities involving speculation (gharar);
* The introduction of an Islamic tax, zakat;
* The discouragement of the production of goods and services which contradict the
Islamic value (haram)

On the other hand, conventional banking is essentially based on the debtor-creditor

relationship between the depositors and the bank on one hand, and between the
borrowers and the bank on the other. Interest is considered to be the price of credit,
reflecting the opportunity cost of money.
Islamic law considers a loan to be given or taken, free of charge, to meet any
contingency. Thus in Islamic Banking, the creditor should not take advantage of the
borrower. When money is lent out on the basis of interest, more often that it leads to
some kind of injustice. The first Islamic principle underlying for such kind of
transactions is deal not unjustly, and ye shall not be dealt with unjustly which explain
why commercial banking in an Islamic framework is not based on the debtor-creditor
relationship.
The other principle pertaining to financial transactions in Islam is that there should not
be any reward without taking a risk. This principle is applicable to both labor and
capital. As no payment is allowed for labor, unless it is applied to work, there is no
reward for capital unless it is exposed to business risk.
Thus, financial intermediation in an Islamic framework has been developed on the basis
of the above-mentioned principles. Consequently financial relationships in Islam have
been participatory in nature.

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Lastly, for the interest of the readers, the unique features of the conventional banking
and Islamic banking are shown in terms of a box diagram as shown below:-

Conventional Banks Islamic Banks

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

2. In contrast, it promotes risk sharing

2. The investor is assured of a predetermined
between provider of capital (investor) and the
rate of interest.
user of funds (entrepreneur).

3. It aims at maximizing profit without any 3. It also aims at maximizing profit but subject
restriction. to Shariah restrictions.

4. In the modern Islamic banking system, it

has become one of the service-oriented
4. It does not deal with Zakat. functions of the Islamic banks to be
a Zakat Collection Centre and they also pay out
their Zakat.

5. Participation in partnership business is the

5. Lending money and getting it back with
fundamental function of the Islamic banks. So
compounding interest is the fundamental
we have to understand our customers
function of the conventional banks.
business very well.

6. The Islamic banks have no provision to

charge any extra money from the defaulters.
6. It can charge additional money (penalty and
Only small amount of compensation and these
compounded interest) in case of defaulters.
proceeds is given to charity. Rebates are given
for early settlement at the Banks discretion.

7. Very often it results in the banks own 7. It gives due importance to the public
interest becoming prominent. It makes no interest. Its ultimate aim is to ensure growth
effort to ensure growth with equity. with equity.

8. For interest-based commercial banks,

8. For the Islamic banks, it must be based on a
borrowing from the money market is
Shariah approved underlying transaction.
relatively easier.

9. Since income from the advances is fixed, it 9. Since it shares profit and loss, the Islamic
gives little importance to developing expertise banks pay greater attention to developing
in project appraisal and evaluations. project appraisal and evaluations.

10. The Islamic banks, on the other hand, give

10. The conventional banks give greater
greater emphasis on the viability of the
emphasis on credit-worthiness of the clients.
projects.

11. The status of a conventional bank, in 11. The status of Islamic bank in relation to its
relation to its clients, is that of creditor and clients is that of partners, investors and
debtors. trader, buyer and seller.

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Overview of Islamic Banking in
Bangladesh
With a timid beginning in 1960s, the Islamic financial industry has now gained
popularity in both Muslim and non-Muslim countries attracting customers of all faith
due to its resilience and less risky character. In tandem with the global rapid expansion
of Islamic banking, Bangladesh has experienced phenomenal growth in Islamic banking
following strong public demand for the system. Since inception in 1983 Islamic banks
have recorded robust performance; at present they accounted for more than twenty
percent market share of the entire banking industry in Bangladesh. Though Islamic
banking industry in Bangladesh has achieved more than 20 percent annual growth, the
industry has immense potentials for further expansion as Bangladesh is a Muslim
majority country with a vibrant economy of 6 percent real economic growth over the
last decade. To reap the full potentials of Islamic banking, it is imperative to access the
present status of Islamic banking industry in Bangladesh, review further potentials and
design proper policy options. Given this, the present paper investigated the present
status of Islamic banking industry and it also assessed its comparative performance
with overall banking industry. Finally, the paper shed light on challenges faced by the
Islamic banking industry and prescribed policy options to meet the challenges.

