Thoughts on Economics Vol. 18, No.

05

A Comparative Study on Performance Evaluation of Conventional Banks and Islamic Banks in Bangladesh with Special Reference to Islami Bank Bangladesh Limited
A dullah Al !ahmud" !# !u$ahidul Islam%

Abstract: This paper focuses on the comprehensive comparison about the performance of conventional and Islamic banking system operation in Bangladesh. For this analysis we have used some most commonly used measures such as general business measures, profitability ratios management soundness, social profitability measures. Though, both conventional and Islamic banking have enormous contribution to the economy they have two major functional differences. First one is that whereas the conventional banks follow borrowing and lending mechanisms, the Islamic bank does trading and investment mechanisms and neither accepts nor pays interest in any of its activities. And the other is that the conventional banks provide and receive interest for deposit and advance but Islamic banks are concerned with profit in case of both deposit and investment. e have taken Islami bank Bangladesh !imited as a special reference in this conte"t. For performance comparison, both financial profitability and social profitability aspect of performance have been taken into consideration. The study shows that in spite of a few e"ceptions in general Islamic banks# overall performance was better than the conventional banks. Keyword: $%Bs, &%Bs, F%Bs, 'Bs, IBs, &rofitability, management soundness, general business, social profitability. "# Introduction Bangladesh is one of the largest Muslim countries in the world. The people of this countr are deepl committed to !slamic wa of life as enshrined in the "ol #ur$an and the %unnah. Naturall , it remains a deep cr in their hearts to fashion and design their economic li&es in accordance with the precepts of
1 ,

'ecturer, (epartment of Ban)ing, *ni&ersit of (ha)a, (ha)a+1000. -rofessor and .hairman, (epartment of Ban)ing, *ni&ersit of (ha)a, (ha)a+1000.

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0 .omparati&e %tud on -erformance E&aluation11111

!slam. The esta2lishment of !slami Ban) Bangladesh 'imited on March 13, 1483, as the first of its )ind in %outheast 0sia, was the true reflection of this inner urge of its people. !t was 2oth a hope and a challenge to the !slam lo&ing people of the countr in general and the pioneers of the !slamic 2an)ing mo&ement to ma)e it a success. !n the 2eginning there was some dou2t in the minds of man people a2out the &ia2ilit as well as the sustaina2ilit of the !slamic 2an)ing s stem. But the histor of two decades of !slamic 2an)ing operation in Bangladesh not onl remo&ed this dou2t from the minds of the people 2ut also showed how a new 2an)ing concept 2ased on !slamic &alues could so rapidl esta2lish itself as the most modern, d namic, and popular 2an) of the countr . 5ithin this short span of time the wor)force of !slamic 2an)s in Bangladesh in general and !slami Ban) Bangladesh 'imited, in particular, 2 their strong commitment and tireless effort ha&e 2een a2le to pro&e the superiorit of !slamic 2an)ing o&er con&entional 2an)ing in e&er department of 2an)ing operations and ser&ices. The success of !slamic 2an)s not onl ga&e them enough floors in the field of 2an)ing 2ut also encouraged at least one con&entional 2an) to con&ert full all its operations on !slamic principles. !n our 2an)ing industr we ha&e different t pes of 2an)s with different t pes of o26ecti&es, commitment and modus operandi. The industr is composed of 5 t pes of 2an)s &i7. N.Bs, %Bs, -.Bs, 8.Bs and !Bs. There are 53 scheduled 2an)s 9:cto2er ,00;< in Bangladesh. :f them ; are nationali7ed commercial 2an)s, 5 speciali7ed 2an)s, 30 pri&ate commercial 2an)s and 1, foreign 2an)s, 1 co+operati&e 2an), and 1 grameen 2an) .The num2er of 2ranches of these 2an)s is /,;,. (ifferent t pes of 2an)s gi&e priorit to different sta)eholders. 5hile the pri&ate sector 2an)s are guided primaril 2 profit moti&e, N.Bs are committed to social and economic considerations. 0mong pri&ate 2an)s, !slamic 2an)s are different as the operate 2e ond the narrow scope of commercial 2an)ing. 0n !slamic 2an) is simultaneousl a commercial 2an), an !n&estment 2an) and a de&elopment 2an). %o it is &er difficult to find a common and unanimousl accepted ardstic) to compare the performance of different categories of 2an)s. Bhattachar6ee 91484< identified fi&e sets of indicators, such as general 2usiness measures, social profita2ilit measures, 2ranch performance measures, emplo ee performance measures, and profita2ilit measures. !n this article, we ha&e tried to measure the comparati&e performances of con&entional and !slamic 2an)s operating in Bangladesh. 8or that purpose we ha&e used some common indicators such as

