Background of the Study
Now-a- day’s banking sector is modernizing and expanding its hand in different financial events every day. At the same time he banking process is becoming faster, easier and is becoming eider. In order to survive in the competitive field of the banking sector all organizations are looking for better service opportunities to provide their fellow clients. So it has becoming essential for every person to have some idea on the bank and banking procedure.
Internship program so called work attachment program an essential for every BBA student because it helps him or her to acquaint with the real life situation. As bank is one of the most important financial intermediaries. So I have selected Shahjalal Islami Bank Limited, which is one of the most leading banks of the new bank arena.
1.2 Objective of the Study
There have two types of objective
1.2.1. The main objectives of the study are:
• To find out the reality in the practical life.
• To fulfill the requirement for the completion of BBA program.
1.2.2. The Secondary objectives of this report are:
• To develop the practical knowledge by the practical orientation of work.
• To build up the pillar of the career for near future.
• To know about Shahjalal Islami Bank Limited (SJIBL) operational activities which is based on Islami Shariah.
• To know about Human Resource Departments Practices of SJIBL.
• To know distinguishing fractures between Islamic & Non-Islamic Bank.
1.3 Methodology of the Study
Different data and information are required to meet the goal of this report. Those data and information were collected from various sources, such as, primary and secondary which is showed below:
1.3.1Primary Sources of Data:
The primary data had been collected in various ways. The different sources were:
• Face to face conversations with the employees and opportunities were given by the management to work in relevant fields in SJIBL.
• By personal interviewing and interacting customers at SJIBL.
• Observing various organizational procedures.
1.3.2 Secondary Sources of Data:
• File study.
• Annual report of Shahjalal Islami Bank Ltd.
• Statement of affairs.
• Bank Rate sheet.
• Progress report of the Bank.
• Bangladesh Bureau of statistics report.
• Different publications regarding banking function.
1.4 Scope of the study
Shahjalal Islami Bank Limited (SJIBL) is now well growing and it’s containing twenty-six branches in Dhaka, Sylet, and Chittagong. The scope of the study will be limited to the organizational setup, function and operation of the SJIBL in the Bangladesh. This report mainly encompasses the Human Resource Practices of Shahjalal Islami Bank Limited in comparison the General Banking. For the purpose of my internship program, I am working in the Satmasjid Road Branch at SJIBL and this provides me the way to get myself familiarized with banking environment. I have an opportunity to gather experience by working in different departments of the Branch.
1.5 Limitations of the Study
During the study, I have faced the following limitations:
• It is very difficult to collect all the required information in such a short period.
• Due to some legal obligation and business secrecy banks are reluctant to provide data. For this reason, the study limits only on the available published data and certain degree of formal and informal interview.
• The bankers are very busy with their jobs, which lead a little time to consult with.
• Large-scale research was not possible due to time constraints.
• Relevant data and document collection were difficult due to the organization confidentiality.
2.1 General Information
Shahjalal Islami Bank Limited is based on Islami Shariah. SJIBL is named after the name of a saint Hajrat Shahjalal ® who dedicated his life for the cause of preaching Islam in the east-north part of the subcontinent. It was incorporated as a public limited company on 1st April 2001 under companies’ act 1994. It started its banking operation on May 10, with the 1st branch opened at 58, Dilkusha C/A, Dhaka, obtaining the license of Bangladesh Bank, for enlistment of financial condition of its customers as well as to contribute to sustainable economic growth and development in trade and industry of the country. Its corporate head quarter is situated at 10, Dilkusha, C/A, Jiban Bima Bhaban, Dhaka -1000, and Bangladesh. Now it has 21 branches 11 Branches are in Dhaka and rest 10 branches are in Chittagong, Sylhet and Gajipur. The sponsors of SJIBL are leading business personalities and renowned industrialists of the country.
2.2 Nature of business
Shahjalal Islami Bank Limited offers services for all banking needs of the customers, which include deposits, making loans & advances, discounting bills, conducting money transfer and foreign Trade transactions and performing other related services such as safe keeping, collections, issuing guarantees, acceptances and letters of credit. Of banking in consonance with the ethos of the value system of Islam.”
The objective of Shahjalal Islami Bank Limited is not only to earn profit but also to keep the social commitment and to ensure its co-operation to the person of all level, to the businessmen, industrialist specially who are engaged in establishing large scale industry by consortium and the agro-based export oriented medium and small scale industries by self inspiration.
SJIBL is always ready to maintain the highest quality of services by upgrading banking technology in management and by applying high standard of business ethics through its established commitment and heritage.
“Would make finest corporate citizen”
SJIBL dreams to become the bank of choice of the general public and it include both the consumer and the corporate clients. They want to build such an image that whenever people will think of a bank, they will think of Shahjalal Islami Bank. SJIBL has created a cadre of young professionals (YP) in banking profession. This has helped boosting productivity in the bank. All officers are now target driven and more focused on banking. Human Resources Management Division that provides training to the officers of the bank to develop their knowledge base about banking activities through training Institute of the Bank.
“Will become most caring, focused for equitable growth based on diversified deployment of resources, and nevertheless would remain healthy and gainfully profitable bank.”
Shahjalal Islami Bank Limited aims to become one of the leading banks in Bangladesh by prudence, flair and quality of operations in their banking sector. The bank has some mission to achieve the organizational goals.
2.6 Organizational Structure
There are different wings to consist the organizational structure of SJIBL. There are –
■ Board of Directors
■ Board Committees
■ Executive Committees
■ Policy Committees
■ Management Team
2.6.1 Board of Directors
There is a board of Directors of 13 members in the bank. The board of Directors is the apex body of the bank. It appears like this-
2.6.2 Policy Committee
Al matters relating to the principles, rules and regulation, ethics etc. for operation and management of the bank are recommended by the committee to the board of directors.
2.7 History of SJIBL
Shahjalal Islami bank limited is a commercial bank and its play a very important role in our economy; in fact it is difficult imaging how our economic system would function efficiently without the help of commercial bank. They are heart of our financial structure since they have the ability, co-operation with the Bangladesh Bank to add to the money supply of the nation and thus create additional purchasing power. These characteristics set commercial banks apart from other financial institution. In addition to issuing deposits payable on demand they accept time deposit. By lending and investing these resources and by transferring funds throughout the nation and even between countries, they make possible a more complete utilization of resources of the nation. Although banks create no new wealth, their lending. Investing and related activities facilitate the economic process of production, distribution and consumption. There are mainly three sections in SJIBL via General Banking Division, Investment Division and Foreign Trade Division. These Divisions have small departments or units under them.
2.8 Deposit Mobilization of SJIBL
Bank account is a contractual relationship between a bank and the customers. It is the best way for a customer to build relationship with the bank. Like interest-based conventional banks, the main function of Shahjalal Islami Bank Limited (SJIBL) is to mobilize saving and provide financial support to the entrepreneurs. Depositors receive interest in a predetermined rate for their deposits make with an interest based banks, where SJIBL neither pay not receive interest and mobilizes saving of the common people in line with Islamic Shariah.
Deposit account can take in a various forms such as:
2.8.1 Al – Wadiah Current Deposit (AC)
2.8.2 Mudarabah Savings Deposit (MSD)
2.8.3 Short – Notice Deposit (SND)
2.8.1 Al – Wadiah Current Deposit (ACD)
Shahjalal Islami Bank Limited receives deposits in its Al – Wadia Current Account. It has some similarity with the current account of conventional bank. The term Al – Wadiah Current Deposit means deposit of money allowing somebody to sue it. Banks being trustee preserves and keeps or in safe custody of what is deposited. Depositors feel safe in keeping their money with the bank and take transaction facilities. Bank provides assurance of returning money to the depositors on demand. In the process of opening Al-Wadiah Deposit, the bank gets approval of the depositors regarding the use of the deposited money and earns profit out of their development. Any losses incurred by way of such investment are totally borne by the bank. Thus, the depositors don’t take the risk of losses with Al-Wadiah Current Deposit; they also don’t expect any profit from it. Depositors are provided with chequebook. They can withdraw or deposit any amount as and when they like. Bank may charge a fee in the account. Al-Wadiah Deposit are short terms and very uncertain, thus banks have to be very useful in the investment of money from this account.
2.8.2 Mudaraba saving Deposit (MSD)
Mudaraba Saving Deposit (MSD) is open by the lower and middle people who wish to save a part of their incomes to meet their future need intend to earn an income from their savings. It aims at encouraging savings of non-trading persons(s), institution(s), society, etc. by depositing small amount of money in the bank.
Restriction on withdrawals and deposit:
• The number of withdrawals over a period of time is limited. Two withdrawals per week are permitted. But more than that no interest will be paid on rest amount for that month.
• The total amount of one or more withdrawal on any date should not exceed 25% of the in the accounts unless 7 (seven) days advance notice is given.
• The customer may deposit any amount in the savings bank account subject to a minimum of Tk.2000/- in the account.
Payment of Profit:
Shahjalal Islami Bank Limited is proving 5.5% profit on Mudaraba Saving Deposit.
Opening a saving account:
For Operating a Mudaraba Saving Deposit following documentation are required
• Two copies of passport size photographs of accountholder and one copy passport size photo of nominee.
• Introductory reference.
• Commissioner’s/Chairman Certificate.
General Precautions of opening an MSD Account:
After opening an account and before issuing a Cheque book the authorized officer should check the account operating form for the complete information, which is given by the customers.
• Name of the account holder.
• Photos of the account holder.
• Date of opening
• Types of account.
• Present and permanent address
• Name of the nominee and their address.
• Initial deposit
• Specimen signature in the form in the “Specimen signature card”.
• Name, address and the account number of the introducer.
2.8.3 Mudaraba Short Notice Deposit (MSND)
Shahjalal Islami Bank Limited also receives term deposit from the clients. The SND account is different from the interest-based banks. It is also a Time Deposit account. The formalities for opening of this account are similar to those required for Al-Wadiah Current Account. The only difference is that seven (7) days notice is required for withdrawal of any sum and profit is paid. The rate of profit for this account is 5%. If the withdrawal on demand is desired, it may be paid subject to the for-feature for the period of notice or the expired of notice.
The Shahjalal Islami Bank Limited (SJIBL) is containing some Deposit Scheme, which are the really profitable for bank and customer. The Bank maintains Shariah –based transaction with their customer by different Scheme those are
1. Monthly Deposit Scheme (MDS)
2. Mudarah Term Deposit Receipt (MTDR)
3. Monthly Income Scheme (MIS)
4. Double Profit Deposit Scheme (DPDS)
5. Millionaire Scheme (MS)
6. Hajj Palon Scheme (HS)
1. Monthly Deposit Scheme (MDS/DPS)
This account open very easy and there are no fixed day to open. Account holders do not need any savings account if he/she directly pays their monthly installment. Account holders carefully complete the MDS form and attests two copies passport size photograph one nominee and other own with form. Account holders can pay advance to continue their installment or can give permanent instruction from his/her savings account. In this term, the account holders are bound to pay Tk.50 for transferred and Tk.5/- for service charge. If the account is close before the maturity then profit will be calculate according to saving rates. If a depositor fails to pay calculate as Savings rate. But for the first six-month no profit will be calculate. Nominee will enjoy the profit will in absence of the accountholder. Depositor will get the profit after the matured according to following table:
Install. period Tk. 1,000 Tk. 2,000 Tk. 5,000 Tk. 10,000 Tk. 25,000 Tk. 50,000
5 years 40125 80250 160500 401250 802500 2006250
77500 155000 310000 775000 1550000 3875000
10 years 111000 222000 444000 1110000 2220000 5550000
2. Mudaraba Term Deposit Receipt (MTDR)
It is like a fixed deposit in the conventional banking system but it does not receive or accept interest father, this account give profit and collect deposits. In this mode less than that Tk.1 crore or Tk.1 crore and above can be deposited against client will get non-transferable instrument of equal amount. If a customer withdraw his/her money before one month than he/she will not get any kind of profit. On the other hand, after the matured if client don’t withdraw his/her money than it will be auto renewed with imposed profit for the next days. If a depositor would like to withdraw his profit after six months he/she will get the profit accordance with previous years profit rate. After the announced yearly profit or loss, if bank felt in loss posting then the depositor bound to incur the loss. In absence of account holder the selected nominee will get the money. Account holder bound to bear any kind of tax or excise duty according to government circular. The profit rates of this account are:
Time of Deposit Up to Tk. 1(one) crore
3 Months 11.25%
6 Months 11.50%
1 Year 11.75%
3. Monthly Income Scheme (MIS)
This scheme is very popular in our country, job retreat people opens this scheme. And which people are not able to do business than they are wanting to safe from risk and they open it. It is the scheme for profit earning. In this account depositor can deposit minimum of Tk. 50,000/- and above. Depositor will get Tk500/ against Tk. 50,000/-. And it is the fixed deposit for 3 (three) years. If the accountholder to want to close his/her account before maturity date than he/she will get profit accordance with savings rate that is 5.5%. In the absence of accountholder, the specified nominee will get the whole benefit. The profit rates of this account are:
Period of Scheme Taka Per month Provisional Rate REMARKS
3 Years Tk.1000/- for one lac 12.00% Credit Account Number is required
4. Double Profit Deposit Scheme (DPDS)
The Shahjalal Islami Bank gives the facility to the client by the Islamic Shariah Mudaraba rules and regulations. In this scheme depositors can deposit more than Tk.10, 000 for 6 years and after the maturity date accountholder will receive double than his/her deposited amount. Depositor will get 80% investment facility by deposit the deposit receipt. Bank can invest this amount any sector by the Islamic Shariah rules and regulations. Accountholder are bound to pay any government tax. For opening this account applicant need recent one copy photograph and one copy photograph of nominee. The profit rates of this account are:
Period of Scheme Provisional Rate
6 Years 11.61%
5. Millionaire Scheme
It maturity is long than other scheme. Generally this account is designed for children. Here, applicants are the selected people for operating the account on behalf of the accountholder. The depositor should to deposit the account within first 15 days of the month; neither will he/she be designated as debtor to the bank. If 15th date is the off day then the next working day will be schedule date. Accountholder can open more one account this Branch. Depositor will get 80% loan facility against the deposit money. No chequebook will be issued for this account, but the bank will provide deposit book.
The profit rate based on different amount and time are given below:
Time Amount Per month Total Amount And Profit Rate
12 years Tk. 3280/= Tk.10 Lac
15 Years Tk. 2120/= Tk.10 Lac
20 Years Tk. 1080/= Tk.10 Lac
25 Years Tk. 575/= Tk.10 Lac
6. Hajj scheme
Hajj is compulsory for all who are the ability to hajj at that cause Hajj is important for all. Hajj is the important way for the Islam but many people have the interest but there have no ability. Many people create the ability but at that time they are physically weak. At that cause Shahjalal Islami Bank open this scheme.
Requirements for this scheme:
Must be age above 18.
Account holder must be citizen of the Bangladesh.
Account holder must be need the attested photo with introducer.
Gradient can maintain their account for the child.
Duration of the scheme:
This account is duration time is 1 year to 25 year.
12 monthly scheme within one year.
Amount of scheme:
Duration (Year) Monthly scheme
(In Taka) Given after duration
1 10200 129950
2 5100 137465
3 3325 142350
4 2450 148240
5 1925 154475
6 1570 160570
7 1310 166170
8 1120 172780
9 965 178390
10 840 183950
11 740 190230
12 655 196210
13 585 202970
14 520 207920
15 465 213370
16 420 220375
17 380 227300
18 340 231240
19 310 239180
20 280 244600
21 255 251790
22 230 256315
23 210 263780
24 190 268700
25 175 278350
The way of the payment:
Scheme must pay at 25 date every month if this date is holiday at that time it will pay at next working day. If scheme pay in cheque at that time cheque clearing must at 25 date everymonth. If the accountholder is give the permanent paying order at that time charge 50 taka and per scheme is 5 taka.
There have new deposit scheme:
Mudaraba Lakhpoti Deposit Scheme
Mudaraba Education Deposit Scheme
Mudaraba Marriage deposit Scheme
Mudaraba Mohor Deposit Scheme
Special MTDR Scheme
2.9 Others general banking related issues
2.9.1 General Documentation requires for opening an account:
a) For an Individual Customer:
• Copy the passport, if available or Employer’s Certificate or Commissioner’s Certificate or Letter of Introduction by a person accepted to the Bank.
• TIN Certificate, if applicable.
• Two recent passport size photographs duly attested by the Introducer.
b) For Sole Proprietorship:
• Copy of Trade License.
• Two recent passport size photographs of the proprietor/Signatory duly attested by the Introducer.
• Copy of the passport the proprietor/Signatory, if available Commissioner’s/Chairman’s Certificate or Letter of Introduction by a person accepted to the Bank.
• TIN certificate.
c) For Partnership:
• Copy of Partnership Deed of the Firm.
• List of Partners with their address and phone number.
• Copy of Trade License.
• Extract of Resolution of the Partners of the Firm for opening the account and authorization for its operation duly certified by the managing Partner of the Firm.
• For Registered Partnership, Certificate of Registration of the Firm along with duly certified copy of the Partnership Deed.
• Two recent passport size photographs of each Partner/Signatory duly attested by the Introducer.
• Copy of Passport of each Partner/Signatory, if available or Commissioner’s/Chairman’s Certificate or Letter of Introduction by a person acceptable to the Bank.
• TIN Certificate.
d) Private & Public Limited Company:
• Certified true copy of the Memorandum and Article Association of the Company.
• Certified true copy of Certificate of Incorporation of the Company.
