Internship Report on Deposit and Investment Management of Islami Bank Bangladesh Limited

Executive Summary

Modern Banks play an important role in promotion economic development of a country. Banks provide necessary funds for executing various programmers underway in the process of economic development. They collect savings of large masses of people scattered throughout the country which in the absence of banks would have remained idle and unproductive. These scattered amounts are collected, people together and made available to commerce and industry for meeting their requirement.

The title of the Internship report is ‘Deposit & Investment Management of Islami Bank Bangladesh Limited’. Previously Bangladesh was a little known country in the world; it was mainly recognized as a place famous for its dense population, poverty and cyclone. But the scenario has been changed during the last decade; Bangladesh is now regarded as a role model for success in economic growth and development maintaining the regular performances in macroeconomics. At present Islami Bank Bangladesh limited (IBBL) is one of the leading private sector banks in our country as well as South-East Asia with excellence in customers’ service aiming to economic uplift, human resources development, employment generation, achievement of balanced growth and development of the country.

IBBL is the first Islamic Shari’ah based multinational bank in South-East Asia. Islami Bank Bangladesh Limited is one of the leading banks in Bangladesh in terms of volume of business handled. It posses a huge clients base who comes in touch with the bank in so many purposes everyday. The bank runs its general banking, investment and foreign exchange operations based on Islamic Shariah. It has 199 branches till to date including 4 corporate branches with 7 Zonal Offices and the Head Office located at 40, Dilkusha C/A, Dhaka – 1000. There are 38 Authorized Dealer (AD) branches, i.e. branches having licenses to import, export and remittance business.

The Bank established 860 correspondent relationships with 300 banks and exchange houses in 110 countries around the globe.
This report is organized to fulfill the partial requirement of internship for MBA program of University of Dhaka. It includes the session like introduction, organization part, deposit and investment modes, conclusion and recommendation. In first session I have explained about my given topic. Here I have discussed about background, objectives, scope, methodology and limitations of the report. In second session I have tried to describe profile of Islami Bank Bangladesh Limited: the historical background of the IBBL, its mission, vision, objectives, mile stone etc. In Session third I have discussed my major internship area that is deposit and investment management of the IBBL. Session four is the conclusion consists of summary findings and where few recommendations have been suggested.

The approaches suggested in this study are that IBBL should give added emphasis on excellence in customer services to expatriate customers and realization the investment strategy as investment is the prime factor of business. Besides, IBBL should conduct elaborate and large scale study and research on the issues in order to improve the maximization of investment area for earning more and more.
So it has been a nice scope found to work and study extensively with this field. The finding of the study will have both practical and academic value. It will make various interested groups, more critical and careful in respect of ensuring classical customer’s satisfaction level.
2.1 Introduction:
Bangladesh is one of the largest Muslim countries in the world. The people of this country are deeply committed to Islamic way of life as enshrined in the Holy Qur’an and the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their economic lives in accordance with the precepts of Islam. The establishment of Islami Bank Bangladesh Limited on March 13, 1983, is the true reflection of this inner urge of its people, which started functioning with effect from March 30, 1983. This Bank is the first of its kind in Southeast Asia. It is committed to conduct all banking and investment activities on the basis of interest-free profit-loss sharing system. In doing so, it has unveiled a new horizon and ushered in a new silver lining of hope towards materializing a long cherished dream of the people of Bangladesh for doing their banking transactions in line with what is prescribed by Islam. With the active co-operation and participation of Islamic Development Bank (IDB) and some other Islamic banks, financial institutions, government bodies and eminent personalities of the Middle East and the Gulf countries, Islami Bank Bangladesh Limited has by now earned the unique position of a leading private commercial bank in Bangladesh.

2.2 Business philosophy of IBBL

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

2.3 Aims and Objectives of IBBL

To conduct interest free banking
To establish participatory banking instead of banking on debtor-creditor relationship
To invest through different modes permitted under Islamic Shariah
To accept deposits on profit-loss sharing basis
To establish a welfare-oriented banking system
To extend co-operation to the poor, the helpless and the low-income group for their economic uplift
To pay a vital role in human development and employment generation
To contribute towards balanced growth and development of the country through investment operations particularly in the less developed area.

2.4 Goals of IBBL
To establish Ihsan (gracious conduct or kindness) in economic affairs
Establishment of Maroof (proper and good acts, institutions) in economic life
Elimination of Munker (Evil, wrong of injurious practices) from economic life
To achieve maximum economic growth
To maximize employment to ensure maximum distribution of wealth in society
To achieve universal education and to encourage Co-operation in society.

2.5 Mission
To establish Islami 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.

2.6 Vision
IBBL’s vision is to always strive to achieve superior financially perform ace, be considered a leading Islamic bank by reputation and performance.
• The goal of IBBL is to establish and maintain the modern banking techniques, to ensure soundness and development of the financial system based on Islamic principles and to become the strong and efficient organization with highly motivated professionals, working for the benefit of people , based upon accountability, transparency and integrity in order to ensures stability of financial systems.
• IBBL tries to encourage savings in the form of direct investment
• IBBL also try to encourage investment particularly in projects which are more likely to lead to higher employment.

2.8 Achievement

2.8.1 IBBL’s World rating
As per Bankers’ Almanac (January 2001 edition) published by the Reed Business Information, Windsor Court, England, IBBL’s world Rank is 1771 among 3000 banks selected by them. This position was 1902 among 4500 selected banks as on January 1999 edition. IBBL’s country Rank is 5 among 39 banks as per ratings made by the above Almanac on the basis of IBBL’s Financial Statements of the year 2001.

2.8.2 Award and Prizes: International & National Perspective
IBBL was awarded for several times by international & national organisations. The Global Finance, an internationally reputed London based quarterly magazine, awarded IBBL as the best bank (World Best Bank Awarded) of the country for the year 1999, 2000 and 2005. ICMAB awarded Islami Bank in 2007 as a best corporate Banking award 2007.
IBBL has got the 2nd prize of National Export Fare for its pavilion of Service Organisation in 1985.

2.8.3 Membership of Different Organization / Chamber
Local:
• Bangladesh Institution of Bank Management (BIBM)
• The Institution of Bankers Bangladesh (IBB)
• Bangladesh Association of Banks (BAB)
• Bangladesh Foreign Exchange Dealers’ Association (BAFEDA)
• Central Shariah Board for Islamic Banks of Bangladesh
• Dhaka Chamber of Commerce & Industries
• Islami Bank consultative forum (IBCF)

Foreign:
• International Association of Islamic Banks (IAIB), Jeddah, K.S.A.
• International Chamber & Commerce of Bangladesh
• Accounting and Auditing Organizations for Islamic Financial Institutions (AAOIFI), Manama, Bahrain.
• General Council of Islamic Banks & Financial Institutions (GCIBFI),
• Islamic Financial Service Board, Kuala Lumpur, Malaysia
• Manama, Bahrain (IBBL is a member of its Executive Council)
• Society for Worldwide Inter-bank Financial Telecommunication (SWIFT)

2.9 FINANCIAL HIGHLIGHTS OF THE BANK
Table 2:

Sl. No.Particulars20082007
1Paid-up Capital4,752.003,801.60
2Total Capital (Equity)18,572.0814,957.74
3Capital Surplus/(deficit)1,243.14860.58
4Total Assets (Excluding contra)230,879.14191,362.35
5Total Deposits200,343.41166,325.29
6Total Investments(excluding Investment in Shares/Securities)180,053.94144,920.61
7Total Contingent Liabilities and Commitments57,138.0658,650.44
8Investment Deposit Ratio89.87%87.13%
9Percentage of Classified Investment against Total General Investments2.39%2.93%
10Profit after Tax & Provision2,674.801,427.36
11Amount of Classified Investment during current year65.11348.32
12Provision kept against Classified Investments1,883.431,703.13
13Provision Surplus/ (deficit)         –        –
14Cost of Fund9.56%9.06%
15Profit Earning Assets174,797.35157,758.03
16Non- Profit Earning Assets56,081.7933,604.32
17Return on Investments10.67%9.68%
18Return on Assets1.27%0.84%
19Income from Investments19,952.5914,856.19
20Earnings per Share (Taka)56.2930.04
21Net Income per Share (Taka)133.5879.56
22Price Earning Ratio (times)10.7817.88

***

2.10 Performance of IBBL:

Table 3: Performance of IBBL for the last 5 years

                 (amount in million Taka)

Particulars

2004

2005

2006

2007

2008

Authorized Capital

3,000.00

5,000.00

5,000.00

5,000.00

10,000.00

Paid-up Capital

2,304.00

2,764.80

3,456

3,801.60

4,752.00

Reserve Fund

4,329.92

5,450.94

6,551.23

7,418.05

9,308.49

Total Equity

6,691.12

8,331.14

10,435.94

14,957.74

18,572.08

Deposits
(Including bills payable)

87,841.01

107,779.42

132,419.49

166,325.29

200,343.41

Investments (Including Inv. in Shares & securities)

79,392.72

97,178.31

117,132.83

165,286.32

187,586.55

Import Business

59,804.00

74,525.00

96,870

137,086.00

168,329.00

Export Business

29,192.00

36,169.00

51,133

66,690.00

93,962.00

Remittance

23,669.00

36,948.00

53,819.00

84,143.00

140,404.00

Total Foreign Exchange Business

112,665.00

147,642.00

201,822.00

287,919.00

402,695.00

Total Income

8,262.73

10,586.78

140,38.30

176,99.52

24,230.33

Total Expenditure

6,419.74

8,424.36

112,95.43

1,4865.19

17,408.50

Net Profit before Tax

1,842.99

2,162.42

2,908.67

3,780.82

6,347.83

Payment to Government (Income Tax)

829.35

973.09

1,490.12

2,322.46

3,424.39

Dividend

20% (Stock)

25%(Stock)

15% (cash)

10% (stock)

25%(Stock)

30%(Stock)

Total Assets (including Contra)

125,776.94

150,959.66

188,155.27

250,637.48

288,017.19

Total Assets (Excluding Contra)

102,149.28

122,880.35

150,252.82

191,362.35

230,879.14

Fixed Assets

2,552.70

3,067.90

3,724.69

3,987.23

4,407.22

Number of Foreign Correspondents

850

860

870

884

        906
Number of Employees

5,306

6,202

7,459

8,426

9,397

Number of Branches

151

169

176

186

199

Book value per Share ( Taka)

2,257

3,013

3,020

4,147

4,862

Earning per Share (Taka)

518.59

487.57

368.42

539.00

560.29

Market Value per Share (Taka) (Highest)

5,110.00

5,580.00

4,749.00

6,999.00

8,030.00

Capital Adequacy Ratio

9.21%

9.44%

9.43%

10.61%

10.72%

(Note: One Million = Ten Lac)

Source: www.islamibankbd.com

Investment :

An investment is a current commitment of fund for a period of time in order to derive future payments that will compensate the investor for – (i) the time the funds are committed, (ii) expected rate of inflation and (iii) the uncertainty of the future payments. 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. The establishment of a factory or the purchase of raw materials and machinery for production purposes are examples in point. On the other hand, the purchase of a legal right to receive income in the form of capital gains or dividends would be indicative of financial investments. Specific examples of financial investments are: deposits of money in a bank account, the purchase of Mudaraba Savings Bonds or stock in a company. Ultimately, the savings of investors in financial assets are invested by the respective company into real assets in the form of the expansion of plant and equipment. Since Islam condemns hoarding savings and a 2.5 percent annual tax (Zakat) is imposed on savings, the owner of excess savings, if he is unable to invest in real assets, has no option but to invest his savings in financial assets.
When money is deposited with an Islamic Bank, the bank, in turn, makes investments in different forms approved by the Islamic Shariah with the intent to earn a profit. Not only a bank, but also an individual or organization can use Islamic modes of investment to earn profits for wealth maximization. Some popular modes of Islamic Investment are discussed below. A comparison is also attempted between the investment modes of IBBL and these of conventional banks.

