Final Internship Report

Internship Report on
Financial Statement Analysis of First Security Islami

Bank Limited
Submitted To
Dr. Md. Abdur Rouf

(Associate Professor)
Department of Business Administration
Faculty of Business & Entrepreneurship
Daffodil International University
Prepared By
Nafiz Intiaz
ID: 163-11-373
Major in Finance
Bachelor of Business Administration
Department of Business Administration
Faculty of Business & Entrepreneurship
Daffodil International University
Submission Date: 17-06-2020
1
Chapter-One
Introduction
2
1.1 Introduction
Banking system occupies an important place in a nation’s economy. A banking institution is

indispensable in a modern society. It plays a pivotal role in the economic development of a
country and forms the core of the money market in an advanced country. In recent times the
banking sector over the world has been undergoing a lot of changes due to deregulation,
technological innovation, globalization etc. Bangladesh banking sector is lagging far behind in
adopting these changes. To thrive well in this changing environment, not only development of
appropriate infrastructure is necessary but also infusion of professionalism in to banking service
is essential. The Banking sector is one of the highly regulated sectors in our country. It is
governed by the rules and regulation of Central Bank of the country i.e. Bangladesh Bank and
Security and Exchange Commission. The bank companies are forced to comply the best
accounting practices. It strictly follows International Accounting Standard (IAS) norms. It
publishes the financial statement every year getting it duly audited by recognized audit firms.
Every bank of our country has a division named Financial Administration Division (FAD) which
takes care of the accounting issues of the Bank. Most of the personnel who lead these divisions
are of accounting background. Among the accounting based FAD personnel who know the
banking operation better can contribute more in the banks.
Islami bank Bangladesh Limited is an unconditional and specialized financial institution which is
first of its kind in South East Asia performs most of the standard banking service and investment
activities on the basis of profit-loss sharing system conforming to the principles of Islamic
Shariah. Islami Bank does not pay interest to depositor. Instead depositors participate in the
profitability of the bank. The Bank participates in financing long-term projects on the basis of
profit-loss sharing instead of granting credit facilities with interest. IBBL also performs various
social welfare activities through its subsidiary organ named Islami Bank Foundation (IBF).
Career in Banking has become very lucrative over the last few years considering the work
environment and remuneration package. As a student of BBA, I cherish to be a banker and that is
why I had chosen a banking organization for my internship. I chose IBBL because it has a good
reputation in the banking community.
My internship program specially based on Islami Bank Bangladesh Limited and I want to focus
the convergence in lending (investment) performance between IBBL vs. other conventional bank
in Bangladesh. For my study purpose I choose National Bank Limited as an example of
conventional bank.
Origin of the report

This report is done as partial requirement of the 2 months internship program for the BBA
students of ASA University Bangladesh (ASAUB). During my internship period I joined Islami
Bank Bangladesh Limited at Shyamoli Branch. My University supervisor Abdullah-al Masum
suggest me that the topic of my report would be “Investment Mechanism of Islami Bank
Bangladesh Limited” and prepare this report in the organization.
Significance of the study
Islami Bank Bangladesh Ltd. is the biggest Bank in Bangladesh in private sector. There are a few
numbers of private Banks that can compete with IBBL. A Banking system is aiming to gain the
goal of Islamic economy through setting a well-designed Islamic Monitory system. Regarding
use of money Islam has its clear-cut instruction through some distinctive guidelines. Avoiding
interest (Riba), restricting exploitation & speculation etc. are major guideline in this process. So
Islamic Banking system is doing banking business under Islamic guide lines.
Scope of the study
The scope of the organizational part covers the organizational structure, background, products
and services and the financial performance of Islami Bank Bangladesh Limited as a whole and
the main part covers investment risk management of IBBL. This report helps us to understand
the clear real-time experience about the investment business operations of IBBL.
In this report I have focused on all the qualitative which include profiles of IBBL, Investment
mechanism like Bai mechanism, Partnership or Share mechanism and Leasing or Ijara
mechanism, different schemes of investment such as household durable schemes, housing
investment scheme, transport investment scheme, car investment scheme, investment scheme for
doctors, small business investment schemes, rural development scheme etc.
Objective of the study

Primary Objective:
 The primary objectives of this report are to represent the “Investment Mechanism” of
Islami Bank Bangladesh Limited and to have a clear conception about all of the essential
parts of the internship program.
Secondary Objective:
 To apply theoretical knowledge in the practical field.