• Certificate true copy of Certificate of Commencement of Business of the Company in case of Public Limited Company.
• Latest list of Directors with address and phone number along with Form XII.
• Extracts of duly adopted Resolution of the Board of Directors of the Company for opening the Account and authorization for its operation duly certified by the Chairman/Managing Director of the Company.
• Copy of Trade License.
• Two recent size photographs of each signatory duly attested by the introducer.
• Copy of the passport of each signatory, if available or Commissioner’s/Chairman’s
• Certificate or Letter of Introduction by a person acceptable to the Bank.
• TIN Certificate.
2.9.2 Computer services
Shahjalal Islami Bank is computerized and provides the following services some of these services will be introduced soon. Shahjalal Islami Bank Limited introduced a few schemes, which are very popular:
1. Online services
2. Automated Accounting
3. Integrated System
4. Signature Verification
5. Any Branch Banking
6. ATM Services
7. POS Services
8. SMS Push Pull Services
9. Other Delivery Channel Services (to be implemented)
126.96.36.199 SJIBL VISA Card
Card is considered as a new dimension of product resulting from technological development in the banking arena. In line with our affiliation with VISA International for VISA ATMs and POS, the following two products are launched broadening service products of the Bank to the clients’:
1. VISA Electron (SJIBL VISA Debit Card – local)
2. VISA Prepaid (SJIBL VISA Prepaid Card)
SJIBL VISA Debit Card: To a customer, “My card, my money” concept is used for Debit Card. Any accountholder of SJIBL can apply for a SJIBL VISA Debit Card against his/her Al-Wadiah Current Deposit (AWCD), Mudaraba Savings Deposit (MSD) or Mudaraba Short Notice Deposit (MSND) Account. He/she is fully authorized to enjoy the benefits of cash withdrawal from ATMs, liberty of shopping, dining, paying utility bills and having access account information through SMS, etc. round the clock.
Description Transaction Limit
Cash withdrawal limit (total) 4 times per day
Cash withdrawal limit (amount) Tk. 20,000 per day
Balance checking 4 times per day
Mini statement printing 2 time per day
PIN change 2 times per day
Invalid PIN retry count 3 times per day
Card usage limit in ATMs (total) 10 times per day
Fees & Charges:
A. VISA Debit Card
Particulars Renewal Replacement PIN
re-issue Transaction Charges (ATM)
ON-US Q-Cash Others (VISA)
188.8.131.52 GP bill
Grameen Phone subscribers availing the service to pay their bills, advances, security deposit and other related charges through all branches of Shahjalal Islami Bank Limited
184.108.40.206 SMS Service
Welcome to the convenience of accessing your banking needs from anywhere anytime. Shahjalal Islami Bank again fulfilled the demand of time in the era of modern banking technology by introducing the Mobile banking i.e. SMS / Push Pull Service. We offer a range of ways for you to access and manage your money. So, that you are always in control of your financial transactions, it is fast, secure and economical. Get real-time banking information on your handset.
Mobile Banking is a secured & flexible solution that delivers the banking services to its customers through a range of mobile devices using SMS / Push Pull technology. It provides banking services to the registered clients access to account information and real-time transaction capabilities from the mobile phones at a true “Anywhere, Anytime, Anyhow” convenience. It works using Shot Message Services (SMS) Technology. It works through a set of text message. With SMS, client can perform a wide range of query-based transactions from his/her mobile phone. It also provides pre-defined Alert Message Service. The Service is designed to serve the bank customers by informing the real-time data about their account such as current balance, recent transaction statement, cheque status etc. as SMS reply within about half a minute in response to their SMS query in a defined simple syntax. It can also serve the customers to stop a cheque, receiving statement request and other request / order at the branch for processing through SMS. In today’s business environment, with so many deadlines to fulfill appointments to meet and meetings to attend, you are hard pressed for time. Don’t you wish you could do all your important activities while traveling from one place to another?
As a leading private sector bank in Bangladesh the Shahjalal Islami Bank Limited presents the Mobile banking i.e. SMS / Push Pull service.
• Balance Inquiry
• Cheque Book Request
• Cheque Leaf Status
• FC Rate Information
• Cheque Stop Payment Instruction
• Statement Request by Courier/Post
• Statement request by E-mail
• Last Three Transaction Statement
• Help inquiry
• PIN Change
2.9.3 Cheque Book Issue
Cheque Book is a material to withdraw money from the bank. It is a very convenient way to transact money from one place to another without any accident. If any one opens an account then she/he will apply for a Chequebook on requisition slip. After verifying the signature of the account holder by the officer issues Cheque. Then we will assign numbers to the leaves of the Chequebook and account number in the register book. The account number and branch seal will also be written on every leaf of the Chequebook. Two officers initialize the account number and leaf numbers the issuing officer will also check the register book and initializes it also. Then the Chequebook is delivered to the party after taking the signature on the register book from the party.
2.9.4 Duplicate Cheque Book issue
When a party looses his/her Chequebook, then he/she applies for duplicate Chequebook. Bank stop payment order for that lost Cheque book series in the respective ledger. Then client needs guarantor’s certificate and guarantor must be an account holder of that branch with sufficient balance. In this case, the party will apply to the branch manager for duplicate Chequebook. The party must give indemnity bondage referring that he/she will liable for any fraud-forgery by the lost Cheque. After the formalities Bank issue of new Chequebook for client.
2.9.5 Return of the Cheque
A Cheque may be returned by the following reason:
• Account Closed.
• Insufficient funds.
• Payment stopped.
• Refer to drawer.
• Drawn against uncollected funds.
• Amount in words and figure differ.
• Drawer’s signature differs.
• Alternation requires draw’s full signature.
• Cheque postdated.
• Date incomplete/missing.
• Clearing house stamp missing.
Examined of the Cheque:
The Passing official must examine the followings:
• Whether the instrument presented is related to the branch.
• The instrument is not undated/anti-dated/post-dated.
• The instrument is not crossed since crossed instruments are not payable over the counter.
• The amounts is words and figures are written and do not differ.
• There is no alternation anywhere on the instrument.
• Incase of order Cheque the proper identification of the payee ensure to the satisfaction of the Bank.
• The instrument bears the signature of the drawer.
• The number of the instrument along with preceding series if any, conform to the number/series issued and recorded in the relative account particulars.
• The instrument bearing similar number was not been paid earlier.
2.9.6 Activities of Cleaning Department
On behalf of the customer bank receives their proceeds of instruments such as Drafts, Cheques, Pay Order and sends for collection through these methods:
Outward Bills for Collection (OBC) and Inward Bills for (IBC) within the cleaning houses area.
Clearing Department works are classified in two ways:
• Outward Clearing
• Inward Clearing
This instruments drawn on other banks, within the clearinghouse area, are deposited through our clients are sent for collection is called outward clearing.
Procedure for Outward Clearing:
• Instrument received
• Check these items in the instrument: a) date, b) branch, c) amount in words and figure d) signature
• Special crossing seal, clearing seal, endorsement seal as “Payees A/C credited”
• Entry in the Outward Clearing Register.
• Preparation for Clearing House: a) Schedule making, b) send to principal office.
The amount in party A/C in the clearing part is not in the available balance part of the computer program. If the instrument is honored then the amount merges are available balance. This is done by customized software prepared by SJIBL OT Department.
When we receive cheque drawn on our branches within the clearinghouse area presented by other banks is known as inward clearing:
Procedure for Inward Clearing:
• Instrument (DD/Cheque/PO) comes from principal office
• Entry in “Inward Register”
• Cheque – in computer
• DD payable
• Pay Order respective register
• Sign in the register by authorized officer
• Cancellation of instrument
• Send IBCA to Local Office for honored instrument
• Send Return memo, showing cause, to Local Office for dishonored instrument.
Transfer delivery is of two types:
Outward Transfer Delivery:
Instrument send for collection to other branches is outward transfer delivery. Its procedure is like this:
• Receive instrument
• Special crossing seal, transfer delivery seal, endorsement as “payees A/C will credit”
• Entry in “Outward transfer delivery” register
• Schedule enclosed
• Receive IBCA and credit the party A/C
Inward Transfer Delivery:
When instrument come to our branch for collection then it is called inward transfer delivery. Its procedure is as follows:
• Receive instruments
• Verification of following items are taken.
• Amount in words and figure
• Serial number
• Entry in “Inward transfer delivery” register
• IBCA issue
2.9.7 Activities of Cash Department
Cash department is the most vital department of a bank and it is call blood of a bank. It is a platform to communicate with customers. Cash department receives & pays cash directly.
In the cash department there are following register:
• Vault register
• Cash receive register
• Cash payment register
• Cash balance register
• Rough cash balance book
• Cash remittance register
• Key register
• Cash position memo
There is a procedure of cash in and cash-out from the vault. Also a systematic procedure is maintained for receiving cash through different vouchers and payment against different cheques and vouchers.
220.127.116.11 Cash Receive
Cash is the life of a bank. Different types of from are use for cash deposits for different types of accounts. Cash may be received by the following ways:
• Current of Savings account pay-in-slip
• Credit voucher
• Different types of instrument remittance (TT, DO, PO etc.) are received by respective forms.
• Bills like National Life Insurance Co. Ltd.
• Share collection
• Different types of scheme
18.104.22.168 Cash payment
Cash is paid in payment counter against the following instrument:
• Cash debit voucher
• Pay Order, DD etc.
• Bank’s expense also paid to outsider through cash debit voucher.
Receive of the cheques with a signature behind it.
1. Scrutinize it by an authorized officer.
2. Submit to computer-to-computer section for checking the available balance.
3. Cancelled & seal up “Pay in Cash” and cancellation through sign up.
4. Again submitted to computer section for debiting the party A/C and seal up “Posted”.
5. Send to cash counter – payment officer.
6. Cash officer checks the cancellation, seal and seal up “Cash Payment”
7. Entry the payments register.
8. Take another signature of payee behind the cheque and pay cash.
22.214.171.124 Cash Balance
At the end of the transaction:
• Sum of total received
• Sum up total payment
• Total receiving + Opening balance – Total payment = Closing balance for that day & opening balance for the next day.
• Check it with computer sheet.
• Counting cash.
• Entry the cash balance register.
• Write cash position memo with denomination.
2.9.8 Sorting and Stitching
At the end of the day, the amount of cash has to be sorted out in order to identify the different types of notes, say-500, 100,50,20,10,5 and so on. Hundred pieces of any type note create a packet and ten packets make a bundle. In this way, the cash is actually sorted out.
After sorting out the cash, packets are stitched along with a slip bearing the name of the bank, total number of notes and the signature of the cash-in-charge. Two round seals are given at both sides of the packet.
2.9.9 Vault Opening
The vault opened with two different keys of two respective authorized officers. The officers are:
• Manager of the Branch
• Cash – in – charge Officer
Strong room has two keyholes opened by two officers respectively by two keys of cash. Generally sub-manager of the Branch bears authority absence of manager. Grill door one keyhole opened by – two keys of two officers and bring out following thing: Cash, Vault register, Receive register, Payment register, Balance Book, security station. Enter the amount of cash withdrawal from the vault register.
Vault is the very secret place to keep money in the bank. Usually vault is made of very hard material like iron or steel, generally it is fireproof, damp-proof. The vault has a fixed limit too. The limitation depends on the regular transaction of the branch. If the amount exceeds its limit, the extra money should be sent to the Bangladesh Bank. The vault limit of the Foreign Trade Branch is Tk.1.5 (one and half) crore. If the amount exceeds its limitation and accident occur, then the branch will be liable and the insurance company will not compensate for that.
Before vault closing concern officer will –
• Cheque receives, Payment, Cash balance, Vault register signature.
• Signature of the computer sheet.
• Count physical cash.
• Keep cash in safe.
• Bundle in safe.
• Loose peak of the tray.
• Loose cash notes & coins on the tray.
• Keep different registers.
• Keep security stationeries.
• Close Safe.
• Check the rifle & cartage.
• Count cartage & entry in register.
• Close Grill door & Vault room’s door.
2.10 Financial Performance of Shahjalal Islami Bank Limited
Shahjalal Islami Bank Limited is a high performing private sector Bank, which further consolidated its position in the market in terms of quality services to the customers and value addition for the shareholders. The Bank made satisfactory progress in all areas of business operation in 2007.
Shahjalal Islami Bank Limited registered an operating profit of Tk 852 million in 2007 compared to Tk 633 million in 2006 after provision including 1% general provision on unclassified loans profit before tax stood at Tk 633 million. Provision for tax for the year amounted to Tk 275 million with a net profit of Tk 358 million compared to the previous years Tk 269 millions earning Per share increased to Tk 60.57 in 2007 registering a 15% growth over previous year return on assets of SJIBL was 1.27% in 2007 which might be considered quite satisfactory. The trend of growing profit of the last five years is shown by using the following graphical presentation.
Chart Year wise Profit Position
As a December 31 2006 total Deposit of the Bank stood at Tk 22575 million excluding call overnight against Tk 16851 million of the previous year registering a 34% growth. At the same time, strict compliance of the central Bank regulations and adherence of Money Laundering prevention Act 2002 ensured. In the year 2007 SJIBL emphasized on lowering the rate of interest on Deposits to achieve a lower cost of funds. The Initiative is intended on encourage investment at Lower rate of interest. The growing Position of deposits of the Last Five years is presented by the following manner.
Deposit and other account:
S.I Mode of Deposit 2006 2007
01 Al-wadiah current Deposits other account 1467851880 925604924
02 Bills payable 160619581 181388686
03 Mudaraba saving Deposits 982699419 1039882525
04 Mudaraba Term Deposits 8157604109 6846747092
05 Other Mudaraba Deposits 4279590188 3211001942
Total- 15048365677 12204625169
Credit Policy of Shahjalal Islami bank Limited
Shahjalal Islami bank Limited credit policy contains the views of total macro-economic development of the country as a whole by way of providing financial support to the Trade, Commerce and Industry. Throughout its credit operation Shahjalal Islami Bank Limited goes to every possible corners of the society. They are financing large and medium scale business house and industry. At the same time they also takes care entrepreneurs through its operation and lease finance and Micro-Credit, Small Loan Scheme etc. As a part of its credit policy Shahjalal Islami Bank Limited through its credit operation maintains commitment for social welfare. The bank is coming up with a scheme where the under privileged children will be given financial support for education and self-employment
Mode of investment 2006 2005
Mudaraba, Bai Muajjal 11995292937 10211090674
Commercial banking is the core activities of Shahjalal Islami Bank Limited. The banks serve all types of customer ranging from individual to corporate entities, both private and public.
The Standard Services Offered by Shahjalal Islami Bank Limited Include
One Counter Service for all banking needs of the customer.
Personalized services and relationship banking.
Loan and advances.
Export and import financing
Inland and foreign remittance facilities.
Long Term Target Services of Shahjalal Islami Bank Limited Include:
Investment banking supported technology transfer program.
Leasing and lease financing.
Capital market operation.
To Reach the Objectives, SJIBL has its Basket of Services among Others:
In house know how for feasibility study and strategic planning.
Automated and computerized offices.
Global network banking facilities.
Foreign Exchange Business
Total Foreign Exchange Business handle during the year 2007 stood at Tk. 3.671 million. The particulars of Foreign Exchange Business are given below:
Particulars Amount in Million Taka Percentage of Total
Import 2,674.29 72.85%
Export 643.93 17.54%
Remittance 352.94 9.16%
Total 3,671.16 100.00%
During the year 2007Bank branches opened 1,265 Import Letter of Credit as 160 of 2006and handle a good number of Export bills.
One of the major businesses of the Bank is foreign exchange dealing. The Bank earned a substantial amount from the foreign exchange business operations. Treasury operations are deals in the money market of Islamic Banks and maintain the Statutory Liquidity Ratio (SLR) and Cash Reserve Requirement (CRR) with Bangladesh Banks as requirement.
1. Investment Income:
Total Investment Income of the Bank as at 31st December 2006 was Tk. 109 million as against Tk. 27 million of the preceding year registering 259% growth over last year, which was 66% of the total income compare to 68% of 2005.
2. Non-Investment Income:
Total non-investment income of the bank as at 31st December 2006 was Tk. 109 million as against Tk. 27 million of the presenting year registering 304% growth over last year, which was 34% of the total income compared to 32% of 2005.
3. Profit Paid on Deposits:
Bank distributed profit of Tk. 141 million against Tk. 47 million of 2005 among the Mudaraba Deposit in the year 2006 being 68% of the investment income earned from deployment of Mudaraba fund.
4. Opening Expense:
Total opening expense as on 31-12-2006 was Tk. 80 million as against Tk. 222 million, resulting a total opening profit of Tk. 95 million up to 31-12-2006 as against 7 million in 2005.
(Amount in Million Taka)
Particulars 31-12-2006 31-12-2005
Total Income 316.54 84.53
Less: Total Expenditure 221.67 77.15
Net Profit before Tax 94.87 7.38
Less: Provision Against Investment 17.83 2.17
Less: Provision for Taxation 30.81 2.95
Total 46.22 2.26
3.1 Islamic Banking Concepts
According to Islamic Banking Act of Malaysia, an Islamic Bank is “company, which carries on Islamic Banking business. Islamic Banking business means banking business whose aims and operations do not involve any element which is not approved by the religion Islam.”
Dr. Ziauddin Ahmed says, “Islamic banking is essentially a normative concept and could be defined as conduct of banking in consonance with the ethos of the value system of Islam.”
3.2 Objectives of Islamic Banking
An Islamic Bank is a financial institution that operates with the objective to implement and materialize the economic and financial principles of Islam in the banking area.
