Chapter One

Introduction

1.1 Origin of the Report

As a part of the Bachelor of Business Administration (BBA) course requirement of University of

Asia Pacific, internship is an 8 weeks program to introduce the students with the real life business

administration. I pursued my internship at Islami Bank Bangladesh Limited which is a renowned

name in the banking industry of Bangladesh. I am proud to work as an intern at Islami Bank

Bangladesh Ltd (IBBL) and this experience will surely help me in my future career. Being an

intern the main challenge was to translate the theoretical concepts into real life experience. The

internship program and the study have following purpose:

 To get organized detail knowledge on the job responsibility.

 To experience the real business world.

 To fulfill the requirement of BBA program.

1.2 Background of the Study

Islami Bank Bangladesh Limited has significantly contributed in flow of international transactions.

Among the private commercial banks of our country. IBBL has consistently been in a dominating

position in earnings the operating profit. I have chosen this topic, because to focus on the general

banking performance of Islami Bank Bangladesh Limited and its activities based on Islamic

Shariah.

I did my internship at the Islami Bank Bangladesh Limited, Shyamoli branch from 2nd October

2017 to 30th November 2017 and at the end of the program an internship report focusing on the

1
overall general banking activities. Banking sector and banking activities is an intrinsic

requirement. Banking sector and banking activities play a vital and important role to achieve the

optimum goal of any countries economy. As commercial banks, IBBL has a huge responsibility

to ensure consistent service all over the Bangladesh in a sound manner with other banks’

competitors.

1.3 Objectives of the Report

The objectives of the report are divided into two parts:

 General Objective

 Specific Objective

General Objectives:

 To fulfill the requirement of internship report.

 To gain practical experience and knowledge about the banking operations.

Specific Objectives:

 To analyze Porters’ 5 forces framework on banking industry.

 To understand the scenario of the bank through SWOT analysis.

 To analyze the ratio analysis to evaluate the performance of Islami Bank Bangladesh

Limited.

 To offer some suggestions for better performance of Islami Bank Bangladesh

Limited (IBBL).

1.4 Scope of the Report

In my internship program, the scope of the work was immense as I was assigned to work in

every department of the bank in Shyamoli branch. I have tried to observe and understand all the

2
banking activities especially general banking activities and other day to day functions performed

in this branch. I also tried to understand different topic from the bank personnel.

1.5 Methodology

Sources of Data

Primary Sources of Data Secondary Sources of Data

Figure 1.1: Methodology of the report.

1.5.1 Primary Sources of Data

 Observation of banking activities

 Face-to-face conversation with officers of the bank

 Practical desk work

 Conversation with the officers of different sections of Islami Bank Bangladesh Limited

 Personal experience gained by visiting different desks, and by asking customer’s opinions

1.5.2 Secondary Sources

 Daily note maintained by me (containing my activities in IBBL)

 Online sources and Website of Islami Bank Bangladesh Limited

 Class notes of Islami Bank Training And Research Academy (IBTRA)

 Annual Report of IBBL

3
  Various books, articles, newspapers etc. related to the banking sector

1.6 Limitations of the Report

The major limitations that I faced during my internship period and preparation of this report are

as follows:

 Lack of adequate time

 Insufficient access to information

 Lack of experience

1.7 Structure of the Report

This report includes five chapters. The first chapter is introductory chapter. Second chapter

contains the overview of the banking industry and overview of Islami Bank Bangladesh Limited.

The third chapter contains brief descriptions about my roles and responsibilities during internship

and general banking activities of Islami Bank Bangladesh Limited. The fourth is the findings,

where I have discussed about BCG Matrix, SWOT Analysis, Ratio Analysis and Challenges and

Opportunities. Conclusion and Recommendation is in fifth chapter and at the end of the report

reference is given.

4
 Chapter Two

Overview of Islami Bank Bangladesh Limited

2.1 Overview of Banking Industry in Bangladesh

Following independence, banking industry in Bangladesh started its journey with 6 nationalized

commercialized banks, 2 State owned specialized banks and 3 Foreign Banks. In the 1980's

banking industry achieved significant expansion with the entrance of private banks. Now, there

are 66 banks in Bangladesh. Out of the 66 banks, 6 are state owned commercial banks, 32 private

commercial banks, 8 islami shariah based commercial banks, 9 foreign banks and the rest 11 are

specialized development banks. Bangladesh Bank (BB) regulates and supervises the activities of

all banks.

6
11

State Owned Commercial Bank

9 Private Bank
Islamic Bank

32 Foreign Bank
8
Development Bank

Figure 2.1: Banking Industry of Bangladesh.

Source: Bangladesh Bank Website.