Share and Structure of Deposits of Islamic Banks

Total deposits of the Islamic banks stood BDT 1335.61 billion at the end of June 2014
which accounts 21 percent share of the entire banking industry. Among total deposits, 8
full-fledged Islamic banks have mobilized deposits of BDT 1266.62 billion (94.8%),
Islamic banking branches of conventional banks have collected BDT 48.18 billion and
Islamic banking branches of conventional banks have gathered BDT 20.80 billion.
Islamic Bank Bangladesh Limited has the biggest share of deposits (39.36%) [chart-1],
followed by EXIM Bank Ltd. (13.01%), First Security Islami Bank Ltd. (12.17%), Al-
Arafah Islami Bank Ltd. (12.10%), Social Islamic Bank Ltd (8.08%), Shahjalal Islami
Bank Ltd. (7.50%), Islami banking branches (3.61%), Union Bank Ltd (1.71%), Islami
banking windows (1.56%) and ICB Islamic Bank Limited (0.89%).

Chart 4.1: Share of Deposits of all Islamic Banks (June 2014)

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 Source: Research Department, Bangladesh Bank

An analysis

of Islami Union Islami Banking different

Window
Banking 1.71% s
modes of FSIBL deposits
Branche 12.17 1.56 IBBL
in the s Islamic
% %
Banking 3.61% 39.36% sector
SJIBL
reveals 7.50% EXIM that
13.01%

AL-Arafah SIBL ICB

12.10% 8.08% 0.89%
MudarabaTerm Deposits secured the highest position (53.12%) [chart-2] followed by

Mudaraba Savings Deposits (MSD) (18.03%), Mudaraba Special Savings

(pension/profit) Deposits (10.04%), Special Scheme Deposit (9.94%) and Current

Account Deposits (4.55%).

Share and Structure of Investments of Islamic Banks:

Total amount of investments in Islamic Banking sector stood at BDT 1137.96

billion at the end of June 2014 which represents 24 percent share of the whole banking
industry. Among total investments, 95.31 % are made by 8 Islamic banks, 3.31% by the
scheduled banks Islamic banking branches and the rest 1.38% is accumulated by the
scheduled banks Islamic banking windows.

Chart 4.3: Share of Investments made by Islamic Banks (June 2014)

Uni Islami Islami
FSIBL on Banking Banking
11.22 1.4 Branches Windows
% 6%
3.31% 1.38%
SJIB
L
7.56 IBBL
%
40.22%

EXI
M
11
 13.9
9%
AL-
Arafah SIBL ICB
12.89
% 8.30% 0.94%
Source: Research Department, Bangladesh Bank

Islami Bank Bangladesh Ltd has accounted for the highest 39.04% share of investments
among all Islamic banks (chart-3) followed by EXIM bank Ltd. (13.99%), Al Arafah
Islami Bank Ltd. (12.89%), First Security Islami Bank Ltd (11.22%), Social Islami Bank
Ltd

11

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(8.30%), Shahjalal Islami Bank (7.56%), Union Bank (1.46%) and ICB Islami Bank Ltd
(0.85%).

Islamic banks invest in all key sectors of the economy of Bangladesh. Investment in the
business has occupied the highest 28.95% share (chart-4). The next position is secured
by MSME (Micro, Small and Medium Enterprises) sector (24.67%) followed by
Industrial sector (23.11%), others (7.70%), Real Estate (7.40%), Agriculture (2.14%),
Transportation (1.51%), Electricity, Gas and Water supply (0.62%) and Poverty
Reduction (0.42%).

Overview of EXIM Bank Ltd.

Export Import Bank of Bangladesh Limited was established in the year 1999 under the
leadership of Late Mr. Shahjahan Kabir, Founder Chairman who had a long dream of
floating a commercial bank which would contribute to the socio-economic development
of our country. He had a long experience as a good banker. A group of highly qualified
and successful entrepreneurs joined their hands with the founder chairman to
materialize his dream. Indeed, all of them proved themselves in their respective
business as most successful star with their endeavor, intelligence, hard working and
talent entrepreneurship. Among them, Mr. Nazrul Islam Mazumder who is an
illuminated business tycon in the Garments business in Bangladesh became the
Honorable Chairman after the demise of the honorable founder chairman. He is also the
chairman of Bangladesh Association of Banks (BAB). Under his leadership, BAB has
emerged as an effective forum for exchanging views on problems being faced by the
banking sector of Bangladesh and for formulating common policy guidelines in
addressing such problems.