The main objectives of Islamic Banking are:
o To conduct interest – free banking.
o To establish participatory banking instead of banking on debtor – creditor – creditor relationship.
o To invest through different modes permitted under Islamic Shariah.
o To accept deposits on profit – loss sharing basis.
o To establish welfare oriented banking system.
o To extend co-operation to the poor, the helpless and the low – income group for their economic enlistment.
o To play a vital role in human development and employment generation.
o To contribute towards balanced growth and development of the country through investment operations particularly in the less developed areas.
o To contribute in achieving the ultimate goal of Islamic economic system.
3.3 Islamic Banking Movement Throughout the world
The expansion and unfolding of Islamic banking along with traditional interest based banking is a recent phenomenon. Islamic banking is an inseparable part of Islamic economy. During fifties it was only a subject matter of research and was limited to the writings of scholars and philosophers. During the sixties actual experiments were made and in the seventies Islamic banking institutions started gaining strength. The eighties and nineties are and the period of consolidation and now Islamic banking is coming up as the only welfare banking system of the modern world.
Consequently, Islamic banking movement achieved steady progress and assumed significant dimension and role with the establishment of the Nasser Social Bank (1972) Faysal Islamic Bank in Egypt and Sudan (1977), Jordan Islamic Bank for Finance and Investment was established in Jordan in (1978), Turkey in (1983). Pakistan declared all banks as Islamic in 1978 and Iran declared in 1984. Emergency of development Bank as an International Financial Institution with a view to institutions was considered as a milestone in the history of Islamic banking. As on today, more than 300 Islamic financial institutions in about 50 countries operation throughout the world covering both Muslim and non-Muslim countries of various socio-economic environment.
3.4 Islamic Banking Movement in Bangladesh
In August 1974, Bangladesh signed the charter of Islamic Development Bank and committed itself to recognize its economic and financial system as per Islamic Shariah.
Bangladesh government subscribed recommendation of Islamic Foreign Minister’s conference held in Senegal in 1978 regarding systemic efforts to establish Islamic banks in the member countries gradually.
In January 1981, the then president of the People’s Republic of Bangladesh while addressing the 3rd Islamic Summit Conference held at Makkah and Taif suggested, “The Islamic countries should develop a separate banking system of their own in order to facilitate their trade and commerce.”
Earlier in November 1980, Bangladesh Bank, the country’s Central Bank, sent a representative to study the working of several Islamic banks of different countries.
In November 1982, a delegation of IDB visited Bangladesh and showed interest to participate in establishing a join venture Islamic Bank in the private sector. They found a lot of work had already been done and Islamic banking was in a ready form immediate introduction.
Two professional bodies Islamic Economies Research Bureau (IERB) established in 1976 and Bangladesh Islami Bankers Association (BIBA) established in 1980 made significant contributions towards introduction of Islamic banking in the country. They came forward to provide training on Islamic banking to top bankers and economists to fill-up the vacuum of leadership for the future Islamic in Bangladesh. They also held seminars, symposia and on Islamic economics and banking throughout the country to mobilize public opinion in favor of Islamic banking.
At last, the long drawn struggle to establish an Islamic bank in Bangladesh became a reality and Islamic Bank Bangladesh Limited was founded o 30th March, 1983 in which 19 Bangladeshi national, 4 Bangladeshi institutions and 11 banks, financial institutions and government bodies of the Middle East and Europe including IDB and two eminent personalities of the Kingdom of Saudi Arabia joined hands to make the dream a reality.
o Al Baraka Bank Ltd. (now recognized as the Oriental Bank) was established in 1987.
o A Arafah Islami Bank and Social Investment Bank Ltd. were established in 1995.
o Shamil Bank of Bahrain (Islamic Bankers) has started its operation in 1997.
o Shahjalal Islami Bank Ltd. was established in 2001.
o Exim Bank Ltd. converted its entire banking operation into Islamic Banking from July 2004.
Nine conventional banks namely Prime Bank Ltd. Dhaka Bank Ltd. South East Bank Ltd. Premier Bank Ltd. The City Bank Ltd. Jamuna Bank Ltd. Arab Bangladesh Bank Ltd. Standard Chartered Bank and the HSBC have so far established Islamic Banking branches in some major cities. More connectional Bank such as Bank Asia Ltd. and Brac Bank Ltd. are contemplating to establish Islamic banking branches in the near future. The first Security Bank Ltd. is going to switch over their entire banking to Islamic Banking.
3.5 Historical Background of Shahjalal Islami Bank Limited.
Shahjalal Islami Bank Limited is based on Islamic Shariah. SJIBL is named after the name of a saint Hajrat Shahjalal (R) who dedicated his life for the cause of peace in this world and hereafter and served the humanity. It was incorporated as a Public limited company on 1st April 2001 under companies Act 1994. It started its Banking operation on May 10, 2005 with the 1st branch (main branch) opened at 58, dilkusha C/A, Dhaka obtaining the license of Bangladesh Bank, for upliftment of economic condition of its customers as well as to contribute sustainable economic growth and development in trade and industry of the country. Its corporate head quarter is situated at 10 Dilkusha C/A, Jiban Bima Bhaban, Dhaka-1000, Bangladesh. Now it has 13 branches, 9 branches are in Dhaka and rest 4 branches are in Chittagong, Sylhet and Gazipur. The sponsors of SJIBL are leading business personalities and renowned industrialist of the country. Now this bank has paid up capital – 46.83 million and No. Of Directors – 13 (source Internet).
Chapter 4: Modes of Investment of SJIBL
Investment is the action of deploying funds with the intention and expectation that they will earn a positive return for the owner. Funds may be invested in either real assets or financial assets. When resources are used for purchasing fixed and current assets in a production process or for a trading purpose, then it can be termed as real investment. Specific examples of financial investments are: deposits of money in a bank account, the purchase of Mudaraba Savings Bonds or stock in a company. Since Islam condemns hoarding savings and a 2.5 percent annual tax (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.
4.1 Objectives and Principles of Investment
The objectives and principles of investment operations of the Bank are:
• To invest fund strictly in accordance with the principles of Islamic Shariah.
• To diversify its investment portfolio by the size of investment, by sectors (public & private), by economic purpose, by securities and by geographical area including industrial, commercial, and agriculture.
• To ensure mutual benefit both for the bank and the investment-client by professional appraisal of investment proposals, judicious sanction of investment, close and constant supervision and monitoring thereof.
• To make investment keeping the socio-economic requirement of the country in view.
• To increase the number of potential investors by making participatory and productive investment.
• To finance various development schemes for poverty alleviation, income and employment generation with a view to accelerating sustainable socio-economic growth and uplift of the society.
• To invest in the form of goods and commodities rather than give out cash money to the investment clients.
4.2 Investment Modes of SJIBL
When money is deposited in the SJIBL , the bank, in turn, makes investments in different forms approved by the Islamic Shariah with the intention 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 SJIBL ’s Investment are discussed below.
1. BAI-MURABAHA(Contract Sale on Profit)
1.1 Meaning of Murabaha
“Bai-Murabaha” means sale for an agreed upon profit. Bai-Murabaha may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods permissible under Islamic Shariah and the Law of the land to the buyer at a cost plus an agreed upon profit payable today or on some date in the future in lump-sum or by installments. The profit may be either a fixed sum or based on a percentage of the price of the goods.
1.2 Features of Murabaha
1. A client can make an offer to purchase particular goods from the bank for a specified agreed upon price, including the cost of the goods plus a profit.
2. A client can make the promise to purchase from the bank, that is, he is either to satisfy the promise or to indemnify any losses incurred from the breaking the promise without excuse.
3. It is permissible to take cash/collateral security to guarantee the implementation of the promise or to indemnify any losses that may result.
4. Documentation of the debt resulting from Bai-Murabaha by a Guarantor, or a mortgage, or both like any other debt is permissible. Mortgage/Guarantee/Cash Security may be obtained prior to the signing of the Agreement or at the time of signing the Agreement.
5. The bank must deliver the goods to the client at the date, time, and place specified in the contract.
6. The bank sells the goods at a price above the cost to obtain a profit. The sale price that is charged by the bank is agreed upon in the Bai-Murabaha. The profit can be stated in terms of a flat dollar amount or on a percentage of the purchase price. If a percentage is used, the percentage shall never be expressed in terms of time, in order to avoid confusion that the price is a form of interest (Riba), which is not allowed.
7. The price agreed to in the agreement is binding on both parties.
8. It is permissible for the bank to contract with a third party to buy and receive the goods on its behalf. This agreement must be a separate contract.
1.3 Steps of Bai-Murabaha
First Step: The client submits a proposal regarding his requirements of the bank. The client sends a proposal with the specifications of the commodity to be acquired from the bank. The proposal also indicates details regarding the date, time and place of delivery as well as price and form of payment information. The bank responds by sending a counter proposal either accepting the buyer’s price or stipulating a different price.
Second Step: The client promises to buy the commodity from the bank on a Bai-Murabaha basis, for the stipulated price. The bank accepts the order and establishes the terms and conditions of the transaction.
Third Step: The bank informs the client (ultimate buyer) of its approval of the agreement to purchase. The bank may pay for the goods immediately or in accordance with the agreement.
The seller expresses its approval to the sale and sends the invoice(s).
Fourth Step: The two parties (the bank and the client) sign the Bai-Murabaha Sale contract according to the agreement to purchase.
Fifth Step: The Bank authorizes the client or its nominee to receive the commodity.
The seller sends the commodity to the place of delivery agreed upon. The client undertakes the receipt of the commodity in its capacity as legal representative and notifies the bank of the execution of the proxy.
1.4 Rules of Bai-Murabaha
1. It is permissible for the client to offer to purchase a particular commodity, deciding its specifications and committing itself to buy it on Murabaha for the cost plus the agreed upon profit.
2. It is permissible that the mutual agreement shall contain various conditions agreed upon by the two parties, especially with respect to the place of delivery, the payment of a cash security to guarantee the implementation of the operation and the method of payment.
3. It is permissible to stipulate the binding nature of the promise to purchase. Thus, the agreement can only be satisfied by either fulfilling the promise to purchase or by indemnifying the bank for any losses incurred if the promise to purchase is not fulfilled.
4. It is a condition that the bank purchases the requested commodity (first purchase contract) before selling it on Murabaha to the buyer. The contract in the first purchase must be settled, in principle, between the source seller and the bank.
5. It is permissible for the bank to authorize a second party including the buyer to receive the commodity on its behalf. This authorization must be in a separate contract, particularly if the buyer is going to receive the goods on behalf of the bank. This is necessary to avoid any conflicts with the ensuing Murabaha sale.
6. Once the bank takes ownership of the goods, it is responsible for any damages or defects. Thus, if the goods are damaged, the bank is liable and must repair the damage prior to delivering the goods to the purchaser.
7. It is a condition that the Bai-Murabaha contract be drawn at the last phase. That is after the promise to purchase and the purchase of the commodity in the name of the bank and receipt of the commodity directly by the bank or through an agent.
8. The legal rules of Bai-Murabaha must be observed in drawing the contract of the Murabaha sale connected with a promise to purchase. Particularly concerning the issue of the transparency of the cost of the first purchase and the amount of profit because discrepancies lead to disputes, which may invalidate the contract.
9. It is permissible to document the debt resulting from Bai-Murabaha by a guarantor or a mortgage, like any other sale on credit. Further, it is permissible that the mortgage accompanies the contract, because it is possible to take a mortgage on actual debt as well as promised debt before it is realized. However, the mortgage shall only be in effect if the debt is actually incurred.
1.5 Application of Bai-Murabaha
Murabaha is the most frequently used form of finance in IBBL throughout the world. It is suitable for financing the different investment activities of customers with regard to the manufacturing of finished goods, procurement of raw materials, machinery, and other required plant and equipment purchases. It is used widely about 53%.
2. BAI-MUAJJAL (Deferred Sale)
2.1 Meaning of Bai-Muajjal
The Bai-Muajjal may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods, permissible under Shariah and law of the country, to the buyer at an agreed fixed price payable at a certain fixed future date in lump sum or in fixed installments.
2.2 Features of Bai-Muajjal
1. It is permissible and in most cases, the client will approach the bank with an offer to purchase a specific good through a Bai-Muajjal agreement.
2. It is permissible to make the promise binding upon the client to purchase the goods from the bank.
3. It is permissible to take cash/collateral security to guarantee the implementation of the promise or to indemnify the bank for damages caused by non-payment.
4. 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.
5. All goods purchased on behalf of a Bai-Muajjal agreement are the responsibility of the bank until they are delivered to the client.
6. The bank must deliver the goods to the client at the time and place specified in the contract.
7. The bank may sell the goods at a higher price than the purchase price to earn profit.
8. The price is fixed at the time of the agreement and cannot be altered.
9. The bank is not required to disclose the profit made on the transaction.
2.3 Some Observations
The following points should receive attention before making any investment decision under Bai-Muajjal.
1. Whether the goods that the client intends to purchase are marketable and have steady demand in the market.
2. Whether the price of the goods is subject to frequent and violent changes.
3. Whether the goods are perishable in short or in long-term duration.
4. Whether the quality and other specifications of the goods as desired by the client can be ensured.
5. Whether the goods are available in the market and the bank will be in a position to purchase the Goods in time and at the negotiated price.
6. Whether the sale price of the goods is payable by the client at the specified future date in lump sum or in Installments as per the agreement.
3. HIRE-PURCHASE UNDER SHIRKATUL MELK
Hire-Purchase under Shirkatul Melk has been developed through practice. Actually, it is a synthesis of three contracts: (a) Shirkat; (b) Ijarah, and (c) Sale. These may be defined as follows:
Definition of Shirkatul Melk: ‘Shirkat’ means partnership. Shirkatul Melk means share in ownership. When two or more persons supply equity, purchase an asset and own the same jointly and share the benefit as per agreement and loss in proportion to their respective equity, the contact is called Shirkatul Melk. In the case of Hire Purchase under Shirkatul Melk, SJIBL purchase assets to be leased out, jointly with client under equity participation, own the same and share benefit jointly till the full ownership is transferred to the client.
Definition of Ijara: The term ‘Ijara’ has been defined as a contract between two parties, the lessor and the lessee, where the lessee enjoys or reaps a specific service or benefit against a specified consideration or rent from the asset owned by the lessor. It is a lease agreement under which a certain asset is leased out by the lessor or to a lessee against specific rent or rental for a fixed period.
Definition of Sale contract: This is a contract between a buyer and a seller under which the onwnership of certain goods or asset is transferred by the seller to the buyer against agreed upon price paid by the buyer. In the case of Hire Purchase under Shirkatul Melk, the lessor bank sells or transfers its title to the asset under a sale contract on payment of sale price.
3.1 Stages of Hire Purchase under Shirkatul Melk
Hire Purchase under Shirkatul Melk Agreement has got three stages:
1. Purchase of asset under joint ownership of the lessor and the lessee.
2. Hire, and
3. Sale and transfer of ownership by the lessor to the other partner – lessee.
3.2 Important Features
1. In case of Hire Purchase under Shirkatul Melk transaction the asset/property involved is jointly purchased by the lessor (bank) and the lessee (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 (lessor bank and lessee client) are clearly mentioned. Under this agreement the lessor and the lessee become co-owners of the asset under transaction in proportion to their respective equity.
2. In Hire Purchase under Shirkatul Melk Agreement the exact ownership of both the lessor (bank) and lessee (client) must be recognized. However, if the partners wish and agree 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.
3. The share/part of the purchased asset owned by the lessor (bank) is put at the disposal possession of the lessee (clients) keeping the ownership with him 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 clearly stated. Under this agreement the lessee (client) becomes the owner of the benefit of the asset not of the asset itself, in accordance with the specific provisions of the contract that entitles the lessor (bank) the rentals.
4. As the ownership of leased portion of asset lies with the lessor (bank) and rent is paid by the lessee against the specific benefit, the rent is not considered as price or part of price of the asset.
5. In the Hire Purchase under Shirkatul Melk agreement the Lessor (bank) does not sell or the lessee (client) does not purchase the asset but the lessor (bank) promise to sell the asset to the lessee only if the lessee only if the lessee pays the cost price/equity price of the asset as fixed and as per stipulations on which the lessee also gives undertakings.
6. The promise to transfer legal title by the lessor and undertakings given by the lessee to purchase the ownership of leased asset upon payment part by part as per stipulations are affected only when it is actually done by a separate sale contract.
7. As soon as any part of lesssor’s (bank’s) ownership of asset is transferred to the lessee (client), that becomes the property of the lessee and hire contract for that share/part and entitlement for rent thereof lapses.
8. The hire contract becomes effective from the day on which the lessor transfers the possession of the leased asset in good order and usable condition, so that the lessee may make use of the same as per provisions of the agreement.
9. Effectiveness of the sale contract depends on the actual sale and transfer of ownership of the asset by the lessor to the lessee.
4. MUDARABA (Investment made by the entrepreneur)
4.1 Definition of Mudaraba
The term Mudaraba refers to a contract between two parties in which one party supplies capital to the other party for the purpose of engaging in a business activity with the understanding that any profits will be shared in a mutually agreed upon. Losses, on the other hand, are the sole responsibility of the provider of the capital. Mudaraba is also known a Qirad and Muqaradah
4.2 Steps of Mudaraba
The bank provides the capital as a capital owner. The Mudarib provides the effort and expertise for the investment of capital in exchange for a share in profit that is agreed upon by both parties.