. 0nnual Aeports of Bangladesh Ban) Bangladesh Ban) Bulletin. The se@uential steps are discussed 2elow? • Aele&ant data were collected from &arious Bangladesh Ban) pu2lications. To measure the performance of cross section of 2an)s from &arious angles. profita2ilit measures.. • Economic Trends. 3. To identif the possi2le reasons for &ariations in the performance of &arious categories of 2an)s especiall !slamic 2an)s. To suggest possi2le lines of actions to impro&e the performance of !slamic 2an)s. profita2ilit . (# !ethodology The paper identifies the most widel used indicators of 2an) performance and applies the same to ma)e a thorough e>amination of &arious performance dimensions of the 2an)ing industr of Bangladesh. 0 list of the indicators is pro&ided in the appendi>.Thoughts on Economics . and social profita2ilit measures. 1. To compare the performance of .= general 2usiness measures. . 3.on&entional and !slamic Ban)s.. management soundness and social profita2ilit were anal 7ed 2 using appropriate indicators or ratios.. management soundness measures. • . %# & 'ective of the Study The main o26ecti&e of the paper is to e>plore the e>tent to which !slamic 2an)s are ahead of the con&entional 2an)s and identif the pro2lem areas of !slami 2an)s as well as their opportunities. . The specific o26ecti&es of this paper are as follows? 1. . 8i&e ma6or dimensions of performance &i7. Mar)et share and growth rate of different categories of 2an)s against certain &aria2les were also pro&ided. &i7.. general 2usiness measures. %cheduled Ban) %tatistics..

.158/./.0/ %./15. trend &alues were calculated to find the a2solute changes of the &aria2les and their direction of change.5/8. %cheduled Ban) %tatistics. .31 /130...4..=4.585..) 5=1//./8=..0.4 =/81.88 35/8.=.05 145=4. 4.4.34 /304.03 /5. The total deposits of !slamic 2an)s were .04 113. 8=04... 1005. Drowth of income is nothing 2ut the outcome of a 2an)Cs 2asic operations.8 0 .5.% 50411..53 54...omparati&e %tud on -erformance E&aluation11111 • !n addition... 9144/+.4 1/4/4.3= million in .1..+otal -eposits By +ype of Banks Bank +ype 0CBs SBs PCBs 1CBs IBs +otal %.. .( 5.. 88/.3= ==1." . ./ 54551.11 1. on the other hand.....11 million in .3= %.10..1/ 9Ta)a in ./411. %. is the principal source of income of a 2an) that ensures the &ia2ilit and sustaina2ilit of the 2an).8/ 5/51..005 showing a growth of almost . =84.4150./1 . +a le ".8 54.1 15=/.005< Deposit by Type of banks 160000 140000 120000 100000 Total Deposits 80000 60000 40000 20000 0 NCBs SBs PCBs FCBs IBs 2000 2001 2002 2003 2004 2005 Year Total 1igure " Ta2le 1 shows a stead growth of the total deposit of the !Bs./8=.5/ 10=5/.4/ %ource? Bangladesh Ban).rores< %.8.3=..... Drowth of loans and ad&ancesBin&estment.5.000 that increased to 1/4/4.3/ . (eposits are the foundation upon which 2an)s stand and grow. .0= %./=/. general 2usiness dimension gi&es primar focus on these two elements.58 8=13..3 5345. )# *eneral Business !easures Mo2ili7ing deposits and pro&iding loansBin&estment are the principal functions of commercial 2an)s.=/ 131845. The a2ilit of a 2an) to attract deposits from indi&idual and 2usinesses is an important measure of the 2an)Cs acceptance 2 the pu2lic.00E within 5 ears ...=. Therefore..8/ ..5/ =44=..

. 3../1 11.4 %.00 M D ar e ke pt o Sh si ar ts e of 50....13 /.. indicates that the mar)et share of deposit 2 the N. 5.0. :n the other hand. The possi2le reason for aggregate (eposit of N.= /...00 /.51 =.48E in .. /./. %.3.45 100 %..Bs to 2e higher than %B.B./= 11.08 100 %.8 100 %.8. 5./..15 33.. 14.4...81 1/./4 /. !t came down from 55.33 /./ /. . 8..000 to 11.) 8.% 8.( 3..5.// 14.08E in ./ .41 .5. /.% 50..00 0..00 2000 2001 2002 2003 2004 2005 Year NCBs SBs PCBs FCBs IBs 1igure % Ta2le .4 time.4/ 13. during the same period the mar)et share of !slamic 2an)s went up from /.E in .5/ 31.000 to .4 .00 30.ommercial Ban)s were down during the same period...00 10." 5. %. *rowth of -eposit y +ype of Banks 2Percent3 Bank +ype 0CBs SBs PCBs %..8." 4... !arket Share of -eposit By +ype of Banks 2percent3 Bank +ype 0CBs SBs PCBs 1CBs IBs +otal %.00 20.48 100 Market Share of Deposits by type of Banks 60.1= 13.005..=.( .04 .1.Thoughts on Economics . +a le (..B and !B was its &ast networ) and huge num2er of 2ranches. 14.4 .0/ /.E in .4/ 100 %. Mar)et share of deposit 2 %pecial Ban)s were almost unchanged while that of 8oreign .84 ../ .00 40.=.34 =.3.Bs has 2een decreasing o&er the ears.=5 /. 5. +a le %.48 ..8= 4.) ./....0 Average rate of *rowth /. -. 55. 5.=1 100 %.../= %..005.38 10.5...4.4/ 4..