5
2.2 Overview of Islami Bank Bangladesh Limited

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 ( total 329 Branches) among the private sector Banks in

Bangladesh. Islami Bank Bangladesh Limited (IBBL) was established on March 13, 1983 as a

public limited company under Companies Act, 1913 as the first Islamic Bank in the South East

Asia. The bank started commercial operation on March 30, 1983 as the first interest-free Islamic

Shariah based commercial bank with an objective of catering to the need of increasing demand

for Islamic Shariah based financial products. It is listed with Dhaka Stock Exchange Ltd. and

Chittagong Stock Exchange Ltd. Authorized Capital of the Bank is Tk. 20,000.00 Million and

Paid-up Capital is Tk. 16,099.90 Million having 33,686 shareholders as on 31st December 2016.

Islamic banking is based on the principles of serving as the masses in the light of Islamic

economy or its ‘Maqasid’ or purpose. Despite the setbacks and deficit of global economy and

subsequent volatility in the country economy, IBBL maintained its leading position in the

banking sector of Bangladesh and could manage to achieve reasonable outcomes in all the

business areas. The total assets of the Bank amounted to Tk. 936,946 million as on December 31,

2016 registering 9% increase over previous year. Equity base of the Bank has increased to stand

at Tk. 48,739 million at year end 2016 against Tk. 47,461 million of the previous year. However,

the Bank achieved promising growth in general investment (16.26%) and moderate growth in

Deposit collection (10.72%); Non-Performing Investment remarkably reduced (3.83%). During

the period Profit after tax of the Bank was Tk. 4,464.98 million, Earnings Per Share (EPS) was

Tk. 2.77 compared to Tk. 2.04 of the year 2016. IBBL is the biggest automated bank in

Bangladesh. Islami Bank’s programs are run by its own software which is unique in banking

6
industry of Bangladesh. The core operational software e-IBS is created by bank’s own young

employees. Islami bank is increasing technology-based services like internet banking, mobile

banking, SMS Banking, e-commerce etc. for the valued customers.

2.3 Islamic Banking in Bangladesh

As interest is haram in Islam, the Muslim scholars in an attempt to establish a banking system

that is free from interest and will work in the basis of profit-loss sharing have come up with the

concept of establishing Islamic banks.

2.3.1 Definition of Islamic Bank

Islamic banking has been defined in a number of ways. According to Organization of Islamic

Conference (OIC), “An Islamic bank is a financial institution whose rules expressly state its

commitment to the principle of Islamic Shariah and to the banning of the receipt and payment of

interest on any of its operations”.

Two basic principles behind Islamic banking are the sharing of profit and loss and the

prohibition of the collection and payment of interest.

7
2.3.2 Difference between Islamic bank and Conventional bank

Islamic Banks Conventional Banks

The functions and operating modes of Islamic The functions and operating modes of

banks are based on the principles of Islamic conventional banks are based on manmade

Shariah. principles.

It wants to maximize profit according to

It maximizes profit without any restrictions.
Islamic Shariah.

Islamic Banks cannot invest in Shariah

prohibited sector, so its investment scope is Its investments scope is not narrow.

narrow.

8
 2.3.3 Products and Services of Islami Bank Bangladesh Limited

IBBL Products & Services

Deposit Investment Foreign RDS ATM Locker

Trade Service Services

Al-Wadeah Current Account Bai-(Trading) Import

(AWCA)
Bai- Murabaha Export
Mudaraba Savings Account
(MSA) Bai- Mujjal Remittance

Mudaraba Hajj Savings Bai- Salam

Account (MHSA)
Bai-Istisna
Mudaraba Special Savings
Share (Partnership)
(Pension) Account (MSSA)
Mudaraba
Mudaraba Mohor Savings
Account (MMSA) Musharaka

Students Mudaraba Savings Ijarah (Leasing)

Account (SMSA) Hire Purchase Under Shirkatul
Melk

9
2.3.4 Islami Bank Bangladesh Limited Organogram

Chairman

Vice Chairman

Board of Director

Deputy Managing Director (DMD)

Executive Vice President (EVP)

Senior Vice President (SVP)

Vice President (VP)

Assistant Vice President (AVP)

Senior Principal Officer (SPO)

Principal Officer (PO)

Senior Officer (SO)

Officer

Assistant Officer (Grade-1)

Assistant Officer (Grade-2)

Assistant Officer (Grade-3)

10
2.3.5 Corporate information of Islami Bank Bangladesh Limited at a glance

Name of the company Islami Bank Bangladesh Limited

Date of Incorporation 13 March, 1983

Chairman Mr. Arastoo Khan

Head Office Islami Bank Tower, 40, Dilkusha C/A, Dhaka-

1000, Bangladesh

Website www.IslamiBankBd.com

Total Income TK. 61,557.45 Million

Reserve Fund 31,029.05 Million

Number of Manpower 11, 381

Number of Branch 329

ATM Booth 410

Number of Shareholders 33, 686

Total Deposit 681,352.25 Million

Import 339,954 Million

Export 243,647 Million

Remittance 279,980 Million

Total Investment 676,747.80 Million

2.4 Porter’s Five Forces Industry Framework

Michael Porter introduced "Five Forces Model" to analyze an industry, which was introduced in

1979. It is mainly used to determine the strategic competitiveness of an industry's attractiveness

to enter or not. So, if all the forces are high then it is easily meant that the industry is risky to

11
enter whereas if majority or important forces are comparatively low then a company can enter

this industry with minimum risk.