1. The Results of Mudaraba: The two parties calculate the earnings and divide the profits at the end of Mudaraba. This can be done periodically in accordance with the terms of the agreement, subject to the legal rules that apply.
2. Payment of Mudaraba Capital: The bank recovers the Mudaraba capital it contributed before dividing the profits between the two parties because the profit is considered collateral for the capital.
3. Distribution of wealth resulting from Mudaraba: In the event a loss occurs, the capital owner (the bank) is responsible for the entire loss. In the event of profits, they are divided between the two parties in accordance with the agreement between them, subject to the capital being recovered first.
4.3 Rules of Mudaraba
There are some legal rules that govern the business relationship Mudaraba which are as follows.
1. It is a condition in Mudaraba that the capital be specific in nature. In other words, the amount of capital must be known at the inception of the contract. The purpose of this rule is to ensure that there is no uncertainty about the amount of capital and, thus, no uncertainty about the division of profits.
2. It is a condition that capital must be in the form of currency in circulation. However, merchandise can be contributed, so long as both parties to the business arrangement agree upon its value.
3. It is a condition that the capital cannot be subject to indebtedness.
4. It is permissible for a Mudarib to mix his private capital with the capital of the Mudaraba, thus becoming a partner. In addition, it is also permissible for the Mudarib to dispose of capital on behalf of the Mudaraba.
5. It is a condition that the capital of the Mudaraba is delivered to the Mudarib.
6. It is permissible to impose restrictions on the Mudarib as long as the restriction is beneficial and does not hinder the agent’s ability to make a profit.
7. It is permissible for the Mudarib to hire an assistant to perform difficult work that he is unable to perform on his own.
5. MUSHARAKA (Partnership based investment)
5.1 Meaning of Musharaka
The word Musharaka is derived from the Arabic word Sharikah meaning partnership. At an SJIBL , a typical Musharaka transaction may be conducted in the following manner.
One, two or more entrepreneurs approach an SJIBL to request the financing required for a project. The bank, along with other partners, provides the necessary capital for the project. All partners, including the bank, have the right to participate in the project. They can also waive this right. The profits are to be distributed according to an agreed ratio, which need not be the same as the capital proportion. However, losses are shared in exactly the same proportion in which the different partners have provided the finance for the project.
6. BAI-SALAM (Advance payment)
6.1 Meaning of Bai-Salam
Bai-Salam is a term used to define a sale in which the buyer makes advance payment, but the delivery is delayed until sometime in the future. Usually the seller is an individual or business and the buyer is the bank.
The Bai-Salam sales serve the interests of both parties.
1. The seller receives advance payment in exchange for the obligation to deliver the commodity at some later date. He benefits from the Salam sale by locking in a price for his commodity, thereby allowing him to cover his financial needs whether they are personal expenses, family expenses or business expenses.
2. The purchaser benefits because he receives delivery of the commodity when it is needed to fulfill some other agreement, without incurring storage costs. Second, a Bai-Salam sale is usually less expensive than a cash sale. Finally a Bai-Salam agreement allows the purchase to lock in a price, thus protecting him from price fluctuation.
6.2 Steps of Bai-Salam
1. Cash sale or Sale on Credit – The bank pays the agreed upon price at the time of the contracts inception. The seller agrees to the delivery of the commodity some specified date in the future.
2. Delivery and Receipt of the Commodity on the Specific due Date: There are several options for delivery available to the bank
a) The bank may receive the commodity and resell it to another party for cash or credit.
b) The bank may authorize the seller to find another buyer for the commodity.
c) The bank may direct the seller to deliver the commodity directly to a third party with whom the bank has entered into another agreement.
3. The Sale Contract: The bank agrees to sell the commodity for cash or a deferred price, which is higher than the Salam purchase price. The buyer agrees to purchase and to pay the price according to the agreement.
6.3 Rules of Bai-Salam
1. It is a condition that the commodity known by both parties to the agreement.
2. It is a condition that the quality of the commodity be monitored closely, as very little variation from specifications in the contract is allowable.
3. It is a condition that the commodity be deliverable on the due date. If there is uncertainty about the ability to deliver the commodity at the due date, a Salam transaction is impermissible.
4. It is permissible to draw a Salam sale contract for a total to be delivered increments on different specified future dates.
5. It is a condition that the commodity is a liability debt. The seller is obliged to deliver the commodity when it is due, according to the specifications stipulated in the contract, whether or not his firm produces the commodity or obtained from other firms.
6. Salam sales are impermissible on existing commodities because damage and deterioration cannot be assured before delivery on the due date.
6.4 Application of Bai-Salam
Salam sales are frequently used to finance the agricultural industry. Banks advance cash to farmers today for delivery of the crop during the harvest season. Thus banks provide farmers with the capital necessary to finance the cost of producing a crop. Salam sale are also used to finance commercial and industrial activities. Once again the bank advances cash to businesses necessary to finance the cost of production, operations and expenses in exchange for future delivery of the end product. In the meantime, the bank is able to market the product to other customers at lucrative prices. In addition, the Salam sale is used by banks to finance craftsmen and small producers, by supplying them with the capital necessary to finance the inputs to production in exchange for the future delivery of products at some future date.
7. ISTISNA’A SALE
7.1 Definition of Istisna’a Sale
The Istisna’a sale is a contract in which the price is paid in advance at the time of the contract and the object of sale is manufactured and delivered later. It is a contract with a manufacturer to make something and it is a contract on a commodity on liability with the provision of work. SJIBL can utilize Istisna’a in two ways.
1. It is permissible for the bank to buy a commodity on Istisna’a contract then sell it after receipt for cash or deferred payment.
2. It is also permissible for the bank to enter into a Istisna’a contract in the capacity of seller to those who demand a purchase of a particular commodity and then draw a parallel Istisna’a contract in the capacity of a buyer with another party to manufacture the commodity agreed upon in the first contract.
7.2 Steps of Istisna’a Sale
Istisna’a Sale Contract: The Buyer expresses his desire to buy a commodity and brings a request to purchase the commodity to the bank. The method of payment, whether cash or deferred is set forth in the agreement. The bank agrees to deliver the commodity to the buyer at some agreed upon time in the future.
Delivery and Receipt of the Commodity: The seller in the parallel Istisna’a agreement, delivers the commodity to the bank on the agreed upon date. The bank, in turn, delivers the product to the buyer of the original Istisna’a contract, in accordance with the original agreement. In this way, all parties fulfill their obligations to the contract.
7.3 Application of Istisna’a Sale
The Istisna’a contract allows SJIBL to finance the public needs and the vital interests of the society to develop the Islamic economy in accordance with Islamic teachings. For example Istisna’a contracts are used to finance high technology industries such as the aviation, locomotive and ship building industries. In addition, this type of business transaction is also used in the production of large machinery and equipment manufactured in factories and workshops. Finally, the Istisna’a contract is also applied in the construction industry such as apartment buildings, hospitals, schools, and universities to whatever that makes the network for modern life. One final note, the Istisna’a contract is best used in those transactions in which the product being purchased can easily be measured in terms of the specified criteria of the contract.
8.1 Definition of Ijarah
According to Islamic Shariah, Ijarah is a contract between two parties – the lessor and the lessee, where the lessees (Hirer or Mustajir) have the right to enjoy/reap a specific benefit against a specified consideration/rent/wages from the lessor – the owner (Muajjir).
8.2 Elements of Ijarah
According the majority of Fuqaha, there are three general and six detailed elements of Ijarah:
1. The wording: This includes offer and acceptance.
2. Contracting parties: This includes a lessor, the owner of the property, and a lessee, the party that benefits from the use of the property.
3. Subject matter of the contract: This includes the rent and the benefit.
The lessor (Mujjir) – The individual or organization who leases out/rents out the property or service is called the lessor.
The lessee: (Mustajir) – The individual or organization who hires/takes the lease of the property or service against the consideration rent/wages/remuneration is called the lessee (Mustajir).
The Benefit (Maajur) – The benefit that is leased/rented out is called the benefit (Maajur).
The rent (Aj’r or Ujrat) – The consideration either in monetary terms or in quantity of goods fixed to be paid against the benefit of the goods or service is called the rent or Ujrat or Aj’r.
8.3 Rules for Ijarah
It is condition that the subject (benefit/service) of the contract and the asset (object) should be known comprehensively.
1. It is a condition that the assets to be leased must not be a fungible one (perishable or consumable) which cannot 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 assets itself.
2. It is a condition that the subject (benefit/service) or the contract must actually and legally be attainable/derivable. It is not permissible to lease something, the handing-over of the possession of which is impossible. If the asset is a jointly owned property, any partner, according to be majority of the jurists, may let his portion of the asset(s) to co-owner(s) or the person(s) other than the co-owners. However, it is also permissible for a partner to lease his share to the other partner(s),
3. It is a condition that the lessee 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.
4. The lessor is under obligation to enable the lessee to the benefit from the assets by putting the possession of the asset(s) at his disposal in useable condition at the commencement of the lease period.
5. In a lease contract, the period of lease and the rental to be paid in terms of time, place or distance should be clearly stated.
6. It is a condition that the rental falls due from the date of handing over the asset to lessee and not from the date of contract or use of the assets.
4.3 Investment Processing of SJIBL
Generally a bank takes certain steps to deliver its proposed investment to the client. But the process takes deep analysis. Because banks invest depositors fund, not banks’ own fund. If the bank fails to meet depositors demand, then it must collapse. So, each bank should take strong concentration on investment proposal. However, Shahjalal Islami Bank Limited (SJIBL) makes its investment decision through successfully passing the following crucial steps:
Selection of the client
Here, investment taker (client) approaches to any of the branch of Shahjalal Islami Bank Limited (SJIBL). Then, he talks with the manager or respective officer (Investment). Secondly, bank considers five C’s of the client. After successful completion of the discussion between the client and the bank, bank selects the client for its proposed investment. It is to be noted that the client/customer must agree with the bank’s rules & regulations before availing investment. Generally, bank analyses the following five C’s of the client:
• Collateral; and
At this stage, the bank will collect necessary information about the prospective client. For this reason, bank informs the prospective client to provide and/or fill duly respective information which is crucial for the initiation of investment proposal. Generally, here, all the required documents for taking investment have to prepare by the client himself. Documents that are necessary for getting investment of SJIBL is prescribed below:
I. Trade License photocopy (for proprietorship);
II. Abridged pro forma income statement;
III. Attested copy of partnership deed (for partnership business);
IV. Prior three (03) years’ audited balance sheet (for joint stock company);
V. Prior three (03) years’ business transactions statement for the musharaka/mudaraba investment;
VI. Abridged pro forma income statement for the musharaka/mudaraba investment;
VII. Attested copy of the Memorandum of Association (MOA) & Articles of Association (AOA) for the joint stock company;
VIII. Attested copy of the Tax Identification Number (TIN)- including final assessment;
IX. Tenders of the proposed assets (in case of HPSM);
X. Detailed summary of the sundry debtors and creditors (including both time & schedule);
XI. Summary of the personal movable & immovable assets; and others.
At this stage, the bank evaluates the client and his/her business. It is the most important stage. Because, on the basis of this stage, bank usually goes for sanctioning the proposed investment limit/proposal. If anything goes wrong here, the bank suddenly stops to make payment of investment.
In order to appraise the client, Shahjalal Islami Bank Limited (SJIBL) provides a standard
F-167B Form (Appraisal Report) to the client for gathering all the information. The original copy of the appraisal report is enclosed in the appendix chapter. However, the following contents are presented from that appraisal report:
A. Company’s/Client’s Information.
B. Owner’s Information.
C. List of Partners/Directors.
D. Purpose of Investment/Facilities.
E. Details of Proposed Facilities/Investment.
F. Break up of Present Outstanding.
G. Other Liabilities of the Client/Group.
H. Previous Banker’s Information.
I. Details of Sister/Allied Concerns.
J. Allied Deposit as on.
K. Business/Industry Analysis.
L. Relationship Analysis.
M. Asset-Liability position of the client as per Audited Balance Sheet.
N. Working Capital Assessment.
O. Risk Grade.
P. Particulars of the godown for storing MPI/Murabaha goods.
Q. Insurance Coverage.
R. Audit Observation.
S. Security Analysis.
At this stage, the bank officially approves the investment proposal of the respective client. In this case client receives bank’s sanction letter. Shahjalal Islami Bank Limited (SJIBL)’s sanction letter contains the following elements:
1. Investment Limit in million.
2. Mode & amount of investment.
3. Purpose of investment.
4. Period of investment.
5. Rate of return.
a. Primary- Stock of goods is the primary security.
i. LC/Bills: Related Documents.
ii. Murabaha Post Investment (MPI)/Bai-Murabaha: Pledge of MPI/Bai-Murabaha goods.
iii. MPI/Bai-Bai Murabaha-TR: Lien on goods to be released.
i. Bai-Murabaha: 25% cash security on cost price to be subsequently converted to goods security.
ii. TR (Trust Receipt): Without cash security.
c. Collateral: Immovable properties.
In allowing Murabaha investment and amount of cash security is generally realized from the client (amount depends on the nature of goods, creditworthiness of the client, collateral security obtained etc.) which is converted to goods security after purchase of goods purchased out of bank’s investment and client’s cash security is pledged to the bank, kept under bank’s custody before its delivery to the client on payment. Example: If, for a Murabaha investment cash security is fixed at 25% Bank’s investment stands at 75% on the total goods purchased. For example, if cost of total goods purchased is Tk.100000 Bank’s investment will be Tk.75000 and client’s cash security will be Tk.25000.
Bank Client Total cost of goods
Tk. 75000 (75%) Tk. 25000 (25%) Tk. 100000 (100%)
At this stage, usually the bank analyses whether required documents are in order. In the documentation stage, Shahjalal Islami Bank Limited (SJIBL) checks the following documents of the client:
I. Tax Payment Certificate.
II. Stock Report.
III. Trade License (renewal).
IV. VAT certificate
V. Liability statement from different parties.
VI. Receivable from different clients.
VII. Other assets statement.
VIII. Aungykar Nama.
IX. Ghosona Potra.
X. Three (03) years net income & business transactions.
XI. Performance report with the bank.
XII. Account Statement Form of the bank.
XIII. Valuation Certificate
a. Particulars of the Proposal.
b. Particulars of the Mortgagor.
c. Particulars of the Properties.
XIV. Outstanding liability position of the bank.
XV. CIB (Credit Information Bureau) Report.
At this stage, bank decides to pay out money. Here, the client gets his/her desired fund or goods. It is to be noted that before disbursement a “site plan” showing the exact location of each mortgage property needs to be physically verified.
Monitoring & Recovery stage
At this final stage of investment processing of the Shahjalal Islami Bank Limited (SJIBL), bank will contact with the client continually, for example- bank can obtain monthly stock report from the client in case of micro investment. Here, the bank will keep his eye on over the investment taker. If needed, bank will physically verify the client’s operations. Also if bank feels that anything is going wrong then it tries to recover its investment fund from the client.
4.4 Investment Schemes of SJIBL
The salient features of the investment policy of Shahjalal Islami Bank Limited are to invest on the basis of profit and loss sharing system in accordance with the tenets and principles of Islamic Shariah. Profit earning is not the only motive and objective of the bank’s investment policy rather emphasis is given in attaining social good and in creation employment opportunities.
In fact, the bank since its inception has been working for the uplifter and emancipation of the unprivileged, downtrodden, and neglected section of the people and has taken up various schemes for their well being. The objectives of these schemes are to raise the standard of living of low-income group, development of human resources, and creation of awareness for self employment.
Household Durable Scheme
In a developing country like Bangladesh people of middle and lower middle class specially service holders with limited income find it difficult to purchase articles like refrigerator, television, cot, almirah, wardrobe, sofa-set, pressure cooker, sewing machine etc. which are part of modern and decent living. They can not enhance the standard and quality of life to the desired level due to the constrain of their limited income.
Shahjalal Islami Bank Limited has, therefore, introduced Household Durables Investment Scheme which has already created great enthusiasm among the people and received tremendous response from them.
To assist the service holders with limited income in purchasing household durables.
To assist the fixed income group in raising the standard of living.
To create opportunity for the service holders to enjoy the benefit of modern and sophisticated living and at the time lead a decent and honest life.
a. Refrigerator/Deep freeze.
d. Motor cycle/Bi-cycle.
e. Air cooler/ Air conditioner.
f. Personal computer.
g. Washing machine.
h. Furniture, viz. cot, almirah, sofa-set, wardrobe, carpet etc.
i. Sewing machine.
j. Kitchen appliances like oven, toaster, blender, pressure cooker etc.
k. Electronic generator: IPS, UPS etc.
l. Power generator, motor pump/power pump etc.
m. CI sheet, Rod, Wood etc.
n. Gold ornaments
p. Mobile telephone set
q. Medical/Engineering Equipment/Machinery
r. Educational equipment/Machinery, books etc.
s. Any other item considered suitable by the Bank.
Interested permanent officials of the following organizations may apply for investment:
a. Government Organizations.
b. Semi-Government Organizations and Autonomous Bodies.
c. Banks and Financial Institutions
d. Armed Forces, BDR, Police and Ansars.
e. Teachers of Universities, Government Colleges and Schools and Senior
f. Officers of International Financial & Relief Organization.
g. Officers of the multinational companies.
h. Officers of the local established and renowned public limited companies.
i. Permanent Teachers & Officers of established & prominent Private Universities,
Medical Colleges & University Colleges.
• House Owners
• Doctors, Engineers, Architects, Chartered Accountants/FCMA and other important professionals.
