CHAPTER- ONE

Orientation of the report

1.1 I
ntrod
uctio
n
Islam is a
complete code
of life. Islamic
Banking is the part of its economic and financial system, a modern Banking system with
Islamic philosophy Built in Banking for long sustainable development. “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”-OIC. Islami Bank Bangladesh Limited
(IBBL) is considered to be the first interest free bank in Southeast Asia. The special
1
feature of the investment policy of the bank is to invest on the basis of profit loss sharing
system in accordance with the tents and principles of Islamic Shariah. Earning profit is
not the only motive and objective of the Banks investment policy rather emphasis is given
is attaining social good and in creating employment opportunities.

1.2 Origin of the Report

This Internship Report has been preparing under the Internship program, an indispensable
part of the BBA and MBA program. For the internship purpose, I choose Islami Bank
Bangladesh Ltd. (IBBL), VIP Road Branch and prepare this report on the Investment
Operations of Islami Bank Bangladesh Limited specially VIP Road Branch.

1.3 Objectives of the Study

The primary objective of this report is to analyze the Investment related activities of the
Islami Bank Bangladesh Ltd. The other specific objectives include:
To enumerate the different modes of investment.
To analyze the sector wise investment of Islami Bank Bangladesh Limited.
To evaluate the investment policies of IBBL
To analyze investment clients of VIP Road Branch, their mode and recovery
procedures.
To get the practical exposure of the banking activities regarding mode of
investment.

1.1 Limitations of the report

Lack of experiences has acted as constraints in the way of meticulous

exploration on the topic.

Lack of current information.

Shortage of time for preparing the report in order.

The study was conducted mostly on secondary data.

The executive and bank authority were very busy, so they could not give me
enough time for discussion.

Clients are not always interested to spend time for interview.

1.1 Methodology of the Study

Methodology is the process or system through which a study is being carried out for the
purpose of collection of information that is required is collection with the study for
2
reaching a conclusion on that Study. The data required for this study were collected from
both primary and secondary sources; however, majority of the information was collected
from secondary sources.

1.2 Sources of data

a) Primary source
Primary data was collected form
Operation Manager & Officers of the branch.
Face to face conversation with employees and staffs.
Practical work experience.
Face to face conversation with clients.

b) Secondary source
The secondary data has been collected from
Annual Reports of 2016 and Unaudited report of June, 2017 of Islami Bank
Bangladesh Ltd.

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

Manuals of Investment of IBBL.

Different text books & materials.

Website of the Islami Bank Bangladesh Limited.

The major portion of the data source used for this report is a secondary one.

3
 CHAPTER- TWO

Overview
of
Islami Bank Bangladesh Limited

2.1 Mission of IBBL

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 through diversified investment operations
particularly in the priority sectors and less developed areas of the country to encourage
4
socioeconomic uplift and financial services to the low-income community particularly in
the rural areas.

2.2 Vision of IBBL

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 the
soundness and development of the financial system based on Islamic principles and to
become the strong and efficient organization with highly motivated professionals,
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.

2.1 Objectives of IBBL

The primary objective of establishing Islamic Bank all over the world is to promote,
foster and develop the application of Islamic principles in the business sector. More
specifically, the objectives of Islamic bank when viewed in the context of its role in the
economy are listed as following:
To offer contemporary financial services in conformity with Islamic Shariah.
To contribute towards economic development and prosperity within the
principles of Islamic justice.
Optimum allocation of scarce financial resources, and
To help ensure equitable distribution of income.

2.1 Corporate information at a glance

(As on 30 September, 2017)
Date of Incorporation 13th March 1983
Inauguration of 1st Branch (Local office,
30th March 1983
Dhaka)
Formal Inauguration 12th August 1983
Share of Capital
Local Shareholders 36.91%
Foreign Shareholders 63.09%
Authorized Capital Tk.20,000.00 million( $ 256.09 million)

5
Paid-up Capital Tk.16,099.91 million( $ 206.14 million)
Deposits Tk.716556.77million ($ 8,738.50 million)
Investments (including Investment in Shares) Tk.683097.10 million($8,330.45 million)
Foreign Exchange Business
Import Tk. 387,632 million ( $ 4,727.22 million)
Export Tk. 3,24,236 million ( $ 3,954.10 million)
Remittance Tk. 3,01,066 million ($ 3,671.54 million)
Branches
Number of Branches 328
Number of SME Service Centers 30
Number of AD Branches 58
Number of ATM Booth 410
Number of Shareholders 1609.99

2.5 Products & Services of the Bank

Deposit Products:

1.Al-Wadeah Current Account (AWCA)

2.Mudaraba Savings Account (MSA)
3.Mudaraba Term Deposit Account (MTDR)
4.Mudaraba Special Notice Account (MSNA)
5.Mudaraba Hajj Savings Account (MHSA)
6.Mudaraba Special Savings (Pension) Account (MSSA)
7.Mudaraba Savings Bond (MSB)
8.Mudaraba Monthly Profit Deposit Account (MMPDA)
9.Mudaraba Muhor Savings Account (MMSA)
10.Mudaraba Waqf Cash Deposit Account (MWCDA)
11.Mudaraba NRB Savings Bond (MNSB)
12.Mudaraba Foreign Currency Deposit Account (MFCD)
13.Students Mudaraba Savings Account (SMSA)
14.Mudaraba Farmers Savings Account (MFSA).