Threat of
New Entrants
(Low)

Bargaining Rivalry among Bargaining

power of Existing power of
Customers Competitors Suppliers
(Medium) (High) (Medium)

Threat of
Substitute
Products or
Services
(Medium)

Figure 2.2: Porters’ Five Forces Industry Framework on the Competiveness of the Banking Industry.

2.4.1 Threat of New Entrants

Capital requirement for establishing a new bank in Bangladesh is 400 crore taka, relatively high

than other industries. Now, government has enforced a rule for new banking companies is that

every bank should set their branches 75% on rural and semi rural areas and 25% on urban areas.

So, it is a challenge for them. For establishing a new bank, there is a Govt. and legal barriers on

licensing as well. As a new bank they may face "Image Crisis" because there are already many

12
banks in Bangladesh. As a new bank they also have lack of confidence and experience.

Bangladesh bank sometimes gives permission to new banks due to political consideration,

government restriction, inflation rate thus this scenario increases competition in the market. So,

threat of new entrants is low in banking industry.

2.4.2 Bargaining power of the Suppliers

Suppliers bargaining power is medium in the banking industry. Suppliers of the Banks are

depositors mainly who deposit their money by opening different types of accounts, scheme and

other things that are required by the banks. They can easily switch to other banks if they get a

little higher rate of return, better environment, better service. As the Bangladesh bank usually

takes decisions associated with interest rate and banks have to follow that rules and regulations.

So, it can be concluded that the bargaining power of suppliers is medium.

2.4.3 Bargaining Power of Customers

The customers of the banks are borrowers. The banks in our country are instructed and controlled

by Bangladesh bank. Customers bargaining power is medium in the banking industry. If

depositors demand to change loan sanction policy of bank or to increase interest rate, Bank will

not accept until they get permission from Bangladesh bank. They can easily switch to other

banks, if other banks offer lower interest rate to borrow money. Customers have no power to

change the rules and regulations set by the banks. For this reason customers/buyers bargaining

power for banking sector is medium.

13
2.4.4 Threat of Substitute Products or Services

Substitute products are produced in a different industry but crucially satisfy the same customer

need. Various financial institutions are coming up to provide financial services in Bangladesh

which might act as a replacement for the banking services. There are some non-banks/substitute

financial institutions that do many of the activities and transactions of a bank like- Lanka Bangla

Financing, Industrial Leasing and Development Company Ltd (IDLC), BRAC etc. do same types

of activity. Lankabangla finance provide various loans like- home loan, personal loan etc. IDLC

Finance Limited works for home loan, car loan, SME loan. In this case, threat of Substitute

Product or Service is medium.

2.4.5 Rivalry among existing competitors

In banking industry the number of competitors are increasing day by day with its increasing

number of different products, improved service, attractive advertising and attractive interest

rates. Also some foreign commercial banks like Standard Chartered Bank, HSBC Bank etc. are

intensity rivalry of the banking industry. All the banks are trying to improve their relationship

with customers by providing quality service to compete with others to make profit. So the degree

of competitive rivalry in banking industry is high.

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 Chapter Three

My roles and responsibilities during internship

3.1 My duties and responsibilities as an intern

As an intern I had started my internship program in IBBL on 2nd October 2017. There were two

types of training methods. First step was theoretical training at Islami Bank Training and

Research Academy (IBTRA) and second step was practical session at Islami Bank Bangladesh

Limited (IBBL), Shyamoli branch. My practical experience was enriched immensely during my

internship at IBBL which enabled me to relate this know-how with my academic exposure. My

working area and responsibilities schedule were provided to me by the bank manager, which is

summarized in the following:

Specific Responsibilities of the job

 Providing detailed information to the clients about different deposit schemes.

 Opening Account.

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  Changing customer address, phone number, photo, signature and close existing account,

transfer account as per customer requirement..

 Assisting employees in their day to day operations.

 Providing clear concept to the clients regarding the difference between profit and interest.

 Dealing with the necessary papers and required documents in the investment section.

 Filling up with the necessary documents to apply and sanction of an investment

procedure of different companies.

Learning points from internship work at different departments

I had a paramount scope of learning the following Islami bank activities:

 Islamic Bank does not provide any loan rather they provide investment on sharing profit

& loss mode.

 Difference between interest and profit.

 The product and services offered by the IBBL.

 Account opening system.

 The difference between Conventional banking & Islamic banking.