The Bank starts functioning from 3rd August, 1999 with its name as Bengal Export
Import Bank Limited. On 16th November 1999, it was renamed as Export Import Bank
of Bangladesh Limited with Mr. Alamgir Kabir as the Founder Advisor and Mr.
Mohammad Lakiotullah as the Founder Managing Director respectively. Both of them
have long experience in the financial sector of our country. By their pragmatic decision
and management directives in the operational activities, this bank has earned a secured
and distinctive position in the banking industry in terms of performance, growth, and
excellent management. Under the leadership of Mr. Lakiotullah, the Bank has migrated
all of its conventional banking operation into Shariah Based Islami Banking in the year
July 2004.

In the year 2006, Mr. Kazi Masihur Rahman became the Managing Director of the bank
when Mr. Lakiotullah left the bank after completion of his successful 7 years as MD. Mr.
Kazi served in the bank for next five years. Under his leadership, the bank has been
placed on a state of the art centralized IT platform with two modern data centers where

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world renowned core banking software TEMENOS T24 is running along with some
alternate delivery channels like ATMs and SMS banking.

On 25th August, 2011, Mr. Md. Fariduddin Ahmed has joined in the bank as Managing
Director. With his long banking experience, EXIM Bank become fully compliant Bank
with adequate capital and good asset quality. After retirement from Managing Director,
he has been continuing his service for EXIM Bank as Advisor since 27th July 2012.

Dr. Mohammed Haider Ali Miah succeeded Mr. Fariduddin Ahmed on July 25, 2012 and
has created a new dimension in EXIM history becoming the first ever in-house
Managing director and CEO of the Bank. Under his far-sighted leadership, EXIM Bank
has not only achieved uppermost level of performance in almost each arena of its
activities but also gained confidence to place itself as one of the dynamic banks through
delivering transparent and standard banking services to the customers in a compliant
manner.

Ratio Analysis of EXIM Bank Ltd.:

Profitability Ratios

Gross Profit Rate = Gross Profit Net Sales

Evaluates how much gross profit is generated from sales. Gross profit is equal to
net sales (sales minus sales returns, discounts, and allowances) minus cost of sales.

Return on Sales = Net Income Net Sales

Also known as "net profit margin" or "net profit rate", it measures the percentage
of income derived from dollar sales. Generally, the higher the ROS the better.

Return on Assets = Net Income Average Total Assets

In financial analysis, it is the measure of the return on investment. ROA is used in

evaluating management's efficiency in using assets to generate income.

Return on Stockholders' Equity = Net Income Average Stockholders' Equity

Measures the percentage of income derived for every dollar of owners' equity.

Liquidity Ratios

Current Ratio = Current Assets Current Liabilities

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 Evaluates the ability of a company to pay short-term obligations using current
assets (cash, marketable securities, current receivables, inventory, and
prepayments).

Acid Test Ratio = Quick Assets Current Liabilities

Also known as "quick ratio", it measures the ability of a company to pay short-
term obligations using the more liquid types of current assets or "quick assets"
(cash, marketable securities, and current receivables).

Cash Ratio = ( Cash + Marketable Securities ) Current Liabilities

Measures the ability of a company to pay its current liabilities using cash and
marketable securities. Marketable securities are short-term debt instruments
that are as good as cash.

Net Working Capital = Current Assets - Current Liabilities

Determines if a company can meet its current obligations with its current assets;
and how much excess or deficiency there is.

Management Efficiency Ratios

Receivable Turnover = Net Credit Sales Average Accounts Receivable

Measures the efficiency of extending credit and collecting the same. It indicates
the average number of times in a year a company collects its open accounts. A
high ratio implies efficient credit and collection process.

Days Sales Outstanding = 360 Days Receivable Turnover

Also known as "receivable turnover in days", "collection period". It measures the

average number of days it takes a company to collect a receivable. The shorter
the DSO, the better. Take note that some use 365 days instead of 360.

Inventory Turnover = Cost of Sales Average Inventory

Represents the number of times inventory is sold and replaced. Take note that
some authors use Sales in lieu of Cost of Sales in the above formula. A high ratio
indicates that the company is efficient in managing its inventories.