Investment Scheme:
6
 1.Household Durables Scheme (HDS)
2.Investment Scheme for Doctors (ISD)
3.Transport Investment Scheme (TIS)
4.Car Investment Scheme (CIS)
5.Small Business Investment Scheme (SBIS)
6.Micro Industries Investment Scheme (MIIS)
7.Agricultural Implement Investment Scheme (AIIS)
8.Real Estate Investment Program (REIP)
9.Real Estate Investment (Commercial & Working Capital)
10.Agricultural Investment of IBBL
11.NRB (Non Resident Bangladeshi)
12.Entrepreneurs Investment Scheme(NEIS)
13.Women Entrepreneurs Investment Scheme (WEIS).

Services:
1.NRB (Non Resident Bangladeshi) Entrepreneurs Services
2.SME services
3.foreign exchange services
4.Locker services, Offshore Banking Units (OBU)
5.Mobile Financial service.

2.6 Financial performance of IBBL:

(Amount in million taka)

Part Particulars 2012 2013 2014 2015 2016

Authorized Capital 10,000.00 20,000.00 20,000.00 20,000.00 20,000.00

Paid-up Capital 7,413.12 10,007.71 12,509.64 16,099.90 16,099.90

Reserves Fund 16,081.14 17,792.50 27,245.87 27,879.72 31029.04

Shareholders Equity 23,494.26 27800.21 39755.51 39755.51 39755.51

Total Deposits 291,934.60 341,853 417,844.14 615,359.21 681044.53

(Including bills payable)
Gross
Total Investments (Including 275493.94 322772.83 399930.79 629,631.27 611418.91
Inv. in Share) Gross

7
Import Business 246,281.00 301,207.00 284,588.00 343,668.00 360451

Export Business 148,421.00 178,244.00 197,095.00 224,236.00 254143

Remittance 214,629.00 236,607.00 300,915.00 321,066.00 310074

Total Foreign Exchange 609,331.00 716,058.00 782,588.00 888,970.00 924668

Business
Total Income 30,128.90 38,401.29 50,345.77 55,256.08

Total Expenditure 20,559.21 25,669.67 34,737.53 38,237.23

Net Profit before Tax 8,454.71 10,841.45 12,096.18 17,018.85

Payment to Government 4,108.98 5,505.87 6,571.74 7,459.57

(Income Tax)
Dividend 35% stock 7%(Cash) 8%(cash) 8%(cash)
25%(Stock 17%(stock) 17%(stock)
Total Assets (including 443,684.79 502,613.05 592,580.32 662,580.32
Contra)
Total Assets (Excluding 330,586.12 389,192.12 482,536.32 512,536.32
Contra)
Fixed Assets 6,748.44 7,100.19 14,808.23 15,930.47

Number of Foreign 919 935 676 676

Correspondents
Number of Shareholders 58,923 60,550 60,302 60,302

Number of Employees 10,349 11,465 11,188 11,381

Number of Branches 251 266 293 304

Earnings per Share (Taka) 6.02 4.84 4.42 5.25

Market Value per Share 90 83.98 59.00 65.00

(Taka) (Highest)

8
 CHAPTER- THREE

Analysis and Findings: Investment

Mechanism of IBBL

3.1 Introduction:
Investment is the action of deploying funds with the intention and expectation that they
will earn a positive return for the owner. Funds may be invested in either real assets or
financial assets. When resources are used for purchasing fixed and current assets in a
production process or for a trading purpose, then it can be termed as real investment.
Specific examples of financial investments are: deposits of money in a bank account, the
purchase of Mudaraba Savings Bonds or stock in a company. Since Islam condemns
hoarding savings and a 2.5 percent annual tax is imposed on savings, the owner of

9
excess savings, if he is unable to invest in real assets, has no option but to invest his
savings in financial assets.

3.2 Objectives and Principles of Investment:

The objectives and principles of investment operations of the Bank are:
To invest fund strictly in accordance with the principles of Islamic Shariah.
To diversify its investment portfolio by the size of investment, by sectors (public &
private), by economic purpose, by securities and by geographical area including
industrial, commercial, and agriculture.
To ensure mutual benefit both for the bank and the investment-client by professional
appraisal of investment proposals, judicious sanction of investment, close and constant
supervision and monitoring thereof.
To make investment keeping the socio-economic requirement of the country in view.
To increase the number of potential investors by making participatory and productive
investment.
To finance various development schemes for poverty alleviation, income and
employment generation with a view to accelerating sustainable socio-economic growth
and uplift of the society.
To invest in the form of goods and commodities rather than give out cash money to the
investment clients.