 The conduct of an executive.

3.2 General Banking Activities of Islami Bank Bangladesh Limited (IBBL)

General Banking is the starting point of all the banking operation. General Banking Department

is considered as the direct customer service center. General banking department performs the

core functions of bank, operates day-to-day transactions of banking operation. This is the busiest

department. Every day it receives deposits from customers and meets their demand for cash. It

16
 opens new accounts, remits customer’s money from one place to another. There are basically

three functional departments in Islami Bank Bangladesh Limited. These are:

IBBL

General Banking (GB) Investment Foreign Exchange

Account Cash Cheque Import Export Remittance

Opening Section Clearing Section
Section Section

The activities of general banking of IBBL are mainly divided into the following categories:

0 0
3.2.1 Account opening Section

Banker-customer relationship begins with the opening of an account by the customer. Opening of

an account binds the same into a contractual relationship. But the selection of customer is very

crucial. IBBL officer opens different types of account on the request of clients.

There are various types of accounts in IBBL. These are: Al- Wadeah Current Account (AWCA),

Mudaraba Savings Account (MSA) etc.

The procedure of opening account is given below:

Al-Wadeah (Current Account)

Al-Wadeah has been derived from the Arabic word “Wadayun” which means to keep/to

deposit/Amanot. In banking, bank is here Muaddah-Elaihee (deposit receiver), depositor is

Muadde and money/goods are muaddah.

17
Required Documents

 Complete account opening form

 Minimum deposit Tk.1000/-

 02 copies passport size photographs of every operators duly attested by introducer

 Identification proof like National ID Card/ Passport/Chairman certificate

 1 copy photograph of nominee duly attested by the accountholder

 Signature of Introducer

Mudaraba Savings Account (MSA)

Mudaraba means travel for undertaking business, where one party provides capital, here the

provider of capital known as “Shahib-al-maal”. Other party provides skill and labour, here the

provider known as “Raab-ul-maal”.

Required Documents

 Complete account opening form

 Initial deposit Tk.500/-

 02 copies passport size photographs of every operators duly attested by introducer

 Identification proof like National ID Card/ Passport/Driving license

 1 copy photograph of nominee duly attested by the accountholder

 Signature of Introducer

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3.2.2 Cash Section

The cash section of IBBL plays very significant role in general banking department. Basically

cash department is the most vital and sensitive department of the branch which deals with all

kinds of transaction in cash. All cash receipts and payments are made through this department.

This section receives cash from depositors and pay cash against cheques. The drawer who wants

to receive money against cheque comes to the payment counter and presents the cheque to the

officer. He verifies the following information:

 Date of the cheque.

 Signature of the account holder.

 Whether the amount in figure and in word corresponds with each one.

3.2.3 Clearing Section

Each Bank has its own clearing department. This department has several jobs. These are:

a) Inward cheque clearing:

Whenever the branch of IBBL receives a cheque from other Bank to collect money, then

the branch send the cheque to the Head Office. The Head Office arranges the cheque

separately by the name of different Banks and then it send to the respective bank for its

clearing. Bangladesh Bank has given condition for this job of clearing house name

HOUSE. This is done twice in a day. First house and return house. First house is to

deliver the cheque and collect cheques from different banks. And return house is to return

the honored cheques. As soon as the principal branch gets the clearance it sends to the

respective branch, who has sent the cheque for collection.

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 b) Outward Cheque Clearing:

This is the opposite flow of the Inward Cheque clearance. When IBBL send cheque to

another person of another bank, that bank does the same things to claim the money from

the Islami Bank Bangladesh Limited with the same procedure.

3.2.4 Local Remittance

Sending money from one place to another place for the customer is another important service of

banks. There are various kinds of techniques for remitting money from one place to another

place. These are:

a) Pay Order (PO)

This is the service for the people. A person can do pay order transaction without having bank

account. Pay order is an instrument which is used to remit money within a city through banking

channel.

b) Demand Draft

Demand draft is a popular instrument for remitting money from one corner of country to another.

This instrument is used for transfer and payment. Difference between pay order and demand

draft is in terms of place only. PO is used for remittance money with the city where as DD is

used for within the country

c) Telegraphic Transfer (TT)

Telegraphic Transfer (TT) is another widely used mode for remittances of funds. TT is quicker

than DD. For TT both parties should have account as money is transferred.

20
 Chapter Four

Findings & Analysis

4.1 SWOT Analysis of Islami Bank Bangladesh Limited

SWOT analysis means strength, weakness, opportunity and threat analysis of company. From the

SWOT analysis we can figure out ongoing scenario of the bank.

Strengths Weaknesses

SWOT

Opportunities Threats

Figure 4.1: SWOT Analysis.

In SWOT analysis, there are two major factors:

1. Internal Factors (Strength & Weakness)

2. External Factors (Opportunity & Threat)

SWOT analysis of IBBL bank is as follows:

Strengths

 Shariah based Islami Banking

All activities of the bank are framed according to Islamic Shariah.