. 10.01 80.% 3558/...==.00 10. -. 10./5 5/.= 8453/.8.3.00 20./.0 =.5 8.= .80 10.83 %.Bs.81 /405. and 30.. .Bs.54 .51 83030.5= 10/.3/..4. 10..3= . 14. This is a clear indication of how trustworth the !slamic 2an)s are to the depositors of the countr ..//..4=45.00 Growth of Deposits 40.08 =814.00 30.. 111=3..00 2000 2001 2002 2003 2004 2005 NCB's SB's PCB's FCB's IB's Year 1igure ( Ta2le 3 indicates that the growth rate of deposit of the !Bs was the highest of all categories of 2an)s. respecti&el ./ .1/ 13=31.1./.4 8=.." 3.05 /31=. 9144/+.=/ Growth of Deposit by type of Banks 50.03 /1/3.88 8/./.8 =4.0= 3==/. 0 ./..33 . 14=../3 3./.=.=. 10../.14 %ource? Bangladesh Ban) .803=.30 1CBs IBs +otal 8.=. !slamic 2an)s for in&estment purpose depends mostl on trading mode which create little scope for creating deri&ati&e deposits.== 4..= 2Ta)a in . 30.4/..Bs./ %. %Bs.33 3. and !Bs was /.1/ 350.) 38108.4.5.01 percent.845.84 10=45.omparati&e %tud on -erformance E&aluation11111 /. !n this connection it is worth mentioning that the growth of deposits of con&entional 2an)s relates to 2oth primar deposits and deri&ati&e deposits while the growth of deposits in !slamic 2an)s is 2ased mostl on primar deposits.0/. 5hile con&entional 2an)s e>pand their deposits 2 sanctioning loans and ad&ances. %cheduled Ban) %tatistics. 13...0... The a&erage growth of deposit for the period under stud for N.rores< %.08 %. +a le ). .0...3..=.1..1.4= .4.81 %..00 0.13 504.=5 3..11.. 15/.8 10/3=../ 44/...0/ 153=1.85 108.8.( 3/1/8.8= =.4=.. which is &er much significant in terms of sta2ilit in the price le&el.3= 3=388.005< . 8.. 104..13 =318...0. +otal Advances4Investment By +ype of Banks Bank +ype 0CBs SBs PCBs 1CBs IBs +otal %.

E.5.15 .33 .. The aggregate in&estment of all !slamic 2an)s were .00 IBs /.1/E to 4. %Bs..5..31 3.E.5. PCBs .E in .=. Mar)et share of deposit 2 speciali7ed 2an)s also came down from 1/.Bs increased 2 35E.=.80 =.8/ . 31.05 million in .Bs also registered their growth of mar)et share from 5. +a le /.Bs and 8.5..33E to 33.13 10. million in ./ 0CBs .. 5.=3 8.00E and .13 /.00 20.. SBs 1/..8 13.% %.( %.0. 0..88 /.. 4. But during .5. -.88 13.0 3=.1..00 +otal 100 100 100 100 100 100 Market share of Total Advances 50..00 40.005...4=.1.0../ 1CBs 5.E within a short span of 5 ears.4.005 showing an increase 2 3/.00 0.1/ 1." %.000 to 3/.0 3/.5. 1...E to =.Bs and -.=.1= . respecti&el .. !arket Share of Advances 4Investment y +ype of Banks 9percent3 Bank +ype %.3E and 1.0..00 NCBs SBs PCBs FCBs IBs 2000 2001 2002 2003 2004 2005 Year T ot al A d va n ce s 10. 8.Bs.Thoughts on Economics 31 Advances by type of Banks 120000 100000 80000 Adv ance s 60000 40000 20000 0 2000 2001 2002 2003 2004 2005 Year NCBs SBs PCBs FCBs IBs Total 1igure ) Ta2le .000 that increased to 15/.1=E in . shows a spectacular growth of the total in&estment of the !Bs.3E.=.11 33..) %..0.B has 2een decreasing o&er the ears.14 /. =.05 .00 30. respecti&el . (uring the same period the aggregate deposits of the N. %..81 10.00 1igure / Ta2le 5 indicates that mar)et share of ad&ances 2 the N..0 1./E. !t came down from .15 11..

.4.38 3.48.88 ./4 1..= 1/. /..=5..) %.00 Growth of advances 30.45 4. 14.3.8 30. 0 .05 1..=4 44=4= SBs 1.1.00 10. 55.4.41 .% %...1/ /3=../5..3.53314.34 8.13 144/0.04 0..005.=8 8....=4 PCBs 3..45 =. 1835/0.18 13./.33 13./.3. which is a clear indication of how efficientl and effecti&el the !slamic Ban)s can in&est their funds for the de&elopment of 2usiness and industr .44 8.E.44.4=3./ =453=.E in .8..) %..03 13. 884/0.11 1531/./ of growth 4.5 1/8.1./10.= =5.// 14..=/.13 . This growth rate of ad&ance 9. Bank +ype 0CBs SBs PCBs 1CBs IBs +otal +a le 5..00 20.381. %.0.. -.8.omparati&e %tud on -erformance E&aluation11111 the period under stud !slamic 2an)s altogether gra22ed the mar)et share of deposit @uite significantl from /. 3.85 18.5..80E in ..4..15 .. %Bs. +a le 6. 8. ../ 1. The a&erage growth of ad&ances for the period under stud for N.3/ 5...48E.451.8 8/.( %.5/ ..rores< Bank +ype %. 1CBs 415.18 11/3/./ 4/.058.331. 115=1. .48E< is &er close to their deposit growth rate 930.00 -10.8.4.3 +otal 1.000 to 1.10 1/.== .8..4/./.8 1=.88 30...51 440=.01E<....5=E.8= +8. 1/134=.8/ .83 .E.0.54 1.35 +1..85 45." %./ 0CBs =. . *rowth of Advances4Investment y +ype of Banks 2percent3 Avg# rate %. 1.3. respecti&el .=5 143." %.00 1 2 3 4 Year 5 6 7 NCBs SBs PCBs FCBs IBs 1igure 5 Ta2le / indicates that the growth rate of ad&ances of the !Bs was the highest of all categories of 2an)s..00 0...0.0.48 83..158.Bs...11 1/.5 1=.54 Growth of Advances by type of Banks 50.=.33 15/18./.Bs.00 40. +otal Business 2-eposits 7 Advances3 y +ype of Banks 9Ta)a in ..Bs.5= =.( %.. and !Bs were =.% %./ .....0. 5.4.5...31 IBs 848.1=..1.4.5= 1=./1 =.38 53.8E and ..= .