3.3 Modes of Investment

3.4 Mechanism of Investment

Bai mechanism

A.Bai-Murabaha (Contract Sale on Profit)

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Definition:
“Bai-Murabaha” may be defined as a contract between a buyer and a seller under which
the seller sells certain specific goods permissible under Islamic Shariah and the Law of
the land to the buyer at a cost plus an agreed profit payable today or on same date in the
future in lump-sum or by installment. The profit may be either a fixed sum or based on a
percentage of the price of the good.
Features of Bai- Murabaha:
A client can make an offer to purchase particular goods from the bank for a specified
agreed upon price, including the cost of the goods plus a profit.
A client can make the promise to purchase from the bank, that is, he is either to satisfy
the promise or to indemnify any losses incurred from the breaking the promise without
excuse.
The bank must deliver the goods to the client at the date, time, and place specified in the
contract.
The purchase price of goods sold and profit mark-up shall separately and clearly be
mentioned in the agreement.
The price once fixed as per agreement and deferred cannot be further increased.
It is permissible for the Bank to authorize any third party to buy and receive the goods
on Bank’s behalf. The authorized must be in a separate contract..

A.Bai-Muajjal (Deferred Sale)

Definition:
The Bai-Muajjal may be defined as a contract between a buyer and a seller under which
the seller sells certain specific goods, permissible under Shariah and law of the country,
to the buyer at an agreed fixed price payable at a certain fixed future date in lump sum or
in fixed installments.
Features of Bai-Muajjal:
It is permissible and in most cases, the client will approach the bank with an offer to
purchase a specific good through a Bai-Muajjal agreement.
It is permissible to make the promise binding upon the client to purchase the goods from
the bank.
It is permissible to take cash/collateral security to guarantee the implementation of the
promise or to indemnify the bank for damages caused by non-payment.
11
The bank must deliver the goods to the client at the time and place specified in the
contract.
The bank may sell the goods at a higher price than the purchase price to earn profit.
The price is fixed at the time of the agreement and cannot be altered.
The bank is not required to disclose the profit made on the transactio

A.Bai-Salam (Advance Payment)

Definition:
Bai-Salam may be defined as a contract between a buyer and a seller under which the
seller sells in advance in the certain commodity (ies)/ products (s) permissible under
Islamic Shariah and the law of the land to the buyer at an agreed price payable on
execution of the said contract and the commodity (ies)/ products (s) to the buyer at a
future time in exchange of an advance price fully paid on the spot.
Features of Bai- Salam:
Generally, industrial and agricultural products are purchased/sold in advance
under Bai-Salam mode of investment to infuse finance so that product is not
hankered due to shortage fund/cash.

It is permissible to obtain collateral security from the seller client to secure the
investment from any hazards via non-supply/partial supply of commodity
(ies)/product(s), supply of low quality commodity (ies) /product(s).

It is also permissible to obtain Mortgage and /or Personal Guarantee from a third
party as security before the signing of the Agreement or at the time to signing the
Agreement

Bai-Salam on a particular commodity (ies)/product(s) or on a product of a

particular field or firm cannot be affected (for Agricultural Product(s) only).

The seller (manufacturer) client may be made agent of the Bank to sell the
goods delivered to the Bank by her provided a separate agency agreement is
executed between the bank and the client (agent).

A.Bai-Istisna

12
Definition:
Intishna’a sale is a contract in which the price is paid in advance at the time of the
contract and the object of sale is manufactured and delivered later. The majority of the
jurist considered Intishna’a as one of the divisions of Salam; therefore, it is subsumed
under the definition of Salam.
Features of Istisna:
It facilitates the manufacturer sometimes to get the price of the goods in advance,
which he may use as capital for producing the goods.

It gives the buyer opportunity to pay the price in some future dales or by go downs.

It is a binding contract and no party or is allowed to cancel the Istishna contract
after the piece is paid and received in full or in part or the manufacturer starts the
work.

Istishna is specially practiced in manufacturing and industrial sectors; however, it

can be practiced in agricultural and constructions sectors also.

Share Mechanism:

A.Mudaraba (Investment made by the entrepreneur)

Definition:
It is a form of partnership where one party provides the funds while the other provides the
expertise and management. The first party is called the “Sahib-Al-Maal” and the latter is
referred to as the “Mudarib”. Any profits accrued are shared between the two parties on a
pre-agreed basis, while capital loss is exclusively borne by the partner providing the
capital.
Features of Mudaraba:
Bank supplies capital as Sahib-Al-Mall and the client invest if in the business
with his

Administration and management is maintained by the client.

Profit is divided as per management.

Bank bears the actual loss alone.

13
 Client cannot take another investment for that specific business without the
permission of the bank.

Differences between Mudaraba and Musharakah:

1. The investment in musharakah comes from all the partners, while in

mudarabah, investment is the sole responsibility of Saheb-ul-maal.