21
 Leading Bank

IBBL maintained its leading position in the banking sector of Bangladesh.

 Bank reputation

Islami Bank Bangladesh Ltd has already established a favorable reputation in the banking

industry of the country with its significant business growth. It continues to earn a

reputation in the banking field.

 Satisfactory Working Environment

IBBL’s working environment is very friendly. It provides its work force excellent place

to work. Its work environment boosts up the spirit and motivation of employees. Many

jobs are performed in-groups in order to reduce the burden of the workload and enhance

the process of completion of the job.

 Financial Strength

IBBL has adequate financial base and does not required to borrow money from

Bangladesh Bank or any other banks. As a result, customers feel comfortable and more

secure while dealing with the bank. It has already established its position in the banking

industry of Bangladesh. The number of deposits and investments are also increasing

rapidly from year to year.

22
 Weaknesses

 Limited Workforce

Islami Bank Bangladesh Limited, in some areas, has inadequate human resources, burden

of extra workloads. This might cause high employee turnover and it will lead to higher

cost.

 A few number of foreign exchange departments

This is a great weakness. Less than adequate number of foreign exchange departments is

a barrier to improve foreign business. Earnings from foreign exchange sector will not

improve without adequate measures in this regard.

 Very few branch level meeting

Staff meetings and departmental meetings at the branch level are not held routinely

resulting into pending decisions regarding service and problem solving.

 Lack of skilled system operators

Due to lack of adequate prowess and academic knowledge of latest computer applications

some of the system operators manifest inefficiency in carrying out their activities

culminating into frequent mistakes in the operations of various computerized statements.

Opportunities

 Branch Expansion

Bangladesh has 64 districts. Besides expanding in the urban areas, IBBL may explore the

options of new frontiers in the remote areas to reach more people.

23
 More concentrated banking based on Islamic Banking

As the functions of Islamic banks are based on the principles of Islamic Shariah they can

attract customers easily than other banks.

 High grades of customer service

The Nationalized Commercial Bank’s (NCB’s) service is traditional and often backward,

creating potential opportunities for Private Commercial.

 Scope of investment potential

Islami Bank Bangladesh Limited has the scope of nurturing their option in the SME

sector which has prodigious potential.

Threats

 Entrance of local private and foreign banks

Many local and foreign banks are entering in the banking industry despite huge capital

requirements and Government restriction. They are offering similar products and can

capture market share which is a big threat for IBBL.

 Lack of customer awareness regarding Islamic banking

Most of the people in our country have misconception about Islamic banking because

they have no clear idea about the activities of Islamic banks. As similar products are

offered, customers cannot differentiate Islamic banks from conventional banks.

 Lack of Customer Loyalty

In banking industry customer loyalty is very unsteady. Sometimes client even does not

know what they actually need. They always look for better option compared to the

existing one.

24
  Political Instability

Unstable political situation causes barrier in the smooth flow of business. Sudden Hartals and

other political programs create problems for the employees. This might also be considered as a

potential external threat for a financial institution.

4.2 Boston Consulting Group Model (BCG Matrix)

In the early 1970’s the Boston Consulting Group developed a model for maintaining a portfolio

of different business units (or major product lines). The BCG growth share matrix displays the

various business units on a graph of the market growth rate v/s market share relative to

competitors. BCG matrix has four cells. Each of these cells represents a particular type of

business. The four cells of this matrix have been called as-

Stars

Question mark

Cash cows

Dogs

High Question
Stars
marks
(RDS)
Market Growth

(SMSA, MMSA)

Cash cows Dogs

(MHSA) (mCash)
Low

High Low
Market Share

Figure 4.2: BCG Matrix.

25
Stars

Stars are those products, who have high growth and high market share. Stars are market leader.

They may generate cash but because of fast growing market, stars require huge investments to

maintain their lead.

IBBL's star product is- Rural Development Scheme (RDS). They generate huge cash but for

holding the leader position, it requires huge investment.

Question marks

Question marks are those in high growth rate markets but have low market share. They require

huge amount of cash to maintain and gain market share. These products need to increase their

market share quickly or they become dogs. So, they need huge investment to capture market

share.

IBBL’s question marks products are- SMSA (Students Mudaraba Savings Account), MMSA

(Mudaraba Mohor Savings Account).

Cash Cows

Cash cows are in a position of high market share with low growth. Cash cows are normally in

mature position in the life cycle of the product. Cash cows require small investment and generate

cash that can be utilized for investment in other business units.

IBBL's Cash Cow product is- MHSA (Mudaraba Hajj Savings Account). These type of service

generate more cash but there is no need to finance or not required any investment.