8..0.18 8.// 34...( %. =.Thoughts on Economics 33 Total Business b t !e o" Ban#s 100000 80000 Tota l Busi ness 60000 40000 20000 0 2000 2001 2002 2003 2004 2005 NCBs SBs PCBs FCBs IBs Year 1igure 6 !n figure =.Bs in the later part of the period under stud .0.." %. we notice that total 2usiness of N.) %.=.. 4.05 4. The condition of !slamic 2an)s was relati&el 2etter than -.. IBs /..83 1. /..3/ .0 SBs 10. PCBs .8 .00 30. 31.8= +otal 100 100 100 100 100 100 Market Share of Total Business by type of banks 60.3../= /.0.88 =.1.00 0.1= 8.34 3.Bs is higher than an other t pe of 2an)s.=.1.3.0 33.00 20. !arket Share of +otal Business y +ype of Banks 2percent3 Bank +ype %.% %.Bs closel mo&e with N..Bs../ 0CBs 51.4.0 =. .5/ 10.43 /.00 10.54 . which was reasona2l e>pected 2ecause of their &ast networ).53 /.54 1./.. /.41 .Bs and 8. -. +a le 8.3.00 2000 2001 2002 Year 2003 2004 2005 NCBs SBs PCBs FCBs IBs 1igure 8 . %.00 40..83 ...00 Mar Tota l ket Shar Busi e of ness 50...4.8 1CBs /.

.1/ 3//5.) 3=. . %Bs.5.=1 11. 8. 18.3.( ..84 4.00 -10.. .8=E in ../...1/5. 14../3E and ...4/E. /3/.0..( %.3 Growth of Total Business by type of banks 50..4./ //5. The a&erage growth rate of total 2usiness for the period under stud for N./ ...0E in ./= 5./.005.00 10./ 3.0.5. -. 10.. Bank +ype 0CBs SBs PCBs +a le ".Bs was almost unchanged while that of %Bs was down during the period under stud .00 20..00 40.10 .00 2000 2001 2002 2003 2004 2005 NCBs SBs PCBs FCBs IBs Year 1igure 9 Ta2le 4 indicates that during the period under stud the growth rate of total 2usiness of the !Bs was the highest of all categories of 2an)s.4...35E.00 Gro wth of Tota l Busi ness 30. =0.3. 0 .1 14.0.0E in .00 0. 13.=1 10.=5 3.== 4=.Bs..55= .Bs./=E. Mar)et share of deposit 2 8.35 13././.54E in . 1=.. .) =.81 30. +otal Income By +ype of Banks 2+aka in Crores3 %..53 /45. %..85 +3.50/.== %../." %..=4 8..4.% 8.34 =38.5 8....4/ =5. :n the other hand during the same period the mar)et share of total 2usiness 2 !slamic 2an)s went up from /.Bs. and !Bs were /.000 to 34....3./3 .8. 8./ .3.4.= 38=8./3 14. .0.=0 %./ ..3 3/5..5/ .005." 4..0. 5. !t came down from 51. . .3 11.=84. respecti&el . %./ .1 %. +a le 9.5 5..10 13.omparati&e %tud on -erformance E&aluation11111 Ta2le 8 shows that the mar)et share of total 2usiness 2 the N.3= 83..=... *rowth of +otal Business y +ype of Banks 2percent3 Bank +ype 0CBs SBs PCBs 1CBs IBs +otal %. 3=15...=5 .4 .8.5.3./3E.3./ Average rate of growth /.13 548. %.% %.000 to 1..Bs has 2een decreasing o&er the ears.