Days Inventory Outstanding = 360 Days Inventory Turnover

Also known as "inventory turnover in days". It represents the number of days

inventory sits in the warehouse. In other words, it measures the number of days
from purchase of inventory to the sale of the same. Like DSO, the shorter the DIO
the better.

Accounts Payable Turnover = Net Credit Purchases Ave. Accounts Payable

15
 Represents the number of times a company pays its accounts payable during a
period. A low ratio is favored because it is better to delay payments as much as
possible so that the money can be used for more productive purposes.

Days Payable Outstanding = 360 Days Accounts Payable Turnover

Also known as "accounts payable turnover in days", "payment period". It measures

the average number of days spent before paying obligations to suppliers. Unlike
DSO and DIO, the longer the DPO the better (as explained above).

Operating Cycle = Days Inventory Outstanding + Days Sales Outstanding

Measures the number of days a company makes 1 complete operating cycle, i.e.
purchase merchandise, sell them, and collect the amount due. A shorter
operating cycle means that the company generates sales and collects cash faster.

Cash Conversion Cycle = Operating Cycle - Days Payable Outstanding

CCC measures how fast a company converts cash into more cash. It represents
the number of days a company pays for purchases, sells them, and collects the
amount due. Generally, like operating cycle, the shorter the CCC the better.

Total Asset Turnover = Net Sales Average Total Assets

Measures overall efficiency of a company in generating sales using its assets. The
formula is similar to ROA, except that net sales is used instead of net income.

Leverage Ratios

Debt Ratio = Total Liabilities Total Assets

Measures the portion of company assets that is financed by debt (obligations to

third parties). Debt ratio can also be computed using the formula: 1 minus Equity
Ratio.

Equity Ratio = Total Equity Total Assets

Determines the portion of total assets provided by equity (i.e. owners'

contributions and the company's accumulated profits). Equity ratio can also be
computed using the formula: 1 minus Debt Ratio.

The reciprocal of equity ratio is known as equity multiplier, which is equal to

total assets divided by total equity.

Debt-Equity Ratio = Total Liabilities Total Equity

Evaluates the capital structure of a company. A D/E ratio of more than 1 implies
that the company is a leveraged firm; less than 1 implies that it is a conservative
one.

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 Times Interest Earned = EBIT Interest Expense

Measures the number of times interest expense is converted to income, and if the
company can pay its interest expense using the profits generated. EBIT is
earnings before interest and taxes.

Valuation and Growth Ratios

Earnings per Share = ( Net Income - Preferred Dividends ) Average Common

Shares Outstanding

EPS shows the rate of earnings per share of common stock. Preferred dividends
is deducted from net income to get the earnings available to common
stockholders.

Price-Earnings Ratio = Market Price per Share Earnings per Share

Used to evaluate if a stock is over- or under-priced. A relatively low P/E ratio

could indicate that the company is under-priced. Conversely, investors expect
high growth rate from companies with high P/E ratio.

Dividend Pay-out Ratio = Dividend per Share Earnings per Share

Determines the portion of net income that is distributed to owners. Not all
income is distributed since a significant portion is retained for the next year's
operations.

Dividend Yield Ratio = Dividend per Share Market Price per Share

Measures the percentage of return through dividends when compared to the

price paid for the stock. A high yield is attractive to investors who are after
dividends rather than long-term capital appreciation.

Book Value per Share = Common SHE Average Common Shares

Indicates the value of stock based on historical cost. The value of common
shareholders' equity in the books of the company is divided by the average
common shares outstanding.

Calculation Result of Ratio:

Bank Name:Exim Bank Ltd. Evaluation

2009 2010 2011
Liquidity Ratios
Current Ratio (CR) 0.660192 0.726165 0.740665 Better
Cash and Bank Balances to
0.145551 0.121153 0.187969 Better
Deposits (CBBD)

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Cash and Portfolio Investment
0.147774 0.137639 0.221552 Better
to Deposits (CPID)
Better than
Loan Deposit Ratio (LDR) 0.929227 0.998091 0.938043
previous year
Loans to Total Assets (LA) 0.795875 0.837477 0.777536 Better