 To know the investment procedures of IBBL.
 To analyze sector wise and geographical location wise investment of IBBL
 To analyze different mode wise investment of IBBL through trend analysis.
 To identify strength and weakness of lending and investments of overall banking system.
 To identify the problems related to investments faced by IBBL and other conventional
banks.
Methodology of the study
Methodology is the process or a system through which a study is being carried out for the
purpose of collection of information that is required is collection with the study for reaching a
conclusion on that study. For smooth and accurate study everyone have to follow some rules &
regulation. The study impute were collected from two sources:
Primary Sources of Data: I discussed with the officials and executives of the IBBL,
Shyamoli Branch and found the approximate data which has been used and presented in this
report. The study has been conducted through the assistance of Investment Department,
Shyamoli Branch as per their operating and maintaining an investment business through applying
modern and technological means. I have also physically observed the effectiveness of the efforts
relating investment business effectively and efficiently managed by Islami Bank Bangladesh
Limited, Shyamoli Branch. Primary sources of data include the following:
 Practical work experience,

 Direct Interviews & Conversation
 Official records
 Observation of various organizational procedures
 Expert opinion
 Practical desk work
 Direct observations
Secondary Sources Data: I have collected secondary data from the following sources:
 Annual report of Islami Bank Bangladesh Limited.

 Training sheets which are provided by Islami Bank Training and Research Academy
(IBTRA).
 IBTRA Library.
 Files & Folders of IBBL
 Memos & Circulars of IBBL
 Various publications on Bank,
 Manuals of IBBL regarding investment business.
 IBBL‟s website (www.islamibankbd.com).
 Different circulars sent by Head Office and Bangladesh Bank.
Limitation of the Report
Although I have obtained the whole hearted co-operation from the employees of Islami Bank
Bangladesh Limited, Shyamoli Branch and Islami Bank Training and Research Academy but in
the way of my study, I have faced the following problems, which may be termed as the
limitations of the study. Some limitations are as under:
 The main constraint of the study was insufficiency of information, which was required
for the study. There are various information the bank employee can’t provide due to
security and other corporate obligations.
 All the branches of the bank were not physically visited and all the concerned personnel
of the bank have not been interviewed.
 Lack of in-depth knowledge and analytical ability for writing such report.
 Lack of experience.
 Learning all the banking functions about the investment mechanism within just 60 days
was really tough.
 Data and information used in this study are mostly from secondary sources.
 Large scale research was not possible due to the constraints and restrictions posed by the
bank.
The report has encountered these limitations that may hinder the progress of the study but with
constant effort, I try to minimize the negative effects of these limitations.
Chapter-Two
An Overview of the IBBL

An overview of Islami Bank
The interest based banking system and mechanism is very familiar to us. At the time of
independence Bangladesh inherited an interest-based banking system introduced by the British
government during the colonial period. At present four nationalized banks, four specialized
banks, nine foreign banks and thirty one private commercial banks are operating in the financial
market of Bangladesh. But the Islamic banking in Bangladesh dates back to 1983 when the
Islami Bank Bangladesh Limited was established with a view to conducting its banking activities
based on the principle of Islamic Shariah.
Islamic banking was successfully tries in Egypt. After establishing the MitGhamar Model, Naser
Social Bank was in the process of establishment. During the seventies, Islamic Development
Bank (IDB) and a number of Islamic banks at national levels were established in the Islamic
world. At home the Islamic groups were vigorously working for adoption of Islam as the
complete code of life. They found Islamic banking in ready form of immediate introduction. Two
professional bodies “Islamic Economics Research Bureau (IERB)” and “Bangladesh Islamic
Bankers Association (BIBA)” were taking practical steps for imparting training on Islamic
Economics and banking to a group of bankers and arranging some national and international
seminars/workshops to mobilize local and foreign people and attract investors to come forward
to establish Islamic bank in Bangladesh. Their professional and right-thought activities were
reinforces by a number of Muslim entrepreneurs working under the aegis of Muslim
Businessman Society. The body concentrated mainly in mobilizing equity capital for the
emerging Islamic bank. Due to continuous and dedicated work of the above groups and
individuals and active support from the government, Islamic banking could be established in
early eighties.
Islamic banks have been operating in Bangladesh alongside with the traditional banks. Like any
other traditional commercial banks, they do mobilize deposits and produce loans. But there
modes of operation, based on Shariah, are different from the other traditional commercial banks.
However the eight Islamic banks operating in Bangladesh are:
1) Al-ArafahIslami Bank Limited