Thoughts on Economics 1CBs 4/=.455.Bs are also showing a declining trend of total income. Bangladesh Ban) 9.=5 ...43 IBs . %. 1.. 1.) +0..5= 0. /05.33 0./3 =8=./ 8/..81 11548..5./= 1..= .3/ 1.BsC total income was higher in the past 2ut shown a declining trend in recent ears./4 %.= ./ 1./ 11=..1.. N.. ..58 1434 1.. !n figure 10 we find that total income of -... 0nal sis of profita2ilit of an enterprise pro&ides an insight into the effecti&eness in utili7ation of funds in the enterprise and also managerial efficienc .13 %ource? Economic Trends. 8.000+.1 +0.45 0. Because of shortage of space we ha&e used onl one indicator to measure the profita2ilit performance.41 10/1.5 10/8." 0.( 0.=8.Bs and !Bs are relati&el higher in the latest ear.. +otal 8554.1 1038. 1. +a le "". 3.8 1.0053 Total Income by type of Banks 6000 5000 4000 Tota l Inco me 3000 2000 1000 0 2000 2001 2002 2003 2004 2005 NCBs SBs PCBs FCBs IBs Year 35 44=.15...5 0. 0../. .4 ==.1 0.% 0.1 0 0.5 %. Return &n Assets 2R&A3 By +ype of Banks 2Percent3 Bank +ype 0CBs SBs PCBs 1CBs IBs +otal %. 10088.3. /# Profita ility !easures -rofita2ilit is an important inde> of operational efficienc of an organi7ation.8.0/ 0./ 1igure ".

!n recent time the ha&e negati&e A:0. The A:0 of 8.3/ 0 .omparati&e %tud on -erformance E&aluation11111 eturn on Assets by type of Banks 3. !Bs and -.Bs ha&e a moderate 2ut consistent return on assets that indicate their efficient management of fund.5 0 -0.Bs is higher than an other 2an). 5# !anagement Soundness !easures 5#" Ratio of +otal E:penditure to +otal Income .5 1 0.5 3 2.5 2 !A 1.Bs ha&e a &er negligi2le return on assets.5 NCB's SB's PCB's FCB's IB's 2001 2002 Year 2003 2004 1igure "" Ta2le 11 shows that %Bs and N.

.18 0. 0.( 0.3.=8 %.43 1.5..00 0.33 0.Thoughts on Economics 3= +a le "%.=.8= 0.00 NCB's SB's PCB's FCB's IB's 2000 2001 2002 2003 2004 2005 Year 1igure "% !n Ta2le 1.40 0.8 0.45 1.80 0./ 0...=.40 0.Bs ha&e a fa&ora2le income+ e>penditure ratio whereas N.=3 0.Bs and %Bs ha&e higher e>penditure than income causing accumulated loss and creating 2urden for the national econom .4/ 0.80 0...81 %.=5 0. The e>penditure+income ratio of 8.) 0.60 0.83 0.= 0.80 "#penditure$Income atio by type of banks 1.=1 0.83 %.55 0. 0..+otal E:penditure to +otal Income ratio By +ype of Banks Bank +ype 0CBs SBs PCBs 1CBs IBs +otal %.43 1.1.20 1.43 1.4. 0./.% 0.. 0./= 0.Bs is comparati&el lower that .80 0..85 %. we see that 2oth !Bs and -.5= 0.81 %. 1.40 "#penditure$Income atio 1." 0. 0. 0..20 0. 0.8/ 0. 0..0. 0.

!t constitutes an integral part of performance d namics.53 3. .40 .Bs are mainl guided 2 social considerations.00 20. 0. 100 %.Bs and -.. 1=.. 14.. N./= 18.1... e>pansion of 2ranches etc are the )e indicators of social profita2ilit measures../.1./ 53.11 .000 to ." 58.81 0..Bs ha&e an increasing trend in the mar)et share of num2er of 2ranches 2ut the mar)et share of !slamic 2an)s increased @uite significantl from ...50 3. !arket Share of Branches By +ype of Banks Bank +ype 0CBs SBs PCBs 1CBs IBs +otal %.. 58.) 5.. 0.0..5.0.8.00 10..Bs ha&e a declining trend. . 100 %..1.=1 .1..00 M ar ke t s h ar e 40.4 0.omparati&e %tud on -erformance E&aluation11111 indicates their high profit margin and less commitment to the people and the econom .5.8E in . 14.005. 6# Social Profita ility !easures %ocial -rofita2ilit implies the contri2ution of a 2an) to the societ . 0..8 100 Market Share of total Branch by type of Banks 60./. ... 8. +a le ")..% 55.00 50.3.8.3..8..33 14.. +a le "(.54 . %Bs.38 0 .00 2000 2001 2002 2003 2004 2005 NCBs SBs PCBs FCBs IBs Year 1igure "( Ta2le 13 shows that the num2ers of Branches of N.1/ 14.1/ 0./ 100 9percent< %.5/ .E in .( 5.00 0. +otal Employment By +ype of Banks . 100 %.00 30.4/ 14. .0.51 100 %.reation of emplo ment. ..1.