2.In musharakah, all the partners can participate in the management of the
business and can work for it, while in mudarabah, the Saheb-ul-maal has no right
to participate in the management which is carried out by the mudarib only.

3. The liability of the partners in musharakah is normally unlimited. Therefore, if

the liabilities of the business exceed its assets and the business goes in liquidation,
all the exceeding liabilities shall be borne pro rata by all the partners.

4. In musharakah, 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. The case of mudarabah is different.
Here all the goods purchased by the mudarib are solely owned by the Saheb-
ulmaal, and the mudarib can earn his share in the profit only in case he sells the
goods profitably.

Types of Mudarabah:

01. The Saheb-ul-maal may specify a business in which to invest, in which case the
mudarib is restricted only to such business as pointed out by Saheb-ul-maal. This is called
restricted mudarabah or al-mudarabah al-muqayyadah.
02. If Saheb-ul-maal has not specified a business in which to invest, it is considered an
unrestricted mudarabah or al-mudarabah al-mutalaqah.

Distribution of Profit:
The distribution of profit must be pre-determined by the two parties. Furthermore, the
amount of profit ascribed to either of the parties must be independent of the capital
amount, dependent solely on the actual profit realized by the commercial enterprise.
14
Termination of Mudarabah:
The mudarabah contract can be terminated by either of the two parties at any time as long
as a notice, per the contract terms, is given to the other party. Furthermore, Hanafi and
Hanbali jurists are of the opinion that a maximum term of the mudarabah contract can be
set, whereafter the contract is terminated automatically.

A.Musharaka (Partnership based on investment)

Musharakah is a type of Shirkat-ul-Amwal which literally means sharing. In the context

of business, it refers to a joint enterprise in which partners (or parties) to the enterprise
share the profit and loss of the enterprise.
The Basic Rules of Musharakah:
Since Musharakah is, in essence, a contract, all conditions and rules of a contract must be
met. Apart from those, there are some basic rules that apply specifically to Musharakah.

Distribution of Profits and Loss:

The proportion of profit to be distributed among the partners must be determined and
agreed upon at the time of the contract. Otherwise the contract is not valid under Shari’ah.
ll the Muslim jurists are unanimous that each partner’s share in loss must be exactly equal
to the ratio of initial investment. Anything to the contrary will render the contract invalid.

The Nature of Capital:

There are the following opinions on this:

According to Imam Malik and some Hanbali jurists, the nature of capital is not a
restriction in a Musharakah arrangement. Therefore, in-kind (non-cash) contributions by
partners are allowed. The share in partnership will be determined based on the market
value of the commodity contributed.

Ijarah Mechanism:
A. Hire Purchase under Shirkatul Melk (HPSM)

15
Under this mode Bank may supply implements/ equipment/goods on rental basis. The
ownership of the implements/ equipment/goods will be with the Bank and the client
jointly and the portion of the client will remain to the Bank as mortgage until the closure
of the investment account, but the client will be authorized to possess the equipment for
certain period. The client, after completion of the installments, will be the owner of the
implements/ equipment/ goods.

Meaning and Definition:

Hire Purchase under Shirkatul Melk is a Special type of contract which has been
developed through practice. Actually, it is a synthesis of three contracts:
01. Shirkat
02. Ijarah
03. Sale

These may be defined as follows:

1.Shirkatul Melk:
Shirkat means partnership. Shirkatul Melk means share in ownership. When two or more
persons supply equity, purchase an asset, own the same jointly, and share the benefit as
per agreement and bear the loss in proportion to their respective equity, the contract is
called Shirkatul Melk contract.

2.Ijarh:
The term Ijarah has been derived from the Arabic works (Air) and (Ujrat) which means
consideration, return, wages or rent. This is really the exchange value or consideration,
return, wages, rent of service of an ASSET. Ijarah has been defined as a contract between
two parties, the Hire and Hirer where the Hirer enjoys or reaps a specific service or
benefit against a specified consideration or rent from the asset owned by the Hire. It is a
hire agreement under which a certain asset is hired out by the Hire to a Hirer against
fixed rent or rentals for a specified period.
Related Terminologies or Elements of Ijara:

3.Sale:

16
 This is a sale contract between a buyer and a seller under which the ownership of certain
goods or asset is transferred by seller to the buyer against agreed upon price paid / to be
paid by the buyer. Thus, in Hire Purchase under Shirkatul Melk mode both the Bank and
the Client supply equity in equal or unequal proportion for purchase of an asset like land,
building, machinery, transports etc. Purchase the asset with that equity money, own the
same jointly; share the benefit as per agreement and bear the loss in proportion to their
respective equity.

Special Features HPSM:

In case of Hire Purchase under Shirkatul Melk transaction the asset / property involved is
jointly purchased by the Hire (Bank) and the Hirer (Client) with specified equity
participation under a Shirkatul Melk Contract in which the amount of equity and share in
ownership of the asset of each partner (Hire Bank & Hirer Client) are clearly mentioned.
Under this agreement, the Hire and the Hirer becomes co-owner of the asset under
transaction in proportion to their respective equity participation.