INVESTMENT Modes OF IBBL
The word “Modes” literally means “methods”, or in other words, it refers to systematic and detailed rules, stipulations and steps to be followed for accomplishing a specific thing. The thing that needs to be accomplished in this context is, however, the subject matter of each of the said modes, i.e. any of the different types of investment activities (trade, leasing, real estate, manufacturing, agriculture, production etc. or using Shariah expressions Murabaha, Mudaraba, Musharaka, Ijarah, Istisna, etc.). One of the significant and revolutionary development in the banking arena of the world during the last four decades is the emergence and extra ordinary development of Islamic Banking among different countries of the world which has brought the attention of the scholars and general public of the Muslim World and Other World including the world bodies like International Monetary Fund, World Bank etc.

3.1 DEPOSITS

The relationship between a banker and his customer begins with the opening of an account by the former in the name of the latter. Initially, all the accounts are opened with a deposit of money by the customer and hence these accounts are called deposit accounts. The bulk of the resources of a bank are mobilized by accepting deposits from the public. Accepting of deposits of money from the public is one of the essential functions of a banker, according to the definition of banking given in the Banking Regulation Act, 1949.

Customarily, the bank accounts are classified into three categories:

(i)                              The savings deposit accounts

(ii)                            The fixed deposit accounts and

(iii)                           The current accounts.

3.2 DEPOSIT MOBILIZATION

Without multidimensional and diversified products, any financial institution especially banks cannot prosper and compete with other banks effectively. With this idea, IBBL has so far introduced the following deposit products.

Products of IBBL:

  1. Al Wadeeah Current Account
  2. Mudaraba Hajj Savings Account (1 Year to 25 Years)
  3. Mudaraba Waqf Cash Deposit
  4. Mudaraba Special Savings (Pension) Account (5 Years and         10 Years)
  5. Mudaraba Muhor Savings Account
  6. Mudaraba Savings Bond (5 Years and 8 Years)
  7. Mudaraba Monthly Profit Deposits Scheme (3 Years and 5 Years)
  8. Mudaraba Term Deposits (3 Months, 6 Months, 12 Months, 24 months and 36 Months)
  9. Mudaraba Savings Deposits Account
  10. Mudaraba Special Notice Deposits Account
  11. Mudaraba Foreign Currency Deposits Account
  12. Mudaraba Foreign Currency Account (US Dollar)
  13. Foreign Currency Account (GB Pound Sterling)
  14. Foreign Currency Account (EURO)
  15. Private Foreign Currency Account
  16. Non Resident Dollar Account

IBBL distributes minimum 65% of its investment-income earned through deployment of Mudaraba deposits among the Mudaraba depositors.

IBBL perform deposit mobilization under two principal:

  1. Mudarabah principal
  2. Al-wadiah principal

Current account is operated on Al-Wadeeah principle & all other deposit accounts on Mudaraba principle of Islamic Shari’ah.

 3.3 GENERAL CHARACTERISTICS OF DEPOSIT ACCOUNT:

3.3.1  Al-Wadeeah Current Account (AWCA):

AWCA accounts are unproductive in nature as far as banks loan able investment fund is concerned sufficient fund has to be kept in liquid form, as current deposits are demand liabilities. Thus huge portion of this fund becomes nonperforming. For this reason banks do not pay any profit of AWCA account holder. Business and companies are the main customers of this product.

3.3.2 Mudaraba Hajj Savings Account (I year to 25 years):

Hajj is one of the five pillars of Islam. Every Muslim cherishes a desire to perform Hajj at least for once in life time. IBBL has introduced a scheme in the name & style of Mudaraba Hajj Savings Scheme to facilitate the intending to perform Hajj properly at appropriate age. Any Muslim intending to perform Hajj by building-up deposit required for meeting Hajj expenses will select one of the 25 alternative choices based on duration of period from 1 year to 25 years for building-up savings by monthly installments under this scheme.

3.3.3 Mudaraba Waqf Cash Deposit Account :

The Bank has introduced Mudaraba Waqf Cash Deposit Account through which savings made from earnings for the purpose of Waqf by the well-off and the rich people of the society can be mobilized and the income to be generated therefore may be spent for different benevolent purposes. Higher profit is given against this account. Profit from this account is utilized for social and human welfare as per instruction of the account holders.

3.3.4 Mudaraba Special Savings (Pension) Account :

Considering the extreme demand amongst the client of Muslim Community in the country, IBBL has introduced an attractive Savings Scheme on the basis of Islamic Shari’ah named Mudaraba Special Savings (Pension) Scheme (MSS) for the middle and the lower middle class professionals and service holders creating an opportunity for them ensuring saving on monthly installment basis for their future financial security and welfare in their retired life.

3.3.5 Mudaraba Muhor Savings Account :

Muhor is wealth, which a husband is to pay to his wife, upon marriage. But there are a large number of married men from all walks of life in our society who did not pay total Muhor to their wives due to their inability. So to enable the intending married Muslims to build up fund to pay the fixed Muhorana (Den Muhor) to their wives at a time, a new Savings scheme named Mudaraba Muhor Savings Account has been introduced. This scheme will help them to save as per their capacity to build up the Muhor amount to be paid to their wives.

3.3.6 Mudaraba Savings Bond (5 years & 8 years) :

Persons-aged 18 years and above eligible to be a party will be eligible to purchase this Mudaraba Savings Bond(s) in single name or in joint names by depositing cash/cheque thought the deposit voucher.

Educational Institutions, Clubs, Associations and other non-Trading and non-profit Earning socio-economic institutions will also be eligible to purchase the Bond(s) in the name of the institutions. Father/Mother/legal guardian will be eligible to purchase Mudaraba Savings Bond(s) on behalf of one minor or two minors mentioning the name and age of the minor(s) with instructions regarding payment/encashment.

3.3.7 Mudaraba Monthly Profit Deposit Scheme (3 years & 5 years) :

Any individual may open Account under this scheme by depositing a minimum amount of Taka 1,00,000.00 and multiplies thereof at a time for 3 or 5 years. Monthly provisional profit shall be given to the Account just after completion of 30 days from the date of opening of the account. The profit amount will be adjusted on completion of each accounting year after declaration of final rate of profit.

3.3.8 Mudaraba Term Deposit Account:

IBBL accepts Mudaraba Term Deposit as per Mudaraba principle of Shariah. Deposits in the Mudaraba Term Deposit accounts are received from the depositors for 3 months, 6 months, 12 months, 24 months, 36 months terms. The depositors share in the profit and bear loss of the Banks investment of udaraba fund. The deposit in MTD will enjoy higher rate of weightage in sharing profit than shared by Mudaraba savings deposit. No Transaction facilities are allowed in this type of deposit.

3.3.9 Mudaraba Savings Deposit Account (MSA):

Mudaraba Savings Account is conducted according to Mudaraba principles. The depositor is the ‘Shahib Al-Mal’ and the Bank is the Mudarib (Organizer). The Bank is authorized to invest the Mudaraba funds at the risk of the depositor. The Bank will arrange proper deployment of the fund. The depositor has got no say in the management. Total profit resulting from such investments will be distributed between the Bank and the depositor as per agreed ratio. At present the ratio is 35:65 (Bank: Depositor). Any loss incurred is to be borne by the depositors.

3.3.10 Mudaraba Special Notice Deposit Account:

The operation of Mudaraba Special Notice Account is subject to Mudaraba principles of Shariah. The nature of the deposit and its operation may be categorized as that of Al-Wadeeah Current Account excepting that these deposits share profit and bear loss of the Bank’s overall performance and its withdrawal is subject to (seven) days prior notice for any amount. Here, minimum initial deposit and balance have been fixed at Tk.25,000/- (Twenty five thousand) only.

3.3.11 Mudaraba Foreign Currency Deposit Account:

Mudaraba Foreign Currency Deposit Scheme (Savings) has been introduced under Mudaraba principle and endeavoring to invest the foreign currency funds in profitable way through its foreign correspondent banks under Shariah principle so as to enable the bank to pay profit to its FC/PFC depositors, who will intend to open/maintain Mudaraba Foreign Currency Deposit (MFCD) Account in minimum 1,000/= US Dollar.

3.4 The amount of total deposits under various deposit products and deposit mix in 2008 and 2007 is given in the following table:

Table 4:

SL

No.

Types of Deposits

 

Deposit in Million TakaGrowthMix
          2008    2007      %    2008    2007
1.Mudaraba Savings

          77,498

62,404

24.19%

38.68%

37.51%

2.Mudaraba Special Savings

          37,902

30,058

26.10%

18.92%

18.07%

3.Mudaraba Term

          36,707

31,104

18.01%

18.32%

18.70%

4.Current & Contingency

          18,407

18,640

-1.25%

9.20%

11.21%

5.Mudaraba Savings Bond

          13,739

11,735

17.07%

6.86%

7.06%

6.Mudaraba Monthly Profit Deposit

            8,733

6,780

28.79%

4.36%

4.08%

7.Mudaraba SND

            3,375

2,390

41.22%

1.68%

1.44%

8.Bills Payable

            2,308

1,767

30.58%

1.15%

1.06%

9.Mudaraba Hajj

               660

553

19.31%

0.33%

0.33%

10.Foreign Currency Account (US Dollar)

               378

347

8.83%

0.19%

0.21%

11.Mudaraba Foreign Currency Deposits

               205

174

17.80%

0.10%

0.10%

12.Mudaraba Muhor Savings

            151

115

30.79%

0.08%

0.07%

13.Non Resident Dollar Account

148

162

-8.41%

0.07%

0.10%

14.Mudaraba Waqf Cash Deposit

108

80

35.42%

0.05%

0.05%

15.Foreign Currency Account (EURO)

16

10

63.13%

0.01%

0.01%

16.Foreign Currency Account (GB Pound Sterling)

8

6

37.44%

0.00%

0.00%

Total Deposits

       200,343

166,325

20.45%

 100.00%

100.00%

                                                                                                          Source: Annual Report 2008

3.5              DEPOSIT STRATEGy

deposit-mix

                  Year wise total Deposit amount (Last 5 years) :

   (Taka In Million)

Year

Deposit

2004

87,841.01

2005

107,779.42

2006

132,419.40

2007

166,325.29

2008

200,343.41

Source : www.islamibankbd.com

3.6 Mobilization of Deposits

The year 2008 was one of the successful years of mobilization of deposit. Total deposit stood at Tk.200,343 million as on 31st December 2008 as against Tk.166,325 million of the preceding year registering a growth of Tk.34,018 million, i.e.20.45% growth as compared to the growth rate of 18.16% of the Banking Sector during 2008. The percentage of growth of Deposit in 2007 was 16.70%.

The share of deposit of IBBL in banking sector as on 31.12.2008 was increased to 7.99% from 7.48% as on 31.12.2007.

Total number of depositors of IBBL increased to 4,361,896 as on 31st December, 2008 from 3,802,709 of the preceding year, registering an increase of 14.70% as against increase of 18.57% as on 31.12.2007.

Source : Annual Report 2008

4.1 Objectives and Principles:

The special feature of the Investment policy of Islamic Banks is to invest based on profit-loss sharing system in accordance with the tenets and principles of Islamic Shariah. Earning of the profit is not the only motives and objectives of the Islamic Bank’s Investment policy, rather emphasis is given in attaining social goal and in creating employment opportunities.

The Objectives and Principles of Investment Operations of The Bank are:

• To invest fund strictly in accordance with the principles of Islamic Shariah.
o To diversify its investment portfolio by size of investment portfolio by sectors (Public &Private), by economic purpose, by securities and by geographical area including industrial, commercial & agricultural.
o 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 there of.
o To make investment keeping the socio economic requirement of the country in view.
o To increase the number of potential investors by making participatory and productive investment.
o To finance various development schemes for poverty alleviation, increase income and employment generation with a view to accelerate sustainable socio-economic growth and upliftment of the society.
o To invest in the form of goods and commodities rather than give out cash money to the investment clients.
o To encourage social developing enterprises.
o To ensure avoid all the investment forbidden by the Islamic Shariah.
o The bank extends investment under the principles of Bai-murabaha, Bai-Muazzal, Hire Purchase Under Shirkatul Melk and Musharaka.