2) Export Import Bank of Bangladesh Limited
3) First Security Islami Bank Limited
4) ICB Islami Bank
5) Islami Bank Bangladesh Limited
6) ShahjalalIslami Bank Limited
7) Social Islami Bank Limited
8) Union Bank Limited
The Organization of Islamic Conference (OIC) defined an “Islamic Bank as a financial

institution whose statutes, 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
operation.”
According to Islamic banking Act 1983 of Malaysia, and Islamic Bank is a company which
carries on Islamic Banking Business Islamic Banding business means banking business whole
aims and operations do not involve any element which is not approved by the religion Islam.
From those definitions, we can find some characteristics of Islami Banking as:
 It is a financial institution.
 It is a business institution.
 It operates its business activities free from interest.
 It is run according to rules and regulations formed and amended by Shariah Council.
 Islamic bank means not business product but running business through money.
 It is profit loss sharing business organization.
The main objective of Islamic Banking is not only to earn profit, but also to do good and welfare
to the people. Islam upholds the concept that money, income and property belong to Allah and
this wealth is to be used for the good of the society.
History of Islami Bank of Bangladesh Limited
Establishment of Islamic Development Bank (IDB) by the OIC member states in the year 1975
has been proved to be a breakthrough in the expansion of Islamic Shariah based finance and
specially banking throughout the world. As a founder member of IDB, the Government of
Bangladesh also had the commitment to establish Islamic banks which was reflected in different
steps taken by the governments of the country. The OIC members consented to the proposals to
introduce Islamic economy and banking in their respective countries held in the foreign
ministers’ conferences in 1978 and 1980 in Dakar and Islamabad respectively. In the year 1981,
OIC in its 3rd summit held in Makkah approved the proposition submitted by Bangladesh to
introduce separate banking system following Islamic ideology. As per decision, the GOB sent
representatives to the Middle Eastern countries to learn the existing banking systems in those
countries.
In the private sector, the Islamic Economics Research Bureau (IERB) was the first organization
that took active initiative in this regard. They arranged a national seminar on Islamic Economics
and Banking in the year 1979 and inspired by the discussion and the papers presented in the
seminars, some local bankers formed ‘Islami Bank Working Group’. The IERB again arranged
an international seminar in 1980. After the seminar, Dhaka based ‘Muslim Businessman Society’
(later renamed as ‘Industrialist and Businessmen Association’) under the leadership of renowned
industrialist Abdur Razzaque Lasker, took initiative to establish an Islamic bank and applied to
the government for permission. At this stage, the GOB provided necessary permission in the year
1983 and at last ‘Islami Bank Bangladesh’ was registered under Company Act in which 19
Bangladeshi national, 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.
Concept of ‘Islamic Banking
A banking system is based on the principles of Islamic law (also known Shariah) and guided by
Islamic economics. Two basic principles behind Islamic banking are the sharing of profit and
loss and, significantly, the prohibition of the collection and payment of interest. Collecting
interest is not permitted under Islamic law.
Since this system of banking is grounded in Islamic principles, all the undertakings of the banks
follow Islamic morals. Therefore, it could be said that financial transactions within Islamic
banking are a culturally distinct form of ethical investing (for example, investments involving
alcohol, gambling, pork, etc. are prohibited). The Dubai Islamic Bank has the distinction of
being the world's first full-fledged Islamic bank, formed in 1975.
What is Islamic Banking?
“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 the receipt and payment of
interest on any of its operations”. -OIC
Ziauddin Ahmed says, “Islamic bank is essentially a normative concept and could be defined as
conduct of banking in consonance with the ethos of the value system of Islam.”
It appears from the above definitions that Islamic bank is systems of financial intermediation that
avoids receipt and payment of interest in its transactions and conducts its operations in a way that
it helps achieve the objectives of an Islamic economy. Alternatively, this is a banking system
whose operation is based on Islamic principles of transactions of which profit and loss sharing
(PLS) is a major feature, ensuring justice and equity in the economy. That is why Islamic bank is
often known as PLS-banks.
Objective of “Islamic Banking”
The primary objective of establishing Islamic banks all over the world is to promote, foster and
develop the application of Islamic principles in the business sector. More specifically, the
objectives of Islamic banking when viewed in the context of its role in the economy are listed as
following:
 To offer contemporary financial services in conformity with Islamic Shariah;

 To contribute towards economic development and prosperity within the principles of
Islamic justice;
 Optimum allocation of scarce financial resources
 To help ensure equitable distribution of income.
 To conduct interest-free banking.
 To establish participatory baking instead of banking on the debtor-creditor relationship.
 To accept deposits on profit-loss sharing basis.
 To contribute in achieving the ultimate goal of the Islamic economic system.
These objectives are discussed below.
 Offer Financial Services: Interest-based banking, which is considered a practice of