In Hire Purchase under Shirkatul Melk Agreement, the exact ownership of both the Hire
(Bank) and Hirer (Client) must be recognized.
The share/part of the purchased asset owned by the Hire (Bank) is put at the disposal
/possession of the Hirer (Client) keeping the ownership with him (Bank) for a fixed
period under a hire agreement in which the amount of rent per unit of time and the benefit
for which rent to be paid along with all other agreed upon stipulations are also to be
clearly stated.
Hire (Bank) is entitled for the rentals. As the ownership of hired portion of the asset lies
with the Hire (Bank) and rent is paid by the Hirer (Client) against the specific benefit, the
rent is not considered as price or part of price of the asset.
The promise to transfer legal title by the Hire and undertakings given by the Hirer to
purchase ownership of the hired asset upon payment part by part as per stipulations are
effected only when it is actually done by a separate sale contract.
Hire Purchase under Shirkatul Melk is a binding contract for the parties to it - the Bank
and the Client who are committed to fulfill / meet their undertakings / obligations in
accordance with the relevant agreement.
Under this agreement the Bank acts as a partner, as a Hire and at last as a seller ;on the
other hand the Client acts as a partner, as a Hirer and lastly as a purchaser.

17
Ownership risk is borne by both the Hire and Hirer in proportion to their retained
ownership / equity.
Hire Purchase under Shirkatul Melk facilities may be for medium-term or long-term
period, which may be utilized for the expansion of production and services, as well as
housing activities. The duration of Hire Purchase under Shirkatul Melk contract shall not
exceed the useful life of the subject / asset of the transaction. The Bank should not
normally enter a Hire.
Purchase under Shirkatul Melk transaction for items with useful life of less than two
years.
Hire Purchase under Shirkatul Melk transaction facilitates the Client (Hirer) to get
benefit from the hired asset in exchange of rental and also to become full owner of the
asset by purchasing it part by part.

3.5 Investment approval Processing of IBBL:

Generally a bank takes certain steps to deliver its proposed investment to the client. But
the process takes deep analysis. Because banks invest depositors fund, not banks’ own
fund. If the bank fails to meet depositors demand, then it must collapse. So, each bank
should take strong concentration on investment proposal. However, Islami Bank
Bangladesh Limited (IBBL) makes its investment decision through successfully passing
the following crucial steps:

(1) Selection of the client:

Here, investment taker (client) approaches to any of the branch of Islami Bank
Bangladesh Limited (IBBL). Then, he talks with the manager or respective officer
(Investment). Secondly, bank considers five C’s of the client. After successful completion
of the discussion between the client and the bank, bank selects the client for its proposed
investment. It is to be noted that the client/customer must agree with the bank’s rules &
regulations before availing investment. Generally, bank analyses the following five C’s of
the client:

Character;

18
Capacity;
Capital;
Collateral; and
Condition.

(2) Application stage

At this stage, the bank will collect necessary information about the prospective client.
For this reason, bank informs the prospective client to provide and/or fill duly respective
information which is crucial for the initiation of investment proposal. Generally, here, all
the required documents for taking investment have to prepare by the client himself.
Documents that are necessary for getting investment of IBBL is prescribed below:
Trade License photocopy (for proprietorship);
Abridged pro forma income statement;
Attested copy of partnership deed (for partnership business);
Prior three (03) years’ audited balance sheet (for joint stock company);
Prior three (03) years’ business transactions statement for the musharaka/mudaraba
investment;
Abridged pro forma income statement for the musharaka/mudaraba investment;
Attested copy of the Memorandum of Association (MOA) & Articles of Association
(AOA) for the joint stock company;
Attested copy of the Tax Identification Number (TIN)- including final assessment;
Tenders of the proposed assets (in case of HPSM);
Detailed summary of the sundry debtors and creditors (including both time &
schedule);
Summary of the personal movable & immovable assets; and others.

(3) Appraisal stage

At this stage, the bank evaluates the client and his/her business. It is the most important
stage. On the basis of this stage, bank usually goes for sanctioning the proposed
investment. If anything goes wrong here, the bank suddenly stops to make payment of
investment.
In order to appraise the client, Islami Bank Bangladesh Limited (IBBL) provides a
standard F-167B Form (Appraisal Report) to the client for gathering all the information.

19
The original copy of the appraisal report is enclosed in the appendix chapter. However,
the following contents are presented from that appraisal report:

Company’s/Client’s Information.
Owner’s Information.
List of Partners/Directors.
Purpose of Investment/Facilities.
Details of Proposed Facilities/Investment.
Break up of Present Outstanding.
Other Liabilities of the Client/Group.
Previous Banker’s Information.
Details of Sister/Allied Concerns.
Allied Deposit as on.
Business/Industry Analysis.
Relationship Analysis.
Asset-Liability position of the client as per Audited Balance Sheet.
Working Capital Assessment.
Risk Grade.
Particulars of the godown for storing MPI/Murabaha goods.
Insurance Coverage.
Audit Observation.
Security Analysis.