• Investment Clients of SJIBL
• Deposit Clients of SJIBL
• Shopkeepers and businessman
• Wage earners, Panel lawyers of SJIBL, C&F Agents enlisted in SJIBL etc.
• Graduate & Post-Graduate Students of Universities, Medical Colleges, Engineering Colleges, University Colleges for purchase of PC, Medical/Engineering Equipment/Machinery, Books etc.
• In case of Government, Semi-Government and Autonomous Organisations the age of the investment clients must be 25 and above with at least three years of service and he must have at least three years of service prior to his retirement. In case of private organisations, teachers of school, collage and madrashas the age of investment clients must be in between 30-50, with at least five years of service and he must have five years of confirm service prior to his retirement in the same organisation.
• In case of others except service holders the age limit must be within 27-60 years.
• In case of students the minimum age must be 18 years and maximum 25 years.
For doctors, Engineers, Architects, Chartered Accountants, FCMAs the Ceiling of the investment of the Bank will be –
a. Dhaka City: Maximum Tk.3,00,000.00
b. Other Metropolitan Cities: Maximum Tk.2,00,000.00
c. Other Municipal Areas: Maximum Tk.1,00,000.00
For Depositors Tk. 2,00,000.00
For others: Tk.1,00,000.00
NCOs of Bangladesh Armed Forces, Teachers of Primary Schools, Private School & Colleges and other professionals: Maximum Tk. 35,000.00
For Students : Maximum Tk. 40,000.00
Rate of Return: 15%
Period of Investment: Maximum two years
Mode of Investment: Bai-Muajjal
Minimum 25% of the total value of the articles. The client shall have to deposit the amount of equity in his Mudaraba Savings/Investment Account with the concerned branch before the disbursement of investment.
After sanction of investment and deposit of required equity by the client, the Branch shall supply to the concerned investment client the desired articles within seven days by procuring them by way of pay-order/cheque/draft etc. favouring the supplier.
For ensuring the ownership of the Bank over the goods, all papers and documents related to the procurement of the goods shall remain in the name of the Bank and Bank’s sticker shall remain affixed over the same. The ownership shall be transferred in favor of the client after full adjustment of the dues to the Bank.
Mode of Recovery
The Bank’s investments and profit thereon shall be recovered in 24 monthly instalments within a period of 2 (two) years.
The monthly installment shall be payable by the first week of every month. The first instalment shall be due for payment in the first week of the subsequent month of the disbursement/delivery of goods/articles.
Dues payable to the Bank shall be recovered in the following manner depending on the nature of the organization and the status of the client:
i. On request of the employee, the employer shall deduct the monthly installment from his salary and remit the amount to the Bank. In this connection, the client shall have to furnish a letter of consent from the employer.
ii. Before the delivery of goods, the client shall deposit to the Bank 24 post-dated cheques giving specific dates against each monthly installment. The cheques shall be presented to the concerned bank on due dates for encashment and adjustment of proceeds towards repayment of installment.
The investment client shall execute/provide the following documents in order to secure the investment.
All required charge documents as per rules of the Bank.
A written undertaking to the effect that the monthly installments shall be paid regularly.
Personal guarantee of an official of the same rank or of superior rank. The guarantee shall have to be duly authenticated by the competent authority of the concerned organization.
Personal guarantee of another person, preferably family member
Procedure for Application
Interested clients shall apply in prescribed form to the concerned Branch. The application shall have to be duly recommended by the Divisional Chief of the organisation where the applicant serves. Form and booklet outlining the rules and procedures of the Scheme may be obtained from the selected Branches of the Bank on payment of Tk. 25.00 only.
Supervision of Investment
Under this Scheme, the Bank, at the initial stage, has engaged M/s. Anudip Services Private Ltd., Ibn Sina Group Investment Company Ltd., Faisal Investment Foundation and Crescent Consultants on commission basis for selection of client, disbursement and recovery of investment and for overall supervision of the Scheme. The concerned investment client shall pay the commission of the supervising agency at the rate of 2% per annum over the investment.
A risk fund shall be created under this Scheme by charging the investment account @ 2% at a time against the total investment at the rate of 1% per annum for 2 years. In case of any genuine damage or if the concerned client is totally incapable to the Bank, then the amount shall be covered or adjusted from the risk fund.
Housing Investment Scheme
One of the basic human needs is to have a house to live in. A house is an abode of peace and happiness. Housing has now become an acute problem in the country, specially 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, Shahjalal Islami Bank Limited is committed to contribute to this end to provide a peaceful and happy living. The Bank has introduced ‘Housing Investment Scheme’ with the objective to ease and minimize the housing problem and assist service holders and professionals with limited income in materializing their dream of becoming owner of houses.
• To extend the benefits of the investment of the Bank under the Scheme to different sections of the people.
• To assist in solving the existing housing problem of the country.
• To assist the service holders and professionals with fixed income to arrange for houses of their own.
• To extend the investment facilities of the Bank to every nook and corner of the country, by size of investment, by sector of investment and on the basis of geographical area.
• To make investment facilities easily available under Islamic Shariah to those people who do not want to avail investment facilities from interest-based financial institutions.
• Initially the following categories of people shall be eligible to apply for availing investment facilities under this Scheme:
1. Officials of the Defense Forces.
2. Permanent Officials of Government, Semi-Government and Autonomous
3. Teachers of the established Universities, University Colleges & Medical Colleges.
4. Graduate Engineers, Doctors and established professionals.
5. Bangladeshi Officials of reputed Multinational Companies, International Financial Organizations, Donor Agencies, Foreign Embassies etc., and Officials of local established & reputed Public Limited Companies
6. Wage earner professionals like Doctors, Engineers, Accountants, Teachers and any other profession doing good job abroad with hand-some pay-package.
• The client must have exclusive and undisputed possession and ownership title over the land on which the proposed house will be constructed. The leased property must be on lease for 99 years and must be legally acceptable for mortgage to the Bank. If the investment client is a service holder then he must have at least 5 years un-expired service prior to retirement.
• Bank will select the client on the basis of the following criteria: Percentage of Bank’s investment is less than the client’s investment; amount of Bank’s investment is comparatively smaller in size, quality of construction & value of the property; constructed house/apartment is in good location & the price is reasonable; return from the property (rented income) & other known sources of income of the
• applicant; investment servicing capacity of the client is quite satisfactory.
Target Area : At the initial stage, the Scheme is being implemented in:
• Dhaka metropolitan area.
• Chittagong metropolitan area.
• Rajshahi metropolitan area.
• Khulna metropolitan area.
• Sylhet metropolitan area.
Scope of Investment
• Investment is to be extended to build new houses on the client’s own land, to purchase built houses/ apartments/flats and for extension/ completion of the house constructed/under construction.
• The building to be constructed on the land must be as per approved plan of the competent authority of that area, viz. RAZUK, CDA, RDA, KDA etc.
• The amount of investment will be limited to the following:
a) In case of construction on land owned by the client: maximum 60% of the total cost of the construction of the building. Maximum ceiling of the Bank’s investment will be Tk. 30.00 lac
b)In case of purchase of apartment/flat/ready-made house: maximum 50% of the value including purchase related cost. Maximum ceiling of the Bank’s investment will be Tk. 20.00 lac.
q If any client intends to provide the following securities to the Bank duly discharged/ completing necessary formalities by him, Bank may allow further or additional investment in excess of the aforesaid ceiling to the extent of 100% of the value of the securities: TDR & Mudaraba Savings Bond of Islami Bank Bangladesh Limited, TDR/Fixed Deposit of any scheduled Bank, Wage Earners Bond, ICB Unit Certificates, National/Defence Savings Bonds/ Sanchaypatra etc., Bank Guarantee from any scheduled Bank.
Rate of Return: 14.5%
Mode of Investment
• Hire Purchase under Shirkatul Melk (HPSM)
Period of Investment
• The maximum period of investment shall be generally 15 years. However, the period of investment shall be determined on the basis of the proposal of the client, the amount of investment (for which the client has applied) and the ability of the project or client to repay the dues.
• Reasonable gestation period for construction be allowed considering the size of construction and Bank’s investment.
The Bank, in accordance with its normal practice shall decide rent on the investment. The clients, who will repay the entire dues in time or before the stipulated time by way of payment of all due installments regularly, they will be allowed rebate on the rent.
Disbursement Procedure of Investment Bank will pay the sanctioned money through Pay-Order directly or through investment client to the supplier of construction materials/owner of the apartment/owner of the built house. However, the following points shall be taken into consideration in disbursing the investment:
• In case of purchase of apartment/flat/built house, the client shall have to deposit the equity money in the Branch or produce documentary evidence in support of his investment upto the satisfaction of the concerned Branch.
• In case of construction of house on the client’s own land or for extension of the existing house, the valuation of the Bank as regards client’s investment shall be considered final.
• The client shall have to submit to the Bank, the construction plan approved by the competent authority and also the required permission to mortgage the property, where necessary.
• The client must execute all necessary documents including mortgage deed and complete all necessary documentation formalities to avail the investment. Related documents of mortgage, agreement of sale and other documents must be vetted by the penal lawyer of the Bank.
Recovery of Bank’s Investment
• The client shall have to pay the Bank’s dues by monthly instalment immediately after the expiry of the period of construction. To ensure payment as per stipulation of sanction the client, shall have to deposit post-dated cheques to the Bank for the amount of each monthly instalments covering the entire period of investment. The Bank shall realise the amount of monthly instalment by depositing the cheque of a particular month on the first week of every month.
• The client shall have to execute irrevocable power of attorney in favour of the Bank authorising the Bank to collect monthly rent from the tenants in case of failure of the client to pay the monthly instalment.
• Personal guarantee of the clients, his/her spouse, adult son(s) and daughter(s) shall have to be obtained.
• Mortgage of land and building to be constructed thereon, apartment/flat/house in favor of the Bank till the full payment of dues to the Bank.
• An undertaking from the client as well as from the dependants (nominees) to the effect that the retirement benefits including Provident Fund will be appropriated towards adjustment of the house building investment liability of the client prior to any other appropriation, if the liability relating thereto or any part of it remains unadjusted at the time of getting the retirement benefits.
Procedure for Application Interested persons shall have to apply in prescribed form of the Bank through the Branch of the concerned area. The Bank shall sanction investment if the proposal is found acceptable after examination of its viability and profitability. The Bank reserves the right to sanction or reject any investment proposal.
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.
Rate of Return: 14.5%
Mode of Investment: HPSM
Investment Limit: No specific limit
Duration: 10 years
Transport Investment Program
The role of modern communication is most vital for the socio-economic growth and uplift of a developing country like Bangladesh. A sound and efficient communication network is the pre-requisite for sustained development through the expansion of trade, commerce and industry. In this backdrop the demand for road and water transports has increased manifold throughout the country. Moreover, the use of modern transports has increased keeping pace with the rise of the standard of living of the professionals. Considering all these facts, Shahjalal Islami Bank Limited has introduced ‘Transport Investment Scheme’. Under this scheme investment on easy terms is being extended to the existing successful businessmen in road and water transports and potential entrepreneurs in this sector for different types of road and water transports. Besides, Multinational companies, established business houses and well to do officials and professionals can become owner of various kinds of transports through Hire Purchase under this scheme.
Mode of Transports
• Road Transports
> Private car, microbus, jeep, pick-up van.
> Bus, truck, minibus.
> Auto-rickshaw, tempo.
• Water Transports
> Cargo vessel of maximum 500 ton capacity.
Ocean going vessel of maximum 800 ton capacity.
> Successful individual/businessman/firm engaged in transport business and potential individual/ businessman/firm who intends to take-up transport as business.
• Private Car/Microbus/Jeep
> Permanent Officials of Government, Semi-government, Autonomous Bodies, Corporations, Banks and Financial Institutions.
> Established Businessman and Business Establishments.
> Officials of Defence Forces.
> Professionals: University Teachers, Doctors and Engineers.
> Experienced Person/Firm engaged or interested in transport business (Rent-a-car). Preference will be given to those person and firms who are already engaged in transport business.
• Auto Rickshaw/Tempo/Pick-up van
> Persons/Businessmen/Firms who have already proved themselves successful in the transport business and those efficient and potential persons/businessmen/firms who are interested to take small transport as business, may apply for investment to purchase auto-rickshaw, tempo and pick-up van.
> Established Clinics and Hospitals.
• Water Transport
> Experienced and successful Persons and Businessmen engaged in water transport business.
Rate of Return: 14.5%
Mode of Investment : Hire-Purchase Shirkatul Meelk(HPSM).
Amount of Bank’s Investment and Client’s Down Payment
Type of Transport Bank’s Maximum Investment Client’s Down Payment
1. Private Car/Jeep 70% 30%
2. Bus/Truck/Mini-bus 60% 40%
3. Water Transport 50% 50%
4. Auto Rickshaw/Tempo/
Pick-up van/Ambulance 50% 50%
While ascertaining Bank’s investment to service holders it should be kept in view that the amount of monthly instalment does not exceed 40% of his total salary.
Period of Investment:
• Maximum 3 years from the date of delivery of the vehicle.
Rent of Investment
The Bank as per existing rules shall charge rent on investment. Clients who will repay the entire investments within the stipulated period or earlier by way of regular payment of instalments, shall be given rebate over the rent.
• The ownership of the vehicle shall remain in Bank’s name till full repayment of investment including rent.
• The client shall have to mortgage immovable properties as collateral security.
• In case of Officials of Government, Semi-Government and Autonomous Bodies, personal guarantee of the officer of the same grade or of superior grade and in case of officials of public limited company or business houses, corporate guarantee of the employer/ chairman/managing director shall have to be provided.
Mode of disbursement
• Bank’s sanctioned amount shall be disbursed directly to the supplier of the vehicle.
• The client shall have to complete all documentation formalities including mortgage of property before disbursement of the Bank’s investment.
• The cost of chassis and bodybuilding shall be taken into consideration in ascertaining the price.
Bank officials or appointed agents of the Bank reserve the right to inspect the vehicle at any time in any place where it is kept or found in order to ascertain its overall condition.
Recovery of Bank’s investment
• The client shall have to repay the dues to the Bank in monthly instalment starting immediately after the expiry of the gestation period fixed by the Bank.
• Required number of post-dated cheques for the whole period of investment mentioning the amount of monthly instalments shall have to be deposited to the Bank. The Bank shall collect the monthly instalment of a particular month through encashment of the cheque in the first week of the concerned month.
• If a client fails to pay 3 consecutive instalments, the Bank can take back the possession of the vehicle from the client and sell or transfer it to another client as per the rules of the Bank. If any amount remains outstanding after sale or transfer of the vehicle, the client shall remain liable to repay the same to the Bank.
Car Investment Scheme
Car is considered as an 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 cannot purchase a car on payment of entire purchase value at a time out of their own sources. To meet this need Shahjalal 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 and also for persons of different professional groups on easy payment terms and conditions.
• To meet the demand of senior officials of different organizations, established business houses and companies and persons of various professional groups who essentially need a car but cannot afford to purchase on payment at a time.
• To assist in minimizing transport problem in the private sector and help the mid and high ranking officials and professionals with fixed income in the improvement of their standard of living.
• To extend the range of Bank’s investment facilities to various sections of people in line with the ideals of the Bank.
• To diversify the investment portfolio of the Bank by size, sector and volume.
Permanent senior officers/executives of the following organizations:
• Government Organisations.
• Semi-Government Organisations/Autonomous Bodies/Corporations.
• Commissioned Officer of Armed Forces, BDR, Police and Ansars.
• Teachers of the Universities, Government Colleges.
• Executives/Directors of big companies and business houses of repute.
• Members of all other professional groups having good income.
The clients, in both the categories, must be within age group of 27-50 years with minimum 6 (six) years unexpired service in case of service holders. In all cases the clients must have sufficient capacity to pay the installments in due time to the satisfaction of the Bank. The Bank reserves the right to regret the sanction of any proposal not found suitable.
Ceiling of Bank’s Investment
Bank’s investment is maximum Tk. 3.50 lac per client against purchase cost of the vehicle. Registration and comprehensive insurance cover shall be in the name of the Bank. The clients shall have to bear all subsequent expenses relating to blue book, registration, first party insurance, tax token, fitness certificate etc.
Minimum 30% of the purchase cost of the vehicle. The amount of equity shall have to be deposited with the Bank before disbursement of Bank’s investment.
Rate of Return: 14.5%
Period of Investment
Period of investment is maximum 4 (four) years from the date of disbursement or delivery of the vehicle to the client, whichever is earlier.
Mode of Investment
a. Hire Purchase
b. Hire Purchase Shirkatul Meelk.
The following shall be obtained as security against bank’s investment under this Scheme:
a. In case of clients falling under category-A of eligibility criteria:
• Personal guarantee of the investment client.
• Personal guarantee of any of the officers of the rank and status equal to the client or an officer of higher rank.
• The guarantee shall have to be duly authenticated by the competent authority of the organization/institution where the client serves.
• Employer’s certificate to the effect that the client is in permanent service of the organization. The net pay and pay scale of the client is to be mentioned in the certificate.
• An undertaking from the client to the effect that in case of his failure to pay regular installments, the amount is to be deducted from his salary at source for adjustment of dues to the Bank.
b. In case of clients falling under category B of eligibility criteria, any of the following additional collateral/securities are required:
• Mortgage of land
• Bank Guarantee
• Deposit of ICB Unit Certificates/National Savings Certificates/TDR/Share Certificates of reputed companies duly discharged/transferred in favor of the bank and/or completing required formalities.
Mode of Disbursement Bank’s sanctioned amount shall be disbursed directly to the supplier of the vehicle as mentioned in the quotation/indent submitted and accepted for the purpose on completion of the following requirements:
• Deposit of the equity amount by the client with the concerned Branch.