Riba in financial transactions, is unanimously identified as anti-Islamic. That means all
transactions made under conventional banking are unlawful according to Islamic
Shariah. Thus, the emergence of Islamic banking is clearly intended to provide for
Shariah approved financial transactions.
 Islamic Banking for Development: Islamic banking is claimed to be more

development- oriented than its conventional counterpart. The concept of profit sharing
is a built-in development promoter since it establishes a direct relationship between the
bank's return on investment and the successful operation of the business by the
entrepreneurs.
 Optimum Allocation of Resources: Another important objective of Islamic banking is

the optimum allocation of scarce resources. The foundation of the Islamic banking
system is that it promotes the investment of financial resources into those projects that
are considered to be the most profitable and beneficial to the economy.
 Islamic Banking for Equitable Distribution of Resources: Perhaps they must

important objective of Islamic banking is to ensure equitable distribution of income and
resources among the participating parties: the bank, the depositors and the entrepreneurs.
Features of 'Islamic Banking
Islami Bank Bangladesh Limited (IBBL) was incorporated on 13.03.1983 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.
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 up lift ment 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.
Vision of IBBL
IBBL vision is to always strive to achieve superior financial performance, be considered a

leading Islamic bank by reputation and performance. To accomplish our aims, we have identified
a series of strategic goals:
 Our goal is to establish and maintain the modern banking techniques, to ensure the
soundness and development of the financial system based on Islamic principles and to
become the strong and efficient organization with highly motivated professionals,
working for the benefit of people, based upon accountability, transparency and integrity
in order to ensure stability of financial systems.
 IBBL will try to encourage savings in the form of direct investment.
 We will also try to encourage investment particularly in projects, which are more likely
to lead to higher employment.
Mission of IBBL
 To establish Islamic Banking through introduction of welfare oriented banking system.

 To ensure equity and justice in all economic activities.
 To achieve balanced growth and equitable development through diversified investment
operations particularly in the priority sectors and less developed areas of the country.
 To encourage the socio-economic development and financial services to the low-income
community particularly in the rural areas.
Shariah Council of IBBL
Profile of Council Members: The Shariah Council of Islamic Bank generally consists
of experts from the following four areas:
1. Fuqaha: Persons representing this group must be well versed in the Quran, Sunnah and
fully conversant with the opinion of all schools of islami thought and Islami law and
jurisprudence. They must view Islam as a total way of life and a living religion.
2. Banker: There must be a member who is fully conversant with banking law and
practices and has practical experiences in Banking business including foreign trade.
3. Economist: A member from this group need not necessarily be an Islami economist to
start with. But if he is an Islami Economist it is an added advantage. What is important is
that he must be really proficient in modern economies with an in depth study of the
community, which a bank is going to solve. He must have up to date knowledge in the
development of the contemporary world.
4. Lawyer: A member representing this group should be a successful practitioner lawyer.

He must be proficient in commercial law including company law. In consultation with the
Fuqaha and Economist members of the council, he should be able to draft such
innovating contracts, which will have the sanction of Islami principles and a banking law
of the land.
Objectives of Shariah Council: The functions of the council are to offer views and
opinions on matters related to the bank from time to time. The council may require any
paper document from the bank and examine the same to see whether it is according to see
whether it is according to Islamic principles.
 The shariah council assists the Board of Directors by advising them on matters related to
shariah.
 The opinion of the majority of members is taken as the opinion of the council provided
that the said opinion is supported by at least three Muftis of the council.
 The council maintains its secretariat and a well-equipped library as the Head Office of the
bank where it keeps proper records of all of its proceedings and decisions.
 The council may whenever it thinks necessary, constitutes a subcommittee to help the
council.
Strategic Objectives
 To ensure customers' satisfaction.

 To ensure welfare oriented banking.
 To establish a set of managerial succession and adopting technological changes to ensure
successful development of an Islamic Bank as a stable financial institution.
 To prioritize the client’s welfare.
 To ensure diversification by Sector, Size, Economic purpose & geographical location
wise Investment and expansion need based Retail and SME/Women entrepreneur
financing.
 To invest in the thrust and priority sectors of the economy.
 To strive hard to become an employer of choice and nurturing & developing talent in a
performance-driven culture.
 To pay more importance in human resources as well as financial capital.
 To ensure zero tolerance on negligence in compliance issues both Shariah and regulatory
issues.
 To train & develop human resources continuously & provide adequate logistics to satisfy
customer’s need.
 To be excellent in serving the cause of least developed community and area.
 To motivate team members to take the ownership of every job.
 To ensure development of devoted and satisfied human resources.
 To encourage sound and pro-active future generation.
 To achieve global standard.
 To strengthen corporate culture.
Present Program of IBBL
Islami Bank Bangladesh Limited

(IBBL)
General Banking Investment Foreign Exchange
Figure 2.1: Present Program of the Organization

Difference between Conventional Banking and Islamic Banking
For the interest of readers, the distinguishing features of the Conventional banking and Islamic
banking are shown it term of a box diagram as shown below:
SL NO Conventional Banks Islamic Banks