5..85 %.48 /.Bs ha&e an increase in the num2er of emplo ment during .3= SBs 8=.00 0.5 1/1/. +a le "/.00 0.00 0...." /13..80 54. shows a declining trend in the num2er of emplo ees of N.5 %.000+.04 /54/ 108.5. %.0=..5.55 88.1 .5.Thoughts on Economics Bank +ype 0CBs SBs PCBs 1CBs IBs +otal %. Rural Branches to +otal Branches ratio By +ype of Banks Bank +ype %.005 2 34E while !Bs got the highest increase of emplo ment 951E< during the same period. %.4= /.5.5480 1.4 1583= . -./8 . 8.51 %.=5 88.( 58/./0 .5." %.84 +otal 54.. .83 ./. %. 0.0= .30 /3. 15300 .=4 1305 505= 10/. 1CBs 0..00 0..1 1588 . .041 1/03/ .0 /3..005< Total "mployment by Type of Banks 70000 60000 50000 40000 30000 20000 10000 0 NCBs SBs PCBs FCBs IBs 2000 2001 2002 2003 2004 2005 Year Tota l "mp loye e 1igure ") Ta2le 1.Bs.) 0CBs /.80 3403 10538.80 54./3 8=.51 %.53 .= 10=1../ /3. 1.81 .5..58 88..8/ .) 5=84.00 IBs .% %./. /.( %./3 PCBs . Bangladesh Ban) 9144/+..8.4 54..% /01/4 1/.Bs and %Bs o&er the period under stud .=5 .5.3= 88.03/= 1==/ =40= 10.5.= 54.000 34 %ource? Economic Trends.5.0 1508 =..//../.00 ../ 5/=4= 15153 ..=.5..=5 ..0 108=8...35.53 54.3.

0.51E 1 . 8331.=/..00.05E %... //41.." %. 0uthori7ed .0 = 35./ *rowth over %.00 80.8.00 0..E .//.. 3 .uity of the IBBL 2%.85.8 5.. 3000 .0 .000.50..( ++ .) *rowth over %.00E .omparati&e %tud on -erformance E&aluation11111 ural Branches to Total Branches by type of Banks 100.4.80."<%.30. +a le "5. 8# A Close Look at the strength and performance of Islami Bank Bangladesh Limited 2IBBL3 *ndou2tedl !slami Ban) Bangladesh 'imited has remained at the top of all !slamic 2an)s wor)ing in Bangladesh.( *rowth over %..apital -aid+up .. 1000 /. !t needs a separate stud to e&aluate the o&erall performance of the !BB'..3 = 5. 8.00 2000 2001 2002 2003 2004 2005 NCBs SBs PCBs FCBs IBs Year 1igure "/ Ta2le 15 shows that N. .0 3..5." %.00E 31.00 40..E 18.=5E %.0.443.% *rowth over %.Bs and %Bs are still dominant in maintaining rural 2ranches.=.) //.00 20.Bs do not ha&e an rural 2ranch.8E 3000 14.% .00 at io 60.=.0 1448... !n fact the !BB' is one of the leading 2an)s of countr . *rowth of E./3 +aka in crore SL# 0o# Particulars %.0 0 /... !n this article we shall concentrates on a &er limited aspect of its operational performances.00E .4 .00.84E . !n e&er department the !BB' is incompara2le to an other !slamic 2an) in the countr ..0. !Bs and -.5 .Bs on the other hand ha&e almost identical record of maintaining rural 2ranches in comparison to their ur2an 2ranches.00E 15.apital Aeser&es Total 1... ../=E .4 .3.0.0.0 0 .44E .1 .1 5000 ..

.00.005. itCs growth rate is significant which is .E ++ 88." %../=E ./...E and 31.0.34E ++ 3 3=/.8..4 30./=E ++ 5 / = 8 ../E 4.4." %.4E 5.4 . Total (eposit E of Total (eposit of Ban)ing %ector Total !n&estments 9Dross< E of Total !n&estment of Ban)ing %ector :&er (ue 0mount E of Total in&estment . 5.04E 3=30.40E ++ +.) *rowth over %.05 . +a le "6. 3.005..E ++ Ta2le 1/ shows the o&erall growth of e@uit of !BB' during ..=.5E ++ 304=./..00...45 /.005.Thoughts on Economics ....3=E ++ 108.5./.( %../3 8. and .) 1 .48E +13.E ...3E 5/./ 33.3E ++ 1 4.8../.35.8..003 which is .E .4185.( *rowth over %..=5 3..30E . and . !BB' also efficientl utili7e itsC deposit in different in&estment purpose which has 2een shown 2 the ta2le 1=.. .30E .44=..=..5 .E /...... The reser&es of !BB' is in increasing trend 2ut in . The growth of deposit of !BB' is significant 2ecause of increase in confidence of people in !slamic 2an)ing. %o the total e@uit of !BB' is also increasing which is shown 2 the increasing growth rate in .5.=5E./8E 10.001+..// . .00.40E ++ .=5E ++ 354=.1E ++ .4./ *rowth over %.=8E =055..=5 14.=.54E 83843./3 +aka in crore Sl# 0o# Particulars %.4.. 5. 5.1.1=3.. .1 =..0E ++ 4.=...1. 8..003.=55."<%.. respecti&el .=5E ./.% *rowth over %. 4.1 E@uit 5 E@uit 9E To ris) 5eighted assets< 4.04E 3.5.03E 30.1.E = 4.001+.5=E ++ /..4..E ..58E Ta2le 1= shows the growth of deposit of !BB' during ..= /. *rowth of -eposits of the IBBL 2%.8.E 31.44E./1 /. The paid up capital of !BB' has significantl increased in .03E 3.E ++ /.3E .% %. /.803.=./4E ++ /.E 5...3.lassified !n&estment E of Total in&estment .. The same thing happened in the ear ./5E =..5E 4./ .