26
Dogs

Dogs are in low growth markets and have low market share. They neither generate cash nor require

huge amount of cash. Dogs should be avoided and minimized because they generate low profits

or losses for the organization. Such businesses consume more management time. IBBL's dog

product is- mCash.

4.3 Ratio Analysis

Ratio analysis is an important and useful technique of financial analysis. Here I select Al Arafah-

Islami Bank Limited (AIBL) to evaluate and compare their performance with IBBL, because I

got available information of AIBL from their annual reports than the other banks and also as

AIBL is an Islamic bank it was more easy for me to evaluate the ratio analysis.

Return on Investment (ROI) (%)

Return on investment is the percentage of income compared to general investment. That means

we can measure the income performance by this ratio. The higher the ratio greater is the income

of the organization.

5Year
Bank/Year 2012 2013 2014 2015 2016
Average

IBBL 12.21% 11.49% 9.86% 8.20% 8.29% 10.01 %

AIBL 12.51% 13.01% 13.70% 11.70% 10.41% 12.27%

Table 4.1: Average return on investment (%) of IBBL and AIBL.

27
 16.00%

14.00% 12.51% 13.01% 13.70%

11.70%
12.00%
12.21% 10.41%
10.00% 11.49%
9.86%
8.00%
8.20% 8.29%
6.00%

4.00%

2.00%

0.00%
2012 2013 2014 2015 2016

IBBL AIBL

Figure 4.3: Year-wise return on investment (%) of IBBL and AIBL.

We know that a bank with lowest non performing investment shows greater efficiency in

managing investment to earn maximum return due to its satisfactory recovery rate. From the

table, we see that AIBL earns greater return on investment due to its greater efficiency in

managing investment that is reflected in their non-performing investment ratio.

Non- Performing / Classified Investments to Total Investment (%)

Non-performing investment means the portion of investment that have unpaid profit and

principle outstanding. It measures the portion of non-performing investment over the total

investment. If NPIs increase that means bank should put in more investment effort and should

monitor the investment more strongly.

5Year
Bank/Year 2012 2013 2014 2015 2016
Average

IBBL 3.81% 3.71% 4.92% 4.25% 3.83% 4.10 %

AIBL 1.63% 2.77% 4.50% 4.66% 4.54% 3.62%

Table 4.2: Average non-performing investment (%) of IBBL and AIBL.

28
 6.00%

4.92%
5.00% 4.66% 4.54%

3.81% 3.71% 4.50%

4.00% 4.25%
3.83%
3.00%
2.77%

2.00%
1.63%
1.00%

0.00%
2012 2013 2014 2015 2016

IBBL AIBL

Figure 4.4: Year-wise non-performing investment (%) of IBBL and AIBL.

The above table shows that the average NPI of IBBL is highest. Since the NPI of AIBL shows

lowest ratio compared to IBBL, so we can say that their recovery performance is better and

improving.

Investment to Deposit (%)

Investment to deposit ratio measures the portion of investment over the deposit .If this ratio is

high that means the organization may earn greater profit but the organization may face the

liquidity problem because higher investment creates lower cash balance.

5Year
Bank/Year 2012 2013 2014 2015 2016
Average

IBBL 85.18% 82.35% 79.88% 83.59% 86.43% 83.49%

AIBL 90.56% 88.74% 84.58% 88.59% 88.50% 88.19%

Table 4.3: Average investment to deposit ratio of IBBL and AIBL.

29
 92.00%
90.56%
90.00%
88.59% 88.50%
88.74%
88.00%

86.00% 86.43%
84.58%
85.18%
84.00%
83.59%
82.00% 82.35%

80.00% 79.88%

78.00%
2012 2013 2014 2015 2016

IBBL AIBL

Figure 4.5: Year-wise investment to deposit ratio of IBBL and AIBL.

The above table shows that the investment to deposit ratio of AIBL is higher than IBBL.

Although the average investment to deposit ratio of IBBL is lower but their average NPI is

higher that is reflected in their lower average ROI.

Return on Asset ROA (%)

Return on Asset is an indicator of how profitable a company is relative to its total assets. ROA

gives an idea as to how efficient management is at using its assets to generate earnings.

5Year
Bank/Year 2012 2013 2014 2015 2016
Average

IBBL 1.27% 0.96% 0.67% 0.48% 0.59% 0.79 %

AIBL 1.30% 1.31% 1.10% 1.08% 1.23% 1.89%

Table 4.4: Average return on asset (%) of IBBL and AIBL.

30
 1.40%
1.30% 1.31%
1.23%
1.20% 1.27%
1.10% 1.08%
1.00%
0.96%

0.80%
0.67%
0.60%
0.59%
0.40% 0.48%

0.20%

0.00%
2012 2013 2014 2015 2016

IBBL AIBL

Figure 4.6: Year-wise return on asset (%) of IBBL and AIBL.