01 The functions and operating modes of The functions and operating modes of Islamic banks
conventional banks based on manmade based on the principles of Islamic Shariah.
principles.
02 The investor assured of a predetermined rate In contrast, it promotes risk sharing between provider
of interest. of capital and the user of funds.
03 It aims at maximizing profit without any It also aims at maximizing profit but subject to
restriction. Shariah restrictions.
04
It does not deal with zakat and does not pay In the modern Islamic banking system, it has become
any zakat. one of the service-oriented functions of the Islamic
banks to collect and distribute Zakat.
05 Leading money and getting it back with Participation in partnership business is the
interest is the fundamental function of the fundamental function of the Islamic banks.
conventional banks.
06
It can charge additional money (compound The Islamic banks have no provision to charge any
rate of interest) in case of defaulters. extra money from the defaulters.
07
In it very often, bank’s own interest It gives due importance to the public interest. Its
becomes prominent. It makes no effort to ultimate aim is to ensure growth with equity.
ensure growth with equity.
08 For interest-based commercial banks, For the Islamic banks, it is comparatively difficult to
borrowing from the money market. borrow money from the money market.
09 The relationship of client is creditor and The relationship of client is partners, investors and
debtors. traders.
10 A conventional bank has to guarantee all its Strictly speaking, an Islamic bank cannot guarantee all
deposits. its deposits
2.13 Difference between Riba and Profit
Some of people think there is a common interest and profits. In fact, interest and profit are not
the same. There are two differences between the theoretical and the practical. Now I discuss the
riba and profit in the given below:
Riba:
Dictionary Meaning: Arabic word Riba means increase, excess, expansion, addition, growth,
superior, increase of anything from its original amount.
Technical Meaning: It means interest, usury, sud etc. Riba is an increasing which is without
an equal counter value.
Definition of Riba: In Short sense “Riba is a predetermined, fixed and time-related excess
over the above the principal of loan”. In Broad sense, “Riba technically refers to the premium
that must be paid by the borrower to the lender along with the principal amount as a condition for
the loan or for an extension in its maturity”.
Profit:
Dictionary Meaning: Arabic word for profit means ‘Ribhun’. This means growth, surplus,
residual, addition to capital.
Definition of Profit: Profit is the difference between the value of production and the cost of
production which is Halal according to Islami Shariah. Profit on loss comes from investment in
business activities. Profit is the result of ownership transaction and risk following the four stages:
 Transformation through Bai /Buying Selling of goods.

 Risk of Transformation and Ownership.
 Other Condition of Shariah.
 Result-Profit on loss
Comparison between Riba and Profit:
SL No Riba Profit
01 In case of riba the lender of capital The entrepreneurial profit of capital, labor
labor and time investment and risk- and the result of the investment and taking a
taking not only lend money. risk.
02 Riba has a loan-ownership retained Profit has Ownership Exchanged
03 Riba is an excess-without exchange Profit is an Equity of Value
value.
04 Riba has no transformation. Profit has transformation.
05 Riba cannot take risk in the ownership. Profit takes always risk in the business.
06 Riba has no relation with result Profit has the result.
imposed.
07 Riba is Predetermined and Fixed. Profit ambiguous and uncertain.
Core Values
 Trust in Almighty Allah

 Strict observance of Islamic Shariah
 Highest standard of Honesty, Integrity & Morale
 Welfare Banking
 Equity and Justice
 Environmental Consciousness
 Personalized Service
 Adoption of Changed Technology
 Proper Delegation, Transparency & Accountability
Corporate Information
Name of the Company : Islami Bank Bangladesh Limited

Legal Status : Public Limited Company
Company Registration No. : Dated March 13, 1983
Bangladesh Bank License No. : BL/DA/4290/83
Tax Payer Identification Number (TIN) : 376764873732
VAT Registration Number : 19011032134
Employees : 13349
Total Branches : 301
ATM Booth (own) : 414
ATM Booth (shared) : 2000
Off-Shore banking Unit : 03
Directors : 15
Sponsors : 36
Shareholders : 60,857
MPB holders : 23,272
Local Shareholders : 32.49%
Foreign Shareholders : 67.51%
Foreign Correspondents : 723
Chairman : Prof. Abu Nasser Muhammad Abduz Zaher
Managing Director& CEO : Mohammad Abdul Mannan
Company Secretary : Abu Reza Md. Yeahia
Head of Internal Control & Compliance : Md. Habibur Rahman Bhuiyan, FCA
Chief Financial Officer : Mohammad ShahidUllah, ACA, CIB, CDCS
Credit Rating Agency : Credit Rating Information and Services Ltd.
Registered Office : 40, Dilkusha C/A, Dhaka-1000, Bangladesh
Phone : PABX: 9551105, 9551062, 9550415, 9563040
Mobile : 88-01711435638-9
FAX : 88-029564532, 9568634
SWIFT : IBBLBDDH
E-mail : info@islamibankbd.com
Website : www.islamibankbd.com
Corporate Structure
Islami Bank
Bangladesh Limited
Shari’ah Supervisory
Committee Board of Directors Review Committee
Chairman
Risk Management Executive Audit