• Completion of all formalities including documentation for the investment.
• Obtaining of securities/collateral as per sanction requirements.
Bank may engage supervising agent(s) to supervise, monitor and recover the investments under the Scheme. The cost of the supervision charge shall be recovered from the client along with rent.
Mode of Recovery
Dues to the Bank shall recover in the following manner:
• In equal monthly installment along with monthly rent, starting from the first week of the month, following the month of disbursement of delivery of the car whichever is earlier.
• The monthly installment shall be payable by the first week of every month.
• Post-dated cheques for the whole period of investment mentioning the amount of monthly installment shall have to be deposited by the client. In the first week of every month, the cheque(s) shall be presented for clearance/collection for the adjustment of the monthly installment.
• The amount of monthly installment shall not exceed 50% of the total income of the client taking into account the take-home salary and other disclosed sources of income of the client.
• The Branch shall have the right to take possession of the vehicle in case of failure of the client to pay 3 (three) consecutive monthly installment.
The vehicle shall be covered by first party (comprehensive) insurance covering all possible risks throughout the investment period at the cost of the client. The client shall have to ensure timely renewal of insurance and payment of premium.
The car shall have to be registered in the name of the Bank only. After payment of the entire investment of the Bank including the charges etc., the car shall be transferred in the name of the client.
The client shall have to maintain the vehicle properly for ensuring its normal operation and shall be solely responsible for loss/damage, if any, as long as it is in his possession irrespective of risk covered by insurance policy. Accordingly, repairing and maintenance cost of operation during investment period, renewal of blue book, tax token, fitness and insurance shall have to be borne by the client.
For the purpose of inspecting the status, operation and custody of the vehicle, the Bank or its authorized agent has the right, at all reasonable time, to enter into the house, office, factory, garage or the premise of the client where the vehicle is kept.
Investment Scheme for Doctors
Shahjalal Islami Bank 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.
1. To provide investment facilities for establishment of chambers, clinics, pharmacies and procurement of medical equipment by the unemployed medical graduates and thus to provide self- employment.
2. To assist newly passed unemployed medical graduates to establish clinics by way of formation of groups by 5 doctors.
3. To assist specialists and consultant physicians to procure specialised medical equipment for extending improved treatment to the people.
Rate of Return: 14.5%
Investment Ceiling and Period:
Category Maximum Ceiling Maximum Period
1. Self employed doctors settled Tk. 5.00 Lacs 5 years
in district town
2. Self employed doctors settled Tk. 5.00 Lacs 5 years
in Thana towns
3. Specialists/Consultant physicians Tk. 10.00 Lacs 5 years
for modern and sophisticated
4. Newly graduate unemployed Doctors Tk. 5 lacs to every doctor and 5 years
Group for establishment of clinics, maximum Tk. 25 lacs to a group
Purchase of machinery, equipment, of 5 doctors
accessories and other goods.
The maximum period of investment is 4 years.
Mode of Investment
q Hire Purchase Shirkatul Melk : For purchase/procurement of medical equipment and appliances, motor cycle and other items.
q Bai-Muajjal : For establishment of Chambers, Clinics and purchase of medicines etc.
• Newly graduated doctors under self-employment scheme : 10%
• Established doctors : 20%
• Established Clinics : 30%
1. The ownership of the medical equipment, appliances etc. and the motor cycle supplied by the bank on Hire Purchase-Shirkatul Melk basis, shall remain with the bank.
2. Against Bank’s investment, the clients shall have to mortgage property at least equal to the value of investment by the Bank. However, in case of investment (other than clinic) for self-employment of the newly graduated doctors the condition of mortgage of property may be relaxed, if they are unable to offer mortgage of property as security against investment. The investment clients shall have to provide personal guarantee of person(s) acceptable to the bank, in such cases.
3. Original copy of the graduation and post-graduation certificates shall have to be deposited with the bank, in case of investments for self-employment of unemployed doctors.
Mode of Repayment
• Investment of the Bank is to be repaid on monthly instalment basis.
• Re-payment of the 1st instalment will start after three months from the date of investment.
• If any investment client under the scheme fails to pay back three consecutive instalments without satisfactory reasons acceptable to the bank for such failure, the bank may take possession and control of the machinery and equipment etc. supplied by the Bank.
Small Business Investment Scheme
Shahjalal Islami Bank, as welfare oriented financial institution, is committed to generate employment and bring about an overall improvement in the socio-economic condition of the people and the quality of their life. The Bank, to make effective contribution in this respect, has taken-up a special programme and introduced ‘Small Business Investment Scheme’ to make the small traders, entrepreneurs and neglected unemployed youths of urban and rural areas self-reliant by providing them required financial support.
The following benefits will be achieved through implementation of this Scheme.
• Gradually it will help to alleviate poverty and minimize unemployment.
• It will help small traders and entrepreneurs to become self-reliant and to improve their quality of life through capital formation.
• It will create opportunity for the unemployed youths to engage themselves in in-come generating activities.
• It will help to expand the market for locally produced goods by increasing
• productivity of small traders and entrepreneurs.
Eligibility of the Clients
• Investment clients must be permanent residents of the command area of the branch through which they intend to avail investment facilities and they must have valid trade license and shops or selling centres.
• Small business and entrepreneurs, who are already engaged in trade and business but cannot run their operations smoothly for shortage of fund/capital, will also be eligible to avail investment facilities under the Scheme.
• Investment shall also be extended to those poor and asset-less unemployed youths who are honest, efficient, physically and mentally capable with drive and initiative, especially those who have ability to run business.
• Besides the above categories, investment facilities under this Scheme shall also be extended to small and cottage industries and service sector.
Sectors of Investment
e) Trading/shop keeping
h) Agriculture Implements and Forestry
Rate of Return: 13%
Ceiling of Amount
• For Dhaka & Chittagong :Maximum upto Tk. 1,00,000/- per client Metropolitan Branches depending upon their requirements.
• Branches in other Divisional :Maximum upto Tk. 75,000/- per client
District Head Quarters depending upon their requirements.
• Branches other than Divisional :Maximum upto Tk. 50,000/- per client & District Head Quarters depending upon their requirements.
Mode of Investment
A. Hire Purchase Shirkatul Meelk :For all kinds of machineries i.e.equipments &
B. Bai-muajjal-TR :For trading shop keeping, agro-processing and
raw materials for manufacturing purposes. Period of Investment
• In case of HPSM : Maximum 24 months.
• In case of Bai-muajjal-TR : Maximum 12 months.
• For HPSM investment :Maximum 20% on cost price of the Machineries/vehicles.
• For Bai-muajjal-TR : Nil.
For Investment up to Tk. 30,000.00
• Hypothecation of existing and future stock of goods. Ownership of machines & equipments shall remain in Bank’s name.
• Personal guarantee of financially sound respectable 2 (two) persons/prominent businessmen acceptable to the Bank shall have to be given.
• Collateral security may be relaxed considering the feasibility of investment and client’s ability and sincerity.
For Investment over Tk. 30,000.00
• Hypothecation of existing/future stock of goods. Ownership of machines & equipments shall remain in the Bank’s name.
• The client shall have to give mortgage of immovable properties to the Bank.
• For HPSM investment : Monthly installment basis
• For Bai-muajjal-TR : Monthly/Quarterly/Half-yearly installment/lump-sum/ at a time – within the date of expiry (which ever is deemed suitable by the Branch depending on the nature of business of payment capacity of the client.)
The Risk Fund shall be 1% per annum. This shall be debited on Bank’s principal investment at the time of disbursement. In case of investment for 2 years, it shall be 2% i.e. 1% per year.
Mudaraba Savings Account It is compulsory that every client must open a Mudaraba Savings account. Each client should built savings by way of deposit in this account a sum of Tk. 10.00 each month for every Tk. 1,000.00 of investment. No chequebook shall be issued against this account. Money can be withdrawn from this account if there is no liability against the client.
Supervision For effective supervision and smooth operation of the scheme, required number of supervisors shall be engaged at the field level. For this purpose the investment client shall have to pay at the time of investment a sum at the rate of 2% per annum of investment as supervision fee. In case of investment for 2 years, supervision charge shall be 4% i.e. 2% per year.
Review and Evaluation
The concerned branch shall arrange meetings of the investment clients occasionally and evaluate the performance of the scheme and discuss problems and take steps to solve those problems.
Agriculture Implements Investment Scheme
In order to bring revolutionary changes in the agricultural sector by adopting modern agricultural technology replacing the age-old traditional way of cultivation and increasing the use of fertilizer. This can only be done by collective efforts of both public and private sectors.
Shahjalal Islami Bank Limited is a welfare oriented Bank. It can play positive and important role in the economic development, progress and uplift of the country by investing in the agricultural sector. The Bank has, therefore, introduced “Agriculture Implements Investment Scheme” to provide power tillers, power pumps, shallow tubewells, thrasher machine etc. on easy terms to the unemployed youths for self-employment and to the farmers to help augment production in agricultural sector.
Types of Agriculture Implements
• Power tillers
• Thrasher Machine
• Any other agricultural implements proposed by the branch and which has local demand.
These implements may be of any popular brand. Any locally manufactured brand, which has large demand, is also acceptable. The choice of investment clients shall be given preference in this regard.
Eligibility of Investment Clients
• Educated or half-educated rural youths, educated or illiterate farmers and any person ready to accept agriculture as business may apply for investment facilities under this scheme. Preference shall be given to those applicants who have passed S.S.C. or above.
• The applicant farmer should posses sound health and his age must be minimum 18 years and maximum 50 years. Person who is willing to take agriculture as business, his age must be between 18 to 45 years. If the applicant is educated or half educated youth than his age must be between 18 to 35 years.
• The applicant must be physically and mentally fit and willing to operate the machine himself.
• Applicant must be a permanent resident of the concerned area and be willing to stay and work there.
Rate of Return: 14%
Period of Investment: Two Years
Mode of Investment: Hire Purchase Shirkatul Melk.
Generally the investment client shall have to pay 20% of the cost of agriculture implements/ equipment as equity. Equity shall be 10% if the Bank undertakes any special project under the supervision of any registered NGO approved by the Bank. The client shall have to bear the cost of installation of the agriculture implements/equipment and related expenses.
• The agricultural implements to be supplied to the investment client shall remain in the name of the bank till the repayment/adjustment of the dues to the bank.
• Collateral security of immovable property equal to the amount of Bank’s investment backed by irrecoverable general power of attorney.
• Client, who is unable to offer collateral security of immovable property, shall have to provide personal guarantee of two respectable persons acceptable to the Bank. Guarantors should preferably be client’s father/guardian or teacher.
The investment shall have to be repaid in 4 instalments within a year. The instalment shall be fixed on the basis of the sowing/transplantation and harvesting seasons of the crop. The branch Manager shall decide both the amount and time of the repayment of instalment.
Under this scheme a risk fund shall be created by debiting the concerned investment account an amount equal to 2% of the Bank’s investment at a time at the rate of 1% per annum for 2 years.
The risk fund will be utilized for the following purposes:
1. For meeting the cost of repair of the implements supplied if there is any damage of the implements due to accidents during operations.
2. To cover the loss if any against the investment subject to approval from the head office.
1. The overall supervision of the investment shall be the responsibility of the concerned branch.
2. For supervision at the field level the Bank, may engage educated unemployed youths of the concerned area as per rules of the Bank. Supervision fee at the rate 2% over investment may be charged from the investment client for this purpose.
Mirpur Silk Weavers Investment Scheme
The Scheme has been taken up to assist the silk weavers of Mirpur area particularly in respect of requirement of working capital, BMRE of existing unit by adding further machineries, to develop new entrepreneurs and to assist the workers for getting further training for producing products of various modern design and for modernisation of the Silk Sector.
Rate of Return: 14.5%
Mode of Investment: Bai-Muajjal
Rural Development Scheme
Shahjalal Islami Bank Limited was founded with the major objective of establishing Islamic economy for balanced economic growth by ensuring reduction of rural-urban disparity and equitable distribution of income.
In view of the above, Branches of the Bank have been encouraged to invest their deposits in their respective areas and in particular for the economic upliftment of the rural people.
Accordingly, a Scheme in the name and style of ‘Rural Development Scheme’ has been introduced to cater to the investment needs of the agriculture and rural sector to create opportunity for generation of employment and raising income of the rural people with a view to alleviate poverty.
The main objectives of the Scheme are:
a. To extend investment facilities to agricultural, other farming and off-farming activities in the rural areas.
b. To finance self-employment and income generating activities of the rural people, particularly the rural unemployed youths and the rural poor.
c. To alleviate rural poverty through integrated rural development approach.
d. To extend investment facilities for rural housing, keeping in view the needs of housing facilities of the rural dwellers.
e. To provide educational services and safe drinking water, sanitation & medicare facilities to the down trodden people.
Target Group: a. Farmers having land holding of maximum 0.50 acres.
b. Sharecroppers with consent from the landowners.
c. Persons engaged in off-farm activities having no land or land up-to-maximum 0.50 acres.
d. Persons/farmers permanently residing in the selected villages.
e. Persons having derelict pond will be eligible for investment for re-excavation and fish cultivation.
f. Destitute women and distressed people will be provided investment for milch cows/poultry birds/ducks/goats etc. and other suitable off-farm activities for raising their supplementary income.
g. Persons having liabilities with other banks/institutions including defaulters will not be eligible for investment under the Scheme.
Purpose, Period and Ceiling of investment:
Purpose of investment Period Maximum ceiling
a. Production of 21 types of Crops
1 year Tk.15,000.00
b. Nursery and commercial production of Flowers & Fruits 1 year Tk.30,000.00
c. Agricultural and irrigation
equipments 3 years Tk.30,000.00
d. Live Stocks 2 years Tk.30,000.00
e. Poultry & Duckery 1 year Tk.20,000.00
2 years Tk.30,000.00
g. Rickshaw/ Rickshaw-van and
other rural transport. 1 years Tk. 10,000.00
h. 343 kinds of off- farm activities
1 year Tk. 30,000.00
i. Construction materials for Rural Housing 5 years Tk.20,000.00
The clients are provided investment maximum Tk.10,000/- at the first time and the good performers are given enhancement, upon his requirement, by Tk.2000 to Tk.5000 in every next term up to the ceiling of a particular sector.
Rate of Return: 11.5%
No security is required against investment under the Scheme as entire Scheme has been drawn taking into account the social welfare objective of the Bank for upliftment of the socially down-trodden and economically backward and weaker section of the population of the society. However, Group discipline should be strictly followed and complied with so that only the right persons are selected and included as members of the Group.
Besides, each member of the Group gives personal guarantee for other members of the same Group and the members are jointly and severally liable and responsible for payment of investment.
Modes of Investment
The Branch selects any of the following modes depending upon the sector and purpose of investment:
b. Hire-Purchase Shirkatul Meelk (HPSM) or Leasing
f. Murabaha TR
Recovery of Investment
To ensure recovery of the investment in time, the Branch determines the instalments judiciously. Instalments should be fixed in the following manner, keeping in view the income generation capacity of the investment and time thereof:
a. In case of “off-farm activities,” instalments should be fixed on weekly basis.
b. In case of agricultural/crop production, instalments should be fixed on quarterly basis or on the basis of harvesting period of the crop in each of the investment area. A token instalment may be realised on weekly basis.
* The members of the Group have to open Mudaraba Savings Account (RDS) in their individual names with the Branch from the very inception of the Group activity.
* This Mudaraba Savings Account is non-chequing which induces the clients to make a habit of compulsory savings.
* This savings may, however, be withdrawn by the member if he does not have any other liability with the Branch in any way.
* The weekly compulsory savings is minimum Tk.10.00 per member.
Supervision, Follow-up and Monitoring
The investment under the Scheme is fully supervised. The Branch must take the responsibility for the investment as well as recovery. To ensure this the Branch must ensure systematic and continuous relationship with the clients. To achieve this close relationship, the Branch has to work together and meet closely and regularly with the clients.
The Field Officers under-take the following functions under the overall supervision of the Project Officers and Managers of the concerned Branch:
a. To conduct base-line survey of the Project area.
b. To organise the target Group people and induce them to form Group(s).
c. To conduct General meetings, elect Leader and Deputy Leader of the Groups.
d. To form Centre and elect Centre Leader & Deputy Centre Leader.
e. To conduct weekly Centre meeting and ensure collection of weekly personal savings, centre fund and investment instalments and enter them in the ledgers/computer.
f. To make entries of the Pass Book of respective clients. The Pass Books must be verified with the respective Ledgers/computer by the Project Officer every month.
Application and Processing
The Branch receives investment applications and accord approval in the following manner as soon as the Investment Committee of the Branch is satisfied that the Group members conform to the principles of Group activities and it is ensured that such Group activities are carried out without any hindrances in future.
a. The application as per Bank’s approved format is distributed among the eligible members of the Group. The Bank officials help in filling the forms.
b. The application after properly filled-in is submitted to the Branch.
c. Upon receipt of the applications from the members, the Bank officials verify them and discuss in the weekly meeting with other members and ascertain whether the Group will take responsibility in recovery of the instalments. Applicant’s past behaviour in the Group meetings is also taken in to consideration to provide him investment facilities. The Group Leaders recommend the application along with Bank’s Field Officer and Project Officer of the Branch for sanction.
d. The application, thereafter, is presented to the Branch for sanction of the investment.
e. The Investment Committee of the Branch gives its observation and sanction of the investment if found suitable.
