1

Introduction:After the surrender of the Pakistani forces on 16 th December 1971, the government of the

Peoples Republic of Bangladesh formally took over the charge of the administration of the

territories now constitute Bangladesh. In order to rehabilitate the war devastated banking

system of Bangladesh, the government promulgated a law called Bangladesh Bank

(temporary) Order, 1971(Acting Presidents Order No 2 of 1971). By this order the State Bank

of Pakistan was declared as Bangladesh Bank and the offices, branches and assets of the said

State Bank was declared to be deemed as offices, branches and assets of Bangladesh Bank. It

was also declared by the aforesaid Order that all currency notes and coins issued by the said

State Bank and government of Pakistan and were in circulation in Bangladesh shall be

deemed to have issued by the Bangladesh Bank. By the steps stated above, the banking

system of Bangladesh started with a legal shape.

The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are

Nationalized Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign banks and

the rest five are Development Financial Institutions (DFIs). Sonali Bank is the largest among the

NCBs while Bank Asia is leading in the private ones. Among the 12 foreign banks, Standard

Chartered and HSBC has become the largest in the country. Besides the scheduled banks, Samabai

(Cooperative) Bank, Ansar-VDP Bank, Karmasansthan (Employment) Bank and Grameen bank are

functioning in the financial sector. Bangladesh Bank (BB) regulates and supervises the activities of all

banks.

Private sector banks started functioning during the year 1983-84 with the objective of

government policy to make sure effective and meaningful participation of the private sector

in the overall national economy.

The perception of Islamic banking has been bloomed from the inspiration of building up a

society on justice in accordance with basic socio-economic principles of Islam. The

difference between Islamic bank and conventional bank is on principles. The functions of this

type of bank are completely different. This bank is established on Islamic Shariah and all

types of transactions are free from interest. Justified profit is the basis of financial transaction

of this bank. This bank is committed to establish socio-economic justice. Islami Bank

2

Bangladesh Limited is the first interest free commercial bank in South-East Asia. The bank

has opened 176 branches covering important commercial areas.

Islami Bank Bangladesh is a financial institution whose status, rules and procedures expressly

state its commitment to the principle of Islamic Shariah. Consequently Islamic banks operate

on Islamic principles of profit and loss sharing, strictly avoiding interest, which is the root of

all exploitation and is responsible for large-scale inflation and unemployment. In this report, I

undertake microscopic analysis mainly on “General Banking, Investment and Foreign

Exchange.”

Origin of the Report:This report is based on an internship program. IBTRA arranges internship program to gather

practical knowledge about banking activities followed by IBBL for University students as

Universities conducted with different organization after the completion of theoretical courses

of program of Bachelor of Business Administration (BBA). Each intern must carry out a

specific project, which is assigned by the IBTRA. Consequently a report based on the

projects is to be submitted to the authority of IBTRA. I select Islamic Bank Bangladesh

Limited (IBBL) for my internship & since then I have started our realistic orientation

program in General Banking, Investment & foreign exchange department. But I have

prepared my project paper on general banking, investment & foreign exchange modes as it is

assigned by IBTRA.

Hence I was placed in New Market Branch of Islami Bank Bangladesh Limited from 18 th

September to 20th December, 2007.

.

3

Objectives of the Study:The first objective of writing the report is fulfilling the partial requirements of the BBA

program. In this report, I have attempted to give on overview of Islami Bank Bangladesh

Limited in general. Following are the main objectives

To familiar the history and operations of Islami Banking in Bangladesh.

To show the investment mechanism and product offerings in different modes of

IBBL.

To show overall investment proposal, appraisal procedures, documentation system of

IBBL and Conventional Banks.

To show the differences with conventional banking regarding investments aspects

To identify strength and weakness of investments of IBBL.

To identify the problems related to investments faced by IBBL.

To recommend actions that may be necessary to redesign the investments of IBBL.

Justification of the Study:In our economy, there are mainly three types of schedule commercial banks are in operation.

They are Nationalized Commercial Banks, Local Private Commercial Banks and Foreign

Private Commercial Banks. Islami Bank has discovered a new horizon in the field of banking

area, which offers different General Banking, Investments and Foreign Exchange banking

system. So I have decided to study on the topic “General Banking, Investment and Foreign

Exchange”. Because the Internship program of the university is an integral part of the BBA

program. So it is obligatory to undertake such task by the students who desirous to complete

and successfully end-up their BBA degree. This also provides an opportunity to the students

to minimize the gap between theoretical and practical knowledge. During the internship

program the teachers of the department are attached to actively and constantly guide the

students. Students are required to work on a specific topic based on their theoretical and

practical knowledge acquired during the period of the internship program and then submit it

to the teacher. That is why I have prepared this report.

4

Methodology of the study:For carrying out this project paper I had to study the actual banking operations of IBBL.

In order to carry out this study, two sources of data and information have been used:

a) Primary data

I discussed with the executives & officials of the IBBL and found the approximate data,

which has been presented in the report. I also discussed with the officials of conventional

Banks & IBTRA regarding the issue and found necessary information, which has been

presented in the report.

b) Secondary data

● Annual Reports of 2000-2007 of Islami Bank Bangladesh Ltd.

● Desk report of the related department

Manuals of Islami Bank Bangladesh Limited (Bai-Murabaha, Bai-Muajjal,

Bai-Salam, Musharaka)

Training sheets which are provided by Islami Bank Training and Research Academy

(IBTRA)

Scope of the Report:

The scope of this paper is limited to the organizational structure, background, and

objectives, functions, and investment performance of IBBL as a whole. The scope is

also limited to different investment schemes, modes, mechanism, investment

proposal appraisal procedures, monitoring and documentation of IBBL.

5

Limitation of the Study:There are some limitations in our study. I faced some problems during the study which I am

mentioning them as below-

i) Lack of time:

The time period of this study is very short. I had only 8 weeks in my hand to complete this

report, which was not enough. So I could not go in depth of the study. Most of the times the

officials were busy and were not able to give us much time.

ii) Insufficient data:

Some desired information could not be collected due to confidentiality of business.

iii) Lack of monitory support:

Few officers sometime felt disturbed, as they were busy in their job. Sometime they didn’t

want to supervise us out of their official work.

iv) Other limitation:

As we are newcomer, there is a lack of previous experience in this concern. And many

practical matters have been written from our own observation that may vary from person to

person.

6

7

Derivation of Islamic Bank:Bangladesh is one of the largest Muslim countries in the world. The people of this country

are deeply committed to Islamic way of life as enshrined in the holy Quran and the Sunnah.

Naturally, it remains a deep cru in their hearts to fashion and design their economic lives in

accordance with the precepts of Islam. The establishment of Islami Bank Bangladesh Limited

on March 13, 1983, is the true reflection of this inner urge of its people, which started

functioning with erect from March 30, 1983. This bank is the first of its kind in South-East

Asia. It is committed to conduct all banking and investment activities on the basis of interest

fee profit-loss sharing system. In doing so, it has unveiled a new horizon and ushered in a

new silver lining of hope towards materializing a long cherished dream of the people of

Bangladesh for doing their banking transactions in line with what is prescribed by Islam.

With the active co-operation and participation of Islamic Development Bank (IDB) and some

other Islamic banks, financial institutions, government bodies and eminent personalities of

the middle east and the gulf countries, Islami Bank Bangladesh Limited has by now earned

the unique position of a leading private commercial bank in Bangladesh.