Committee Committee Committee
Islami Bank Islami Bank Capital Islami Bank

Securities Limited Management Limited Foundation
MANAGING
DIRECTOR
Shari’ah Secretariat Board Secretariat

Division
Management Asset Liability

Committee (MC) Committee (ALCO)
Islami Bank Training Human Resources Research & Development

& Research Academy Division Division
Operations Corporate Retail Internationa Development Internal Control ICT Wing Risk
Wing Investment Investment l BANKING Wing & C compliance Management
Wing Wing Wing Wing Wing
VIGILANCE Squad MD’s Secretariat
Zones & Corporate

Branches
IBBL Networks
As a Bank of the mass people and to deliver its banking services to every possible doorstep,
IBBL has a vast banking network across the country by mean of setting up its branches at almost
all the suitable places of the country. Alternative Delivery Channel (ADC) with 450owned &
4000 shared ATM booths has expanded the network. As a part of gradual coverage to the
important commercial places both in urban & rural areas, the Bank has successfully opened 8
Branches in 2014 raising the total number of Branches to 294 from 286 of the previous year.
Aiming to achieve a balanced development in economic movement of the country as well as to
uplift the socio economic conditions at rural areas, IBBL has the highest number of the rural
branches among the first generation private banks. Out of 301 Branches, 73.35%, i.e. 216 are
urban Branches and 27%, i.e. 84 are Rural Branches.
Year 1985 1990 1995 2000 2005 2010 2013 2014 2015
13 49 90 116 169 251 286 294 301
Products and Services of Islami Bank Bangladesh Limited

Deposit Schemes:
 Al-Wadeah Current Account (AWCA)
 Mudaraba Savings Account (MSA)
 Mudaraba Term Deposit Account (MTDR)
 Mudaraba Special Notice Account (MSNA)
 Mudaraba Special Savings (Pension) Account (MSSA)
 Mudaraba Hajj Savings Account (MHSA)
 Mudaraba Savings Bond Account (MSBA)
 Mudaraba Waqf Cash Deposit Account (MWCDA)

 Mudaraba Monthly Profit Deposit Account (MMPDA)
 Mudaraba Muhor Savings Deposit Account (MMSA)
 Students Mudaraba Savings Account (SMSA)
 Mudaraba Farmers Saving Account (MFSA)
 Mudaraba NRB Savings Bond (MSNB)

 Mudaraba Foreign Currency Deposit Account (MFCD).
Investment Scheme:
 Household Durables Scheme (HDS)
 Investment Scheme for Doctors (ISD)
 Transport Investment Scheme (TIS)
 Car Investment Scheme (CIS)
 Small Business Investment Scheme (SBIS)
 Micro Industries Investment Scheme (MIIS)
 Agricultural Implement Investment Scheme (AIIS)
 Real Estate Investment Program (REIP)
 Real Estate Investment (Commercial & Working Capital)
 Agricultural Investment of IBBL
 NRB (Non Resident Bangladesh) Entrepreneurs Investment Scheme (NEIS)
 Women Entrepreneurs Investment Scheme (WEIS)

Rural Development Scheme
Foreign Exchange Scheme:
 Central Crediting of Remittances,
 Payment of 3rd Bank Remittance through TT & PO,
 Payment of Spot Cash Remittances - Online and Web-based,
 Centralized NRB Account Opening,
 SMS Notification, SMS Push Pull Service,
 Maintaining of NRD & NRT Accounts.
Special Service:
 Locker Services
 ATM Services
 M cash
 I Banking
 Online services.
Chapter-Three
Theoretical Background
Introduction
The overall investment mechanism of islami bank Bangladesh limited is presented through an
overview of 3P of investment of IBBl. Here the three P stands for the Policy of investment, the
process of investment and finally the principles on which the investment is made. The diagram
below will clarify the concept.
Investment Mechanism
of IBBL
Policy of investment Principles of

of IBBL Investment of IBBL
Process of investment
of IBBL
Figure 3.1: Investment Mechanism of IBBL (Source-Self)
 What do we mean by Policy: -A policy is a deliberate system of principles to guide

decisions and achieve rational outcomes? It is a statement of intent and is implemented as
a procedure of protocol.
 What to do we mean by Process: -A process is a series of systematic steps or actions to
be taken to attain a specific goal. Or in simple words, the way or the combined activity to
do something.
 What to do we mean by principle: - A fundamental, primary or general law on truth
from which others are derived. A law or rule that has to e followed or can be desirably
followed.
Investment Policy of Islami Bank Bangladesh Limited (IBBL)
Generally Islami Bank as the name implies runs its business based on Islamic shariah. Whatever
the policy it imposes over its management; is justified in the light of The Holy Quran and Islamic
shariah. The policy of investment of IBBL is listed below:
 Strict observance of Islamic shariah.