To secure Bank’s investment, the following documents have to be executed:
• Group guarantee form.
• Deed of Agreement.
• Usual charge documents.
PERFORMANCE OF RURAL DEVELOPMENT SCHEME
UP TO DECEMBER 2007
(Figure in Million taka)
Sl. Areas of performance Number/Amount
1 Total number of Branch of SJIBL 186
2 No. of Branch handling the Scheme 126
3 No. of Village 7,825
4 No. of District 60
5 No. of Centre 14,256
6 No. of Group 73,712
7 No. of Male member 339,115
8 No. of Female member 29,445
9 Total number of Members 368,560
10 No. of Client (Who availed investment) 259,064
11 Cumulative disbursement 8,589.74
12 Average size of investment 0.011
13 Present outstanding 1,944.47
14 Amount of overdue 6.68
15 Percentage of Recovery 99%
16 No. of account adjusted (Since inception) 707,401
17 Adjusted amount (Since inception) 5,833.90
18 Balance of personal savings 653.18
19 Total waiver from inception 4.46
20 Number of client under MEIS 1,808
21 Cumulative disbursed under MEIS 88.18
22 Present outstanding under MEIS 77.23
23 No. of Field Officer 1,391
24 No. of Tube-well provided (Since inception) 5,372
25 Amount disbursed against Tube-well 9.98
26 No. of Sanitary Latrine provided (Since inception) 3,042
27 Amount disbursed against Sanitary Latrine 2.79
Investment under MEIS
To satisfy the graduated clients who already availed highest limit of investment under RDS, a new Scheme has been introduced under the name & style of ‘Micro Enterprise Investment Scheme (MEIS)’. Small entrepreneurs of the area, other than RDS members, are also provided with investment facilities under this Scheme. At present, the clients under this Scheme are extended investment up to a maximum limit of Tk. 200,000/- individually against third party guarantee or collateral security.
The investment requirements of the deserving and investment worthy clients of the area who are not covered under the Scheme may be accommodated under other existing Schemes of the Bank like:
I. Agriculture Implements Investment Scheme.
II. Micro Industries Investment Scheme.
The Field Officers and the Project Officer explore the possibilities of investment in the area under the afore-said Schemes and recommend to the Branch for sanction. The Schemes have been chalked out in such a way so that all the persons within the command/ target area may be brought within the fold of Bank’s Investment for productive economic activities.
Micro Industries Investment Scheme
Shahjalal Islami Bank Ltd. has been appreciably participating in the 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. This scheme has been devised to cater to the investment needs of those persons who intend to set-up new micro industrial ventures or to restructure their old units by way of BMRE involving a total cost of Tk.5.00 lac. This is intended mainly to create new jobs for the educated, skilled & semi skilled unemployed and also to encourage those who remain outside the purview of investment due to shortage of funds and insufficient collaterals. The scheme has been prepared with easy terms and conditions to encourage the small entrepreneurs, educated unemployed youths and skilled /semi skilled persons to come forward for establishment of micro industries commensurate with the local demand.
The eligibility criteria for the selection of the entrepreneurs under the scheme will be as under:
1. Engineering diploma or degree holders, or persons having diploma or certificate from any Technical /Vocational Training Institutes and willing to set-up micro industries.
2. Educated unemployed youths having initiative and knowledge regarding the proposed industry.
3. Skilled and semiskilled persons having practical knowledge and experience in industrial perations.
4. Persons already engaged in micro-industries as owners and willing for BMRE of their enterprises.
5. Wage Earners who want to establish micro industries having work experience/training in the particular field of industry.
6. The proposed enterprise must be exclusively owned by Bangladeshi Nationals which use indigenous raw materials or imported raw materials not exceeding 25% of the total requirement of raw materials.
7. Defaulters and persons/enterprises having outstanding liabilities with other Banks and Financial Institutions will not be eligible for availing investment under the scheme.
Sectors of investment:
Different sectors including food and agriculture based industries, plastic & rubber industries, forestry and furniture industries, engineering industries, leather industries, chemical industries, textile industries, recycling industries, service industries, electrical accessories industries, computer technology industries, paper products industries, handicrafts industries, fishery & live stock farming, hollow bricks, roof tiles and any other viable micro-industries have been identified for financing under the Scheme.
A detailed list of enterprises in each sector is given at ANNEXURE-A. Any other item(s)/sector(s) that has not been included in the list but there is scope for investment, the Branch may approach Head Office through their respective Zonal Office for inclusion thereof.
Purpose of Investment:
• To procure capital Machinery
• To purchase raw materials
• To meet a portion of working capital requirement.
While selecting enterprises(s)/project(s) for financing, Branch must ascertain the market demand of the product of such enterprise(s)/project(s). Also care should be taken so that local machineries & raw materials are used to keep cost of the project at a minimum level and to develop supporting job opportunities.
Bank’s investment & ceiling thereof:
The extent of Bank’s investment will depend upon the actual requirement of a particular industry/enterprise, its nature of production, model & origin of machineries, the working capital requirements etc. The Branch should ascertain the cost of the project taking into account all the above issues.
Bank’s investment shall not be more than 60% of the cost of machineries or 50% of the total cost of the project (both machinery & working capital), whichever is less, within the maximum total investment ceiling of TK.5.00 lac per project/enterprise.The client’s equity shall be calculated taking into account cash investment plus the cost of the project land & building if owned.
To secure Bank’s investment, collateral security of immovable properties backed by Irrevocable General Power of Attorny shall have to be obtained.
In case of technically qualified persons and educated unemployed youths, the original educational certificates shall have to be deposited with the Bank.
The ownership of machineries/equipments shall remain in the name of the Bank till full adjustment of Bank’s dues.
The stock (existing & future) shall remain hypothecated with the Bank till full adjustment of Bank’s investment.
In case of exceptionally deserving candidates, such as educated, experienced, sincere, hardworking young-men with good reputation who intend to set-up & run the industries fulfilling all the terms & conditions except that of collaterals they may be allowed an investment up to a maximum ceiling of TK.2.00 lac without collateral but on personal guarantee of 2(two) reputable persons having good financial means and social standing acceptable to the Bank.
Period of Investment:
Capital Machinery : 5(five) years including reasonable gestation period.
Raw Materials : One year from the date of 1st disbursement.
Rate of Return
The Rate of Return will be @ 14% per annum.
The client will contribute in the risk fund @ 2% of the total Bank’s investment for the project/enterprise at the time of disbursement in order to meet any loss caused by genuine/ and unforeseen risks & hazards.
Mode of Investment:
Capital Machinery :Hire-Purchase Shirkatul Melk (HPSM)
Raw Materials :Bai- Muajjal.
Recovery of Bank’s dues:
The Mode of payment shall be determined considering the cash flow of the particular project enterprise within the investment period. The Branch in consultation with the client will determine the instalment and payment period. However, the following may be considered in fixing the mode of payment.
a. Hire Purchase :In monthly/fortnightly/weekly instalment basis.
b. Bai-Muajjal :In Lumpsum at the end of the tenure of Investment
In order to encourage regular payment of Bank’s dues, Branch should encourage instalment payment in both the modes. This will reduce the risk of overdues & diversion of funds.
Close supervision is ensured by the branch for proper implementation of the project and recovery of installments in time. For this purpose supervisors (technical hands) shall have to be appointed for each of the designated branches.
Review & Evaluation:
Branch must ensure constant and close supervision of end-use of investment. Close monitoring of performance of the client and the enterprise is vital for the success of the Scheme.
Investment Performance of SJIBL
4.5 Sources of Funds
The financial resources of the SJIBL consist of ordinary capital resources comprising paid-up capital and reserves, and funds rose through borrowings from the central bank and other banks (inter-bank borrowing), and issue of Islamic financial instruments. The major part of their operational funds is, however, derived from the different categories of deposits accepted on the Islamic principles of Al-Wadiah (safe custodianship) and Mudaraba (trust financing). For the sake of ease of understanding we call these two sources as ‘Primary’ and ‘Secondary’. These are discussed as under.
SJIBL is public limited companies incorporated under the companies Act, which are listed on the Stock Exchange. Individuals and institutions, local and foreign, have subscribed their capital. For example, the First SJIBL of Bangladesh – Shahjalal Islami Bank Limited (SJIBL)- is a joint venture of Bangladesh and overseas capital in the ratio of 38:62. Its local capital is owned by the Government of Bangladesh and private individuals and institutions. The overseas capital (62%) of the bank is owned by the institutions and individuals as follows.
i) Islamic Development Bank, Jeddah, Saudi Arabia
ii) Kuwait Finance House, Kuwait
iii) BahrainSJIBL , Bahrain
iv) Jordan SJIBL, Jordan
v) Al-Rajhi Company for Currency Exchange and Commerce, Saudi Arabia
vi) Dubai Islami Bank, UAE
vii) Islamid Investment and Exchange Corporation, Qatar
viii) Ministry of Awqaf and Islamic Affairs, Kuwait
ix) The Public Authority for Minor Affairs, Ministry of Justice, Kuwait
x) Public Institution for Social Security, Kuwait
xi) Ahmed Salah Jamjoom, Saudi Arabia
xii) Fouad Abdul Hameed Al-Khateeb, Saudi Arabia
xiii) SJIBL System International holding S. A. Luxembarg
The capital resources of the SJIBL is mobilized through the issue of shares for which negotiable share certificate are used. With prior permission from the Government, shares are issued from time to time. Laws governing the shares correspond to the Musharaka laws of Shariah. The holders of shares have management (voting) right and participate in the profit/loss of the bank. The shares are transferable. In the case of the IBBL, its entire capital is denominated in the local currency – i.e. Taka, though the foreign shareholders had to pay for their shares in US Dollars.
The central bank also requires that every SJIBL shall maintain a reserve fund. Before any dividend is declared, SJIBL transfers to the reserve fund out of the net profits of each year, after due provision has been made for Zakat and taxation, a certain percentage of the net profits in order to build up adequate reserves. If the central bank is satisfied that the aggregate reserve fund of an SJIBL is adequate for its business, it may by order in writing exempt the bank from this requirement for a period of one year. In Bangladesh, the SJIBL besides maintaining the statutory reserve, has built up an Investment Loss Offsetting Reserve (ILOR) by appropriating 10 (ten) percent of the bank’s annual investment profits.
SJIBL is further required to keep at all times minimum amount of liquid assets against its deposit liabilities expressed as certain percentage of the deposits, as may be prescribed from time to time by notice in writing by the central bank. For this purpose, liquid assets mean (i) cash in bank, (ii) balances with the central bank/other designated banks, (iii) Government Investment Certificates, and (iv) such other assets as may be approved by the central bank. Failure to keep the minimum liquid assets invokes penalty for each day of deficiency.
Borrowing From Central Bank
To tide over temporary liquidity shortages SJIBL, as member bank, is entitled to borrow from the central bank, as the lender of last resort. In such cases, SJIBL does not pay interest like the conventional banks. Such borrowing from the central bank is treated as a PLS deposit with the SJIBL and profit is paid at the rate payable on corresponding PLS deposit of the bank.
The SJIBL has established interest-free fund arrangements with local and foreign banks on the basis of reciprocity. Normally, under prior arrangement, the SJIBL keep surplus funds with selected banks. When needed, these banks also place interest-free compensating balance with the SJIBL. If balances are not equal, then periods for which funds placed are adjusted.
(MOBILIZATION OF DEPOSITS)
Like interest-based conventional banks, the main function of SJIBL is to mobilize savings and provide financial support to the entrepreneurs. Yet there are differences in techniques applied in the process of savings mobilization and financing investment by the two banking systems. Depositors receive interest in a predetermined rate for their deposits made with an interest-based bank. Similarly, the investors are to pay a predetermined rate of interest to the bank. The technique, thus, involves each and every partner in the transaction process (i.e. the depositor, the investor and the bank) with the element of interest. SJIBL, on the other hand, neither pays nor receives interest from any of its transactions thereby saving everybody from the curse of interest.
Islam disapproves hoarding of savings and encourages its productive investment. It puts emphasis on savings and the productive use of savings. Thus, the bank assembles the small deposits and savings of individuals into a common pool and makes these deposits available for large investment opportunities, ensuring the productive use of society’s savings.
SJIBL is a response to such demand. It mobilizes savings of the common people in line with Islamic Shariah. Techniques employed by SJIBL for saving mobilization are as follows.
SJIBL receives deposit in their Al-Wadiah account. The term Al-Wadiah means deposit of money allowing somebody to claim the funds in the account. The bank as trustee preserves and safe keeps the funds deposited. Thus, depositors feel safe keeping their money with the bank because the bank provides assurance of returning their money on demand.
General Mudaraba Account
General Mudaraba account, which does not have a specified term and is not restricted to being invested in specific project. In addition, deposits may be taken out of the General Mudaraba account on relatively short notice.
Term Mudaraba Account
Term Mudaraba account. Just as the name suggests, this account is a time like deposits with a specified maturity, but is similar to the General account in that it is not restricted to specific projects.
Special Mudaraba Account
These accounts can either be readily liquid like the General accounts or fixed for a specific term like the Term accounts. In addition, these accounts are invested into specific projects or industry, which is stipulated in the contract.
4.6 Five Years’ Performance of SJIBL
(Amount in million Taka)
Particulars 2003 2004 2005 2006 2007
Authorized Capital 3000.00 3000.00 5000.00 5000.00 5000.00
Paid-up Capital 1920.00 2304.00 2764.80 3456.00 3801.60
Reserves Fund 3280.37 4329.92 5450.94 6551.23 8039.74
Total Equity 5266.47 6691.12 8331.14 10435.96 15765.94
(Including bills payable) Gross 70,552.65 88,452.18 108261 132419.40 166325.29
Total Investments (Including Inv in Share) Gross 62,755.90 83,893.63 102145 117132.83 165286.32
Import Business 46,237.00 59,804.00 74,525.00 96870.00 137086.00
Export Business 21,738.00 29,192.00 36,169.00 51133.00 66690.00
Remittance 16,668.00 23,669.00 36,948.00 53819.00 84143.00
Total Foreign Exchange Business 84,643.00 112,665.00 147,642.00 201822.00 287919.00
Total Income 6,841.29 8262.73 10586.78 14038.30 17699.52
Total Expenditure 6039.28 6419.74 8424.36 11129.63 13918.70
Net Profit before Tax 802.01 1842.99 2162.42 2908.67 3780.82
Payment to Government (Income Tax) 426.61 829.35 973.09 1490.12 1700.77
Dividend 20% (Stock) 20% (Stock) 25%(Stock) 25% (15%Cash) 25%
Total Assets (including Contra) 98,046.85 125,776.94 150959.66 188115.27 250634.48
Total Assets (Excluding Contra) 81,704.74 102149.28 122880.35 150252.82 191362.35
Fixed Assets 2036.65 2552.70 3067.90 3724.69 3987.23
No. of deposit account holder 19,94266 22,91269 2705180 3032658 3560013
No. of investment account holder 22,3954 26,4863 297943 331456 372846
Cumulative amount of disbursement from RDS 2923.60 4216.77 6033.36 6832.40 7490.10
Outstanding Investment of RDS 570.9 789.97 –
RDS no. of A / C holder 130,465 163,465 164116 193119 246574
RDS no. of village 3700 4230 4560 4850 5200
Number of Foreign Correspondents 840 850 860 870 884
Number of Shareholders 14,196 15,892 17201 20960 26488
Number of Employees 3,752 4,261 4906 7459 8426
Number of Branches 141 151 169 176 186
Book value per Share ( Taka) 2181 2257 3013 3020 4147
Earning per Share (Taka) 195.92 518.59 487.57 368.42 539.00
Market Value per Share (Taka) (Highest) 2595 4833 5580 4749 6999
Capital Adequacy Ratio 9.43% 9.21% 9.44 9.43 11.18
4.7 Trend of Investment
Investment of the bank increased to Tk. 144921 million as on 31st December 2007 from Tk. 113575 million as 31st December 2006 showing an increase of Tk. 31346 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 share of investment of SJIBL in banking sector as on 31st December 2007 increased to 8.27% from 7.67% as on 31st December 2006.
Outstanding amount of investment as at the yearend under different schemes are as under:
(Amount in Million Taka)
SL. No. Name of Scheme 2005 2006 2007
(1) Rural Development Scheme 1106.47 2242.22 2884.66
(2) Household Durables Scheme 782.09 699.95 742.80
(3) Investment Scheme for Doctors 64.42 33.38 23.64
(4) Transport Investment Scheme 2947.38 2698.88 2624.24
(5) Car Investment Scheme 27.75 23.54 31.46
(6) Small Business Investment Scheme 629.81 768.45 876.34
(7) Micro-Industries Investment Scheme 10.21 6.24 35.79
(8) Agricultural Implements Investment Scheme 12.53 11.94 13.61
(9) Housing Investment Scheme 609.78 506.75 485.29
(10) Real Estate Investment Program 5859.75 6582.85 6903.09
4.8 Sector-Wise & Mode-Wise Investments
Sector-wise distribution of investment as on 31st December 2007 vis-à-vis the correspondent period of last year is given below:
(Amount in Million Taka)
SL. No. Sector 2006 2007
Amount % of Total Investment Amount % of Total Investment
(1) Industrial 78788 54.37 62642.10 55.15
(2) Commercial 43877 30.28 28983.80 25.52
(3) Real Estate 8588 5.93 8357.80 7.36
(4) Transport 2656 1.83 2722.40 2.40
(5) Agriculture 6485 4.47 5890.00 5.19
(6) Others 4527 3.12 4978.97 4.38
Total 144921 100.00% 113505.07 100%
(Amount in Million Taka)
Mode 2006 2007
Amount % to Total Investment Amount % to Total Investment
Bai-Murabaha 59465 52.36 73833 50.95
Hire Purchase under Shirkatul Melk 39399 34.69 50201 34.64
Bai-Muajjal 6921 6.09 6546 4.52
Purchase & Negotiation 4847 4.27 11040 7.62
Quard 1947 1.74 1955 1.35
Bai-Salam 906 0.80 1135 0.79
Mudaraba 50 0.04 50 0.03
Musharaka 13 0.01 143 0.10
Total 113575 100.00% 144921 100.00%
Private Non-commercial Remittances
Remittance and Other Facilities for Foreign Nationals:
Family Remittance Facility
Foreign nationals who are resident in Bangladesh and have income in Bangladesh are permitted to make monthly remittances to the country of their domicile out of their current savings up to 50% of their net income to cover their commitments abroad.