Banking plays an important role in the economy of any country. In Bangladesh Muslim

constituted more than 80% of its population. These people possess strong faith on Allah and

they want to lead their lives as per the constructions given in the holy Quran and the way

shown by the prophet Hazrat Muhammad (Sm). But no Islamic banking system was

developed here up to 1983. The Traditional banking is fully based on interest or "Riba". But

interest is absolutely prohibited by Islam. As a result the people of Bangladesh have been

experiencing such a non-Islamic prohibited banking system against their normal values and

faith.

The present world especially the third world is affected by unemployment socio economic

injustice inflation, inequitable distribution of income and wealth etc. The main aim of

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traditional banking is to earn profit by borrowing and lending money in exchange of interest.

As a result there is an unfair competition among the bankers and among the customers.

Under conventional framework a bank borrows to lend and it mobilizes savings/deposits by

borrowing from savers and loans those deposits to productive interest on deposits and

advances respectively. The banks generally maintain a difference is known as interest spread,

which is the main income of an interest-based bank. There is no interest received by the

Islami Bank. In this case IB receives its entire deposits from the investment of the clients on

the basis of profit- sharing place it to the actual entrepreneurs on the basis of the profit

sharing. So, it is clear that in case of the traditional banking systems, a fixed percentage of

interest, irrespective of income earned is paid to the depositors. The depositors of IBBL are

never deprived of excess income, which the bank may make at the end of year, not only this

traditional bank give fixed interest rate even when they incur operational loss. The critics of

Islamic banking system are of the opinion that both are found same in terms of deposits

mobilization and advances investment.

Banking functions of IBBL is an important aspect in our economy as it has broken

the line of interest based traditional banking system through the introduction Islamic

Shariah based banking. Since its commencement in 1983, it has already gained a

good reputation in customers as well as the masses of people of Bangladesh.

Islamic Banking is especially important in the world countries, which are characterize

by unemployment, inequitable distribution of income and wealth, etc. But there are

so many constraints in our country in terms of functioning of the Islamic Bank

Bangladesh Ltd. (IBBL). The paper is an attempted to evaluate the modes of IBBL in

terms of productivity and effectiveness. Since it is difficult to measure the productivity

of a bank, especially the interest-free IBBL, as it does not any visible product. Some

specific indicators have been selected for the purpose of measurement of

productivity.

Historical Background of IBBL:In August 1974, Bangladesh signed the Charter of Islamic Development Bank and committed

itself to reorganize its economic and financial system as per Islamic Shariah. In January 1981,

9

Late President Ziaur Rahman while addressing the 3rd Islamic Summit Conference held at

Macca and Taif suggested. "The Islamic countries should develop a separate banking system

of their own in order to facilitate their trade and commerce".

This statement of Late President Ziaur Rahman indicated favorable attitude of the

Government of the People's Republic of Bangladesh towards establishing Islamic banks and

financial institutions in the country. Earlier in November 1982, Bangladesh Bank, the

country's Central Bank, sent a representative to study the working of several Islamic Banks

abroad.

In November 1982, a delegation of IDB visited Bangladesh and showed keen interest to

participate in establishing a joint 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 for immediate

introduction. Two professional bodies Islamic Economics Research Bureau (IERB) and

Bangladesh Islamic Banker's Association (BIBA) mode significant contributions towards

introduction of Islamic Bank in the country.

They came forward to provide training on Islami Banking to top bankers and economists to

fill up the vacuum of leadership for the future Islamic banks in Bangladesh. They also help

seminars, symposia and workshops on Islamic economics and banking throughout the

country to mobilize public opinion in favor of Islamic banking.

Their professional activities were reinforced by a number of Muslim entrepreneurs working

under the aegis to the then Muslim Businessmen society (now reorganized as industrialist &

Businessmen Association). The body concentrated mainly in mobilizing equity capital for the

emerging Islamic Bank.

At last, the long drawn struggle to establish an Islamic bank in Bangladesh becomes a reality.

Islamic Bank Bangladesh Limited was established in March 1983. In which 19 Bangladeshi

nationals, 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.

10

Business Philosophy of IBBL

The philosophy of IBBL is to the principles of Islamic Shariah. The organization of Islamic

conference (OIC) defines an Islamic Bank as "a financial institution whose status, rules and

procedures expressly state its commitment to the principles of Islamic Shariah and to the

banking of the receipt and payment of interest on any of its operations. The sponsor,

perception is that IBBL should be quite different from other privately owned and managed

commercial bank operating in Bangladesh, IBBL to grow as a leader in the industry rather

than a follower. The leadership will be in the area of service, constant effort being made to

add new dimensions so that clients can get "Additional" in the matter of services

commensurate with the needs and requirement of the country growing society and developing

economy.

Mission and objective: To conduct interest free banking.

To establish participatory banking instead of banking on debtor creditor

relationship.

To invest through different modes permitted under Islamic Shariah

To accept deposits on profit-loss sharing basis.

To establish a welfare-oriented banking system.

To extend co-operation to the poor, the helpless and the low-income group for

economic uplift.

To pay a vital role in human development and employment generation.

To contribute towards balanced growth and development of the country through

investment operations particularly in the less developed area.

To contribute in achieving the ultimate goal of Islamic economic system.

Objectives of Islami Bank:It is a golden desire of every Muslim that his social and political lives should be in

accordance with the divine guides prescribed in the holy Quran and the Sunnah. In the same

tune of aspiration as above, he desires to follow a unified life in financial and business life.

So, the objectives of the Islamic Banking may be derived from the broader objectives of the

Islamic economy. Two quotations may help us understand our objectives.

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Ibn al- Qayyim says. The basis of the Shariah is the wisdom and welfare of the people in this

world as well as the hereafter. This welfare lies in complete justice, mercy, well-being and

wisdom. Anything that departs from justice to oppression, from mercy to harshness, from

welfare to misery and from wisdom to folly, has nothing to do with the Shariah Al-Ghazali

says, "The very objective of the shariah is to promote the welfare of the people which lies in

safeguarding their faith, their life, their intellect, their posterity and their property. Whatever

ensures the safeguard of these five serves public interest and is desirable."

However M. Umer Chapra, in his book "Towards a just Monetary System discussed some of

the most fundamental characteristics of Islamic money and banking system. Those are as

follows:

1. Broad-based economic well-being with full employment and optimum rate for economic

ground;

2. Socio-economic justice and equitable distribution of income and wealth;

3. Stability in the value of money to enable the medium of exchange to be a reliable unit of

account, a just standard of deferred payments, and a stable store or value.

4. Mobilization and investment of savings for economic development in an equitable manner

such that a just return is ensured to all parties concerned, and

5. Effective rendering of all services normally expected from the banking system.

Islamic economy including Islamic banking is now entering a new phase, which calls fore

more integrative as well as a more critical approach to meet the present day complex

financial needs. Now, the economists are faced with the challenging task of reviewing the

whole situation emerging at least in three areas.

Firstly, To bring together the works done by different economists into a comprehensive view

of the monetary system of Islam in its fullness, as against concentrating on specific,

sometimes even disjointed, elements of money and banking.

Secondly, To review critically the different models of Islamic banking presented over the

years in the context of the practice of Islamic banking with a view to refining the theory as

well as improving the practice.

Thirdly, It is essential to put the whole theory and practice of Islamic banking in the

perspective of an Islamic economy and the Islamic moral and social order. Any element of

12

the Islamic system, however important, cannot produce the desired results, if it is allowed to

operate in isolation. It must lead to other complementary changes to complete the process.

Role of contribution of IBBL to Bangladesh Economy

Islami Bank Bangladesh Limited has many success stories of achievements. These are

summarized below:

IBBL is the pioneer institution of Islamic Banking in Bangladesh.