 Investment to national priority sectors.
 Diversified investment portfolio:
 Diversified by size, sector, geographical area, economical purpose,
securities and mode of investment.
 Preference to short term investment.
 Preference to investment of small size
 To insure the safety and security of investment.
 To look profitability of investment
 To give support to Govt. denationalization industrial program.
 Investment to trade and commerce sector.
 Investment to industrial sectors.
 Investment to foreign trade (Import & Export)
 Prohibition of investment in sectors that are Haram in the light of shariah.
 All of this policy mentioned is strictly supervised by an Authority named “The Shariah
Supervisory Committee (SSC)”
SHARI’AH
HONESTY ACCOUNT TRANSPER JUSTICE

-ABILITY -ANCY
Figure 3.2: Policy of Investment (Source-Self)

Deposit Products of IBBL
Generally a bank takes certain steps to deliver its proposed investment to the client. But the
process takes deep analysis. Because banks invest depositors fund, not banks own fund. If the
bank fails to meet its depositors demand, then it must collapse. So, each bank should take strong
concentration on investment proposal. However Islami Bank Bangladesh Limited (IBBL) makes
its investment decision through successfully passing the following crucial steps.
Where the money came from: The deposit mobilization function IBBL is represented in the
following diagram. It collects money from the general people (people of every class and age
cycle) under.
AWCA
MSA
MTDRA
NITA MSNA
MFSA MHSA
MUDA SMSA MSSA MIESA

FUND
MFCD MSB
MNSB MMPDA
MWCD
A
Figure 3.3: Deposit products of IBBL (Source-Self)

Islami bank has several deposit schemes mentioned in the above diagram (Short forms).The bank
collects money from the general mass through this deposit accounts and accumulate the whole
fund to invest in the market. Currently IBBL has accumulated fund of 56 thousand cores.
Investment Process of final disbursement

IBBL has an 8 stage investment process. These steps are co related with one another in
sequential manner. Successful implementation of the preceding step is followed by the next one,
which start from selection of the appropriate client for the project and ending on monitoring and
recovering stage.
(1) SELECTION OF THE (2)

CLIENT APPLICAT- ION STAGE
(3) (5)DOCUME N-TATION

STAGE
APPRAISAL STAGE
Process
(4) (6)
SANCTION DISBURSEM
STAGE -ENT STAGE
(7) (8)
MONITORING RECOVERY
STAGE
STAGE
Figure 3.4: Investment Process of final disbursement (Source-Self)

Selection of the client: First of the all client will approach the any branch of the IBBL
and will notify the manager that he wants to take a loan from the bank. Secondly the bank
will consider the five C of the client. After successful discussion between the client and
bank, bank selects the client for its proposed investment. It is to be noted that, neither the
client nor the customer must agree with the banks rules & regulation before availing
investment. Generally, Banks analyses the following five C’s of the client
COLLATERAL
CAPACITY
CAPITAL CONDITION
CHARACTER
Figure 3.5: Client Selection Process (Source-Self)
Application Stage: At this stage the bank will collect necessary information about the
prospective client. For this reason, bank informs the perspective client to provide and or
fill duly respective information which is crucial for the initiation of the investment
proposal. Generally here all the required documents for taking investment have to prepare
by the client himself. Documents that are necessary for getting investment of IBBL are
prescribed below:
 Trade license photocopy (For proprietorship).

 Abridged pro forma income statement.
 Attested copy of partnership deed.
 Prior three years audited balance sheet for (joint stock Company).
 Prior three years business transaction statement for the musharaka / mudaraba
investment.
 Abridged pro forma income statement for the musharaka / mudaraba investment.
 Attested copy of the memorandum of Association (MOA) & Article of Association
(AOA) for the joint stock company.
 Attested copy of the Tax Identification Number (TIN)- including final assessment;
 Tenders of the proposed assets (in case of HPSM)
 Detailed summary of the study debtors and creditors (including both time & schedule)
 Summary of the personal moveable & immovable assets; and others.
Appraisal Stage: At this stage, the bank evaluates the client and his or her business. It is
the most important stage. On the basis of this stage the bank goes for sanctioning the
proposed investment limit/proposal. If anything goes wrong here, the bank suddenly stops
to make payment of investment.
In order to appraise a client, Islami Bank Bangladesh Limited (IBBL) provides a standard F-
167B form (Appraisal report) to the client for gathering all the information. The original copy of
the appraisal report is enclosing in the appendix chapter. However, the following contents are
presented from that appraisal report:
 Company / client information.