4.2 Investment Policy of IBBL:

Investment policy of Islamic Bank and non Islamic bank are fully different. The investment policies of Islamic bank are
o Strict observance of Islamic Shariah principles.
o Investment to national priority sectors.
o Diversified investment portfolio: Diversification by size, sector, geographical area, economic purpose, securities and mode of investment.
o Preference to short-term Investments.
o Preference to investment of small size.
o To ensure safety & security of investments
o To look profitability of investments.
o To give support to government denationalization industrial program.
o Investment to trade and commerce sector.
o Investment to industrial sectors.
o Investment to Foreign Trade (import & export).
o Exploration of the possibility of investment in the existing Money & capital Market and help organization of Islamic Money & Capital Market

4. 3 Investment Strategy of IBBL:
Investment strategy of Islamic Bank and interest-based bank are contradictory. The investment strategies of Islamic Bank are:
o To check exodus of investment clients.
o To induct new investment clients.
o To induct good investment clients of other Banks.
o To enhance existing limits of good investment clients.
o Extension of investment transport sector.
o Extension of investment to backward as well as forward linkage industries.
o Extension of investment to real Estate Sector.
o Extension of investment to Jute sector; particularly for trading and export purpose.
o Strengthening supervision, control and monitoring mechanism.
o Training and motivation of manpower to handle increased and diverse volume of investment s.
o To give due consideration to high risk, high return and low risk, low return investment proposals.
o Adaptation of modern technology

4.4 Investment Mechanisms of IBBL

IBBL invests its money in various sectors of the economy through different modes permitted by Islamic Shariah and approved by the Bangladesh Bank. The Modes of Investment are as follows:
1) Bai Mechanism:
• Bai-Murabaha
• Bai-Muazzal
• Bai-Salam
• Bai-Istishana
2) Ijara Mechanism:
• Hire Purchase (HP)
• Hire Purchase under Shirkatul Melk (HPSM)

3) Shirkat Mechanism:
• Mudaraba
• Musharaka

4.4.1 Bai-Murabaha:
Bai- Murabaha may be defined as a contract between a buyer and a seller under which the sells certain specific goods (permissible under Islamic Shariah and the law of the land) to the buyer at a cost plus agreed profit payable in cash or on any fixed future data in lump sum or by installments. The marked up profit may be fixed in lump sum or in percentage of the cost price of the goods.
Important features:

• It is permissible for the client to offer an order to purchase by the bank particular goods deciding its specification and committing him to buy same from the bank on murabaha, i.e. cost plus agreed upon profit.
• It is permissible to make the promise binding upon the client to purchase from the bank, that is, he is to satisfy the promise or to indemnify the damages caused by breaking the promise without excuse.
• It is also permissible to take cash / collateral security to guarantee the implementation of the promise or indemnify the damages.

Stock availability of goods is a basic condition for signing a Bai-murabaha agreement. Therefore, the bank must purchase the goods as per specification of the client to acquire ownership of the same before signing the Bai-Murabaha agreement with the Client.
• After purchase of goods the Bank must bear the risk of goods until those are actually sold and delivered to the Client, i.e., after purchase of the goods by the Bank and before selling of those on Bai-Murabaha to the Client buyer, the bank bear the consequences of any damages or defects, unless there is an agreement with the Client releasing the bank of the defects, that means, if the goods are damaged, bank is liable, if the goods are defective, (a defect that is not included in the release) the Bank bears the responsibility.
• The Bank must deliver the specified Goods to the Client on specified date and at specified place of delivery as per Contract.
• The bank shall the goods at a higher price (Cost + {profit) to earn profit. The cost of goods sold and profit markup therewith shall separately and clearly be mentioned in the Bai-Murabaha agreement. The profit Mark-up may be mentioned in lump sum or in percentage of the purchase/cost price of the goods. But, under no circumstance, the percentage of the profit shall have any relation with time or expressed in relation with time, such as per month, per annum etc.
• 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 behalf. The authorization must be in a separated contract.

Cost and Sale Price of the Goods:

A. Purchase Price/Landed Cost of the goods PLUS
B. Other expenditures incurred by the Bank in connection with the Purchase, Transportation and Storage before sale of the Goods to the Client:
a. Conveyance – TA/DA of Bank Official or the Agent, if any.
b. Commission Paid to the Agent, if any.
c. Cost of Remittance of Fund.
d. Transportation Cost up to Bank’s Godown (if not sold just after purchase).
e. Transit Insurance and Incidental Charges.

f. Other Expenses, except interest incurred (if any). Interest element, if any, is to be paid by the Client himself.
g. Godown Rent and Godown Staff Salary (if the Goods are kept in the Bank’s Godown before sale to the Client).
C. Total Cost Price (A+B) Tk…………………………
D. Estimated Profit of the Bank Tk…………… (Percentage of Profit …………%)
E. Sale Price (C+D) Tk………………………. ( )

4.4.2 Bai-Muazzal:

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 within a fixed period by fixed instalments. The seller may also sell the goods purchased by him as per order and specification of the Buyer.

In this Bank, Bai-Muajjal is treated as a contract between the Bank and the Client under which the Bank sells to the Client certain specified goods, purchased as per order and specification of the Client at an agreed price payable within a fixed future date in lump sum or by fixed instalments.

Important features:

It is permissible for the Client to offer an order to purchase by the Bank particular goods deciding its specification and committing himself to buy the same from the Bank on Bai-Muajjal i.e. deferred payment sale at fixed price.

01 It is permissible to make the promise binding upon the Client to purchase from the Bank, that is, he is to either satisfy the promise or to indemnify the damages caused by breaking the promise without excuse.
02 It is permissible to take cash / collateral security to Guarantee the implementation of the promise or to indemnify the damages.
03 It is also permissible to document the debt resulting from Bai-Muajjal by a Guarantor, or a mortgage. or both like any other debt. Mortgage / Guarantee / Cash security may be obtained prior to the signing of the Agreement or at the time of signing the Agreement.
04 Stock and availability of goods is a basic condition for signing a Bai-Muajjal Agreement, Therefore, the Bank must purchase the goods as per specification of the Client to acquire ownership of the same before signing the Bai-Muajjal Agreement with the Client.
05 After purchase of goods the Bank must bear the risk of goods until those are actually delivered to the Client.
06 The Bank must deliver the specified Goods to the Client on specified date and at specified place of delivery as per Contract.
07 The Bank may sell the goods at a higher price than the purchase price to earn profit.
08 The price once fixed as per agreement and deferred can not be further increased.
09 The Bank may sell the goods at one agreed price which will include both the cost price and the profit. Unlike Bai-Murabaha, the Bank may not disclose the cost price and the profit mark-up separately to the Client.

Cost and Sale Price of the Goods:

A. Purchase Price/ Landed cost of the goods
PLUS
B. Other expenditures in connection with the Purchase, Transportation and Storage of the Goods incurred by the Bank before sale to the Client:
a. Conveyance – TA/DA of Bank Official or the Agent, if any.
b. Commission Paid to the Agent, if any.
c. Cost of Remittance of Fund.
d. Transportation Cost up to Bank’s Godown (if not sold just after purchase).
e. Transit Insurance and Incidental Expenses.
f. Other Expenses except interest incurred (if any). Interest element, if any, is to be paid by the Client himself.
g. Godown Rent and Godown Staff Salary (if the Goods are kept in the Bank’s Godown before sale to the Client).
C. Total Cost Price (A+B) Tk………………….
D. Estimated Profit of the Bank Tk…………. (Percentage of Profit ……….%)
E. Sale Price (C + D) Tk……………….. ( )

4.4.3 Bai-Salam:

Bai-Salam may be defined as a contract between a Buyer and a Seller under which the Seller sells in advance the certain commodity(ies)/product(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)/product(s) is/are delivered as per specification, size, quality, quantity at a future time in a particular place.
In other words, Bai-Salam is a sale whereby the seller undertakes to supply some specific Commodity(ies) /Product(s) to the buyer at a future time in exchange of an advanced price fully paid on the spot. Here the price is paid in cash, but the delivery of the goods is deferred.
Important features:

01. Bai-Salam is a mode of investment allowed by Islamic Shariah in which commodity(ies)/product(s) can be sold without having the said commodity(ies)/ product(s) either in existence or physical/constructive possession of the seller. If
02. the commodity(ies)/product(s) are ready for sale, Bai-Salam is not allowed in Shariah. Then the sale may be done either in Bai-Murabaha or Bai-Muajjal mode of investment.
03. Generally, Industrial and Agricultural products are purchased/sold in advance under Bai-Salam mode of Investment to infuse finance so that production is not hindered due to shortage of fund/cash.
04. It is permissible to obtain collateral security from the seller client to secure the investment from any hazards viz. non-supply/partial supply of commodity(ies)/product(s), supply of low quality commodity(ies)/Product(s) etc.
05. 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 of signing the Agreement.
06. Bai-Salam on a particular commodity(ies)/product(s) or on a product of a particular field or farm cannot be effected. [for Agricultural Product(s) only]
07. The seller (manufacturer) client may be made agent of the Bank to sell the goods delivered to the Bank by him provided a separate agency agreement is executed between the Bank and the Client (Agent).
4.4.4 Bai-Istishna’a:

Istisna’a is a contract between a manufacturer/seller and a buyer under which the manufacturer/seller sells specific product(s) after having manufactured, permissible under Islamic Shariah and Law of the Country after having manufactured at an agreed price payable in advance or by instalments within a fixed period or on/within a fixed future date on the basis of the order placed by the buyer.

In Istisna’a contract, the buyer is called ‘Al-Mustasni’, the seller ‘Al-Sani’ and the goods or the subject matter of the contract ‘Al-Masnoo’.

PARALLEL ISTISNA’A

If the ultimate buyer does not stipulate in the contract that the seller will manufacture the product(s) by himself, then the seller may enter into a second Istisna’a contract in order to fulfil his contractual obligations in the first contract. This new contract is known as Parallel Istisna’a, whereby the obligations of the seller in the first contract are carried out.

ISTISNA’A IN ISLAMI BANK

01 Islami Bank can utilize Istisna’a in the following ways:

a) Islami Bank may buy a commodity under Istisna’a contract and then sell it on cash or deferred payment basis to a Client of the Bank without receiving prior order from the Client.
Islami Bank in the capacity of a seller may receive order from a Client for manufacturing and supplying certain specified goods under an Istisna’a contract and then enter into a Parallel Istisna’a contract in the capacity of a buyer with a Manufacturer for having the Product(s) manufactured by him i.e. the Islami Bank may obtain an order from a buyer to supply goods under
b) Istisna’a and by a Parallel Istisna’a contract may have the goods made by a Manufacturer by an order.
c) Bank may pay the price to the Manufacturer of the Product(s) in advance or by instalments or on deferred payment basis. They also may receive price of the Product(s) from the ultimate buyer in advance or by instalments or on deferred payment basis.

02 The obligations of Islami Bank as a ‘Seller’ in the first contract and as a ‘Buyer’ in parallel contract are as under:

a) The Islami Bank as a seller in the first contract will remain solely responsible for the execution of its obligations as if the parallel contract is non-existent. Hence, Islami Bank in the first contract would remain liable for any default, negligence or breach of contract ensuing from the parallel contract.

b) In the parallel Istisna’a, the Manufacturer is accountable to Islami Bank in the way and manner by which he performs his obligations. He has no direct legal relationship with the ultimate buyer in the first contract.

c) The second Istisna’a is a parallel contract, but not a contingent transaction on the first contract. Legally speaking they are different contracts with respect to rights and obligations.

d) The Islami Bank as a seller is liable to the ultimate Buyer with regard to any mal-execution of the sub-contractor and any guarantees arising therefrom. It is this very liability that justifies the validity of the Parallel Istisna’a and which also justifies the charging of profit by the Islami Bank, if any.