From the above table it is found that, return on asset ratio of AIBL is higher than IBBL. It

indicates that AIBL has good asset management efficiency and the bank is more efficient to

convert its assets into net earnings. The asset management efficiency of IBBL is not good

because their ROA was inconsistent decline from 2012 to 2015.

4.4 Main Findings

As per analysis of the report, I found the following important information.

 Limited investment scope

Islami Bank Bangladesh Limited as an organization in Islamic Banking is committed to avoid

interest. Therefore IBBL often has to avoid assured profitable projects.

 Decision making process is centralized

Decision making process is very lengthy and sometimes it creates problems.

31
  Lack of skilled system operators

Often due to failure to keep pace with the advancement of technological changes especially in

terms of use new computer applications, IBBL is caught at the wrong end of the bargain in terms

of proving state of the art service.

 Lack of marketing strategy

Marketing strategy of the bank is very poor. They do not use any modern advertising method to

attract customers.

 Lack of motivation

The bank does not provide any extra incentive for showing extra ordinary performance. So,

employees become demotivated.

Challenges

Islami Bank Bangladesh Limited (IBBL)

 Due to the lack of proper monitoring and efficiency IBBL’s NPI has increasing trend year

to year.

 Because of the increasing rate of NPIs, IBBL has a low investment to deposit ratio that

means they keep large proportion as provision against classified investment which causes

a decline in ROI.

 IBBL keeps huge proportion of provision against classified investment. It indicates that

their investment recovery is declining.

Al- Arafah-Islami Bank Limited (AIBL)

 NPI is increasing year to year. This may be caused by lack of proper monitoring.

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Opportunities

Islami Bank Bangladesh Limited (IBBL)

Before granting fund for investment, IBBL should examine the investment proposal carefully to

know whether the proposal fulfills the investment criteria of the bank and after granting fund for

investment they should monitor properly. If they are able to do these perfectly, the amount of

NPI is likely to decrease. As a result, they can decrease the volume of provision against

classified investment which can be used as new investment. Besides this, they can also increase

their investment to deposit ratio and ultimately their ROI will increase.

Al-Arafah-Islami Bank Limited (AIBL)

AIBL should increase the number of efficient personnel of investment department for forecasting

investment properly.

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 Comparative Financial Performance Analysis between Islami Bank and Al-Arafah-Islami

Bank:

2012 2013 2014 2015 2016

SL
Particular
No.
IBBL AIBL IBBL AIBL IBBL AIBL IBBL AIBL IBBL AIBL

Authorized
1. 20,000.00 10,000.00 20,000.00 15,000.00 20,000.00 15,000.00 20,000.00 15,000.00 20,000.00 15,000.00
Capital

Paid up
2. 12,509.64 7,130.98 14,636.28 8,343.25 16,099.91 9,469.58 16,099.91 9,469.58 16,099.91 9,943.06
Capital

Earning
3. per Share 4.42 2.03 3.40 2.46 2.48 2.20 1.88 2.25 2.77 3.07
(Taka)

Import
4. 284,588.00 71,931.70 285,890.00 85,915.00 316,975.00 101,244.70 343,668.00 107,049.80 339,954.00 118,786.60
Business

Export
5. 197,095.00 58,476.60 205,269.00 68,980.30 222,753.00 75,843.90 224,236.00 79,362.90 243,647.00 88,152.20
Business

Net
6. Investment 17,801.80 5,288.12 17,170.27 5,858.61 18,459.69 7,109.14 19,414.41 7,494.99 23,596.98 8,872.42
Income

Return on
7. Equity 13.42 13.85 11.36 14.15 8.85 12.80 7.00 12.82 9.28 15.67
(ROE)%

Return on
8. Assets 1.27 1.30 0.96 1.31 0.67 1.10 0.48 1.08 0.59 1.23
(ROA)%

Fixed
9. 14,808.23 2,394.62 15,732.81 2,517.22 15,926.36 2,661.11 15,836.48 3,057.38 15,586.91 3,240.18
Assets

34
 Chapter Five

Conclusion & Recommendations

5.1 Conclusion

A strong banking sector can change the economic structure of the country. IBBL performs

various activities according to Islamic Shariah both for the public and for the government. Islami

Banks are those who do not charge interest, rather they do business on profit sharing basis.

Most of the people in our country have misconception about Islamic banking. They cannot find

any difference in its operation between conventional commercial banks and Islamic banks

because they have no clear idea about the activities of Islamic banks. At present there are eight

Islamic banks operating in our country and they are making contribution through performing

their activities with better efforts. However, Islami Bank Bangladesh Limited is not free from

limitations.

There are no laws of Bangladesh Bank based on Islamic principles to regulate Islamic Banks.

The traditional regulatory systems are neither suitable nor sufficient. So, up-to-date Islamic

banking laws are very essential. Some financial instruments approved by Islamic Shariah should

be introduced so that investors may comfortably put their funds into those financial instruments

other than interest based instruments.