E 30.( 13../3 .44 ./=0 /5131 . Because of this increasing rate of growth the total foreign e>change 2usiness of !BB' is also is in increasing trend./3 +aka in crore Sl# 0o# Particulars %../. 13..8 /5/8.41E %.45 30.50E ..8..4.=5E 3=5. and .84E % 30/0 3.( *rowth over %.5E 44./.1.=/.11E %../.48E %.." %./3 +aka in crore SL# 0o# 1 ..5E 1=."<%.4E +/..% *rowth over %. *rowth of Inward Remittance through the IBBL 2%..414." %."<%. +a le "9..00. Because of this the net profit increased to 5=/...E and 5/./4E 3/.3 ./81.54...5 +15.." 1. 5/30.) *rowth over %.001 which is /.E ..40/ 15.80E .85E 3 1=10.E ...005.3/E %.8.. 3 ...) .E ++ 18.../1 13. 0 ..3.4E ./3 +aka in crore Sl# 0o# Particulars %..0.) *rowth over %.1/./1E 3.% 4.." 30. 5 Net -rofit (i&idend 9E< 5=/...001../E %./.8 1.1./ *rowth over %. 1..4/E %..E ..omparati&e %tud on -erformance E&aluation11111 +a le "8.00E 33.E 3..55 3/83.5 3/1/4 3/4.5=E .. 1/. . Total !ncome Total E>penditure :perating -rofit .4. *rowth of the IBBL in terms of Social Profita ility 2%... .540= 1/08.40E 5/.0.. ./ *rowth over %.01 =.1=38 1///8 8. +a le %.10E...1..4= =.=4.10E 31.0.4.4.=3 ..001+ .. 48=4 518/8 33=88 1//=3 1./8 80..3 5480.33." %..5.8=/.E ++ 80.=4E ++ .34.8. Ta2le 18 shows the growth of inward remittances through the !BB' during .."<%./=3 530/ /.005 which are .84E .( *rowth over %.=3 3./=E .( *rowth over %..( ...// .4 ./.3//4 11. *rowth of Income and E:penditures of the IBBL 2%. Particulars %.38 .1.( .=.0E +14.0E 1..3. The e>penditure of !BB' decreased significantl in .. .//5 =.. .05E !mport E>port Aemittance Total 8oreign E>change Business ...3.) 1 ..) *rowth over %. 1=.3../3E 188/..33E ++ Ta2le 14 shows the growth of income and e>penditure of !BB' during .33E ..... 10......5E =..) " Num2er of emplo ees 9iFii< i< Aegular Emplo ees 3831 ..5.05 ../ *rowth over %.5..38E 13. The growth was significant in .=4E.% 3..55E %./.% 3/." 10..5=E %.E .E 3. million in .1=E ...005.% *rowth over %..4.% *rowth over %.. respecti&el .=4E %.001+.

30 .) *rowth over %.345.8= .( 18./=E .3E 5=0." 11..=.. Ma>imi7ation of the &alue of the compan is considered as the 2est goal of a compan .8=5 /.005.3 .1 .3..5/0 33.8E 3. But 0lhamdulillah..3.00.4/ 3= .% 13.13E 4.80E The a2o&e anal sis clearl shows that during the period under stud the !slamic 2an)s in Bangladesh in general and the !BB' in particular was growing in respect of most of the indicators of 2an)ing performance anal sis.38E 110/./.1 33 +3.8.. 3=1. The goodwill of the !slamic 2an)s was the cause of headache to a section the people and the media. of Villages 13.E .. 10=. 45./5 + 10.5 35 13.001+.0...0 shows the growth rate of the !BB' in terms of social profita2ilit during .. !n particular. /33 .4../5 ..00. .0/E 3 ..0.4= 38.=1E Ta2le .88 3.4E 1.. !n that sense the !slamic 2an)s ha&e 2een an all time success stor .. which indicates that !BB' creates the emplo ment opportunit in the countr significantl .0/ 1/.= . the growth of emplo ees is increasing during . 100./3 +aka in crore Sl# 0o# Particulars %.0.3.3..) 1 A(%? 0mount of !n&estment 9dis2ursed< A(%? 0mount of !n&estment 9:utstanding< A(%? No.. in the almost dead share mar)et of Bangladesh where most of the companies are struggling for e>istence. *rowth of Rural -evelopment Scheme of the IBBL 2%.=3E %.Thoughts on Economics .. of 0ccounts A(%? No.( *rowth over %..13E =84." %.% *rowt h over %. it was a great surprise to 2oth friends and foes of the !slamic 2an)ing s stem that in spite of all negati&e pu2licit the !slamic 2an)s in Bangladesh are continuing to gain in e&er aspect.1=..0. to . the share prices of !slamic 2an)s were affected &er little.=0E 1/3./E /./5 3=00 . Emplo ee per Branch ==1 3.08E .5.80E %../= .1.3 ( ) ii< A(% and others 0&g..1.=0 ."<%.=E %..E ..E 5.E =.4=4./ *rowth over %.. +a le %".0/E 1.4..8/3 . Ver recentl the admirers of !slamic 2an)ing s stem ha&e noticed a well+orchestrated negati&e pu2licit against the !slamic 2an)ing s stem 2 a section of media 2oth at home and a2road.5 . !t was possi2le partl 2ecause of the full commitment and sincere effort 2oth of management and emplo ees of !slamic 2an)s and partl 2ecause of the huge friendl and moti&ated customer of !slamic 2an)ing s stem.3..8/E 130.5 ...