(4) Sanctioning stage:

At this stage, the bank officially approves the investment proposal of the respective
client. In this case client receives bank’s sanction letter. Islami Bank Bangladesh Limited
(IBBL)’s sanction letter contains the following elements:

1.Investment Limit in million.

2.Mode & amount of investment.
3.Purpose of investment.
4.Period of investment.
5.Rate of return.
6.Securities

20
In allowing Murabaha investment and amount of cash security is generally realized from
the client (amount depends on the nature of goods, creditworthiness of the client,
collateral security obtained etc.) which is converted to goods security after purchase of
goods purchased out of bank’s investment and client’s cash security is pledged to the
bank, kept under bank’s custody before its delivery to the client on payment. Example:
If, for a Murabaha investment cash security is fixed at 25% Bank’s investment stands at
75% on the total goods purchased. For example, if cost of total goods purchased is
Tk.100000 Bank’s investment will be Tk.75000 and client’s cash security will be
Tk.25000.
Bank Client Total cost of goods

Tk. 75000 (75%) Tk. 25000 (25%) Tk. 100000 (100%)

(5) Documentation stage

At this stage, usually the bank analyses whether required documents are in order. In the
documentation stage, Islami Bank Bangladesh Limited (IBBL) checks the following
documents of the client:
Tax Payment Certificate.
Stock Report.
Trade License (renewal).
VAT certificate
Liability statement from different parties.
Receivable from different clients.
Other assets statement.
Aungykar Nama.
Ghosona Potra.
Three (03) years net income & business transactions.
Performance report with the bank.
Account Statement Form of the bank.
Valuation Certificate
a.Particulars of the Proposal.
b.Particulars of the Mortgagor.

21
c.Particulars of the Properties.
Outstanding liability position of the bank.
CIB (Credit Information Bureau) Report.

(6) Disbursement stage:

At this stage, bank decides to pay out money. Here, the client gets his/her desired fund or
goods. It is to be noted that before disbursement a “site plan” showing the exact location
of each mortgage property needs to be physically verified.
(7) Monitoring & Recovery stage
At this final stage of investment processing of the Islami Bank Bangladesh Limited
(IBBL), bank will contact with the client continually, for example- bank can obtain
monthly stock report from the client in case of micro investment. Here, the bank will
keep his eye on over the investment taker. If needed, bank will physically verify the
client’s operations. Also if bank feels that anything is going wrong then it tries to recover
its investment fund from the client.
3.6 Performance of IBBL, BADDA Branch

At a glance position as on 30-11-2015

Amount In Million Taka
Particulars 2013 2014 Up to Increased since
November, previous year
2015
Total Investment Income 620.06 1239.89 1055.40 322.10

Total Non-investment 78.08 98.92 84.37 22.92

Income

Comparative Study of Sector wise Investment Position of BADDA Branch:

[Amount in million Taka]
Sector 2012 2013 2014 2015
Invt. OD Invt. OD Invt. OD Invt.
1 Industri 5005.60 4.07 6931.96 7.21 8586.76 95.65 8988.89
al
2 Comme 903.99 1.74 1384.49 1.56 1520.52 7.07 1755.92
rcial

22
 4 Real 423.51 39.23 425.46 40.57 881.53 39.50 2958
Estate
6 Others 533.70 1.36 402.35 0.26 318.35 0.09 314.61
Total= 6866.80 46.40 9144.26 49.60 11307.16 142.31 14017.42 1
0
0

Investment Deposit Ratio (IDR): 2.94 : 1.00 . We will try to reduce the IDR gap
between Investment and Deposit portfolios by increasing our deposit by the end of the
year – 2015.

[Amount in million Taka]

2010 2011 2012 2013 2014 Nov,14 Nov,15
12.70 5.84 4.24 20.99 46.40 49.60 69.7

SL Company Name Investment Mode & Type of Business

NO Limit(in million)
:
01 Kushum Koli Shoe MTR,10.00 Shoe manufacturer

02 Rich Man- Lubnan MTR,8.00 Garments and apparels

03 M/S Masud Rana 6.50, HPSM Construction material

Enterprise (TIS),0.57,HPSM(HIP) supplier & wholesaler
04 M/S Monwar Electric MTR, 4.50 Electric materials & Solar
panel wholesaler
05 M/S Delwar MTR, 4.80 Tiles, Marbles retailer
Enterprise
06 Al-Mohammadia MTR, 3.00 String manufacturer
Bobin factory
23
07 Abirvab Publication MTR, 2.50 Books printing & publisher