RULES AND CONDITIONS

01. There must be a contract between the Manufacturer and the Buyer, which shall be the principal instrument to govern the advance selling and buying under Istisna’a.
02. The name, specification, brand, quantity, quality, size, etc. of the Product(s) must be clearly specified in the Contract leaving no ambiguity.
03. Unit price and total price of the product(s) must be fixed and mentioned in the Contract.
04. The time and place of delivery should be mentioned in the contract.
05. Mode of transportation, transportation cost, storage charge/godown rent, insurance etc., if any, should be specified in the Contract.
06. The name of party who will bear the cost of transportation, storage charge/godown rent, insurance etc. also be mentioned in the contract.
07. The seller shall remain responsible for quantity, quality, and specification of the product(s) till physical/constructive delivery of the same to the buyer.
08. Under Istisna’a transaction advance payment of price of the Product(s) under order is not compulsory. The Buyer may pay the price of the goods in advance in full or part as agreed upon, which should be clearly mentioned in the contract.
09. Remaining price, if any, may be paid after receipt of the Product(s) or at any future date(s) or in instalments, if so agreed, and mentioned in the contract.
10. After taking delivery of the Product(s), the Buyer shall be the owner and shall bear all risks till disposal / sale of the Product(s).
11. The Buyer has the right to obtain security, in any form, from the Manufacturer for
a) The total amount that he has paid.
b) The delivery of al-masnoo’ in accordance with the specifications and on due time.
12. The Manufacturer has also the right to obtain security, in any form, to guarantee that the price is payable on due time.
13. It is permissible for the Buyer to insert a fine/penalty / compensation clause in the contract against unfulfilment of obligations by the Manufacturer at a fixed rate per day as mentioned in the contract.
14. If the Product(s) is/are the Product(s) not in conformity with specification, the Buyer has the following options:
Reject or accept it without seeking damages.
15 The contract of Istisna’a may be terminated under the following conditions:
a) Normal fulfilment of obligations by both the parties.
b) Mutual consent of both the parties.
c) Judicial rescission of the contract. This is if a reasonable cause arises to prevent the execution of the contract or its completion, and each party may sue for its rescission.

IMPORTANT FEATURES OF ISTISNA’A

 Istisna’a is an exceptional mode of investment allowed by Islamic Shariah in which product(s) can be sold without having the same in existence. If the product(s) are ready for sale, Istisna’a is not allowed in Shariah. Then the sale may be done either in Bai-Murabaha or Bai-Muajjal mode of investment. In this mode, deliveries of goods are deferred and payment of price may also be deferred.
 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 dates or by instalments.
It is a binding contract and no party is allowed to cancel the Istisna’a contract after the price is paid and received in full or in part or the manufacturer starts the work.
Istisna’a is specially practised in Manufacturing and Industrial sectors. However, it can be practised in agricultural and constructions sectors also.

4.4.5 Hire Purchase (HP), Hire purchase under Shirkatul Melk (HPSM)

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:
i) Shirkat
ii) Ijarah; and
iii) Sale
These may be defined as follows:
i) 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.

ii) IJARAH
The term Ijarah has been derived from the Arabic works. 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 Hiree 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 Hiree. It is a hire agreement under which a certain asset is hired out by the Hiree to a Hirer against fixed rent or rentals for a specified period.

RELATED TERMINOLOGIES OR ELEMENTS OF IJARAH

According to the majority of Fuqaha, there are three general and six detailed elements of Ijarah.
The wording : This includes offer and acceptance.
Contracting parties : This includes a Hiree, the owner of the property, and a Hirer, the party that benefits from the use of the property.
Subject matter of the contract : This includes the rent and the benefit.
The Hiree (Muajjir)- The individual or organization hires/rents out the property of service is called the Hiree (muajjir).
The Hirer (Mustajir)- The individual or organisation hires/takes the hire of the property or service against the consideration rent / wages / remuneration is called the Hirer (mustajir).
The benefit / asset (Maajur) – The benefit which is hired / rented out is called the benefit (Maajur).

iii) SALE

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. The share, part or portion of the asset owned by the Bank is hired out to the Client partner for a fixed rent per unit of time for a fixed period. Lastly the Bank sells and transfers the ownership of it’s share / part / portion to the Client against payment of price fixed for that part either gradually part by part or in lump sum within the hire period or after the expiry of the hire agreement.

STAGES OF HIRE PURCHASE UNDER SHIRKATUL MELK
Thus Hire Purchase under Shirkatul Melk Agreement has got three stages:
i. Purchase under joint ownership.
ii. Hire; and
iii. Sale and /or transfer of ownership to the other partner Hirer.

IMPORTANT FEATURES:
01 . In case of Hire Purchase under Shirkatul Melk transaction the asset / property involved is jointly purchased by the Hiree (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 (Hiree Bank & Hirer Client) are clearly mentioned. Under this agreement, the Hiree and the Hirer become co-owner of the asset under transaction in proportion to their respective equity participation.
02 . In Hire Purchase under Shirkatul Melk Agreement, the exact ownership of both the Hiree (Bank) and Hirer (Client) must be recognised. However, if the
partners agree and wish that the asset purchased may be registered in the name of any one of them or in the name of any third party, clearly mentioning the same in the Hire Purchase Shirkatul Melk Agreement. However, in IBBL, no third party registration shall be allowed.

03. The share / part of the purchased asset owned by the Hiree (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. Under this agreement, the Hirer (Client) becomes the owner of the benefit of the asset but not of the asset itself, in accordance with the specific provisions of the contract which entitles the Hiree (Bank) is entitled for the rentals.

04 As the ownership of hired portion of the asset lies with the Hiree (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.

05 In the Hire Purchase under Shirkatul Melk Agreement the Hiree (Bank) does not sell or the Hirer (Client) does not purchase the asset but the Hiree (Bank) promise to sell the asset to the Hirer (Client) part by part only, if the Hirer (Client) pays the cost price / equity / agreed price as fixed for the asset as per stipulations within agreed upon period on which the Hirer also gives undertakings.

06 The promise to transfer legal title by the Hiree 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.

07 As soon as any part of Hiree’s (Bank’s) ownership of the asset is transferred to the Hirer (Client) that becomes the property of the Hirer and hire contract for that share / part and entitlement for rent thereof lapses.
08 In Hire Purchase under Shirkatul Melk Agreement, the Shirkatul Melk contract is effected from the day the equity of both parties deposited and the asset is purchased and continues upto the day on which the full title of Hiree (Bank) is transferred to the Hirer (Client).

09 The hire contract becomes effective from the day on which the Hiree transfers the possession of the hired asset in good order and usable condition to the Hirer, so that the Hirer may make use of the same as per provisions of the agreement.

10 Effectiveness of the sale contract depends on the actual sale and transfer of ownership of the asset by the Hiree to the Hirer. It is sold and transferred part by part, it will become effective part by part and with the sale and transfer of ownership of every share / part. The hire contract for that share / part will lapse and the rent will be reduced proportionately. At the end of the hire period when the full title of the asset will be sold out and transferred to the Hirer (Client), the Hirer will become the owner of both the benefit and the asset consequently the hire contract will fully end.
11 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.

12 Under this agreement the Bank acts as a partner, as a Hiree and at last as a seller ; on the other hand the Client acts as a partner, as a Hirer and lastly as a purchaser.

13 Ownership risk is borne by both the Hiree and Hirer in proportion to their retained ownership / equity.

14 Under this agreement the role of Hirer is one that of a trustee, the hired asset being a trust property in his hands; he will manage, maintain the asset in favour of the interest of the Hire at his own cost as the exact subject of hirer except in cases of any accident due to any event entirely beyond control of the hirer and natural calamity/disaster (acts of Allah) to be determined by the Bank after proper investigation within the knowledge of the hirer.

15 The Hirer is responsible for keeping the hired asset(s) in good condition throughout the whole period of hire and if the asset is damaged or destroyed due to mismanagement, corruption, negligence, transgressions, default, etc. of the Hirer, he shall be responsible to compensate the Hiree (Bank) for that. Of course, such mismanagement, corruption, negligence, transgressions, default, etc. of the hirer shall be determined by the Hiree (Bank) after proper investigation within the knowledge of the hirer.
16 The Hirer cannot, without obtaining prior written permission of the Hiree (Bank) make any changes in the exact item of the hire, and / or remove it from its place of installation and transfer it to another location.
17 In a Hire Purchase under Shirkatul Melk agreement any stipulation may be made, provided it is not against the nature and requirements of the contract itself, nor does it violate the /this may be the last one devine laws of Islam and is also acceptable to both the parties.

18 Hire Purchase under Shirkatul Melk facilities may be for medium-term or long-term period which may be utilised 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.

19 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.

20 If, for any reason, the hire contract is revoked prior to the transfer of full title of the asset to the Hirer, then the title of the asset will be shared by both Hiree and Hirer – the Hirer will share that part of title which has been transferred to him against payment and the Hiree will share the remaining part.

21 The Hirer to secure the Bank (the Hiree) will pledge / hypothecate / mortgage his portion / part / share in the asset (acquired / to be acquired) and or any other asset / property of his own / third party guarantor to the Bank to fulfill his all liabilities / commitments including the accrued rental, if any.
RULES FOR HIRE PURCHASE UNDER SHIRKATUL MELK
01. It is a condition that the subject (benefit/service) of the contract and the asset (object) should be known comprehensively.
02. It is a condition that the asset(s) to be hired must not be a fungible one (Perishable or consumable) which can not be used more than once or in other words, the asset(s) must be a non-fungible one which can be utilized more than once or the use/benefit/service of which can be separated from the asset(s) itself.
03. It is a condition that the subject (benefit/service) of the contract must actually and legally be attainable/derivable. It is not permissible to hire something, the handing-over of the possession of which is impossible. If the asset is a jointly owned property, any partner, according to the majority of the jurists, may let his portion of the asset(s) to co-owner(s) or the person(s) other than the co-owner(s). However, it is also permissible for a partner to hire his share to the other partner(s).
04. It is a condition that the Hirer shall ensure that he will make use of the asset(s) as per provisions of the Agreement or as per customs/norms/practice, if there is no expressed provision.
05. The hire contract is permissible only when the asset(s) and the benefit/service drived from it is within the category of ‘Halal’ or at least ‘Mobah’ as per Islamic Shariah.
06. The Hiree is under obligation to enable the Hirer to the benefit from the asset(s) by putting the possession of the asset(s) at his disposal in useable condition at the commencement of the hire period.
07. In a hire contract, the period of hire and the rental to be paid per unit of time be clearly stated.
08. Everything that is suitable to be considered a price, in a sale, can be suitable to be considered as rental in a hire contract.
09. It is a condition that the rental falls due from the date of handing-over of the asset to Hirer and not from the date of contract or use of the asset.
10. It is permissible to advance, defer or install the rental in accordance with the Agreement.
11. It is permissible to review the hire period or the rental or the both, if the Hiree and the Hirer mutually agree to do so.
12. The hired asset is a trust in the hands of the Hirer. He will maintain the asset(s) with due produce and shall not be held responsible for the damage or destruction of the asset without transgression, default or negligence, otherwise he must be responsible for the same.
13. The Hiree/owner bears all the costs of legally binding basic repairs & maintenance including the cost of replacement of durable parts on which the permanence and suitability of the hired asset(s) depend or as per Contract.
14. It is permissible to make the Hirer to bear the cost of ordinary routine maintenance, because this cost is normally known and can be considered as part of the rental.
15. It is permissible for the Hirer to let the asset to a third party during the hire period whether for the same rental or more or less as long as the asset is not affected by the change of user and not barred / restricted by the hire agreement/customs to do so.

16. It is permissible to purchase an asset bearing a hire contract. The hire contract may continue since the purchaser agrees to its continuity up to the end of the hire term. All rights and liabilities emanating from the hire contract will transfer to the new owner. But if the sale-contract is drawn and the purchaser is oblivious of the hire contract, he has the right to rescind the purchase contract and the hire continues.
17. As soon as the hire period terminates, the Hirer is under obligation to return the asset to the owner or if the Hiree agrees he may enter a fresh hire contract or purchase it from the Hiree on payment of agreed upon price as per market rate.
18. The hire contract is binding and no one party shall unilaterally rescind except reasons that abrogate binding contract such as damage or destruction.
19. If the hired asset is damaged or destructed by the act of Allah and if the Hiree offers a substitute with the same specifications agreed upon in the hire contract the contract does not terminate.
20. It is also permissible to sell the hired asset by the Hiree to the Hirer during the tenure of the hire period either part by part or in full at a time. As soon as any part or in full the asset is sold during the tenure of the hire agreement the hire contract for that part or for the full asset as the case may be, be lapsed and the rental ceased to apply accordingly.
21. It is permissible for the Hirer to promise or to give undertaking to purchase the hired asset during the tenure of the hire period, either part by part or in full or at the end of the hire period in full. It is also permissible for the Hiree to give similar promise to sell the asset.
22. The hire with promise to purchase and sale is different from the memorandum of sale. The rent paid by the Hirer can not, in any way, be considered as part of the price of the asset, rather it is the price of the service of that asset.