&arious issues. it will 2e e>posed to the same criticism which was directed to interest as a fi>ed charge on capital. %tatistics (epartment. 2ut all these ris)s are insura2le and are actuall insured against. Bangladesh Ban). %tatistics (epartment. %tatistics Bangladesh Ban). #uarterl pu2lication of 'cheduled Banks 'tatistics. agriculture etc. dul passed o&er to the other part . Bai+Mua66al etc are lac)ing the fulfillment of all conditions of the shariah. %ome of these modes of finance are said to 2e e>posed to some ris). &arious issues. 0 financial s stem 2uilt solel around these modes of financing can hardl claim superiorit o&er an interest 2ased s stem on grounds of e@uit . :n the other hand. "e wrote. the superiorit of which could 2e claimed on the 2asis of profit+sharing. (ha)a. for an alternati&e to interest s stem which is not 2ased on sharing.. industr .omparati&e %tud on -erformance E&aluation11111 in the histor of 2an)ing in Bangladesh.. 3.. Bangladesh Ban). 9# +he Pro lem Area Identification= Conclusion and Recommendation The 2iggest pro2lem area for !slamic 2an)s in general and the !BB' in particular is the failure to implement the !slamic modes of in&estment in its truest sense. G5e can not claim. The uncertaint to which the 2usiness 2eing so financed is e>posed is. 2aiCsalam. Annual (eport) *++. Ne6atullah %iddi@ui is worth mentioning.ouncil. not e&en during the 144/ crisis. are all predetermined li)e interest. (epartment. to ta)e necessar steps so that compliance of shariah is ensured at the 2ranch le&el of all the !slamic 2an)s in all modes of in&estment. 0s depicted in the stud . 5e will further e>pect from the !slamic 2an)ing legends. leasing and lending with a ser&ice charge. Bangladesh Ban). efficienc .. . most of the trading modes li)e Bai+Mura2aha.H 5e are happ to learn that the !BB' authorit has ta)en a decision to increase in&estment in Mushara)ah and Mudara2ah modes. if the alternati&e in practice is 2uilt around predetermined rates of return to in&esti2le funds supplied to finance trade. 0 . 5hat is worse. /conomic Trends. The shareholders of the !slamic 2an)s ne&er faced an de2acle. most of the !slamic 2an)s at home and a2road are scared to go for profit sharing and profit and loss sharing modes of in&estment. RE1ERE0CES 1. (ha)a. !t so happens that the returns to finance pro&ided in the modes of finance 2ased on mura2aha. speciall the central %hariah . (ha)a. !n this connection a famous statement of (r. sta2ilit and growth. . Bangladesh Ban). Bangladesh Ban).-*++.

. Vol. (. Bhattachar6ee.. -art+. 5or)ing paper. No.Thoughts on Economics . 5. G-rofit and -rofita2ilit of N.omparati&e %tud H. K!V. =. No.asual AelationH.. K!K.1. No.. J0n E&aluation of performance of N. 0uditorium. 10. 8inance Ministr Barai M. (. G8inancial Dlo2ali7ation? Ban)ing sector in BangladeshH.K!!. Vol. 1445.1. %aha. 0ournal of Business 'tudies. 8unctions of Ban)s and other 8inancial !nstitutions.and M. (ha)a *ni&ersit . Lune1441. 8. Bhattachar6ee. 4. /. March and Lune 1484. List of indicators used for measuring performance of Banking Industry Performance -imensions *eneral Business !easures !easures Total Business (eposit 0d&ances 0d&ance+(eposit Aatio Total !ncome &perational -efinition Total (eposit F Total 0d&ance Time (eposit F (emand (eposit 0d&ance B(eposit Profita ility !anagement soundness Aeturn on E@uit Total e>penditure to total income Branch E>pansion Net !ncome B Total E@uit Total E>penditure B Total !ncome Total No of Branches . Appendi: +a le<%%. the 2haka 3niversity 'tudies. 0ournal of the Institute of Bank 1anagement.. Bhui an M. (. Vol. . GManagerial Effecti&eness of -ri&ate .BsC. (ecem2er 1448. T%.00. No.I . Lune1488. presented on March =. Vol..ommercial Ban)s? 0 . and M.5 .howdhur . (ha)a *ni&ersit . G-erformance of 8oreign Ban)s &is+M+&is :ther .0 . KV!. 'ia)at "ossain. 0ournal of Business 'tudies..0 and et al.% !slam. -roducti&it Measurement of Nationali7ed . ".ommercial Ban)s of Bangladesh? 0 Multi&ariate 0nal sisC.Bs in Bangladesh? 0n 0nal sis of the ( namics and .I.. Bhattachar6ee.1 and . Bangladesh# Bank &arikrama.ommercial Ban)s :perating in BangladeshH.4. *ni&ersit of (ha)a. and %.. Vol.

.omparati&e %tud on -erformance E&aluation11111 Social Profita ility Emplo ment Deneration Aural Branch to Total Branch Total No of Emplo ees No of Aural Branches B Total Branches ./ 0 .

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