08 M/s New Popular MTR, 5.00 Lethe machine factory

Engineering Works
09 Bismillah Food MTR 2.00 Bakery & Food Item supplier

10 Al-Fida Multipurpose MTR, 2.00 Co-Operative Society

Co-operative Society
3.7 Top Ten Investment Clients of IBBL-BADDA Branch, Dhaka

3.8 Mode Wise Investment Analyses:

From the following table we can see, from the year 2013 to 2015(up to November 15),
this bank has invested year to year in different modes. Year to year it was increased the
value higher and higher
Investment of IBBL Badda Branch
(All amount in million)
Serial Mode Outstanding Outstanding Outstanding
No. Amount as on Amount as on Amount as on
31/12/2013 31/12/2014 10/11/2015
1 Bai-Murabaha 0.00 0.00 0.00
2 Bai-Muajjal 28.53 38.73 50.25
3 Musharaka 0 0 0
4 HPSM 204.85 277.64 305.52
7 Murabaha TR 215.19 233.86 256.50
Total Investment 595.09 628.54 769.03

Mode wise investment (2013-2015)

Graphical Analysis of the Investment of Badda Branch:

*Up to 10/11/2015 (All amount in million)

24
Figure: Investment of Badda Branch on different modes (2013-2015)
From the above graph, it is clear that the overall trend of investments were positive and
increasing during the period under study. In 2013-2015, all investment modes are
graphically presented into the analysis.
The Investment Performance of IBBL in Different Modes from 2013 to
2015
Bai- Muajjal
*Up to 10/11/2015 (All amount in million)

Figure: Investment of Badda Branch on Bai-Muajjal sector (2013-2015)

From the above figure, we can see in this investment mode that in 2013 the amount is
around five core which is increasing in 2015 is around 30 core.

Bai-Murabaha
*Up to 10/11/2015 (All amount in million)

Figure: Investment of Badda Branch on Bai-Murabaha sector (2013-2015)

In the following figure, It has been presented that Bai- Murabaha has increased their
income in 2013 is 230 core, 350 core in 2014 and 380 core in 2015.The bank has enjoyed
increasing growth in investment mode by providing good connection to its customers.

HPSM(Hire Purchase Under Shirkatul Meelk)

*Up to 11/11/2015 (All amount in million)

25
Figure: Investment of Badda Branch on HPSM sector (2013-2015)

In the following figure, It has been presented that HPSM(Hire Purchase Under Shirkatul
Meelk) has increased their income in 2013 is 255 core, 378 core in 2014 and 406 core in
2015.The bank has enjoyed increasing growth in investment mode by providing good
connection to its customers.

Bai-Salam
*Up to 10/11/2015 (All amount in million)

Figure: Investment of Badda Branch on Bai-Salam sector (2013-2015)

26
In this graph, Bai-Salam is popular in Badda branch. In 2013 this investment mode
income 15.34 core.In the year 2014 growth is slowed down But in 2015, it achieved sharp
growth in this mode is 24 core.
MPI
*Up to 10/11/2015 (All amount in million)

Figure: Investment of Badda Branch on MPI sector (2013-2015)

In this graph, MPI is popular in Badda branch. In 2013 this investment mode income 59
core.In the year 2014 growth is increased But in 2015, it achieved sharp growth in this
mode is 158 core.

2008 2009 2010 2011 2012 2013 2014 Novembe

r15
1590.6 2430.8 4584.5 5829.6 6866.8 11307. 10645. 14017.42
4 0 3 4 0 16 59
Growt 0.52 0.88 0.27 0.18 0.65 -0.5 0.32
h
Rate
(in %)

27
3.9 Findings:

IBBL has achieved stable growth and continuous progress to be one of the leading private
sector banks of the country.
1.Investment is made through different modes as per Islami Shariah.
2. Invest income of the bank is shared with the Mudaraba depositors according to
an agreed upon ratio, ensuring a reasonable fare rate of return on their deposits.
3.Ensures Shariah compliance through regular and effective guidelines of
powerful and highly esteemed Shariah council consisting of thirteen members
representing Shariah scholars.
4.Among 90% of top 10 clients are used MTR and only 10% are used HPSM.
5.Lack of strong initially to explore investment opportunities through research and
markets.
6.Most of the employers and employees are not business graduate/master.
7.Some investment deal is very much slow.

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 CHAPTER- FOUR

Recommendation and Conclusion

29
 4.1Recommendation

Though Islami Bank Bangladesh Ltd. (IBBL) is performing well but it has some crucial
areas to improve which are prescribed below:

IBBL can diffuse its scope of investment through focusing shariah concept
regarding investment among the Bank officers; employer and the Clients by
strong training, workshops and Clients get – together.
This Bank should arrange a wide varieties of regular programs like “ISLAMIC
JALSA” “OAAZ MAHFIL” “SEMINAR” “MOSQUE -BASED DISCUSSION”
etc. about investment mechanism of Islami Bank countrywide to remove the
negative impression about IBBL.
Practice amount of doubtful income declined substantially during the year as
compared to the past few years, indicating more carefulness of the Management in
complying with Shariah. As a result, idle money will be invested to increase
potential profit of this Bank.
Arrangement of monthly /quarterly training courses /workshops for the clients
selected by the Branches in order to promote Investment clients of the desired
level.
IBBL should initiate different investment modes according to changing /diverse
needs of clients by conducting huge Research and study.
IBBL should appoint a sufficient number of women employees to deal women
entrepreneurs and professionals and understand their needs and thus create
demand for investment.
To gain success in the programs like “Poverty Alleviation and “Self Reliant”
especially in rural areas, this bank should provide investment facilities on the
basis of individual position.
In the context of Bangladesh considering the necessity of Islami Banking system
the Government should establish Mudaraba company/bank.
IBBL needs to finance the needy entrepreneurs who have no money at all and
they are newcomer in the business.
We know there are most important modes of investment is share mechanism but
islami bank have no such strong application of that mode though theoretical use of
share mechanism is so wide.