This remittance facility is not available to foreign born wives of Bangladesh nationals.
The branch that receives the pay cheques from the employer for credit of the personal account of the foreign national shall process and approve such remittance applications. A certificate as per Appendix 5/56 of BB Guidelines for Foreign Exchange Transactions, 1996 along with TM Form and attested copy of the employment contract duly approved by the BOI or other relevant Government authority (renewed/revalidated up to date, where needed) should accompany the application.
Remittance of Sale Proceeds of Assets
Application for remittance of sale proceeds of real assets such as household articles and real estates should be forwarded to the Bangladesh Bank with the following documents/certificates:
Statement of sale proceeds realized in respect of locally purchased articles of value Tk. 500 or more mentioning:
Date of purchase
Date of sale, and
Sale proceeds realized
Relative sale receipts or their certified true copies should be produced.
A statement of sale proceeds realized in respect of articles imported/brought from abroad of value Tk. 500 or more mentioning (a) description, (b) landed cost in Bangladesh, (c) date of import, (d) date of sale, (e) sale proceeds realized.
Relative import documents and relative sale receipts or their certified true copies
Should be produced.
Application and Supporting Documentation
Application as per pro-forma at Appendix 5/55 of BB Guidelines for Foreign Exchange Transactions, 1996 duly filled in by the applicant and his employer should be accompanied by:
TM form signed by the applicant;
A certificate from the employer showing:
Net salary and allowances for each year,
Provident Fund and leave salary paid on retirement,
Bonus and other gratuitous payments for each year.
Cost of passage, if any, for self and family is payable by the employer.
A certified true copy of the employment contract approved by BOI/ appropriate Department of the Govt. of Bangladesh should be produced in support of the above.
If any of the above payments are not covered by the original service contract, a certified copy of the resolution of the Board of Directors of the employer company allowing the payment (duly approved by the Govt. Department, which originally approved the employment of the foreign national) should be submitted.
Bank’s encashment certificate in support of receipt of funds, if any, from abroad.
AD’s certificate in regard to the applicant’s investment in Govt. securities made for availing of the income tax relief showing also the amount realized from the sale proceeds and income accrued on the investments.
Bank certificate showing
Total amount of remittances made on account of family maintenance, and
Total amount of remittances made on account of leave salary. In case the applicant’s period of stay exceeds 10 years, the bank’s certificate should cover the period of the last 10 years.
Statement of transactions in bank account for the last one year prior to the date of the application with explanation of sources of credit entries of Tk. 500 or more other than those relating to receipt of salary and allowances.
Application for transfer of actuarial reserve and relative insurance record in respect of insurance policy, if any, should be submitted through the insurance company concerned.
The statement/certificates mentioned above are to be prepared by the branch on the basis of their own records.
Clearance certificate in respect of income tax and other taxes payable.
For remittance of pension/Provident fund/gratuity on account of an employee retiring from a foreign-owned or foreign controlled organization, a certificate signed jointly by the employer organization and its nominated AD should be submitted. It should state that the relevant pension fund/retirement fund out of which the retirement benefits are payable are maintained in Bangladesh and that no remittance towards contribution to any retirement fund maintained abroad had been made in respect of the applicant.
Examination and Processing of Applications
Before remittance of funds representing savings, pension, and other benefits entitled the branch shall carefully examine the applications and supporting documents to ensure that the amount applied for remittance is the genuine
If, in course of the examination, there emerges sufficient grounds to believe that the amount applied for remittance is in excess of the applicant’s possible genuine entitlement, the branch shall affect remittance only to the extent of its own estimate of the applicant’s genuine claims. Thereafter, the branch should refer the case to Foreign Exchange Policy Department, Bangladesh Bank for further consideration regarding the excess amount, with such additional explanation/representation as the applicant may wish to furnish.
Remittance of Foreign Exchange for Education Abroad:
Foreign exchange may be released for studies abroad by Bangladesh nationals in all regular courses (subject to being consistent with the Education Policy of the Bangladesh Govt.) in recognized institutions. The branch may allow exchange facilities for this purpose according to the following drill:
Application and required papers:
Application (Appendix 5/57 of BB Guidelines for Foreign Exchange Transactions, 1996) duly filled in;
Original and photocopy of admission letter issued by the educational institution in favor of the student (such as 1-20 in the case of US institutions);
Original and photocopy of estimate relating to annual tuition fee, board and lodging, incidental expenses etc. issued by the concerned educational institution (1-20 in case of US institutions);
Attested copies of educational certificates of the applicant; and
Examination and processing by AD
After scrutiny the application and the supporting documents the branch may sell foreign exchange as per estimate furnished by the educational institution subject to adjustment with the normal travel quota. On application from the student, expenses in transit not exceeding US$ 200 or its equivalent in other freely convertible currency may be allowed out of normal travel quota.
In each case of sale of foreign exchange, the front page of the original letter of estimate/acceptance letter issued by the concerned educational institute should bear clearly the round stamp of the foreign exchange issuing branch and also the signature of the officer of the said branch.
None other than the student (such as the spouse of the student of attendant) will be eligible for exchange facility other than the normal travel quota.
After verifying the original copies of papers the foreign exchange issuing branch shall retain photocopies authenticated by an official of the branch and return the original to the applicant.
Foreign exchange payable to the educational institution should be issued in favor of the institution concerned in the form of TT/MT/Draft. If payment on account of board and lodging and incidental expenses etc. is not compulsorily required to be in favor of the educational institution, foreign exchange on these counts may be issued in favor of the student in the form of TC/Draft etc.
Education institutions sometimes require applicants to send advance amounts for processing of applications, retention of seats etc. If the papers of the foreign educational institution clearly state that advance payment is required for processing of admission application or for retention of seat, the remittance may be made provided the papers from the educational institution also state clearly the advance will be refunded (possibly with small deduction as handling costs etc) in case the applicant is not admitted or cannot join the course.
Foreign exchange will not be admissible to pursue more than one course at a time. Change of course is also not permissible, if a student changes his/her course, foreign exchange facility would be discontinued. However, if credits earned in the earlier course count as credits in the new course by the educational institution concerned, the remittance facilities may be continued.
The facility of purchase of foreign exchange/remittance will not be admissible for more than one academic year at a time.
For each release of foreign exchange subsequent to the first release, the current progress report and current estimate of the educational institution should be taken into consideration. The branch shall maintain separate file for each student with all relevant papers in readiness for perusal by inspecting officials of Bangladesh Bank. All purchases of foreign exchange throughout the entire duration of a course of study pursued abroad should be from the same branch of the bank. For any intended change in this respect, the relevant file shall be transferred direct to the concerned new AD branch on written request from the applicant. This should not be handed ever to him or her.
Remittance of Consular Fees
Consular fees collected by foreign embassies in Bangladesh and deposited in an account maintained with an AD solely for depositing the consular fee collections may be remitted abroad with prior Bangladesh Bank approval. The branch shall report such remittance, if any, in the usual monthly returns along with the relevant TM Form to the concerned area office of Bangladesh Bank.
Foreign immigration authorities may demand evaluation fee from persons desiring immigration for getting educational certificates evaluated by a specific foreign institution. The branch, on application from the applicant, may remit the evaluation fees in such cases as per demand notes of the foreign immigration authorities. The remittances shall also be reported to the area office of Bangladesh Bank in the usual monthly returns along with relevant TM Forms.
Family Maintenance Abroad by Resident Bangladesh Nationals
Applications for remittance of moderate amounts of foreign exchange for maintenance of family members (dependent parents, spouses and children) living abroad may be forwarded by the branch to the Bangladesh Bank for prior approval. The application should be supported by a certificate issued by the relevant Bangladesh Embassy or High Commission regarding residency of the beneficiaries, extent of income abroad along with the mission’s recommendation as to the moderate requirement for family maintenance purpose. The certificate should also indicate the purpose for which the family member(s) went abroad, reasons for continued residence and the probable period of stay abroad.
Other Private Remittances
Applications for remittances by private individuals for purposes other than those mentioned above should be made on Form TM in which full details of the purpose of the remittance should be stated and full documentary evidence in support of the application be attached. The branch must satisfy itself regarding the bonafide of each case on the basis of their personal knowledge of the applicant, if any, or evidence which the applicant may be able to produce. After thus satisfying itself, the branch should certify the application and forward it to the Bangladesh Bank for consideration.
Outward remittances are those sent aboard in foreign exchange. These also include payment into convertible Taka account or non-resident Taka Account (the so-called vostro Account) of foreign banks maintained with banks in Bangladesh. The branches must exercise utmost care to see that foreign exchange sold to a client is used for the declared purpose. They should also systematically maintain proper record to make these available to Bangladesh Bank as and when required.
For import payments, the branch will accept applications from the importers on form IMP while in other cases of outward remittances the prescribed form of applications is called TM. These Forms are also to be used for reporting to Bangladesh Bank. In case prior approval of Bangladesh Bank is required, the branch will send the TM form, along with the necessary papers to the Bangladesh Bank for approval. The TM Form or special permit, if any, or approval letter issued by Bangladesh bank should be utilized within the period, if any stipulated therein and conditions laid down by them must be carefully observed. Original copies of the IMP and TM Forms must be submitted to the Bangladesh Bank along with the specified Returns.
Findings and Analysis
5.1 SJIBL Market Share
The SJIBL holds the highest market share of deposits and investments among Private Commercial Banks (PCBs). The banking industry of Bangladesh had a deposit of Tk. 1440.16 billion and loans & advances of Tk. 1319.60 billion as on 31st December 2007, shared among 49 banks consisted of 04 Nationalized Commercial Banks (NCBs), 05 specialized banks, 10 foreign banks, 24 conventional PCBs, and 06 Islamic banks. The SJIBL’s customer deposits stood at Tk. 107.76 billion and Tk. 87.82 billion in YE 2005 and YE 2006 respectively. The investments (loans & advances) of IBBL stood at Tk. 93.64 billion and Tk. 75.86 billion respectively during the same period. The SJIBL held 7.48% of total market deposits and 7.10% of total market investment (loans & advances) as on 31st December 2007. However, the growth rate of SJIBL is higher than the overall market growth. The SJIBL’s customer deposits were increased by 22.70% compared to the industry growth of 16.56% and PCBs growth of 20.00% in YE 2007. During the same year, the investments (loans & advances) of SJIBL were increased by 23.44% compared to the industry and PCBS growth of 19.08% and 30.00% respectively. Being a first generation bank in the private sector, SJIBL has been maintaining commendable growth of deposits and investments, which is better than the growth trends in the industry mainly due to the huge customer participation.
5.2 SJIBL’s Private Sector Focus
The focus of Bangladesh industrial policy is to consider the private sector as the engine of growth. The SJIBL has been financing and promoting private sector very extensively. The SJIBL shariah based products such as Bai-Murabaha, Bai-Muajjal, Hire Purchase under Shirkatul Melk, all are basically meant for private sector business financing. Therefore, SJIBL as the leader of private sector financing has been contributing substantially in the private sector development. The SJIBL by this time has developed a base of loyal customers who are paying regularly and enjoying the services of the bank. A Bank of SJIBL stature needs this customer base to maintain its growth.
Foreign Exchange Market
The world foreign exchange market is very big and getting bigger every day in tandem with the growth of cross border trade and investment. Within a space of only 50 years world exports have recorded a phenomenal growth from $57.2 billion in 1950 to nearly $ 6,000 billion at the turn of the century. Simultaneously, turnover in the world foreign exchange market has reached a staggering number of nearly $ 1500 billion per day.
On the global scale, Bangladesh’s performance in the field of foreign trade and foreign exchange is very small. The picture is none-the-less getting better. The country’s exports are growing at an encouraging pace. Bangladesh workers abroad send around $2 billion each year. The growth in foreign trade and remittances has had its impacts on the foreign exchange market. Buoyed by liberalization of exchange control by Bangladesh Bank the newly emerging foreign exchange market grew at a rapid pace– from $1 billion in 1994 to nearly $30 billion in 2000. The growing market reflects diversification of foreign exchange transactions and the depth. Shahjalal Islami Bank should work towards carving a niche for itself in this market through a sustained programmed of training, motivation and operational flexibility
Operation in the Foreign Exchange Market
Compared to the quietness that featured foreign exchange market in the early nineties, banks are now increasingly taking recourse to the inter-bank foreign exchange market to meet their needs: buying, selling and switching of currencies and covering the risks. Bangladesh Bank now deals only in US dollar within a fixed band around its buying and selling rates. Banks in the market naturally operate at finer than Bangladesh Bank’s rates. Unless the weight of market demand or supply on a particular date pushes the rates to a level that coincide with that of the central bank, Shahjalal Islami Bank should operate in the inter-bank market to cushion the shortfall or unload the excess foreign currencies.
Operation in the market is overseen by an inter bank committee known as Bangladesh Foreign Exchange Dealers Association (BAFEDA). The Association has prepared a code of conduct setting out elaborate rules and procedures governing quotations, delivery, value dates, confirmations etc. Officials responsible for operation in the inter-bank market should carefully follow the codes and other practices to avoid possible complications or disputes.
5.4 SWOT ANALYSIS
SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats. It is a careful evaluation of an organization’s internal strengths and weaknesses as well as its environmental opportunities and threats. In SWOT analysis, Islami Bank Bangladesh Limited would get the best strategies accomplish its mission by (1) exploiting its opportunities and strengths while (2) neutralizing its threats and (3) avoiding (or correcting) its weaknesses.
Satisfactory business growth
Experienced top management
Diversified product lines
Low cost of fund
Stable source of fund
Strong networking of branches
Strong market share
Moderate Asset quality
Moderate liquidity position
MIS at initial stage
Moderate Risk Management System
Average operational performance
Limited delegation of power
SME and Agro based industry investment
Real time online banking
Credit card in dual currency
Increasing awareness of Islamic banking
Basel-II compliance to tap advantages from RM System Threats:
Increased competition in the market
Market pressure for increasing the SLR
Overall liquidity crisis in money market
Based on my three months observation in the bank, I achieved so many practical knowledge. At the time of my internship period I felt some problems and based on that I state the following recommendations to the bank:
Bank should make their advertisement through newspaper and TV
They should update their banking software and systems that ultimately result in fully automated banking activities to attain customer satisfaction.
It should also introduce new innovative services and increase its area of coverage.
Shahjalal Islami Bank should train its new employees in professional institutions like Bangladesh Institution of Bank Management (BIBM).
Number of branches should be increased.
They should increase number of ATM booth.
The employee of the different branch should be trained continuously.
Bank should provide their annual reports, Brochure, bulletin etc in order to give necessary information to customer.
Bank should introduce consumer credit scheme.
1. Madura, Jeff (2006), “Financial Markets and Institutes”, edition7th , Thomson, New York, USA
2. Zikmund, William G (1997) “Research Management” 16th edition.
3. Skinner,Steven J.(2003) “Business for the 21st century”, edition 5th, Irwin, Boston.
4. Shahjalal Islami Bank Limited: www.shahjalalbank.com.bd
5. Annual Report, 2006-2007 “Shahjalal Islami Bank Ltd”
6. Brochure, Shahjalal Islami Bank Limited.
It was great pleasure for me to do my Internship Program in a respected organization Shahjalal Islami Bank Ltd. Though my practical exposure in Prime Bank Ltd. for just twelve weeks it provides me a wide range of scope to observe the different functions of bank through the cordial assistance of its members. I had the scope to observe the functions of focused on Foreign Exchange banking system especially in export division.
What I have observed the bank has the vision to be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management etc.
The bank is maintaining a well-structured communication from top to bottom level. Each official should be valued and treated as a part of the bank and they must have the privilege to devote themselves for the betterment of service of the bank. Prime Bank places utmost importance on managing credit risk. The whole process includes management of Credit Risk, Foreign Exchange Risk, Prevention of money Laundering, Asset liability Management, Internal control and Compliance.
The performance of Shahjalal Islami Bank Limited during the Last five years has proved that with strong desire and will power one achieve whatever target he may have. Almost all the leading banks in our country have various Extra facilities in offer for the customers in comparison with other Banks but SJIBL has succeed in achieving more customer than other competitors. This has been possible only because of strong customer relation and excellent customer service.
The 9 years success story though helped the bank to attain a leading role but to remain unrivalled among new generation banks; the bank must face new challenges.
Overall, the bank must make a positive attempt to be more outward looking in their goals and aware of what is happening. They must also emphasize on the domestic scenario more closely and analyze any certain trends and strategies of their competitors. The bank must accept any failures and think of them as an objective to pursue future goals instead of blaming such failures on other factors. I hope in spite of my all limitations, this experience of sharing works with such working environment will help me a lot in my professional life.