Total cost of goods
Tk. 75000 (75%)
Tk. 25000 (25%)
Tk. 100000 (100%)
(5) Documentation stage
At this stage, usually the bank analyses whether required documents are in order. In the documentation stage, Islami Bank Bangladesh Limited (IBBL) checks the following documents of the client:
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
XIV. Outstanding liability position of the bank.
XV. CIB (Credit Information Bureau) Report.
(6) Disbursement stage
At this stage, bank decides to pay out money. Here, the client gets his/her desired fund or goods. It is to be noted that before disbursement a “site plan” showing the exact location of each mortgage property needs to be physically verified.
(7) Monitoring & Recovery stage
At this final stage of investment processing of the Islami Bank Bangladesh Limited (IBBL), bank will contact with the client continually, for example- bank can obtain monthly stock report from the client in case of micro investment. Here, the bank will keep his eye on over the investment taker. If needed, bank will physically verify the client’s operations. Also if bank feels that anything is going wrong then it tries to recover its investment fund from the client.
4.5 Investment Schemes of IBBL:
The salient features of the investment policy of Islami Bank Bangladesh 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 uplifted 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.
4.5.1 Household Durable Scheme (HDS)
In a developing country like Bangladesh people of middle and lower class especially 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 cannot enhance the standard and quality of life to the desired level due to the constrain of their limited income. Islami Bank Bangladesh Limited has, therefore, introduced Household Durables Investment Scheme that has already created great enthusiasm among the people and received tremendous response from them.
Items of HDS
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.
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.
The investment client shall execute/provide the following documents in order to secure the investment.
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.
4.5.2 Housing Investment Scheme (HIS)
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, Islami Bank Bangladesh 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.
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 Official of
local established & reputed Public Limited Companies.
Rate of Return:13%
Mode of Investment: Hire Purchase Under Shirkatul Melk (HPSM)
Period of 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.
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.
4.5.3 Real Estate Investment Program (REIP)
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:13%
Mode of Investment:HPSM
Investment Limit:No specific limit
4.5.4 Transport Investment Scheme (TIS)
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, Islami Bank Bangladesh 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
Rate of Return:15%
Mode of Investment:Hire-Purchase Shirkatul Meelk(HPSM).
Period of Investment:
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.
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.
4.5.5 Car Investment Scheme (CIS)
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 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.
Permanent senior officers/executives of the following organizations:
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.
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:15%
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:
(b). In case of clients falling under category B of eligibility criteria, any of the following additional collateral/securities are required:
Bank may engage supervising agents 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. Insurance
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 clientby 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.
4.5.6 Investment Scheme for Doctors (ISD)
Islami Bank Bangladesh Limited has taken the initiative an introduced the “Doctors Investment Scheme” to ensure modern treatment and medical facilities available to the people through extension of Bank’s investment facilities for self-employment of newly graduated doctors and at the same time extending investment facilities to the established medical practitioners to procure modern and sophisticated medical equipment.
Rate of Return:14%
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.
Mode of Investment
a. Hire Purchase Shirkatul Melk : For purchase/procurement of medical equipment and appliances, motor cycle and other items.
b. Bai-Muajjal : For establishment of Chambers, Clinics and purchase of medicines etc.
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.
4.5.7 Small Business Investment Scheme (SBIS)
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:
Eligibility of the Clients
Sectors of Investment
e) Trading/shop keeping
h) Agriculture Implements and Forestry
Rate of Return:14%
Ceiling of Amount
Branches depending upon their requirements.
Head Quarters depending upon their requirements.
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
For Investment up to Tk. 30,000.00
For Investment over Tk. 30,000.00
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.
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.
4.5.8 Agriculture Implements Investment Scheme (AIIS)
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. Islami Bank Bangladesh 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
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
Rate of Return: 13%
Period of Investment:Two Years
Mode of Investment:Hire Purchase Shirkatul Melk.
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.
5.1 Investment Performance of IBBL
5.1.2 Sources of Funds
The financial resources of the IBBL 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.
(1) Paid-Up Capital
IBBL 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 IBBL of Bangladesh – Islami Bank Bangladesh Limited (IBBL)- is a joint venture of Bangladesh and overseas capital in the ratio of (42.63%). Its local capital is owned by the Government of Bangladesh and private individuals and institutions. The overseas capital (57.37%) of the bank is owned by the institutions and individuals as follows:
The central bank also requires that every IBBL shall maintain a reserve fund. Before any dividend is declared, IBBL 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 IBBL 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 IBBL 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.
(3) Liquid Assets
IBBL 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.
(4) Borrowing from Central Bank
To tide over temporary liquidity shortages IBBL, as member bank, is entitled to borrow from the central bank, as the lender of last resort. In such cases, IBBL does not pay interest like the conventional banks. Such borrowing from the central bank is treated as a PLS deposit with the IBBL and profit is paid at the rate payable on corresponding PLS deposit of the bank.
The IBBL has established interest-free fund arrangements with local and foreign banks on the basis of reciprocity. Normally, under prior arrangement, the IBBL keep surplus funds with selected banks. When needed, these banks also place interest-free compensating balance with the IBBL. If balances are not equal, then periods for which funds placed are adjusted.