23. In a Hire Purchase under Shirkatul Melk contract, it is permissible to divide the sale/cost price of the asset or ownership of the Hiree to the asset into several parts and to sell each part of ownership on payment of proportionate sale/cost price of the Hiree.
24. Under Hire Purchase under Shirkatul Melk Agreement, both the Hiree and the Hirer must pay their respective equity as agreed upon to purchase the demised asset under joint ownership.
25. Ownership of the asset of both the Hiree and the Hirer should be recognized as per law of the land.

Share Mechanism:

4.4.6. Mudaraba:

Definition
Mudaraba is a partnership in profit whereby one party provides capital and the other party provides skill and labour. The provider of capital is called “Shahib Al-Maal” while the provider of skill and labour is called “Mudarib”.

So, Mudaraba may be defined as a contract of partnership where the Shahib al-maal provides capital to the Mudarib for investing it in a commercial enterprise by applying his labour and endeavor. Both the parties share the profit as per agreed upon ratio and the losses, if any, being borne by the provider of funds i.e. Shahib al-maal except if it is due to breach of trust i.e. misconduct, negligence or violation of the conditions agreed upon by the Mudarib. If there is any loss incurred due to the reasons mentioned above, the Mudarib becomes liable for that.

TYPES OF MUDARABA
Mudaraba Contracts may be divided into 2 types:

Restricted Mudaraba (Al-Mudaraba Al-Muqayyadah)
A restricted Mudaraba (Al-Mudaraba Al-Muqayyadah) is a contract in which the Shahib al-maal impose any restrictions on the actions of the Mudarib but not in a manner that would unduly constrain the Mudarib in his operations.
Restricted Mudaraba may further be divided into three types:
a. Restriction in respect of time or period:
In this type of Mudaraba, the Mudaraba contract includes a clause on duration of the business. After expiry of such period, the Mudaraba shall become void.
b. Restriction in respect of place or location:
In this type of Mudaraba, the Mudaraba contract includes a clause on place or location of the business. The Mudarib shall bound to do the business within the area of such place or location.

Restriction in respect of business:
In this type of Mudaraba, the Shahib al-maal restricts the actions of the Mudarib to a particular type of business as he (Shahib al-maal) considers appropriate.
Unrestricted Mudaraba (Al-Mudaraba Al-Mutlaqah)
An unrestricted Mudaraba (Al Mudaraba Al Mutlaqah) is a contract in which Shahib al-maal permits the Mudarib to administer the Mudaraba capital without any restrictions. In this case, the Mudarib has a wide range of trade or business freedom on the basis of trust and the business expertise he has acquired. Such unrestricted business freedom must be exercised only in accordance with the interests of the parties and the objectives of the Mudaraba contract.
But, if Mudarib wants to have an extraordinary work, which is beyond the normal course of business, he cannot do so without express permission from Shahib al-maal. He is also not authorized to:
o Keep another Mudarib or a partner
o Mix his own capital in that particular Mudaraba without the consent of the Shahib al-maal.

Shariah Rules for Mudaraba
Rules relating to Mudaraba Contract
01. There are two contracting part+-ies in Mudaraba Contract :
The provider of the capital i.e. ‘Shahib al-maal’ and the Mudarib. Both parties should possess the legal capacity to appoint agents and accept agency.
02. The general principle is that a Mudaraba contract is not binding, i.e. each of the contracting parties may terminate it unilaterally except in two cases:
a. When the Mudarib has already commenced the business, in which case the Mudaraba contract becomes binding up to the date of actual or constructive liquidation.
b. When the contracting parties agree to determine a duration for which the contract will remain in operation. In this case, the contract cannot be terminated prior to the end of the specified duration, except by mutual consent of the contracting parties.
01 Mudaraba contract is one of the trust based contracts. Therefore, the Mudarib invests Mudaraba capital on trust basis in which case the Mudarib is not liable for losses except in case of breach of trust, such as misconduct, negligence and breach of the terms of Mudaraba contract. In committing any of the above, Mudarib becomes liable for the Mudaraba capital.
Rules relating to Offer and Acceptance
The wording-“Offer and Acceptance” – by which both the contracting parties express their willingness to conclude a contract and must conform to the following:
01. The wording should explicitly or implicitly indicate the purpose of the contract.

02. Acceptance of the offer is contingent on its taking place during the time which both the parties are negotiating agreement to the contract. However, acceptance is not valid if one party refuses the terms of the offer or leaves the place where the negotiation of the contract is being made before the deal is concluded.
03. Contract is permissible by verbal utterance or in writing and signing it. It is also permissible through correspondence or by the use of modern communication means, e.g., Telex, Fax, E-mail or Internet.
4.4.7. Musharaka:

Definition
Musharaka may be defined as a contract of partnership between two or more individuals or bodies in which all the partners contribute capital, participate in the management, share the profit in proportion to their capital or as per pre-agreed ratio and bear the loss, if any, in proportion to their capital/equity ratio.

In Islami Bank Bangladesh Limited (IBBL), the Bank may take part in a business with its Client(s), where both the Client(s) and the Bank provide capital in fixed proportions, take part in the management of business and share the profit in proportion to their respective capital ratio or at pre-agreed ratio and bear the loss, if any, in proportion to their respective capital/equity ratio.

Important Features:

• The investment client will normally run manage the business.
• The bank shall take part in the policy and decision making as well as overseeing (supervision and monitoring) the operation s of the business of the client. The bank may appoint suitable personal(s) to run the manage business and to maintain books of accounts of the business property.
• As the investment client shall manage the enterprise, the bank may more share of profit to him than that of his proportion capital contribution.
• Loss, if any, shall be shared on the basis of capital ratio.

4.5 Mode Wise Investment:

Mode wise distribution of investment as on 31st December 2003 vis-à-vis corresponding period of last year is given below:

Table No. 01: Mode Wise Investment of IBBL
(Million in Taka)

 

 

 

Mode

2005% of Total InvestmentDifference2006% of Total Investment
Bai-Murabaha51,822.2855.34%7,642.8159,465.0952.36%
HPSM30046.8932.09%9,352.3039,399.1934.69%
Bai-Muajjal5917.186.32%1,004.226921.46.09%
Purchase & Negotiation3179.813.40%1,666.814846.624.27%
Quard1966.132.10%8.071974.21.74%
Bai-Salam641.440.68%264.18905.620.80%
Mudaraba500.05%0.00500.04%
Musharaka20.420.02%-7.4712.950.01%
Total93644.15100.00%19,930.92113575.07100.00%

4.6 Investment Sectors:

Table No. 02: Investment Sectors of IBBL
Amount in Million

SectorTakaUSDPercentage
Industrial54486.49789.6645.25%
Commercial44473.48644.5436.93%
Real estate7719.36111.876.41%
Transport2720.4239.432.26%
Agriculture3412.8849.462.83%
Others7589.05109.996.30%
Total120401.681744.95100%

Source: Islami Bank 25 Years of progress 2008 (published by IBBL).

4.7 Details of Special Investment Schemes under Investment Modes
i. Household Durable Scheme
Islami Bank Bangladesh Limited has introduced Household Durables Investment Scheme which has already created great enthusiasm among the people and received tremendous response from them. Objectives are to assist the service holders with limited income in purchasing household articles such as furniture, electric and electronic equipment etc.

ii. Investment Scheme for Doctors
A good number or newly graduated doctors from Medical Colleges are unemployed. Many of the medical graduates are waiting for job because the opportunity for Government service is limited. If these young doctors could be self-employed by extending investment facilities, they could make modern facilities available at the door-steps of rural people.

In view of the above facts, Islami Bank Bangladesh Limited has taken the initiative an introduced the ” Doctors Investment Scheme” to ensure modern treatment and medical facilities available to the people through extension of Bank’s investment facilities for self-employment of newly graduated doctors and at the same time extending investment facilities to the established medical practitioners to procure modern and sophisticated medical equipment.

iii. Small Business Investment Scheme
Bangladesh a third-wood developing country is rich in natural and human resources. Inspite of vast possibilities, the majority people of the country livein hardship-below poverty tapped, explored and exploited. Physical labour is their only means of earning. A large segment of this populace is active youth force. Many of them are efficient, intelligent and energetic with initiative & drive and have courage to tale risks. But they can not uplift their socio-economic condition due to poverty, lack of financial support and other required facilities.

iv. Housing Investment Scheme
One of the basic human needs is to have a house to live in. A house is in an abode of peace and happiness. Housing has now become an acute problem in the country, especially in the towns, cities and metropolis. With their limited income, it has become almost impossible on the part of the lower middle class, middle class and sometimes, even for upper middle class to solve their housing problem. To meet this basic human need, Islami Bank Bangladesh Limited is committed to contribute to this end to provide a peaceful and happy.

v. Real Estate Investment Program
Professionals, Service-holders, Businessmen, Real Estate Developer and other categories of people who are not entitled for availing investment facilities under Housing Investment Scheme, shall be eligible under this programme Investment is to be extended to build new houses and for extension/ completion of the house already constructed, commercial building, shopping complex, flat apartment etc.

vi. Transport Investment Scheme
Under this scheme, investment in being allowed to the existing successful businessmen and potential entrepreneurs in this sector for all types of road and water transport with simple and easy terms and conditions. The bank is also extending investment facilities to multinational companies, established, business houses and well to do officials and professionals for acquisition of private cars, microbus and jeeps.

vii. Car Investment Scheme
Car is considered as on essential mode of transport in the modern society, particularly by a section of the officials, business houses and business executives and established professionals for movement in discharging their duties and responsibilities punctually and efficiently. Many of these categories of people can not purchase a car on payment of entire purchase value at a time out of their own sources. To meet this need Islami Bank has introduced the ‘Car Investment Scheme’ for the mid and high ranking officials of government and semi-government organizations, corporations; executives and directors of big business houses and companies arid also for persons of different professional groups on easy payment terms and conditions.

viii. Rural Development Scheme of IBBL
Islami Bank Bangladesh limited (IBBL) envisages an economic system based on equity and justice. Taking into consideration that majority of the population below poverty line lives in rual Bangladesh, the Bank has devised a Rural Development Scheme (RDS) with a view to creating employment opportunity for them and alleviates their poverty through income generation activities. The IBBL through its RDS project has been implementing integrated programs for the landless poor, aged laborers and marginal farmers aimed at meeting their basic needs and promoting their comprehensive development. Consciousness among the poor needs should be enhanced so that they can lift their position in the socio-economic structure of the country. In order to consolidate their economic base, invested money should be used in income generating activities so the poorer section of the population can become self-reliant. RSD works for the realization of that objective.

ix. Agricultural Implements Investment Scheme
Bangladesh is predominantly an agricultural country with vast majority of people living in rural areas. Most of our people for their living are dependent on agriculture. Agriculture still contributes the lion share of the gross domestic product. But we could not as yet become self-sufficient in food production. We still import a bulk quantity of food grains from abroad to meet the deficit. We must modernise our agriculture and establish more and more industries in order to minimise imports
The Bank has introduced “Agriculture Implements Investment Scheme” to provide power tillers, power pumps, shallow tube wells, thrasher machine etc. On easy terms unemployed youths for self-employment and to the farmers help augment production in agricultural sector.

x. Micro Industries Investment Scheme
Islami Bank Bangladesh Ltd. has been appreciably participating in this direction by financing industrial sector. With a view to creating wider base for industries, the Bank has decided to launch “Micro Industries Investment Scheme” through its Branches.