The success of IBBL has imbibed other sponsors at home and abroad to establish

Islamic Banking in Bangladesh. Four national, one international Islamic Banks have

since been established in the country. A private sector traditional bank has also

established two full-fledged Islamic Banking branches. Several other existing and

proposed traditional banks have also expressed their intention to introduce Islamic

Banking.

IBBL has successfully mobilized deposits from a section of people who hither-to-

before did not make any deposit with interest based banks.

The Islamic Banking products which are offered by IBBL through its 185 branches

located at important centers all over the country and spontaneous acceptance of those

products by the people proves the superiority of Islamic by the people proves the

superiority of Islamic banking.

IBBL's market share of deposit investment and ancillary business is steadily

increasing

IBBL, through still a tiny bank, handless more than 10% of country's export and

import trade.

Among the contemporary commercial Banks IBBL's position is first in respect of

mobilization of deposit, deployment of found and earning profit.

Investment in industrial sector occupies nearly 49.19% of IBBL's investment

portfolio. This is a unique example of industrial finance by a commercial Bank.

More than 1.15,000 workers are employed in the industrial projects financed by

IBBL. IBBL has thus made significant contribution to solving unemployment

problem of the country.

Dhaka-the capital of Bangladesh being a Mega city has acute transport

problem. IBBL has joined hands with an enterprising group to introduce a fleet

13

of Premium Bus service, which has attracted the attention of all section of the

people and mitigated transportation problem of the city to some extent.

Opportunity & Threats of IBBL

Despite tremendous popular support spectacular success in terms of mobilization of deposit

and distribution of profit Islamic banking in Bangladesh yet to achieve the desired level of

success due to the absence of appropriate legal framework for carrying out Islamic Banking

operations in the country. All the government- approved securities in Bangladesh are interest

bearing, Besides, Islamic Money Market in Bangladesh is yet to develop. As a result the

Islamic banks, which are committed to avoid interest, cannot invest the permissible part of

their Statutory Liquidity Reserve and short Term Liquidity in those securities.

Inspire of the present limitations, Islamic -banking system has tremendous potentiality and

prospect in Bangladesh, Firstly, the successful launching and needs to an Islamic Money

Market in the country. Secondly Islamic banks have brought together many depositors and

entrepreneurs under their fold and coverage. These depositors and entrepreneurs so long

avoided interest-based banking on grounds of religious injunctions.

The gradual and successful globalization of Islamic banking coupled with growing

awareness of the people about its financial and social benefits makes it clear that the

next century is going to be the century of Islamic banking.

Special features of the IBBL:Islami Bank Bangladesh Limited (IBBL) was incorporated on13.03.1983 as a public

company with limited liability under the companies act, 1913. The bank started functioning

with effect from 30.03.1983 as the first Shariah based interest-free bank in South-East Asia.

14

The bank is committed to run all its activities as per Islamic Shariah. IBBL

through its steady progress and continuous success has, by now, earned the

reputation of being one of the leading private sector banks of the country. The

distinguishing features of IBBL are as under:

All its activities are conducted on interest-free system according to Islamic

Shariah.

Investment is made through different modes permitted under Islamic Shariah.

Investment income of the bank is shared with the Mudaraba depositors according

to a ratio to ensure a reasonably fair rate of return on their deposits.

Its aims are to introduce a welfare-oriented banking system and also to establish

equity and justice in the field of all economic activities.

It extends Socio-economic and financial services to the poor, helpless and low-

income group of the people for their economic enlistment particularly in the rural

areas.

It plays a vital role in human resource development and employment generation

particularly for the unemployed youths.

Its aim is to achieve balance growth & equitable development of the country

through diversified investment operations particularly in the priority sectors and in

the less developed areas.

The operation of Islamic Bank Bangladesh limited can be divided into three (3) major

categories:

General Banking

Investment

Foreign Exchange Business

Other activities

The IBBL performs the following task for the welfare of the society:

Income generating scheme is for the unemployed youth of the nation.

15

Functions of IBBL

Standard sales center for marketing home made garments, handicrafts and other items.

Education scheme for assisting poor scholar student to case and help them to continue their

study.

Health scheme for fulfillment of health needs of rural people.

Islamic bank hospital was established to extend first hand modern and contemporary

medical service to the people on non-profit business.

Humanitarian assistance is being provided to the poor, families affected by river erosion and

for marriage of poor girls.

Energy relief operations are provided to the people affected by natural calamities.

Contribution to Mosque for construction, repair and renovation.

As on 31st December 2007

Date of Incorporation               :  13th March 1983

Inauguration of 1st Branch               :  30th March 1983

(Local office, Dhaka)

Formal Inauguration                          :  12th August 1983

Share of Capital

Local Shareholders               :    42.64%

Foreign Shareholders          :   57.36%

Authorized Capital                            :     Tk.5, 000.00 million

Paid-up Capital                                  :      Tk.3, 801.60 million

Deposit                                              :    Tk.166, 325.29 million (As on 31-Dec-2007)

Investment                                        : Tk. 188,848.85 million (As on 31-Dec-2007)

Foreign Exchange Business :      Tk. 286,017.00 million (As on 31-Dec-2007)

16

Corporate information

Number of Branches                          :     196

Zone : 8

Number of Shareholders                    :     26,715

Manpower                                          :      9,273

Capital position from 2000 – 2007

(In million Taka)

Particulars 2000 2001 2002 2003 2004 2005 2006 2007

Authorized

capital1000 1000 1000 3000 3000 5000 5000 5000

Paidup

Capital320 640 640 1920 2304 2764.80 3456 3801.60

Reserve fund 1759.65 1998.04 2852.07 3280.37 4329.92 5450.92 6551.23 8039.74

Equity

Total equity of the bank as on 31st December 2006 was at 10,435.96 million as against tk

8,331.14 million as on 31st December 2005 comparative position equity of the year 2001-

2007 is given below:-

(In million)

Particular 2001 2002 2003 2004 2005 2006 2007

Core Capital:

i) Paid up

capital

Taka

640

Taka

640

Taka

1920Taka

2304

Taka

2764.80

Taka

3456

Taka

3801.60

ii) Share

Premium

1.99 1.99 1.99 1.99 1.99 1.99 1.99

17

iii) Statutory

Reserve

528.3 727.11 887.51 1256.12 1688.60 2270.33 3026.49

iv) General

reserve

241.75 447.37 278.37 462.62 464.76 419.61 140.41

v) Investment

Loss-Offsetting

Reserve

644.43 644.43 644.43 644.43 644.43 644.43 644.43

vi) Dividend

Equalization

Account

- - - 32.00 32.00 32.00 32.00 32.00 32.00

vii)

Distributable

reserve

160.00 160.00 384.00 460.80 691.20 864.00 1572.09

Total core

capital

2216.47 2652.90 4148.30 5161.96 6287.78 7688.36 9219.02

Supplement

capital:

i) Provision

classified

investment

ii) Assets

Revaluation

reserves

iii)

Exchanges

Equalization

355.20

386.06

35.51

448.83

400.38

38.41

572.93

506.83

38.41

773.97

716.78

38.41

1060.17

944.78

38.41

1568.96

1140.23

38.41

2005.72

1137.98

38.41

Sub Total 776.77 887.62 1118.17 1529.16 2043.36 2747.60 6546.92

Total 2993.24 3540.52 5266.47 6691.12 8331.14 10435.96 15765.94

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Total risk-

Based assets

32387.79 40973.23 55851.30 72628.26 88230.30 110664.24 140971.58

As per new Capital Adequacy Policy prescribed by Bangladesh Bank, the Central Bank of the

country, banks are to maintain 9.74(p) % capital on its Risk-Weighted Assets against which

present total equity of the Bank as on December 31, 2006 stood at Taka 10435.96 million.

This was Taka 8,331.14 million in 2005,Taka 6,691.12 million in 2004, Taka 5,266.47 million

in 2003, Taka 3,540.52 in 2002, Taka 2,993.24 million in 2001,Taka 2,671.06 million in

2000.

Performance of IBBL for last 7 years(Amount in million Taka)

Particulars 2001 2002 2003 2004 2005 2006

Authorized Capital 1,000.00 1000.00 3000.00 3000.00 5000.00 5000.00

Paid-up Capital 640.00 640.00 1920.00 2304.00 2764.00 3456

Share Money Deposit 1.99 1.99 1.99 1.99 1.99 1.99

Reserves Fund1,998.04 2852.07 3280.37

4329.925450.94 6551.23

Retained Earnings160 160 384

460.80691.20 864.00

Total Equity2,993.24 3540.51 5266.47

6691.128331.14 10,435.96

Total Deposits

(Including bills payable) Gross41,640.94 56,246.37 70,552.65 88,452.18 10,7779.42 1,32,419.40

Total Investments (Including Inv

in Share) Gross37,648.75 49,185.92 62,755.90 83,893.63 97,178.31 1,17,132.83

Import Business 25907.00 33,788.00 46,237.00 59,804.00 74,525.00 96,870.00

Export Business 16082.00 16,673.00 21,738.00 29,192.00 36169.00 51,133.00

Remittance 9879.00 14,670.00 16,668.00 23,669.00 36948.00 53,819.00

Total Foreign Exchange Business 51868.00 65,131.00 84,643.00 112,665.00 14,7642.00 2,01,822.00

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Total Income 4,259.55 5,234.07 6,841.29 8024.62 10586.78 14,038.30

Total Expenditure 3,683.43 4,240.02 6039.28 6419.74 8424.36 11,129.63

Net Profit before Tax

576.12994.05

802.01 1842.99 2162.42 2,908.67

Payment to Government (Income

Tax) 275.52450.55

373.25 829.35 973.09 1,490.12

Dividend

25%25% 20% (Bonus) 20% (Bonus) 25% (Bonus) 25% (Bonus)

Total Assets (including Contra) 58,644.46 77,463.12 98,046.85 125,776.94 150959.66 1,88,115.27

Total Assets (Excluding Contra)49,551.87

65,080.1281,704.74 102149.28 122880.35 1,50,252.82

Fixed Assets1,276.89

1725.532036.65 2552.70 3067.99 3,724.69

No. of deposit account holder 13,55,053 16,51122 19,94266 22,91269 27,05,180 32,07,131

No. of investment account holder 176,138 1,96295 22,3954 26,4863 29,4888 33,27,500

Cumulative amount of

disbursement from RDS1323.87 2,029.67 2923.60 4216.77 6033 9303

Outstanding Investment of RDS 371.1 432.1 570.9 789.97 1,107 2,242

RDS no. of A / C holder 100,470 107,225 130,465 163,465 217,445 409,575

RDS no. of village 2,214 2875 3700 4230 4560 8059

Number of Foreign

Correspondents815

830840 850 860 870

Number of Shareholders

9,917 10,74714,196 15,892 17,201 20960

Number of Employees3,060 3,297

46735306 6,202 7459

Number of Branches 121 128 141 151 169 176

Book value per Share (Taka) 4677 5532 2743 2904 3013 3019.66

20

Cost of fund % 10.78 10.20 10.89 9.08 858 9.34

Cost income ratio .86 .81 .88 .78 .80 .79

Return on Equity (ROE)% 13.18 16.85 7.43 15.15 16.15 13.42

Return on Assets (ROA) % .80 .92 .53 1.10 2.10 1.03

Price earning ratio 5.12 4.24 23.26 9.32 9.24 10.97

Earning per Share (Taka) 617 932 195.92 518.00 487.57 368.42

Price equity Ratio .69 .72 1.66 1.76 1.85 1.57

Market Value per Share (Taka)

(Highest)3,205 3956 4548 5110 5580 4749

Capital Adequacy Ratio9.24%

8.64%9.43% 9.21% 9.44% 9.43%

(Note: One Million = Ten Lac)

Trend of IBBL Operating Result

21

Trend of Net Profit

22

Retained Earnings

Trend of foreign exchange business of IBBLItems 2001 2002 2003 2004 2005 2006 2007

Remittance 9,879 14,670 16,668 23,669 36,948 53,819 84,143

Import 25,907 33,788 46,237 59,804 74,525 96,870 1,37,086

Export 16,082 16,673 21,738 29,151 36,169 51,133 66690

23

24

IntroductionGeneral Banking is the heart of Banking. Here money collection procedure occurs. Other

services, like cheque encashment, account transfer; account closing, bills and remittance are

given here. So general banking is the most important thing in banking service.

Procedures1. Issuance of token, Maintenance of subsidiary day Book, writing of day Book, balancing of

Ledger.

2. Opening of A/c Mudaraba Savings A/cs Mudaraba term deposit A/c Al-Wadiah current

A/cs, Mudaraba Hajj saving A/cs, writing of A/c opening registers and issuance of pass book

and cheque Book.

3. Maintenance of current A/c ledgers, deposit ledger and TDR ledger and operation of

computer.

4. Writing of transfer scroll, statement of current A/cs and deposit A/c and Hajj deposit A/c

pass book.

5. Bills: Outward & inward Bills (OBC & IBC) and clearing.

6. Remittance: Issuance and payment of DD, TT, PO etc.

7. Writing of clean cash Book and posting of General Ledger and checking of computer final

sheets with General Ledger.

8. Maintenance of charges, suspense and sundry deposit A/c, maintenance of dead stock and

stationery articles registers.

9. Schedule Telegram and preparation of General ledger A/c statement.

10. Establishment: Preparation of Salary, pay sheet, LPC, maintenance leave register,

personal files and method of correspondence and payment of income tax.

11. Reconciliation of General A/c.

25

Dispatch: Inward

OUTWARD

General Characteristics of Deposit Account:Bank receive deposit by different accounts.

Those are two types:

i) Al Wadiah --- Client A/C is conducted under Al - Wadia system.

ii) Mudaraba Mode :- Client- Sahib Al Mal

Bank-- Mudarib

Under this arrangement - profit distribution under agreed ratio and loss (if any) will be borne by

Saheb-Al-Maal.

Under Mudaraba mode:- there are many accounts as under:

i) MSA - Mudaraba Savings Account

ii) MHSA - Mudaraba Hajj Savings Account

iii) MSB - Mudaraba Savings Bond

iv) MSS - Mudaraba Special Scheme

v) MTDR - Mudaraba Term Deposit Receipt

vii) MMS - Mudaraba Mahor Savings A/C

viii) MSNA - Mudaraba Short Notice A/C

Al-Wadiah Current A/C (AWCA)

Account Opening Eligibility

a) Persons over 18 years (except some restricted persons)

b) Account of Club

c) Association

d) Agent

e) Govt.

f) Semi Govt.

g) Organization

26

h) Liquidators

i) Minor

j) Married Women

k) Pordanshil Ladies

l) Illiterate Persons

Account Closing

Account Transfer

General Practice at Regarding Accounts, in Account Opening Register

The principles of calculation and distribution of profit to Mudaraba Depositors generally

followed by different Islami Banks are as under:

Mudaraba Depositors share income derived from investment activities i.e. from the use

of fund.

Mudaraba Depositors do not share any income derived from miscellaneous banking

services where the use of fund is not involved, such as commission, exchange, service

charges and other fees realized by the Bank.

Profit and loss resulting from the use of funds are separately maintained in the accounts

from other income and expenditure relating to other activities and services offered by the

Bank.

Mudaraba Deposits get priority in the matters of investment over Bank's equity and other

cost free funds.

Mudaraba Depositors do not share any income derived from investing Bank's equity and

other cost free fund.

The amount of the statutory cash reserve and the liquidity reserve, which are required to

be maintained with Bangladesh Bank, is deducted from the aggregate balance of

Mudaraba Deposits to arrive at the net balance of profit sharing deposit.

27

The gross income derived from investments during the accounting year is, at first,

allocated to Mudaraba Deposits and cost-free-funds according to their proportion in the

total investment.

The share of gross investment income of Mudaraba Deposits as worked out in terms of

principle shown against serial No 7 above is distributed as under:

The Bank’s Management at its discretion to rationalize the Rates of profit to Mudaraba

Depositors might further raise Mudaraba Depositors’ share of 65% of gross investment

income but it would not be reduced during any accounting year without giving prior

declaration

The rest amount of gross investment income is retained by the Bank as management fee

for managing the investment & for making reserve for Bad & doubtful investments.

Islami Bank Bangladesh Ltd, at present, applies the following weightages to Mudaraba

Deposits:

Sl. no. Particulars of Deposits Weightages1. Mudaraba Hajj Savings A/C : 11 to 12 years 1.35

2. Mudaraba Hajj Savings A/C : Upto 10 years 1.30

3. Mudaraba Special Savings (Pension) A/C (MSS): 10 years 1.30

4. Mudaraba Special Savings (Pension) A/C (MSS) : 5 years 1.10

5. Mudaraba Muhur Savings Account (MMSA) : 10 years 1.30

6. Mudaraba Muhur Savings Account (MMSA) : 5 years 1.10

7. Mudaraba Savings Bond (MSB) : 8 years 1.25

8. Mudaraba Savings Bond (MSB) : 5 years 1.10

9 Mudaraba Monthly Profit Deposit A/C (MMPDS) 1.20

10. Mudaraba Term Deposit Account (MTDA) : 36 months 1.00

11. Mudaraba Term Deposit Account (MTDA) : 24 months 0.98

12. Mudaraba Term Deposit Account (MTDA) : 12 months 0.96

13. Mudaraba Term Deposit Account (MTDA) : 6 months 0.92

14. Mudaraba Term Deposit Account (MTDA) : 3 months 0.88

15. Mudaraba Savings A/C (MSA) 0.75

16. Mudaraba Foreign Currency Deposit A/C (MFCDA) 0.75

17. Mudaraba Special Notice A/C 0.55

28

Source : Diary 2005, IBBL, Page 13-14.

Differential rates of weightages have been assigned to Mudaraba Depositors on account

of the following factors:

a) Period of Deposits

The longer the period of deposit, the greater the risk they bear with regard to fluctuation

of the rates of profit and erosion of the value of deposit due to inflation. The Term

Depositors have also to forgo profit in case of premature encashment.

b) Banking Facilities

The Term Depositors do not enjoy any banking facility such as, operating accounts by cheques,

transfer of account from one branch to another, collection of cheques and other instruments,

executing standing instructions through their accounts and so on and so forth. On the other hand,

the PLS Savings Depositors have freedom to get the above services through their accounts. PLS

Short Notice Depositors enjoy still greater facilities in regard to making deposits in and

withdrawal from their accounts.

c) The pattern of Rates of Return on various types of cost bearing deposits of the

traditionalBanks in our Money Market have also an important bearing on allocation of

weightage a different rates.

d) In consideration of the above factors, full weightage has been assigned to our Mudaraba

Deposits of 36 months and relatively lower Weightages have been given to Mudaraba

Deposits of lower periods, Mudaraba Savings and Mudaraba Short Notice Deposits.

Local Remittance

Pay Order (PO)

Issuing of a pay order (PO)

29

A customer can purchase pay order in different ways:

By Cash A/C............................................................................. Dr

By account Client A/C ............................................................. Dr

By transfer head office/other departments client A/C ............. Dr

Bills Payable (PO) A/C ............................................................ Cr

Income A/C commission on Remittance ......................... Cr

Demand Draft (DD)

Telegraphic Transfer (TT)

Electronic Transfer (ET)

Clearing

Transfer Delivery

Cheque is of a same branch of IBBL

Outward Bills for Collection (OBC)

Inward Bills for Collection (IBC)

Bills Collected Through Branch

H.O. A/C concerned branch..................................................... Dr

Customer A/C........................................................................... Cr

Income A/C commission; postage.................................................. Cr

In this case commission will be charged by the collecting branch, not the agent branch.

Bills Collected Through Drawer's Bank

Accounting treatment for the collecting branch will be

a. Clearing............................................................................... Dr

b. Customers A/CC................................................................. Cr

Inward Bills For Collection (IBC)

30

INTER BRANCH GENERAL ACCOUNT (IBG A/C)

Originating Branch

Credit Transaction

Debit Transaction

Responding Branch

Debit Transaction

Credit Transaction

Cash

Vault

Teller Customers Relationship

Cash Packing and Handling

Evening Banking

31

32

Investment System of IBBL

The most important difference between the Conventional and Islamic bank is that both the banks

operate to earn profit but they differ in the way of operation. Islami Bank emphasis on legitimate

(Halal) business. On the other hand traditional bank is not operated by the following rules and

regulations approved by Islam that is the most powerful contradiction between them. Islamic

Bank does not invest in loans and fixed interest securities. It can invest in ordinary share only

while interest based bank can invest in loans and different kinds of securities. Islami Bank

establishes and participate projects with its client as a partner and bears the risk along with the

client on a proportionate basis. Besides, other conventional banks sometimes finance projects but

do not bear risk. Finally, the concept of Islamic Bank is to establish on egalitarian society based

on principles of social justice and equity. Whereas traditional banks pay a fixed interest on

savings, time deposit and grant loans with interest for any purpose. We have gathered the fact

that investment management is the theme of IBBL. The bank takes deposits and invests the same

based on the profit-loss sharing. Bank go for the investment mainly which are long term and

profitable in nature. IBBL also give high concentration on the investment that will generate more

employment. As investment is one of the most priority areas for the IBBL, so it needs to cautious

in investment decision. To ensure proper investment IBBL always go with in-depth study before

making the investment.

The objectives and principles of investment operations of the Banks are:

The investment fund strictly in accordance with the principles of Islamic Shariah.

To diversifies its portfolio by size of investment, by sectors (public and private), by

economic purpose, by securities and by geographical area including industrial,

commercial and agricultural.

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 therefore.

To make investment keeping the socio-economic requirement of the country in view.

Investment Objectives of IBBL

33

To increase the number of potential investors by making participatory and productive

investment.

To finance various developments schemes for poverty alleviation, income and

employment generation with a view to accelerating sustainable socio-economic

growth and upliftment of the society.

To invest in the form of goods and commodities rather than give out cash money to

the investment clients.

To encourage social upliftment enterprises.

To shun even highly profitable investment in fields forbidden under Islamic Shariah

and is harmful for the society.

The Bank extends investments under the principles of Bai-Marabaha, Bai-Muazzal

Hire purchase under Shairkatul Melk and Musharaka. The Bank is making sincere

efforts to go for investment under Mudaraba principle in near future.

Investment operation of a Bank is very important as the greatest share of total revenue is

generated from it, maximum risk is centered in it and the very existence of a Bank mostly

depends on prudent management of its Investment Port-folio.

For efficient deployment of mobilized resources in profitable, safe and liquid sector a sound,

well-defined and appropriate Investment Policy is necessary.

The important feature of the investment policy of the Bank is to invest on the basis of profit-loss

sharing system in accordance with the tenets and principles of Islami Shariah. Earning of profit is

not the only motive and objective of the Bank’s investment policy rather emphasis is given in

attaining social good and in creating employment opportunities.

Pursuant to the Investment Policy adopted by the Bank a 7-year Perspective Investment Plan’ has

been drawn-up for the year 1995 to 2002 and put into implementation. Recently a further 5-year

perspective investment plan has been drawn up for the year 2003 to 2007 and put into

implementation. The plan aims at diversification of the investment port-folio by size sector

Investment Policy of IBBL

34

geographical area, economic purpose and securities to bring in phases all sectors of the economy

and all types of economic groups of the society within the fold of Bank’s investment operations.

A sound well defined, well planned and appropriate investment policy frame work is a pre-

requisite for achieving the goal of the Bank i.e. implementation and materialization of the

economic and financial principles of Islam in the Banking area and justice in trade, commerce

and industry and to build socio-economic infrastructure, create opportunity for income and

sustained economic growth of the country.

Observance of the legal investment limit of the bank.

Observance of the legal investment limit of the client.

Optimum utilization of investible fund.

Profitability of the investments.

Safety and security of the investments.

Investment at minimum possible risk.

Liquidity of investments.

Conform to central bank’s investment restrictions.

Preference to short term investments.

Preference to the investments for small size.

Satisfactory return on investments.

To take in view, inter alias, the following points while considering an investment

proposal.

Sector and sect oral performance.

Management of the company.

Location of the company.

Market demand/supply gap, import/export position, consumption trend.

Cash flow position.

Financial or internal rate of return.

Infrastructural facilities in and around the proposed project.

SALIENT FEATURES OF INVESTMENT OF IBBL

35

Risk in the investments and return thereon are interrelated. An investment policy that emphasizes

a high return must accept relatively high risk. Conversely, an investment policy that will tolerate

only small amount of risk must be prepared to accept a relatively low return.

As such, it is really difficult whether to select a high return port-folio on high risk or low risk

port-folio with a low return.

Nevertheless, considering all aspects following guidelines shall be followed as strategy for banks

investments.

i. If two port-folios have the same risk but different returns, the port-folio having higher

return shall be preferred.

ii. If the two port-folios have the same expected returns, but different degrees of risk, the

port-folio with lower risk shall get preference.

iii. If one port-folio has both a higher return and a lower risk than another, the first port-

folio shall be preferred.

iv. Keeping in view the risk factor, the bank shall maintain flexibility in determination of

rate of return on investments on case to case basis in consideration of the risk element

involved in the respective investment.

v. Emphasis is given for expansion and strengthening cottage and small industries sector

and rural industries. This immensely potential industrial sub-sector shall create

employment opportunities to rural and semi-urban population and shall have positive

contribution in employment and income generation and poverty alleviation of the

low-income group.

vi. Investment facilities shall be extended for establishment and expansion of export

oriented forward / back ward linkage and import substitute industries.

vii. The bank requires retaining 10% of its total deposit liability as Statutory Liquidity

Ratio (SLR) including 4% Cash Reserve Ratio (CRR) with the Central Bank. The

bank may go for investments up to 90% of its total deposit. The perspective

investment plan is being formulated quantifying the allocation of investments size-

Strategies

36

wise, sector-wise, geographical area-wise, economic purpose-wise, security-wise and

mode-wise keeping in view 20% projected growth of deposit each year.

viii. Taking into consideration the broad objectives of the bank, national priority, socio-

economic need, growth level of the economy, the investments port-folio of the bank

may gradually be diversified and allocated in term of size, sector, geographical area,

economic purpose, security and mode.

ix. Safety, security, profitability and liquidity of Bank’s investments.

x. Each branch invests, at least 50% of its deposits locally.

xi. Enhance of extending limit of good investment clients.

xii. Adopting of modern technology

So, banks investment policy, investment planning and investment budgeting, till situation

changes / improves, shall aim at promotion of quality general investment.

37

a) Bai-Murabahab) Bai-Muajjalc) Bai-Salamd) Istishna’a

a) Mudarabab) Musharaka

a) Hire Purchaseb) Hire Purchase Under shirkatul Melk

Bai- Mechanism Share Mechanism Ijara Mechanism

Investment Mechanism Of IBBL

Trading modes (Bai-Mechanism)

Bai-Murabaha

Types of Murabaha

Investment Instrument of IBBL

38

In respect of dealing parties Bai-Murabaha may be of two types.

Ordinary Bai-Murabaha

Bai-Murabaha on Order and Promise

Bai Muajjal Meaning

Bai - Salam

Bai-Istishna Meaning

Leasing mode (Ijarah mechanism)

Hire purchase /Ijarah

Hire Purchase Under shirkatul Melk

Stages of Hire Purchase under Shirkatul Melk

Thus Hire Purchase under Shirkatul Melk Agreement has got three stages:

Purchase under joint ownership.

Hire and

Sale and /or transfer of ownership to the other partner Hirer.

Types of sale contract in hire purchase under shirkatul melk

Hire Purchase under Shirkatul Melk through gradually transfer (sale) of legal

title/ownership of the hired asset/property

Hire Purchase under Shirkatul Melk through transfer of legal title by gifts (for no

consideration)

Taking delivery of asset by the bank (hiree) and the (client) hirer:

Hire, Delivery, Sale and Transfer of Title of Asset to the Client

Musharaka

39

List of The IBBL’s Special Schemes:

Household durable scheme(HDS)

Investment scheme for doctors(ISD)

Small business investment scheme(SBIS)

Housing investment scheme(HIS)

Real estate investment program(REIP)

Transport investment scheme(TIS)

Car investment scheme(CIS)

Rural development scheme (RDS)

Agricultural implements investment scheme(AIIS)

Micro industries investment scheme(MIIS)

Mirpur Silk Weavers Investment Scheme (MSIS)

40

Meaning of Foreign ExchangeMeaning of Foreign Exchange

Foreign Exchange means currency & trade exchange say conversion of one to another. This is a

part of economic & Science. This is a big deal divided into different currencies instrument such

as Draft, Traveler Cheque, Bill of Exchange business including sell, purchasing of currency

notes & TC etc.

Currency Exchange means the conversion of one Currency into another.

Foreign Exchange Market:Foreign Exchange Market:

Foreign Exchange market means the places where foreign currency is bought & sold. In this

more that supply, currency value.

Alternately following are the features of foreign exchange market:

41

1. Bank & client.

2. Different Banks in the same foreign exchange market.

3. Different Bank & Schedule Bank of the same country.

4. Different Control Bank.

Islami a Bank follows the following the two craters in respect & payment of foreign exchange:

1. Local currency market value &

2. Foreign currency market value.

Exchange is being controlled:

1. To stabilize the rate of exchange.

2. To protect domestic industries.

3. For proper implementation of plans.

4. To increase the bargaining strength

5. To check over invoicing & Under invoicing

6. To check the Blank marketing and smuggling

7. For regulating the international movements of goods

Authorized Dealer BranchAuthorized Dealer Branch

Arbitrage of Foreign ExchangeArbitrage of Foreign Exchange

Foreign Exchange Regulation ItemsForeign Exchange Regulation Items

1. Bangladesh Bank Manual.

2. Foreign Exchange Circular.

3. Public Notice

4. Import & Export Policy Gazette

5. Ministry of Commerce Circular

6. BCD circular.

7. Guide lines for foreign exchange regulation.

8. Other authorization (i.e. NBC Dept)

Methods of effecting payment of IBBL

Islami Bank follows the following methods to make payments between countries.

1. Telegraphic Transfer (TT)

2. Electronic Trnsfer (ET)

3. Mail Transfer (MT)

42

4. Drafts & Cheque: A draft is pay order issued by one Bank to another Bank or its branch.

Some common terms used in Foreign Exchange:

Over Bought: This position known as long position.

Over Sold: This position known as short position.

LIBOR: London Inter Bank Offer Rate.

SWIFT: Society for World Wide Inter Bank Financial Telecommunication.

CHIPS: Clearing House Inter Bank Payment System.

NOSTRO A/C: Our A/C with you i.e. out A/C with American Express.

VOSTRO A/C: Their A/C with us, Al- Raji A/C with IBBL.

LORO A/C: This A/C i.e. third Bank Relationship.

ACU: Asian Clearing Union.

Uniform Customs and Practices for Documentary Credits (UCPDC

Activities of Foreign Exchange

There are three kinds of foreign exchange transaction

1. Import

2. Export &

3. Remittance.

In the following these are discussed in brief.

IMPORTIMPORT

Important Policy Order Important Policy Order

Duration Duration

Import related feesImport related fees

Four categories of importer registration renewal fees are as under

Categories Yearly heights

import

Registration

Fees (Taka)

Renewal

A 5.00 500/- 500/-

B 15.00 1500/- 1500/-

C 50.00 3000/- 3000/-

43

D Above 50.00 5000/- 5000/-

2. Surcharges for different years are as under:

1 year late TK 50/-

2 year late TK 100/-

3 year late TK 200/-

Regulations of Import

Import of goods under this policy shall be regulated as under:

Regulations of Import::

L/C: may be open under deferred payment basis.

Direct Payment in Abroad

Time Limit Opening of L/C:

Validity of LCA for Shipment:

Document required to be submitted along with LCA Form

Classification of L/C:1. Revocable Credit:

2. Irrevocable Credit:

Classification of importer:Classification of importer:

Importers are those who ate authorized by the import Trade authority i.e. & CCI & E for import

of goods essential for consumption or for production purposes.

There are mainly three types of importers.

1. Commercial Importer

2. Industrial Importer

3. Importers under Wage Earner Scheme

1. Commercial Importer:

2. Industrial importers:

3. Importers under WES:

L/C application & Procedure for Opening L/C :L/C application & Procedure for Opening L/C :

Accounting procedure.

Dr. Party’s A/C.

44

Cr. Commission A/C.

Cr. Postage & Telegraph A/C.

Liability:

If the amount of L/C increased the liability voucher is to be passed as under:

Dr. Liability as per contra (WES L/C).

Cr. Asset as per contra (WES L/C).

Dr. Asset as per contra (WES L/C).

Cr. Liability as per contra (WES L/C).

A fresh Liability is to be passed including amount of increase on the date of amendment.

Back to Back L/CBack to Back L/C

Problems of Back to back L/C Problems of Back to back L/C

1. Shipment time gap: Sometime time is shorted for exporting against import L/C,

kit may be caused.

2. Terms and rules violations: IBBL cannot violate the rules & term of Shariah

council.

3. Selling violation: Out of agreement IBBL cannot receive excess wanted.

4. Payment of back to back L/C bill: No stock bills are supported against Shariah.

5. Gaps of International rules & regulations.

Prospects of back to back L/C

1. It is Garment oriented readily.

2. Backward lender (must have)

3. To continuous quality improvement.

4. To exchange customer facilities.

5. To be continuous of our authorized.

L/C Opening functions

45

The following functions are maintained for opening L/C.

1. Opening the L/C.

2. L/C Lodgment.

3. L/C Retirement.

Lodgment of L/C Lodgment of L/C

Retirement of L/CRetirement of L/C

When the parties retire the documents by cash payment or by MPI/LIM arrangement is known as

retirement.

Kinds of Bill:

a. At sight

b. Collection (30 cash/ Loan? Barter

Check up the document:

Before lodgment, documents must be checked with L/C file. Check up as under:

1. Invoice

2. Bill of Lading

3. Draft

4. Bank forwarding date.

1. INVOICE:

a) The invoiced amount tallied with draft amount.

b) The invoice is shown by the beneficiary ad s signed by him.

c) Description of goods in the invoice and bill of Lading are identical.

2. Bill of Lading:

Retirement Procedure for Deferred Payment of issuance Bills/ BB Bills :Retirement Procedure for Deferred Payment of issuance Bills/ BB Bills :

When the draft is returned by the draw (importer) after duly accepted by him the

following procedure to be maintained.

46

1. The maturity date is to be worked out and noted in the bill Register and also in due date

diary. The due date diary may be maintained by the dealing officer ad the Manager in-

charge of foreign Exchange Determent.

2. The Foreign Correspondent should be advised the due date maturity and be authorized to

debit the NOSTRO account or to claim reimbursement on due date as per L/C terms.

3. All the documents delivered to the importer except accepted bill of exchange/ draft.

For liability of issuance bill reversed the following vouchers are to the assed be the Bank.

Dr. Liability as per contra, When retired the documents, the as Cr. Assets as per contra. Voucher

under:Dr. Party’s A/C.,Cr. H.I., I.D A/C.Cr. R & T A/C.Cr. F.C.C. A/C.Cr. Commission A/C.

Checking & Advising of Export L/C Processing of Opening of BB L/C Checking & Advising of Export L/C Processing of Opening of BB L/C

47

Meaning of Export:Meaning of Export:

Export means lawful carrying out of anything from one country to another country for sale

Definition of ExporterDefinition of Exporter

The importers and exports trade of the country is regulated by the Imports Exports Control Act

1950. No person /firm is allowed to export any thing from Bangladesh unless he is registered

with CCI and E under the registration order (Importer and Exporter) 1952. To become an

exporter an ERC (export Registration Certificate) must be obtained from the office of CCI & E.

Export under L/C

Exporters are allowed to export the commodity under irrevocable letter of credit. Under this type

of export, exporter will ship the goods as pr terms of the credit and will get payment as per

arrangement of the credit.

General Rules for Export

There are some rules, which are mandatory for export of any goods form Bangladesh. The rules

are as under:

(1) No Person can export any goods from Bangladesh, unless he is duly registered as an exporter

with the CCI & E.

(2) All export must be declared on the EXP form, which is consisting of 4 copies.

(3) Export mush is against any of the following:

a) Export L/C.

b) Firm Contract.

c) Advance Payment.

(4) Transport documents related to land route or sea and any other Author8ized Dealer. The

Airway Bill and any other documents of title to car4go may be drawn to the order of a Bank in

the country of import. However in case of advance payment, transport document may be drawn

to the order of Foreign Importer Bank endorsement of transport documents is prohibited.

Directions under Sl. No. shall not apply in the following cases:

Stages & Mechanism of ExportStages & Mechanism of Export

48

1) Exporter will make the goods ready for shipment.

2) Arrangements have to be taken for inspection of the goods by the competent authority as per

credit terms.

3) Exporter will declare on EXP form against export L/C/Firm Contract/ Advance payment.

4) Exporter have to arrange approval for export from custom authority on EXP from by

submitting Export L/C, Export permission from CCI & E, Quota clearance from EPB, U.D. in

case of garments, invoice, packing list along with shipping bill prepared by C&F agent.

5) After completion of custom formalities, shipping company will receive the goods and will

issue B.L.

6) Exporter will collect visa/ license and certificate of origin for final documentation.

7) Exporter will submit the full set of documents to the negotiating bank for negotiation.

8) Negotiation bank will dispatch the documents to the issuing bank for clearance of the goods

from destination against payment as per credit terms.

49

Meaning of RemittanceMeaning of Remittance

The word “Remittance” originates from the word “remit” which means to transmit money/ fund.

In banking terminology, the work “remittance means transfer of fund one place to another. When

money transferred from one country to another is called “Foreign Remittance”

Types of Remittance:Types of Remittance:

Foreign remittance may be classified into.

Inward Foreign Remittance.

Outward Foreign Remittance.

Mechanism of RemittanceMechanism of Remittance

FCAD- Foreign currency A/C Dollar.

MFCD- Mudaraba foreign currency deposits.

PFC- Private foreign currency.

FCAD- Exp.- Foreign currency A/C dollar export.

NRT- No residence Taka.

PDAP- properly development A/C pound.

Instruments of Foreign Remittances:Instruments of Foreign Remittances:

Cash for : Dollar, Pound, France Fr. Riyal or any other currency.

T.C. : Travelers Cheque.

F.D.D : Foreign Demand Draft.

T.T : Telegraphic Transfer, Cable transfer or swift transfer.

M.T : Mail Transfer.

I.M.O : International Money Order.

Cheque : By any person & institution..

P.O : Payment Order.

50

PROBLEMS & RECOMMENDATION

PROBLEMS

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.

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.

Because of improper insufficient application of Islamic Banking rule in our country. The

investment operations of IBBL can't run smoothly.

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.

IBBL has no strong promotional activities to increase motivate its present and potential

investment client.

51

52

1. IBBL should increase skilled manpower to do its financial activities more efficiently. So that

many of the employees do not have to do extra work.

2. The Bank should go aggressive advertising and promotional activities to get a broad

geographic coverage.

3. The authority of IBBL should introduce more innovative and modern customer service.

4. Practice amount of doubtful income declined substantially during the year as compared to the

past few years, indicating more carefulness of the Management in complying with Shariah.

As a result, idle money will be invested to increase potential profit of this Bank.

5. Inclusion of more subjects based on the Quran and Sunnah in the Training courses of the

Islami Bank Training & Research Academy in order to develop human resources having

morally.

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Bangladesh is a developing country. Without developing banking sectors this country’s business

sector is not possible to progress rapidly. In such conditions IBBL is trying to develop banking

sector through welfare and servicing to the people. Islami economy and banking are bound

together. This economy and Banking is not possible to establish without Tauhid, Reshalat and

trust of Akhirat. This economy and banking are suitable to operate as a Muslims country. But our

Government is not aware to establish such system. IBBL has emerged facing the many obstacles

yet. This bank is trying to operate their activities according to Islami Shariah. Islam is a religion

for human welfare as well the social welfare. All the steps of Islam are only for the welfare for

human being. Above discussion also proves that interest is a curse and in the banking transaction

only Islamic bank can help people to relieve of this curse. Islamic banking is the superior

banking system. We have to take necessary steps to remove all problems that stand as a great

obstacle before Islamic banks as early as possible for the development of Islamic banks.

Performance of IBBL:

Particulars 2004 2005 2006 2007 2008

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Authorized Capital 3,000 5,000.00 5,000.00 5,000.00 10,000.00

Paid-up Capital 2304 2764.00 3,456.00 3,801.60 6,177.00

Reserved Fund 4329.92 5450.94 6,551.00 8039.74 9023.00

Total Equity 6691.12 8331.14 10,435.96 15,765.94 14060.49

Deposits (including Bills Pay.) 87841.01 1,07,779.42 1,32,419.40 1,66,325.29 200343.41

Investments (Gross) 79392.72 97,178.31 1,17,132.83 1,44,920.61 180053.93

Import Business 59,804.00 74,525.00 96,870.00 137086.00 180,020.00

Export Business 29,151.00 36,169.00 51,133.00 66690.00 83993.00

Remittance 23,669 36,948.00 53,819.00 84143.00 90176.00

Total Foreign Ex. Business 1,12,624 14,7642.00 2,01,822,00 22,01,822.00

Total Income 8,262.73 10,586.78 14,038.30 17699.52

Total Expenditure 6,419.74 8,424.36 11,129.63 14856.19

Net Profit before Tax 1,842.99 2,162.42 2,908.67 3780.82

Payment to Govt.(Income Tax) 829.35 973.09 1,490.12 2049.05

Dividend 20%

(Bonus)

25%

(Bonus)25% (Bonus) 25%(Bonus)

Total Assets (including Contra) 1,25,776.94 1,50,959.66 1,88,115.27 250634.48

Total Assets (excluding Contra) 102149.28 1,22,880.35 1,50,252.82 191362.35

Fixed Assets 2552.70 3,067.99 3,724.69 3987.23

No. of Foreign Correspondents 850 860 870 884

Number of Shareholders 15892 17,201 20,960 26,488 51931

Number of Employees 5306 6,202 7,459 8,426 9616

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Number of Branches 155 169 176 186 210

Book Value per Share (Taka) 2904 3,013.00 3,020 4,147

Earnings per Share (Taka) 519 487.57 368.42 539

Market Value per Share (Taka) 5,110 5,580 4,749 6,999

Capital Adequacy Ratio 9.21% 9.44% 9.43% 11.18%

Note: Tk. in (Million)

Source: Economic Trends published by Bangladesh Bank.

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Total Growth of Foreign Exchange Business:2000-2007

57

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Import, Export & Remittance of IBBL :

(Tk. in Thousand)

Year 2000 2001 2002 2003 2004 2005 2006 2007

Import 25327 25907 33788 46237 59804 74525 96870 137086

Export 16889 16082 16673 21738 29192 36169 5113366690

Remittance 7644 9879 14670 16668 23669 36948 5381984143

Total Foreign Exchange Business of IBBL :

Year(Tk. in Thousand)

2000 2001 2002 2003 2004 2005 2006 2007

Total 49860 51868 65131 84643 112624 147642 201822 287919

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Books:1. A.A.M. Habibur Raman; Islami Banking.

2. Md. Haider Ali; A Hand Book of Islami Banking & Foreign Exchange Operation.

3. Bangladesh Bank; Guide lines for Foreign Exchange Transactions.

4. Howard R. Goldsmith; Import / Export

(A Guide to Growth, Profits and Market Share).

5. Sayed Ashraf Ali; Foreign Exchange & International Finance.

6. A.K. Chatterjee ; Principles of Foreign Exchange.

7. M. Omar Chapra; Review of Islami Economics.sssss

Reports:

1. Annual Report of IBBL, 2000 To 2007.

2 Branch Managers Conference Report 2007

3. Islami Bank Bangladesh Ltd. Parichiti-2001

4. Economic Trends published by Bangladesh Bank

Class Lecture:

1. Asheque Ahmed Jebal, SVP,OW,IBBL,HO.

2. M.Jafrullah, Director General, IBTRA

3. Md. Rafiqul Islam, SVP & Director (Training), IBTRA

4.Md, Habibur Rahman,DMD,IBW,IBBL,HO.

5. Md.Omar Faruk Khan , VP & FM (Course Co-coordinator), IBTRA

Web Site: www.islamibankbd.com

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