30
IBBL’s investment processing should become easier than other conventional banks.
IBBL should consider utilization of rural potentials from both efficiency and equity
grounds in the context of the present-day socio-economic conditions of Bangladesh.
Strong commitments and stepping up through experiment and implementation of
innovative ideas are the appropriate ways to do that.
IBBL can diffuse its scope of investment through focusing shariah concept regarding
investment among the bank officers; employer and the clients by strong training,
workshops.
IBBL should initiate different investment modes according to changing /diverse needs
of clients by conducting huge research and study.

4.2 Conclusion

31
Islam is a complete way of life and Allah’s guidance extents into all areas of our lives.
Islam has given detail regulations for our economic life. Therefore, Islami Bank
Bangladesh Limited (IBBL) is trying to establish the maximum welfare of the society by
maintaining the principles of Islamic Shariah which is based on “Quran” and “Sunnah”.
Since 1983, IBBL is the pioneer in welfare banking in this subcontinent and it is trying
to do all its activities for the betterment of its depositors. For the greater interest of the
depositors the investment policy of IBBL is to invest on the basis of profit and loss
sharing in accordance with the tents and principles of Islamic Shariah. Profit earning is
not the only motive and objective of the bank’s investment policy rather emphasis is
given in attaining social good and in creation employment opportunities.
IBBL is not secular in its orientation. IBBL does not finance any project which conflicts
with the moral value system of Islam. IBBL does not strictly consider the credit
worthiness of the entrepreneur. IBBL receives a return only if the project succeeds and
produces a profit. IBBL considers the soundness of the project and business acumen and
managerial competency of the entrepreneur. Therefore, the rate of return of investment of
IBBL is greater comparing to that of conventional banks.
Finally, Islami Bank Bangladesh Limited (IBBL) has been established with a view to
conduct interest free banking to establish participatory banking instead of debtor-creditor
relationship and finally to establish welfare oriented banking through its investment
operations that would lead to a just society.

List of Acronyms

Acronyms ELABORATIONS

BB BANGLADESH BANK

IBBL ISLAMIC BANK BANGLADESH LIMITED

32
IBTRA ISLAMI BANK TRAINING AND RESEARCH ACADEMY

GB GENERAL BANKING

OIC ORGANIZATION OF ISLAMIC CONFERENCE

BIBM BANGLADESH INSTITUTION OF MANAGEMENT

SWIFT SOCIETY FOR WORLDWIDE INTER-BANK FINANCIAL

AD AUTHORISED DELLER

T.T TELEGRAPH TRANSFER

MSA MUDARABA SAVINGS ACCOUNT

AWCA AL-WADIHA CURRENT ACCOUNT

MSSA MUDARABAH SPECIAL SAVINGS (PENSION)ACCOUNT

KYC KNOW YOUR CUSTOMER

P.O PAYMENT ORDER

HPSM Hire Purchase under Shirkatul Melk

Bibliography

1.“Text Book on Islamic Banking” Published By- Islamic Economics Research

Bureau, 2nd Edition, November, 2008.
2.“Principal & Practice of Islami Banking” Written By- AbdurRaquib (Executive
President), IBBL, 1st Edition, February, 2007.
3.“Islami Banking” Written By- A.A.M HabiburRahman (Senior Vice President),
IBBL, 3rd Edition, January, 2008.
4.“Islamic Financial System And Selected Islamic Economics Issues” Written By-
Md.Mahfuzur Rahman (Executive Vice President), B.M. HabiburRahman (Assistant
Vice President), IBBL, 2nd Edition, February, 2008.

33
 5.Prof. Mohd. Sharif Hussain, “Riba, Bai, Investment, Profit & Rent”. Director, IBBL,
Dhaka. (Lecture Synopsis).

6.Md. AshequreAhamedJebal, “Islamic Banking Definition, History, Growth & Present

status in Bangladesh and around the World”. VP, FM, IBTRA (Lecture Synopsis).

7.Md. Nurul Islam Khalifa, “Different Investment Modes of IBBL & Difference with
that of Conventional Banking”. EVP, IBBL, Dhaka (Lecture Synopsis).

8.Investment Manual, 2012. - Published by IBBL.

9.Web site : www.islamibankbd.com
10.Website : www.ibtrabd.com

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