Secondary Sources:Mobilization of deposit.
5.2 Five year’s performance of IBBL at a glance:
(Amount in Million Tk.)
Deposits (including Bills Payable)
Investments (including Inv. In Shares & Securities)
Total Foreign Exchange Business
Net Profit before Tax
Payment to Govt. (Income Tax)
15% (Cash) 10% (Stock)
Total Assets (including Contra)
Total Assets (excluding Contra)
Number of Foreign Correspondents
Number of Employees
Number of Branches
Book Value per Share (Taka)
Earning per Share (Taka)
5.3 Trend of investment and deposit of IBBL:
This figure shows the upward trends for IBBL deposits and investment, from 2004 to 2008. Each year deposits collection is higher than the total investment except in 2007 investment exceeds the deposits collection, in which they required to be concerned. Overall trend is very satisfactory.
5.4 Mode-wise Investment of IBBL Kawran Bazar Branchfrom 2008 to 2009:
|Amount||% to total investment||Amount||% to total investment|
|Puchase & Negotiation||10,223||5.68%||11,289||5.26%|
5.5 Sector-wise Investment of IBBL Kawran Bazar Branchfrom 2008 to 2009:
|Amount||% of total investment||Amount||% of total investment|
|Agriculture (Including investment in fertilizer & agriculture implements||9,110||5.06%||14,057||6.55%|
5.6 Growth of some investment scheme 2005 to 2009
5.7 SWOT ANALYSIS:
|Adequate finance: Islami Bank Bangladesh Ltd. has adequate finance. That is why; they need not to borrow money from Bangladesh Bang or any other.More funds fore investment: For adequate financial ability, they can provide more investment facility to their rather than other Banks. |
Honest and reliable employees: All of the employees of Islami Bank are honest and reliable. They are always devoted themselves to the clients for better customer.
Religious feelings of the people: Most of the people of Bangladesh are Muslim and they are trusted in superior performance of IBBL as a Sariah based-Islamic Banking.
|Lake of adequate employees: Islami Bank Bangladesh Ltd. has very limited human resources compared to its financial activities.Lake of up-to-date equipment: IBBL has lack of modern technologies and equipments like adequate online facilities as well as cash card and credit card system. |
Deficiency of expertise: Many of the employees are unskilled and from them, superior performance is unexpected to survive in the national economy as well as in the world economy.
Lake of advertising: IBBl has lack of aggressive advertising like other banks. They don’t telecast any attractive advertise in the media.
Centralized decision making: The decision making of the bank is too many centralized. No decision is made without the authorization of the head office.
|Innovative and modern customer service: This bank can introduce more Innovative and modern customer services to its customers to survive better in the competition market.Retaining vast customer: IBBL has a vast opportunity to hold most of the customers by extending its banking operation all over the country as most of the people of Bangladesh are religious minded.|
Poverty alleviation: IBBL has a great opportunity to save the county’s poor people from being taking loan from different NGOs or few banks with higher interest rate.
Special Image: IBBL has created special image to the people as a more reliable bank. People believe that if they keep their money in Islami bank it will be more secured than other banks.
|Rules and regulation: Rules and regulation of Bangladesh Bank defers with islami banking system. So they have to face various problems to operate their activities according to the Islamic Shariah.Lower salary structure: Now many of the Banks are hiring young talent and expertise employees with higher remuneration where IBBL could not hire skilled manpower because of lower salary structure compared to other banks. |
Islami banking system introduced by conventional banking: Few other conventional banks have opened their Islamic Banking Branch.
Conclusion and Recommendation
Islam is a complete way of life and Allah’s guidance extents into all areas of our lives. Islam has given detail regulations for our economic life. Therefore, Islami Bank Bangladesh Limited (IBBL) is trying to establish the maximum welfare of the society by maintaining the principles of Islamic Shariah which is based on “Quran” and “Sunnah”. Since 1983, IBBL is the pioneer in welfare banking in this subcontinent and it is trying to do all its activities for the betterment of its depositors. For the greater interest of the depositors the investment policy of IBBL is to invest on the basis of profit and loss sharing in accordance with the tents and principles of Islamic Shariah. Profit earning is not the only motive and objective of the bank’s investment policy rather emphasis is given in attaining social good and in creation employment opportunities.
IBBL is not secular in its orientation. IBBL does not finance any project which conflicts with the moral value system of Islam. IBBL does not strictly consider the credit worthiness of the entrepreneur. IBBL receives a return only if the project succeeds and produces a profit. IBBL considers the soundness of the project and business acumen and managerial competency of the entrepreneur. Therefore, the rate of return of investment of IBBL is greater comparing to that of conventional banks.
Finally, Islami Bank Bangladesh Limited (IBBL) has been established with a view to conduct interest free banking to establish participatory banking instead of debtor-creditor relationship and finally to establish welfare oriented banking through its investment operations that would lead to a just society.
Though Islami Bank Bangladesh Ltd. (IBBL) is performing well but it has some crucial areas to improve which are prescribed below: