Sme Financing of FSIBL

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Transcript of Sme Financing of FSIBL

SME Financing of FSIBL

CHAPTER 1 introduction

1.1 WHAT IS INTERNSHIP?Internship is a field project for a student of Business Administration of final year that gives the student a chance to apply business theory practically in any organizational environment. The objectives of internship are: 1. Practical fulfillment of MBA program. 2. Application of theoretical knowledge into practice. 3. Gaining work experiences. 4. Having an exposure for searching a good job in future. 5. Knowing/understanding gap between theoretical knowledge and practical situation. Parts of Internship Report: There are two parts of internship report. They are: Part A: Organization Part. Part-B: Project Part.

1.2Background of the ReportThe report comprises of the organizational overview, operation of Banking in the different section such as General Banking, Investment, Foreign Trade/Exchange and Briefly analysis the performance of the

Prepared By- Md. Alamgir

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SME Financing of FSIBL

Branch. Finally the recommendations.

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During my two months study, Ive tried my best to get knowledge about their overall banking operation with special emphasis on their performance. The Banking Industry in Bangladesh is characterized by strict regulations and monitoring from the central governing body, the Bangladesh Bank. The main concern is that currently there are many banks for the market to sustain. As a result, the market will only accommodate those banks that can transpire the most competitive and profitable in the future. Currently the major financial institutions under the banking system include: 1. 2. 3. 4. 5. Bangladesh Bank Private Commercial Banks State Owned commercials Bank Islamic banks Non-bank financial Institutions, etc.

Of these, there are four state owned commercial banks (NCB), 5 specialized banks, 11 foreign banks, and 26 domestic private banks, 4 Islamic banks currently operating in Bangladesh.

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SME Financing of FSIBL

Scheduled Banks in Bangladesh

FCB 20% NCB 8% PCB 54% Islamic 8% Specialized 10%

FCB NCB Islamic Specialized PCB

FIGURE: 1 Generally, the commercial banks and finance companies provide a myriad of banking products/services to cater to the needs of their customers. However, the Bangladesh banking industry is characterized by the tight banking rules and regulations set by the Bangladesh Bank, All banks and financial institutions are highly governed and controlled under the Banking Companies Act-1993.

The range of banking products and financial services is also limited in scope; all local banks must maintain a 4% Cash Reserve Requirement (CRR), which is non-interest bearing and a 16% Secondary Liquidity Requirement (SLR). With the liberalization of markets, competition among the banking products and financial services seems to be growing more intense each day. In addition, the banking products offered in Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by the central bank. Competing through differentiation is increasingly difficult and other banks quickly imitate any innovative banking service.

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SME Financing of FSIBL

1.3 Objective of the StudyThe main objective of the study is to have knowledge about the investment management in the First Security Islami Bank Ltd. In order to study the credit management I have decided to study about the following facts: 1. To know about the Islamic banking system of First Security Islami Bank Limited. 2. To know about the different schemes, policies, procedures of FSIBL. 3. To know about investment policy of the Islamic banking systems. 4. To about the credit policies and limitations of FSIBL. 5. To know about the monitoring and recovery system in islami banking. 6. To observe the overall environmental situation of the Bank.

1.4 Scope of the StudyScope means the area on which the study has to be done. The study is only related in First Security Islami Bank Limited, Jubliee Road Branch, Chittagong. This report focuses on the Overview of the First Security Islami Bank Limited and mainly related with Lending Policy and recovery system.

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SME Financing of FSIBL

1.5 Limitation of the StudyI have faced several problems during the preparation of this repot. Some of the limitations of this report are mentioned below: a. Credit management is a big subject: Credit management is a big subject to cover wholly in this limited space. It required huge time and huge space to cover. So, I have covered only some important topics of credit management and furnished only the gist here. b. Engaged in work: Every man of the branch was so busy in their work, so they were not able to provide sufficient time to make me clear about different topics. c. Time constraint: I had to prepare this report within a period less than three months which was not enough to prepare such a report. Because collection and arrangement of information is a time consuming job. Then again I had to summarize those. So I had to work in haste. d. Confidential matter: It is not possible to get all sorts of information due to official confidentiality. e. Lack of practical knowledge: For the lack of practical knowledge, some short comings may be available in the report. Because in some cases I could not practically involved because of banks policy limitations and operational bindings. The problems mentioned above are some of the major problems; I have faced during the preparation of this report. In spite of that, I have tried my level best to make the report as informative as possible.

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1.6 Methodology of the studyThe methodology of the study can be discussed under the major heads: Organization and development of the report: The report is organized and developed under a mixture of both descriptive and analytical framework.

1.7 Source of DataThe data sources used to prepare this report delineated as follows:

1. Primary Source:a) Practical deskwork. b) Face to face conversation with the officers and executives. c) Face to face conversation with the clients. 2. Secondary Source: a) Annual report of First Security Islami Bank Limited. b) Prospectus of First Security Islami Bank Limited. c) Banks financial statement. d) Banks quarterly statement. e) Banks daily affairs. f) Broachers etc.

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SME Financing of FSIBL

CHAPTER 2 ABOUTTHE

FIRST SECURITY ISLAMI BANK LIMITED

2.1 Definition of Bank:We can define A bank as an institution, usually incorporated with power to issue its promissory notes intended to circulate as money (known as bank notes); or to receive the money of others on general deposit, to form a joint fund that shall be used by the institution, for its own benefit, for one or more of the purposes of making temporary loans and discounts; of dealing in notes, foreign and domestic bills of exchange, coin, bullion, credits, and the remission of money; or with both these powers, and with the privileges, in addition to these basic powers, of receiving special deposits and making collections for the holders of negotiable paper, if the institution sees fit to engage in such business." Generally there are two main way of operating commercial bank. They are conventional banking and Islamic banking system.

2.2 Islamic Banking:The Islamic banking has been defined in a number of ways. The definition that is given approved by Organization of Islamic Conference is most popular. According to The OIC, The Islamic bank is a financial institution whose status, rules, and procedures expressly state its commitment to the principle of Islamic Shariah and to the banning of receipt and payment of interest on any of its operations. It appears from the definition that Islamic banking is a system of financial intermediation that avoids receipt and payment of interest in

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SME Financing of FSIBL its transactions and conducts its operation in a way that it helps achieve the objectives of an Islamic economy. And also it is operated on the basis of Mudaraba theory. According to Mudaraba theory, the relationship between bank and clients is not debtors-creditors, it is a relationship of trusteeship. The difference between Conventional and Islamic Banking are shown

in terms of a box diagram as shown below:

Conventional Banks 1 The functions and operating modes of conventional banks are based on manmade principles. The investor is assured of a predetermined rate of interest. It aims at maximizing profit without any restriction. It does not deal with Zakat. 1

Islamic Banks The functions and operating modes of Islamic banks are based on the principles of Islamic Shariah. In contrast, it promotes risk sharing between provider of capital and the user of funds. It also aims at maximizing profit but subject to Shariah restrictions. In the modern Islamic banking systems, it has become one of the serviceoriented functions of the Islamic banks to collect an distribute Zakat. Participation in partnership business is the fundamental function of the Islamic banks. The Islamic banks have no provision to charge any extra money from the defaulters. For the Islamic banks, it is comparatively difficult to borrow money from the

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Leading money and getting it back with interest is the fundamental function of the conventional banks. It can charge additional money in case of defaulters. For interest-based commercial banks, borrowing from the money market is relatively

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