Problems regarding investment of IBBL:
- Most of the people in our country have a bad impression of IBBL,s operations regarding indirect generation of interest which meaning no difference between investment of IBBL loan / Credit / advance of conventional banks for this reason, they are not too much interested to make investment with IBBL.
- Islamic Banking is a new phenomenon in our country during last two decades. So majority of our people have no proper knowledge about the activities of Islamic Banking as well as its investment mechanism hamper large scope of investment of IBBL.
- IBBL which is committed to avoid interest can’t invest the permissible part of its statutory liquidity Reserve and short Term liquidity surplus in those securities.
- This Bank can’t invest in all economic sectors which are prohibited by the law of Islam.
- Because of improper, insufficient application of Islamic Banking rule in our country the investment operations of IBBL can’t run smoothly.
- Profitable investment portfolio of IBBL requires forsightment and clear investment knowledge according to Islamic shariah. But sometimes IBBL can’t invest its assets in proper portfolio due to insufficient and unskilled manpower in these regards .As a result, there is a large amount of money being idle and thus potential profit is not increasing.
- IBBL has no strong promotional activities to increase motivate its present and potential investment client.
- This Bank revalues its investment operations within limited number of investment modes and does not initiate investment modes according to changing a diverse needs of people.
- Sometimes investment operations of IBBL are hampered due to increase, dishonest, indiscreet, hypocritical nature of people.
- In IBBL , there is no profit-loss sharing system of Mudaraba & Musharaka.
Findings from the trend analysis of IBBL investment:
1. Investment of the Bank stood at Tk.174,058 Million as on 31.12.07 as against Tk. 123,950 Million as on 31.12.06 showing an increase of Tk. 50,108 Million of investment of the Banking sector. This increase of investment of the Bank in 2007 may be attributed to the trust given to foster investment and to reduce the Surplus Liquidity of the Bank.
2. Investment in Bai-Murabaha and HPSM is much more than other investment modes. In 2007, investment in Bai-Murabaha and HPSM is Tk. 75,528 million and Tk. 50,256 million respectively. On the other hand in 2007, investment in Musharaka is the lowest which is Tk.16.92 million.
3 Investment in industrial and commercial is much more than other investment sectors. In 2007, investment in industrial and commercial is Tk. 78,788 million and Tk. 49,252 million respectively. On the other hand in 2007, investment in transport is the lowest which is Tk. 2726.
4 The investment growth in transport, rural development scheme and small business investment scheme is significantly increasing over the last five years. But investment in the agriculture sector has been decreasing over the years 2002-2007.
5. Overdue of IBBL was Tk. 4041.46 million in 2007. On the other hand, percent of overdue to investment in 2006 and 2007 was 3.35% and 2.32% respectively. That means total overdue to investment has been decreasing by 1.03% over the years 2006 to 2007. Consequently the classified loan has decreased in 2007.
6 Surplus equity of IBBL is sufficient. Also the capital adequacy ratio of IBBL is satisfactory over last five years.
7 Islami Bank Bangladesh Limited diversifies its investment in urban and rural areas. 91.63% of IBBL’s total investment is in urban areas while in rural areas it is 8.37%.
8. IBBL is the second largest Bank in investment among the Banks of Bangladesh with 9% share which was 7.67% in 2006 and 6.67 in 2005. Nationalized Sonali Bank is in the leading position with 12% share.
- There is a difference between investment of IBBL loan/ credit/ advance of conventional banks because IBBL don’t give loan, they give investment & they take their percentage when their investment purpose is profited. On the other hand, conventional bank give loan & take their percentage after a fixed period. This difference should be known to the people or customer.
- Islami bank can invest in all economic sector if that project is not haram so that those project should be helpdfull for the people. So, peole who want to start a business should be honest and peacefull. If people’s are honest, Islami bank should be invested in all economic sector. This should be remined to the people.
- IBBL can’t invest its assets in proper portfolio due to insufficient and unskilled manpower in these regards .As a result, there is a large amount of money being idle and thus potential profit is not increasing. For this reason, they have to appoint some skilled manpower & have to be trained about investment so that this trained people can give knowledge to the people.
- IBBL has to be a strong promotional activities so that it can increase & motivate its present and potential investment client. That’s why client will be invested more next time.
- Islami bank only use the Bai-Murabaha mode. They have to use the other investment mode. That’s why there will be a change of diverse needs of people.
- Since investment operations of IBBL are hampered due to increase, dishonest, indiscreet, hypocritical nature of people so bank have to identify the real people so that there is no hampered is create.
Recommendations from Trend Analysis of Investment:
1. To foster and to reduce the surplus liquidity of the bank, the bank has to be reduced Investment on the next year. So, there will be no attributed in the next year.
2. Investment in Bai-Murabaha and HPSM is much more than other investment modes.Since in 2007, investment in Bai-Murabaha and HPSM is Tk. 75,528 million and Tk. 50,256 million respectively. On the other hand investment in Musharaka is the lowest which is Tk.16.92 million. So, the bank have to be invested more in Musharaka & if probab they can try to invest in the other mode- wise investment.
3. They have to increase their investment in transport sector because if in our country increase the transport facility there will be profited fo the people specially those who are service holder.
4. Since investment in the agriculture sector has been decreasing over the years 2002-2007 so the bank has to be increased their investment in the agriculture sector because in Bangladesh most of the people are farmer & if they can growth their agriculture product the country will be profited. We should be remembered that our country is agricultural country.
5. Since total overdue to investment has been decreasing by 1.03% over the years 2006 to 2007 & Consequently the classified loan has decreased in 2007. So their overdue have to be decreased more in 2008 & the next over year have to be increased.
6. In rural areas total investment will be increased.