4.8 Sector wise Industrial Position of IBBL from 2005 to 2008

The investment in the industrial sector as on 31.12.2008 is Tk.78,788.15 million (approximately), which signifies the commitment of the Bank towards rapid growth of the economy and to increase the per capita income of the people by creating employment opportunities and greater contribution to the national economy.

Sector wise Industrial Position of IBBL from 2005 to 2008

Table No. 07
(Figure in Million Taka)

Name of the sector2005% to total Indus. Investment2006% to total Indus. Investment2007% to total Indus. Investment2008% to total Indus. Investment
Textile Mills1289736174093824338393541545
Steel, Re-rolling & Engineering712720683615768012770610
Agro based Industry475913549012733712942112
Garments Industry4065113959950198869411
Food & Beverage16835274263788650276
Cement Industry12884165741489215622
Pharmaceuticals727258911171215312
Poultry, Poultry Feed & Hatchery5171574176714681
Sanitary Wares3301409143215881
Chemicals, Toiletries & Petroleum2601177024308821
Printing & Packaging2421596149817081
Power (Electricity)2171546135916091
Ceramic & Bricks2101320155217471
Health Care (Hospital & Others)1130216029406911
Plastic Industry1090528159813020
Petrol-Pump & CNG Filling Station660114012703100
Information Technology56090100220
Hotel & Restourant4040901380
Other Industries92333891879311339675
Total35593100460641006264210078788100

Source: Islami Bank 25 Years progress 2008

4.9 Shari’ah Compliance in IBBL

Alhamdulillah, by the grace of Almighty Allah, IBBL is proceeding towards continuous progress and success with due commitment for compliance of Islamic Shari’ah Principles. Since very inception of IBBL, Shari’ah Council was formed to provide necessary counsel and guideline to the management for effective Shari’ah Compliance in the Bank. During the period January–December, 2007, the Muraqibs of Shari’ah Council had conducted Shari’ah inspection at 176 branches. During the period the doubtful income was detected by the Muraqibs of the Shari’ah Council Secretariat to the tune of Tk. 6,08,14,190/- out of total inspected amount of Tk. 67,80,60,471/- and percentage of doubtful income is 8.97%.
Chart No – 04: Type of Shariah Violation in 2008

Source: Branch Managers’ Conference Book 2008

4.10 Investment Plan for 2008-2012

Currently a “5 year perspective Investment Plan” has been porposed for the year 2008-2012 in continuation of 7 years Plan from 1996-2002 and 5 Years Plan from 2003-2007. The plan has been formulated keeping in view of the national economic priorities and aiming at diversification of the investment portfolio by size, sector, geographical area, economic purpose and securities to bring in phases all sectors of the economy and all types of economic activities and different economic strata of the society within the fold of Bank’s investment operations.
Chart No – 05: Investment Plan of IBBL: 2008 – 2012

Source: Branch Managers’ Conference Book 2008

3.8 Special Investment Schemes of IBBL:
Table No.03

Name of SchemeEligibilityMaximum invested moneyClient’s equityPeriod of investmentMode of investment
Household Durables schemeGovt. , semi govt, autonomous official, teachers, doctors, engineers etc.50000025%2 yearsBai-Muazzal
Housing Investment SchemeGovt., semi govt, autonomous official, universities teachers, doctors, engineers etc. of City Corporations300000050%/

40%

15 yearsHPSM
Transport Investment  SchemeGovt. , semi govt, autonomous official, universities teachers, doctors, engineers, business man, etc.200000030%3 yearsHPSM
Car  Investment

Scheme

Govt. , semi govt, autonomous official, universities teachers, doctors, engineers, business man, etc.35000030%4 yearsHPSM
Investment for DoctorsNew, experienced, specialized doctors100000020-30%5 yearsHPSM, Bai- muazzal
Small BusinessFishery, livestock, manufacturing.1000000-20%1-2 yearsHPSM, Bai- muazzal
Agriculture ImplementsFarmer, half educated rural youth20000020%2 yearsHPSM
Micro IndustriesDiploma, skilled & semi skilled youth200000Nil5 yearsHPSM, Bai- muazzal
Real Estate Investment ProgramFor all Kind of land owners under City Corporation, Pourashavas & important business places50% of cost of construction50%10-15 yearsHPSM

Source: Islami Bank 25 Years of progress 2008

INVESTMENTS

Investment of the Bank increased to Tk.144,921 million as on 31.12.2008 from                Tk.1,13,575 million as on 31.12.2008 showing an increase of Tk.31,346 million, i.e. 27.60% growth as against 17.24% growth of investment of the Banking Sector. This increased investment growth of the Bank in 2007 is due to the thrust given to promote investment for effective utilization of depositors’ fund. The percentage of increase of Investment of IBBL in 2007 was 21.28%.

The share of Investment of IBBL in banking sector as on 31.12.2007 increased to 8.27%, from 7.67% as on 31.12.2007.

INVESTMENT  STRATEGY

Year wise total Investment amount (From 2004 to 2008)

Taka In Million)

Year

Investment

2004

79,392.72

2005

97,178.31

2006

117,132.83

2007

165,286.32

2008

187,586.55

 a) Sector-Wise Investments

Sector-wise distribution of investment as on 31st December 2008 vis-à-vis the corresponding period of last year is given below:

Sl. No.

Sector

2008

2007

     Amount

% to Total Investment

    Amount

% to Total Investment

1

Industrial

99,233

55.11%

78,788

54.37%

2

Commercial

51,332

28.51%

43,877

30.28%

3

Real Estate

10,172

5.65%

8,588

5.93%

4

Agriculture (including investment in Fertilizer and Agriculture Implements)

9,110

5.06%

6,485

4.47%

5

Transport

4,082

2.27%

2,656

1.83%

6

Others

6,125

3.40%

4,527

3.12%

 

Total

 

100.00%

 

100.00%

 

 

 

 

 

 

b) Mode-wise Investment

                                                                                              (Amount in Million Taka)

 

Mode

2008

2007

Amount

% to Total Investment

Amount

% to Total Investment

Bai-Murabaha

73,833

50.95%

59,465

52.36%

Hire Purchase under Shirkatul Melk

50,201

34.64%

39,399

34.69%

Bai-Muajjal

6,546

4.52%

6,921

6.09%

Purchase & Negotiation

11,040

7.62%

4,847

4.27%

Quard

1,955

1.35%

1,974

1.74%

Bai-Salam

1,153

0.80%

906

0.80%

Mudaraba

50

0.03%

50

0.04%

Musharaka

143

0.10%

13

0.01%

Total

144,921

100.00%

113,575

100.00%

4.4 Growth of Investment:

The investment of the Bank demonstrated steady growth over the years. The total investment to the Bank stood at TK.123950.40 million in 2006. It was TK.102144.51 million in 2005. The total investment to the Bank stood at TK.174058.40 million in 2007.

Investment in Industrial Sector

As per Investment Policy of the Bank top priority has been given towards the Industrial development of the country. The Bank’s Investment portfolio is gradually being increased towards industrial finance along with commercial investment.

Bank’s investment in industrial sector is substantially higher compared with those of other commercial Banks. Total Investment for projects finance together with Working Capital stood at Tk.99,233 million as on 31st December 2008 as against Tk.78,788.17 million as on 31.12.2007 resulting in 25.95% growth.

Industry-wise investment position is given below (year 2008) :   

                                                                                                    (Amount in Million Taka) 

Sl. No.

Particulars

No. of Projects

% of Total Number

Amount of Investment

% of Total Amount

1

2

3

4

5

 

i.Textile-Spinning, Weaving & Dyeing

157

14.91%

47,716

48.08%

ii.Steel, Re-rolling & Engineering

38

3.61%

10,367

10.45%

iii.Agro based Industry

129

12.25%

11,457

11.55%

iv.Garments & Garments Accessories

221

20.99%

8,360

8.42%

v.Food & Beverage

16

1.52%

1,940

1.95%

vi.Cement Industry

7

0.67%

645

0.65%

vii.Pharmaceuticals

9

0.85%

1,874

1.89%

viii.Poultry & Hatchery

15

1.42%

1,328

1.34%

ix.Sanitary Wares

1

0.10%

517

0.52%

x.Chemicals, Toiletries & Petroleum

11

1.04%

1,882

1.90%

xi.Printing & Packaging

37

3.51%

735

0.74%

xii.Power (Electricity)

4

0.38%

1,217

0.23%

xiii.Ceramic and Bricks

4

0.38%

912

0.92%

xiv.Health Care (Hospital & Others)

10

0.95

597

0.60%

xv.Plastic Industry

11

1.04%

616

0.62%

xvi.Petrol-Pump & CNG Filling Station

20

1.90%

294

0.30%

xvii.Information Technology

1

0.10%

100

0.10%

xviii.Hotel & Restaurant

12

1.14%

150

0.15%

xix.Other Industries

350

33.24%

8,256

8.59%

 

Total

1,053

100.00%

99,233

100.00%

Pursuant to the Investment policy adopted by the Bank, a 5-year Perspective Investment Plan was drawn up for the year 2003 to 2007 and put into implementation. The Plan was formulated keeping in view the national economic priorities and aiming at diversification of the Investment portfolios by size, sector, geographical area, economic purpose and securities to bring in phases all sectors of the economy and all types of economic activities and different economic strata of the society within the fold of Bank’s investment operations.

Welfare Oriented Investment (Special Scheme)

In addition to the normal commercial and industrial investment operations, many special Investment Schemes like: i) Rural Development Scheme, ii) House-hold Durables Scheme, iii) Investment Scheme for Doctors, iv) Transport Investment Scheme, v) Car Investment Scheme, vi) Small Business Investment Scheme, vii) Micro-Industries Investment Scheme viii) Agricultural Implements Investment Scheme, ix) Housing Investment Scheme, x) Real Estate Investment Program, xi) Mirpur Silk-weavers’ Investment Scheme, xii) Poultry Investment Scheme and xiii) Small Transport Investment Scheme, targeting different economic groups, have been introduced by the Bank over the years. The schemes have been implemented and being expanded to meet the specific and welfare oriented needs of the different segments of people of the country.

The Bank, since its inception, has been working for the upliftment and emancipation of the under-privileged downtrodden and neglected sections of the population and has taken up various financing schemes for their well-being. The objectives of these schemes are to raise the standard of living of low-income group.

Outstanding amount of Investment as at the year end under different welfare Schemes are as under:                                                                                                              

(Amount in Million Taka)

Sl. No.

Name of Scheme

2003

2004

2005

2006

2007

i.

Rural Development Scheme

570.88

789.97

1,106.47

2,242.22

2,884.66

ii.

House-hold Durables Scheme

910.91

878.76

782.09

699.95

742.80

iii.

Investment Scheme for Doctors

101.01

85.54

64.42

33.38

23.64

iv.

Transport Investment Scheme

2,311.60

2,442.16

2,947.38

2,698.88

2,624.24

v.

Car Investment Scheme

33.58

30.30

27.75

23.54

31.46

vi.

Small Business Investment Scheme

395.75

501.26

629.81

768.45

876.34

vii.

Micro-Industries Investment Scheme

10.10

17.18

10.21

6.24

35.79

viii.

Agricultural Implements Investment Scheme

12.76

14.69

12.53

11.94

13.61

ix.

Housing Investment Scheme

661.56

672.10

609.78

506.75

485.29

x.

Real Estate Investment Program

3,418.85

4,713.70

5,859.75

6,582.85

6,903.09

Sub-total

(Investment under Schemes)

8,427.00

10,145.6612,050.19

13,574.20

14,620.92

Total Investment

59,007.49

75,858.56

93,644.15

113,575.07

144,920.61

% to total Investment

14.28%

13.37%

12.87%

11.95%

10.09%

a) Sector-Wise Investments

Sector-wise distribution of investment as on 31st December 2007 vis-à-vis the corresponding period of last year is given below:

b) Mode-wise Investment                                                                                             

(Amount in Million Taka)

 

Mode

2007

2006

Amount

% to Total Investment

Amount

% to Total Investment

Bai-Murabaha

73,833

50.95%

59,465

52.36%

Hire Purchase under Shirkatul Melk

50,201

34.64%

39,399

34.69%

Bai-Muajjal

6,546

4.52%

6,921

6.09%

Purchase & Negotiation

11,040

7.62%

4,847

4.27%

Quard

1,955

1.35%

1,974

1.74%

Bai-Salam

1,153

0.80%

906

0.80%

Mudaraba

50

0.03%

50

0.04%

Musharaka

143

0.10%

13

0.01%

Total

144,921

100.00%

113,575

100.00%

Pursuant to the Investment policy adopted by the Bank, a 5-year Perspective Investment Plan was drawn up for the year 2003 to 2007 and put into implementation. The Plan was formulated keeping in view the national economic priorities and aiming at diversification of the Investment portfolios by size, sector, geographical area, economic purpose and securities to bring in phases all sectors of the economy and all types of economic activities and different economic strata of the society within the fold of Bank’s investment operations.

Welfare Oriented Investment (Special Scheme)

In addition to the normal commercial and industrial investment operations, many special Investment Schemes like: i) Rural Development Scheme, ii) House-hold Durables Scheme, iii) Investment Scheme for Doctors, iv) Transport Investment Scheme, v) Car Investment Scheme, vi) Small Business Investment Scheme, vii) Micro-Industries Investment Scheme viii) Agricultural Implements Investment Scheme, ix) Housing Investment Scheme, x) Real Estate Investment Program, xi) Mirpur Silk-weavers’ Investment Scheme, xii) Poultry Investment Scheme and xiii) Small Transport Investment Scheme, targeting different economic groups, have been introduced by the Bank over the years. The schemes have been implemented and being expanded to meet the specific and welfare oriented needs of the different segments of people of the country.

The Bank, since its inception, has been working for the upliftment and emancipation of the under-privileged downtrodden and neglected sections of the population and has taken up various financing schemes for their well-being. The objectives of these schemes are to raise the standard of living of low-income group.

Outstanding amount of Investment as at the year end under different welfare Schemes are as under:                                                                                                              

(Amount in Million Taka)

Sl. No.

Name of Scheme

2003

2004

2005

2006

2007

i.

Rural Development Scheme

570.88

789.97

1,106.47

2,242.22

2,884.66

ii.

House-hold Durables Scheme

910.91

878.76

782.09

699.95

742.80

iii.

Investment Scheme for Doctors

101.01

85.54

64.42

33.38

23.64

iv.

Transport Investment Scheme

2,311.60

2,442.16

2,947.38

2,698.88

2,624.24

v.

Car Investment Scheme

33.58

30.30

27.75

23.54

31.46

vi.

Small Business Investment Scheme

395.75

501.26

629.81

768.45

876.34

vii.

Micro-Industries Investment Scheme

10.10

17.18

10.21

6.24

35.79

viii.

Agricultural Implements Investment Scheme

12.76

14.69

12.53

11.94

13.61

ix.

Housing Investment Scheme

661.56

672.10

609.78

506.75

485.29

x.

Real Estate Investment Program

3,418.85

4,713.70

5,859.75

6,582.85

6,903.09

Sub-total

(Investment under Schemes)

8,427.00

10,145.6612,050.19

13,574.20

14,620.92

Total Investment

59,007.49

75,858.56

93,644.15

113,575.07

144,920.61

% to total Investment

14.28%

13.37%

12.87%

11.95%

10.09%

Rural Development Scheme (RDS)

The Rural Development Scheme (RDS) was launched in 1995 with the objective to alleviate rural poverty by providing small  & micro investment facilities to the agricultural & rural sector to create opportunity for generation of employment and raising income of the rural poor. At present 118 branches of the bank are involved in this scheme as designated branches. Under this designated branches 1,03,345 groups (5 members in each group) have been organized by 1,819 field officers in 18,897 centers (maximum 8 group in each center) among 10,023 villages under 926 unions in 220 thanas of 61 districts under 6 divisions. There are 5,16,725 group members of which 3,50,278 clients availed investments in 1,03,345 groups through 18,897 centers. The female members in this scheme constitute about 90% of the total beneficiaries. These rural poor are provided with collateral-free investment facilities for 21 types of crop production and 343 off-farm activities in the rural areas starting from Tk.10,000.00 to a maximum limit of Tk.30,000.00. To meet up the higher investment need of the successful graduated members of RDS, another scheme has been introduced under the name and style of ‘Micro Enterprise Investment Scheme (MEIS)’ under which the clients are provided with investment facilities from Tk.30,000.00 to Tk.200,000.00 aganist securities.

Up to 31.12.2007, total disbursement of Tk.13,969.01 million has been made since beginning of the scheme against which the total recovery is Tk.9,716.88 million. The percentage of recovery against this scheme was 99%. The group members deposited a total of Tk.922.86 million as their  personal savings and Tk.130.70 million as centre fund. Beside the investment activities, successful members, so far, have been provided with 6,242 tube-wells at a cost of Tk.12.12 million and 3,551 sanitary latrines at a cost of Tk.3.51 million on Quard-e-Hasana (profit-free  investment) basis as a part of health and sanitation program of the scheme out of the fund provided by Islami Bank Foundation, a subsidiary organ of IBBL.

Performance of Rural Development Scheme up to 31.12.2007

Year-wise data for the last 4(four) years performances of the Scheme are given below:

SLParticulars

2004

2005

Growth

2006

Growth

2007

Growth

1.Village

4,230

4,560

8%

8,057

77%

10,023

24%

2.Center

6,384

8,526

34%

15,321

80%

18,897

23%

3.Member (Male)

9,808

13,047

33%

32,766

150%

56,830

73%

4.Member (Female)

1,53,657

2,04,398

33%

3,76,809

84%

4,59,885

22%

5.Total Member

1,63,465

2,17,445

33%

4,09,575

88%

5,16,725

26%

6.Cumulative disbursement

(Million Tk.)

4,217

6,033

43%

9,303

54%

13,969.01

50%

7.Outstanding Investment (million Tk.)

790

1,107

40%

2,242

103%

2,884.66

29%

8.Rate of Recovery

99%

99%

99%

99%

9.Member’s Savings       (million Tk.)

323

459

42%

728

58%

1,053.56

45%

10.Tube-well (Nos.)

3,400

4,421

30%

5,525

25%

6,242

13%

11.Sanitary Latrine (Nos.)

1,509

2,204

46%

3,147

43%

3,551

13%

12.Field Officer (Nos.)

731

868

19%

1,368

58%

1,819

27%

 

Household Durables Scheme

Among the above schemes, the objective of Household Durables Scheme is to increase standard of living and quality of life of fixed income group by providing them investment facilities to purchase different household durable items.

As on 31 December 2007, investment under Household Durable Scheme was Tk.1,371.31 million among the 27,010 investment clients as against Tk.699.95 million among the 27,349 investment clients in 2006.

Industry-wise investment position is given below:                                                          

                                                                                                    (Amount in Million Taka) 

Sl. No.

Particulars

No. of Projects

% of Total Number

Amount of Investment

% of Total Amount

i.Textile-Spinning, Weaving & Dyeing

150

14.85%

35,414.97

44.95%

ii.Steel, Re-rolling & Engineering

47

4.65%

7,956.55

10.10%

iii.Agro based Industry

250

24.75%

8,093.00

10.27%

iv.Garments & Garments Accessories

260

25.74%

8,694.30

11.04%

v.Food & Beverage

22

2.18%

5,026.67

6.38%

vi.Cement Industry

7

0.69%

1,561.68

1.98%

vii.Pharmaceuticals

12

1.19%

1,530.74

1.94%

viii.Poultry & Hatchery

15

1.49%

468.41

0.59%

ix.Sanitary Wares

4

0.40%

588.16

0.75%

x.Chemicals, Toiletries & Petroleum

12

1.19%

881.93

1.12%

xi.Printing & Packaging

32

3.17%

598.50

0.76%

xii.Power (Electricity)

3

0.30%

450.30

0.57%

xiii.Ceramic and Bricks

15

1.49%

994.99

1.26%

xiv.Health Care (Hospital & Others)

15

1.49%

691.25

0.88%

xv.Plastic Industry

8

0.79%

460.65

0.58%

xvi.Petrol-Pump & CNG Filling Station

25

2.48%

309.73

0.39%

xvii.Information Technology

2

0.20%

21.52

0.03%

xviii.Hotel & Restaurant

12

1.19%

137.67

0.17%

xix.Other Industries

119

11.78%

4,907.15

6.23%

 

Total

1,010

100.00%

78,788.17

100.00%

Investing in SMEs by IBBL

SME has become a familiar slogan today around the world including Bangladesh. It is now very much in the public and trade support institutions policy limelight in Bangladesh. Financial institutions, including state owned and private Commercial Banks, are also rendering their support by providing investment facilities and promotional services to SMEs.

SMEs including micro-enterprises make a significant contribution to economic and industrial development in Bangladesh like any other economy. Various survey findings show that SMEs form the backbone of the private sector, making up over 90 percent of enterprises and account for 80% of the industrial employment and about 40% of industrial output. Despite it tremendous impact and scope, access to finance has been the key problem for SMEs for last two decades despite taking various programs by the government.

IBBL a multi product financial institution operating on Islamic Shari’ah offering a broad spectrum of financial assistance to institutional and individual clients. Since its inception, it has introduced several investment schemes to cater to the needs of SMEs keeping in view the needs of different sectors and various sections of people for their socio-economic uplift and to improve their quality of life.

In accordance with principles of Islamic Shari’ah as well as to foster rapid economic development, the policy makers of the Bank have encouraged to make investment in SMEs from the very beginning of the Bank. At present, to make these types of investment pragmatic and deal with SMEs more explicitly and effectively, IBBL has set up a separate division named as “Small Enterprise and Consumer Investment Division (SE&CID)”.

Under SME Investment, IBBL invests in various manufacturing, trading and service concerns. It’s investment in SMEs as on December 31, 2007 is shown below:

(Taka in “000”)

SME Type

No. of Accounts

Amount

Service Concern

3,690

1,114,169

Trading Concern

41,546

9,390,399

Industrial Concern

794

546,023

Sub Total (Small Enterprise)

46,030

11,050,591

Service Concern

176

476,545

Trading Concern

9,502

7,997,444

Industrial Concern

1,004

3,090,106

Sub Total (Medium Enterprise)

10,682

11,564,095

Grand Total

56,712

22,614,686

Types of Murabaha:

Mode of Investment

  1. Bai-Muajjal :Bai-Muajjal may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods permissible under Islamic Shari’ah and the law of the country to the buyer at an agreed fixed price payable on a certain fixed future date in lump sum or within a fixed installments. The seller may also sell goods purchased by him as per order and specification of the buyer.
  2. Hire Purchase Sirkatul Melk (HPSM) :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 : Shirkat, Izara and Sale. Shirkat means partnership. Shirkatul Melk  means share on 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.
  3. Mudaraba :It is a form of  partnership in profit where by one party provides funds while theother provides expertise and management. The first party is called the Sahib-al-Maal and the later is referred to as the Mudarib. Any profit accrued is shared between two parties on a pre-agreed rates, while capital loss is excluuusively borne by the partner providing the capital except it is due to the breach of trust by the Mudarib.
  4. Musharaka :Musharaka is a contract of partnership between two or more individuals or bodies in which all partners contribute capital, participate in the management, share the profit as per pre-agreed ratio and bear the loss, if any in proportion to their capital/equity ratio.
  5. Bai-Salam :Bai-Salam may be defined as a contract between a buyer and a seller under which the seller sells in advance the certain commodity(ies)/product(s) permissible under Islamic Shari’ah and the law of the land to the buyer at an agreed price payable on execution of the said contract and the commodity(ies)/product(s) is/are delivered as per specification, size, quality, quantity at a future time in a particular place. In other word, Bai-Salam is a sale where by the seller undertakes to supply some specific commodity (ies)/product(s) to the buyer at a future time in exchange of an advanced price fully paid on the spot.
  6. Murabaha :

Conclusion

In conclusion, I will focus some recommendations which will help the bank to improve the efficiency as well as the quality of work. It will be based on the data presented and supported by the facts in the discussion.

At the beginning it is better to give a clear definition of “Investment Modes”. The word “Finance” is one of its different meanings refers to the supply of money capital or credit, provided by either a person (household), or an organization (private or public – financial or non financial). The word “Islamic” is inserted in the above expression to restrict the type of rules that can govern different modes of finance to the Shariah rules. A complete definition for the term “Islamic Modes of Finance”’ may be given as follows:

CONSTRAINTS FACED BY ISLAMIC BANKS IN BANGLADESH

Constraints faced by Islamic banks in Bangladesh are analyzed as below.
Problem with legal reserve requirement:

Islamic banks in Bangladesh have to keep 10% of its total deposits as liquidity. Of this, 5% is required to be kept in cash with Bangladesh Bank and the rest 5% is to be kept either in approved securities or in cash (in case of problem with securities) with Bangladesh Bank. Legal reserve requirement for conventional banks is 18%. They have to keep 5% in cash with Bangladesh Bank and the rest 13% is invested in Bangladesh Bank approved securities. Traditional banks can earn interest on their deposits with Bangladesh Bank but Islamic banks can not since they cannot receive interest as earning. Compared to interest-based traditional banking, Islamic banks, in this case, are in disadvantageous position. However, Islami Bank Bangladesh Limited has been receiving interest against its deposit with Bangladesh Bank and crediting it to its Sadaqa fund (Islami Bank Foundation). It should be noted that the interest earning are not considered as bank income and added to profit. The proceeds are spent on welfare activities.

Lack of opportunities for profitable use of surplus funds:

Conventional banks can invest their excess liquid amount in approved securities and or in other bank in crisis. Islamic banks cannot take this opportunity due to the existence of interest element in the transaction process.

Apprehension of liquidity crisis and possibility of liquidity surplus:

Islamic banks have to be more cautious and vigilant in managing their funds since it can not resort to call money provision at times of fund shortages or crisis. As a result Islamic banks may have always left with a sizeable amount of cash as liquidity surplus. Conventional banks can borrow in the form of call money among themselves even at an exorbitant rate of interest.

Problems in capital market investment:

Conventional banks can invest 30% of their total deposits in shares and securities. Islamic banks have their problem in this case as they avoid any transaction based on interest. Following examples may be cited for illustration. (a) Islamic banks do not purchase shares of companies undertaking interest-based business; (b) Shares of companies taking loan from commercial banks on interest are not also purchased by Islamic banks; and, (c) Islamic banks can not purchase shares of companies involved in businesses not approved by Shariah.
The above restrictive environment in the capital market of Bangladesh has limited substantially the investment opportunities for Islamic banks and hence the avenues of lawful earning. In the absence of Islamic money and capital market these banks cannot obtain funds from capital market at times of need.

Absence of inter-bank money market:

In spite of five Islamic banks have been functioning in Bangladesh, inter-bank money market within Islamic banks has not yet taken place. These banks can take initiative to form a money market among themselves. This may help minimising particularly the call money problem they are suffering from beginnings.

Predominance of Murabaha financing:

Predominance of Murabaha financing in the portfolio management of investment funds by the present day Islamic banks of Bangladesh has been a hot agenda of debate. One study shows that Islami Bank Bangladesh Limited, Al Arafah Bank and Social Investment Bank Limited have used 54%, 76% and 65% respectively of their investment funds by resorting to Murabaha mode (Hoque 1996, p.9). Murabaha though considered as a Shariah approved mode, the Islamic economists have traditionally prescribed for its limited application. Due to legacy of traditional banking, lack of appropriate legal protection and standard accounting practice in business, Islamic banks in Bangladesh find Murabaha financing as suitable and Mudaraba and Musharaka as difficult to apply.

Depression of Profit:

Traditional banks can meet up loss arising from delay in repayment by the clients through charging compound interest. Islamic banks cannot do that. What it does it realises compensation at the rate of profit. But the compensation so realised is not added to the profit income rather credited to Sadaqa account i.e., amount meant for social welfare activities. This depresses profits of Islamic banks. This may place Islamic banks relatively in weaker position in terms of profitability compared to conventional banks.
Moreover, Islamic banks are to make a compulsory levy equivalent to 2.5% of its profit earned each year and credited to Sadaqa account, which also depresses banks’ profitability. This is unlikely the case with conventional banks.

Absence of legal framework:

Amendment of old laws and promulgation of new laws conducive to efficient operation of Islamic banks are sin qua non for its healthy growth. Countries introducing Islamic banking should create an enabling environment for Islamic banks by modifying existing laws and regulations. Islamic banks in Iran and Pakistan have their legal supports. Pakistan has provided legal support to float Participation Term Certificate and conduct Mudaraba transaction by replacing “The legal Framework of Pakistan’s Financial and Co-operative System” on June 26, 1980. The Banking Tribunal Ordinance and The Banking and Financial Services (Amendment of Laws) Ordinance were passed in 1985 by amending seven Acts such as the Partnership Act, The Banking Companies Ordinance, the Wealth Tax Act, the Federal Bank Co-operation Act, the Income Tax Ordinance, The Registration Act and Capital Issues, 1974.
5.1 STRENGTH

The main strength of IBBL are:
5.1.1 IBBL has a well educated and trained workforce.
5.1.2 Top managers are visionary.
5.1.3 IBBL has sustainability plans are indicated in its approach to diversity its lines of Banking business ( credit Card, travelers cheque, ATM Card,  electronics etc).
5.1.4 Adequate physical facilities.
5.1.5 Commitment towards quality output
5.1.6 Certified by ISO 9001, 9002,

5.2 WEAKNESSES

The main weakness of IBBL are:

5.2.1 Some of the directions are professional Bankers, thus hindering effective decision making.
5.2.2 Some branches are always showing profit.
5.2.3 Huge Investment

5.3 OPPORTUNITIES
The main opportunities of IBBL are:

5.3.1 Freedom granted by Bangladesh Bank to charge discriminatory interest rates on various accounts.

5.3 THREATS

The main Threats of IBBL are:
5.4.1 Severe liquidity problem in the money market.
5.4.2 Depression in the Economy.
5.4.3 Slow growth in industrisation.

Problems Confronting Islamic Banking:
The Islamic Banks have and continue to face considerable problems in their operations and other matters related to their relations with other banks and institutions ranging from managerial, financial and regulatory to legal extent such as:
 Shortage of professionals conversant with Islamic banking.
 Total lack of familiarity by international financial and non-financial sector with Islamic products.
 Several competitions in the financial sector.
 Economic slowdown and political situation in some of the countries.
 Inadequate track record of Islamic Banking itself in particular and Islamic banks in general.
 Lack of professionals’ image in the market.
 Absence of infrastructure for Islamic trade financial on international basis.
 An offshore banking unit status of some of the major Islamic institutions without prospect of doing business in the home market.
 Non-acceptance by national laws of many countries of the provisions of Shariah.
 Relatively under developed corporate sector and capital market in Islamic countries.
 Apprehension of liquidity crisis and possibility of liquidity surplus.
 Absence of inter-bank money market.

PROBLEMS OF IBBL

Islami Bank Bangladesh Limited has been observed that the activities of the institutions in the capital market are not efficient. Particularly after the devastating effect of share market, it demands that the institutions have to be reformed and modified and should be accommodated with global standard.

Bangladesh capital market is combined with the following institutions:

Dhaka Stock Exchange
Chittagong Stock Exchange
Bond Market
Corporate Governance
Depository.
Mutual fund and Asset Management
Merchant Banks.
Bangladesh Association of Publicly listed Companies.

The Security and Exchange Commission came into existence as Capital Market Regulator through Promulgation of the Securities and Exchange Commission Act 1993 with the responsibility of protecting the interest of the investors, Issuance of capital and regulating the capital market for a fair and transparent market operations.

The main objectives of the SEC are as follows:

Ensure a sound and stable securities market.
Ensure proper issuance of securities.
Protect interest of Investors in securities.
Promote development and maintain fair market.
Ensure proper issuance and compliance of law.

But the problem is that the depositor/investors totally lost their faith on the stock market, so to regain the faith again SEC’s main activities should be surrounded to attract the investors to the capital market.

On the other hand as per the Efficient Market hypothesis a locative, operational and information processing efficiency should be brought to attract investors. Speculation should be minimized.

Islami Bank Bangladesh Limited activities are vast and elaborated but our study is concentrated mainly in the capital market. Considering this our findings of the main problems related with Investment Banking are as follows:

A short number of Investment Banks in Bangladesh
Lack of investors.
Bureaucratic activities in the capital market.
Sluggish condition of domestic economy.
Huge speculations.
Lack of entrepreneurs.
Depression in global economy.
Inefficiency and inexperience management.

3.4. SWOT Analysis:
SWOT Means Strength, Weakness, Opportunity and Threat. Those are given below:
Strength:
 Honest and Reliable Employees: All of the employees of Islami Bank are honest and reliable. They are always devoted themselves to the works for better customer service .they have no corruption report.
 Adequate Finance: Islami Bank Bangladesh Ltd. Have adequate finance. That is why they need not to borrow money from Bangladesh Bank or any other banks.
 More funds for Investment; for adequate financial ability they can provide loan to the more investment clients.
Weakness:
 Lack of Adequate Employees: Number of employees are fewer than the volume of works which creates problem for prompt service.

 Lack of up to date equipment’s: IBBL has lack of modern technologies and equipment’s like online facilities, fax, cash card and credit card system.
Opportunity:
 Religious Minded People: Most of the people of our country are religious minded. So they accept the concept “Interest free banking system” and going to Islami Bank with more interest.
 Special Image: IBBL has created special image to the people as a more reliable bank. People believe that if they keep their money in Islami Bank it will be more secured than other banks.

Threat:

Rules and Regulation: The rules and regulations of Bangladesh are not favorable for Islami Bank. So they have to face various problems to operate their activities according to Islami Shariah.

More Competitors: There are a lot of competitors in banking sector of Bangladesh. So it’s a great threat for them. There are not only the conventional banks but also some other Islami Banks in the market as their competitors. Conventional banks are always trying to understand people that interest and dividend are the same through various shiner and publicity.

Deposit of tremendous popular support, spectacular success in terms of mobilization of deposit and distribution of profit. Islami Bank in Bangladesh is yet to achieve the designed level of success due to the absence of appropriate legal framework for carrying out Islami banking operations in the country. All the Government approved securities in Bangladesh are interest bearing. Bangladesh is not a full Islami Country; all activities are not operating according to the Shariah of Islam. But the IBBL is trying to operate their activities as possible.

PROBLEMS OF ISLAMI BANK:

The Islami Bank have and continue to take considerable problems in their operations and other matters related to their relations with other banks and institutions ranging from managerial, financial and regulatory to legal extent, such as:

1) Shortage of professionals conversant with Islami Banking.
2) Total lack of familiarity by international financial and non-financial sector with Islami Products.
3) Severe competition in the financial sector.
4) Inadequate track record of Islami banking itself in particular and Islami Banks in genrral.
5) Lack of professional image in the market.
6) Absence of infrastructure for Islami trade financing on international basis.
7) An offshore banking unit status of some of the major Islami Institutions without prospects of doing business in the home market.
8) Economic slow down and political situation in some of the countries.
9) Non-acceptance by national laws of many countries of the provisions of Shariah, and
10) Relatively under-developed corporate sector and capital market in Islami countries.

PROSPECTS OF ISLAMI BANKING IN BANGLADESH:

In spite of the present limitations, Islami banking system has tremendous potential and prospect in Bangladesh.
1)   The successful lunching and operations of Islamic banks has established the fact that banking without interest is feasible.
2)   The lunching of Islami bank has shown the Islami money market in the country.
3)   Islami banks have brought together many depositor sand entrepreneurs under their fold and coverage, these depositors and entrepreneurs so long avoided interest- based banking on grounds of religious injunctions.

We see that the IBBL is growing very rapidly in our country. But our rules and regulation for banking systems is not Shariah based. So, when the govt. makes a rules &regulation
For Islamic banking it will be growing more rapidly than present time.

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