Islamic bank is now functioning efficiently, smoothly and satisfactorily despite facing various

internal and external threats.

35
In this report, I have analyzed BCG growth share matrix to show the market position in banking

industry of IBBL. In addition, Porters five forces is analyzed to show the competition of Islami

Bank Bangladesh Limited with others banks. SWOT analysis has been shown to determine the

IBBL’s strengths, weaknesses, opportunities, and threats, and finally ratio analysis to determine

the current financial condition.

I hope in spite of my all limitations, this experience of sharing works with such working

environment will help me a lot in my professional life.

5.2 Recommendations

For improving the performance of Islami Bank Bangladesh Limited, the following steps may be

fruitful:

 Management Efficiency

In order to increase efficiency, the authorities of Islami Bank Bangladesh Limited should set up

right personnel to the right place at the right time.

 Decentralize decision making process

There may be communication gap between top and bottom management. Many bright ideas from

the bottom level personnel are not able to reach the top management. Islami Bank Bangladesh

Limited should delegate authority and responsibility to the branch so that they can take some

decisions. So, decision making process should be decentralized.

36
  Turn company objectives into individual target

The entire department should be informed regarding their goals and objectives. A philosophy of

working for the customer instead of working for boss must be introduced.

 Increase Advertisement and Promotion

The bank should give an aggressive advertisement in form of outdoor advertising - specifically

through 'Electronic digital billboards’ in its pursuit of building up a strong image and reputation

adapting large portion of the market. It will help to collect more deposits and enhance investment

scope.

 Use of Marketing Research

The management of Islami Bank Bangladesh Limited should regularly execute marketing

research like face to face interview, consumer survey in order to keep the management informed

about the changing attitude of the customers and to minimize the gap between the customer

expectation and the management perceptions of customer expectations.

37
 Reference

Websites

Islamibankbd.com. (n.d.). Islami Bank Bangladesh Ltd.. [online] Available at:

http://www.islamibankbd.com/ [Accessed 14 Mar. 2018].

Islamibankbd.com. (n.d.). Annual Report. [online] Available at:

http://www.islamibankbd.com/annual_report.php [Accessed 14 Mar. 2018].

Ibtra.com. (n.d.). Islami Bank Training and Research Academy :: Home Page ::. [online]

Available at: http://www.ibtra.com/ [Accessed 14 Mar. 2018].

Al-arafahbank.com. (n.d.). Al-Arafah Islami Bank Limited. [online] Available at: http://www.al-

arafahbank.com/ [Accessed 14 Mar. 2018].

Annual report

Al-Arafah Islami Bank Limited (2012). Annual Report 2012. [online] Available at: https://al-

arafahbank.com/Annual%20Report%202012.pdf [Accessed 14 Mar. 2018].

Al-Arafah Islami Bank Limited (2013). Annual Report 2013. [online] Available at:

https://www.al-arafahbank.com/AIBL%20Annual%20Report%202013.pdf [Accessed 14 Mar.

2018].

38
Al-Arafah Islami Bank Limited (2014). Annual Report 2014. [online] Available at:

https://www.al-arafahbank.com/AIBL%20Annual%20Report-2014.pdf [Accessed 14 Mar.

2018].

Al-Arafah Islami Bank Limited (2015). Annual Report 2015. [online] Available at:

https://www.al-arafahbank.com/AIBL-Annual-Report-15-Big.pdf [Accessed 14 Mar. 2018].

Al-Arafah Islami Bank Limited (2016). Annual Report 2016. [online] Available at:

https://www.al-arafahbank.com/AIBL_AR_2016.pdf [Accessed 14 Mar. 2018].

Books:

Internship Program for the University students and class notes of IBTRA.

39
 Appendix

Questionnaire Survey

(Personal details of the respondent)

Section A

1. Name :

2. Age:

3. Gender: Male Female

4. Occupation : Business Service Student Housewife Others

Section B

5. What type of account do you have?

a. Current

b. Saving

c. Others

6. How long have you been a customer of IBBL

a. 0-3 years

b. 3-5 years

c. 5-10 years

d. Above 10 years

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 7. What is your opinion about online service of IBBL

a. Excellent

b. Good

c. Moderate

d. Poor

Put a Tick mark ( ) that best reflect your opinion

Strongly Strongly

SI Questions Disagree Disagree Neutral Agree Agree

No. 1 2 3 4 5

1 Employee of IBBL provides friendly service?

2 Employee of IBBL can efficiently solve customer

problem?

3 It is easy to open account in IBBL?

4 New cheque book issuance time of IBBL is acceptable?

5 New VISA Card issuance time of IBBL is acceptable?

6 ATM service of IBBL is good?

7 Service charge is good enough in IBBL?

8 Waiting time to get service from IBBL is longer?

9 Information of IBBL is available to the customers?

Thank You for Your Co-operation

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