Profitability Ratios
Return on Asset (ROA) 1.95% 3.06% 1.56% Not good
Return on Equity (ROE) 25.10% 27.77% 13.94% Not good
Profit Expense Ratio (PER) 3.490575 4.190278 2.615253 Not good
Return on Deposits (ROD) 0.022794 0.036435 0.018767 Not good
Net Investment Margin 0.025569 0.031722 0.030269 Good
Earnings Per Share (EPS) 2.625356 3.746994 2.187566 Not good

Efficiency Ratios
Assets Utilization (AU) 0.051547 0.068246 0.050999 Good
Income Expense Ratio (IER) 3.490575 4.190278 2.615253 Not good
Operating Efficiency 0.286486 0.238648 0.382372 Better

Risk & Solvency Ratios

Debt to Equity Ratio
Debt to Total Assets
Equity Multiplier
11.854542 8.082504 7.964371 Good
Better than
0.922174 0.889898 0.888447
previous year
12.854989 9.082504 8.964371 Not good

Others
Internal Growth Rate 0.235789 0.357118 0.106177 Not good

Recommendation:
Absence of Separate law: There is no separate act in regulating Islamic banking
industry in Bangladesh. Bangladesh Bank as a central bank exercises authority over
Islamic banks under some clauses incorporated in the Bank Company Act, 1991 (last
amended in 2013) which is used to control and supervise interest based traditional
banks. Besides, the operations of Islamic banks based on the principle of profit and loss
sharing (PLS) actually do not come fully under the jurisdiction of the existing civil laws.
As a result, civil courts are not sufficiently equipped to handle disputes created in the
operations of Islamic Banking in Bangladesh.
Absence of Role in Government Project Financing: Bangladesh Government borrows
from conventional banks through treasury bills and bonds to finance many

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development projects towards higher inclusive growth and jobs creation. Though
Islamic banks pay huge amount of fund to Government treasury as corporate and other
tax regularly, they cannot participate. in public projects as financer due to lack of
Shariah based instruments and legal framework
Promoting Investment under Musharaka and Mudaraba mode of Investment:

Since investments made by Islamic banks are miserably low (below 2%) in
Musharaka and Mudaraba, the ideal Islamic modes, Bangladesh Bank may provide
necessary directions to Islamic banks and Islamic branches/windows of
conventional bank for investing at least 10% of investable funds.

Conclusion
Islamic banking has achieved significant growth in Bangladesh that belongs to 20
percent share of the whole banking industry. However, investments under Mudaraba
and Musharaka are below 2 percents. Investment in socially desirable sectors like
microenterprises, small projects and agricultural sectors are only getting marginal
shares in total investment. Islamic banks are also facing challenges; among them major
constraints include absence of separate act, paucity of money and capital market
instruments, and lack of skilled manpower. Bangladesh has also tremendous potentials
for further growth of Islamic banking as she has vast population with increasing real per
capita income and Muslim majority people. Bangladesh may also bank on Islamic
finance specially for financing large infrastructure projects badly need to achieve higher
GDP growth towards bringing poor people out of poverty cycle. The ground has already
been prepared by Islamic banks and its more than ten million customers. The unlocking
of unexplored immense potentials of the Islamic finance industry depends on the
appropriate legal framework, development of customized products suitable for all
segments of customer base, adoption of state-of-the-art technology and committed
skilled human resources.

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To summarize the project paper, it can be said that EXIM Bank Bangladesh is
performing really well. Though EXIM Bank Bangladesh has a strong financial
position, the service provided by one of the branch (EXIM Bank, Panchaboti
Branch) were perceived to be level headed by the customers, but were not
excellent. According to the survey, Customers expect more from an excellent bank,
and if EXIM Bank wants to live up to such expectations, there lies no other option
than brining the service standards up. EXIM Bank is a renowned organization, and EXIM
Bank should reflect prominent image in all aspects. One of the main objectives of this
report was to evaluate the performance of EXIM Bank. After analyzing ratio analysis, I
have concluded that in the course of five years the overall performance of EXIM Bank
was satisfactory. So, it will be a good decision to invest in this bank. Before I conclude
this section, I would like to mention that the internship at EXIM BANK has
increased my practical knowledge of Business Administration. I have created
different sorts of real life acquaintance, which I believe will be of great help in the
future. I tried my best to formally present the findings and leanings of my first
ever professional exposure through this report, and if such composition helps anyone,
I would feel delighted.

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