 Owner information.
 List of partners or directors.
 Purpose of investment facility.
 Details of proposed Facilities / Investment.
 Break up of present outstanding.
 Other liabilities of the client / group.
 Previous Bankers information
 Details of sister / Allied concerns.
 Allied Deposit as on
 Business or industry analysis
 Relationship Analysis.
 Asset liability position of the client as per audited balance sheet.
 Working capital assessment
 Risk grade
 Particulars of the go down for storing MPI/ Murabaha goods.
 Insurance coverage
 Audit observation
 Security Analysis.
Sanctioning Stage: At this stage the bank officially approves the investment proposal
of the respective client .In this case client receives banks sanction letter. Islami bank
Bangladesh limited (IBBL) sanction letter contains the following elements.
 Investment limits in million

 Mode & amount of investment
 Purpose of investment
 Period of investment
 Rate of Return
 Securities.
 Primary : stock of goods is the primary security

o LC / Bills : related documents
o Murabaha Post investment (MPI) / Bai-Murabaha: pledge of MPI /
Bai-Murabaha goods.
o MPI/Bai-Bai-Murabaha-TR; Lien on goods to be released.
 Cash/Goods :
o Bai-Murabaha: 25% cash security on cost price to be subsequently
converted to goods security.
o TR (Trust Receipt): Without cash security.
 Collateral: Immovable Properties
Cash / Goods securities: In allowing Murabaha investment and amount of cash security is
generally realized from the client (amount depends on the nature of goods, creditworthiness of
the client, collateral security obtained etc.) Which is converted to goods security after purchase
of goods purchased out of banks investment and client’s cash security is pledged to the bank,
kept under banks custody before it’s delivery to the client on payment. If for a Murabaha
investment cash security is fixed at 25% Banks investment stands 75% on the total goods
purchased. For example, if cost of total goods purchased is tk. 100000 bank investment will be
tk. 75000 and clients cash security will be tk. 25000.
Bank Client Total Cost of Goods
Tk. 75000 (75%) Tk. 25000 (25%) Tk. 100000 (100%)
Documentation Stage: At this stage, usually the bank analyses whether required
documents are in order. In the documentation stage, Islami Bank Bangladesh limited
(IBBL) checks the following documents of the client:
 Tax Payment Certificate

 Stock Report
 Trade License (Renewal)
 VAT Certificate
 Liability statement from different parties
 Receivable from different clients
 Other asset statement
 AungykarNama
 GhosonaPatra
 Three (03) years net income & Business transactions
 Performance report with the Bank
 Account statement of from the bank
 Valuation Certificate :
o Particulars of the proposal

o Particulars of the mortgage
o Particulars of the properties
 Outstanding liability position of the bank

 CIB (Credit Information Bureau) report.
Disbursement Stage: At this stage, bank decides tom pay out the money. Here the
client gets his/ her desired fund or goods. It is to be noted that before disbursement a site
plan showing the exact location of each mortgage property need to be physically verified.
Monitoring & recovering Stage: At this stage of investment processing of islami

bank Bangladesh limited (IBBL), bank will contact with the client continually, for
example- bank can obtain monthly stock report of the client in case of micro investment.
Here the bank will keep his eye on over the investment taker. If needed, bank will
physically verify the clients operations. Also if bank feels that anything is going wrong it
tries to recover its investment fund from the client.
Cash
Disbursement
Stage of
Documentation Monitoring
Recording
Figure 3.6: Stage of Documentation (Source-Self)

Principles or Modes of Investment of IBBL
The special features of the investment policy of the bank is to invest on the basis of profit – loss
sharing system in accordance with the tenants and principles of the Islamic shariah which is
already mentioned in the “Policy of investment of IBBL” part. Earning of profit is not the only
goal an objective of the Bank’s investment policy rather emphasizes is given on attaining social
goal and objective in creating employment opportunity. The Islami Bank Bangladesh Limited
follows the modes of investment presented in the following diagram.
BAI MECH- ANISM
BAI
MURABAHA
BAI-
SALAM
BAI- SHARE
MUAJJAL MECHA- NISM
ISTISNA’A
IJARA MECHA-
NISM
MUDAR-
ABA
MUSHAR-
AKA
MECHANISM OF INVESTMENT HPSM
Figure 3.7: Mechanism of Investment (Source- Self)

Bai-Mechanism of investment
Bai means trading. Bai-mechanism means purchase and sale of goods in cash or on credit or in
advance at an agreed upon profit, which may or may not be disclosed to the client. Majority of
investment of Islami Bank Bangladesh Limited (IBBL) are extended through this mechanism. A
good number of investment products have been designed to facilitate mainly working capital
financing. This mechanism can be further drawn into 6 categories as follows:-
Bai-Murabaha: The term Bai- Murabaha has been derived from the Arabic word
“Bai’un and Ribhun” means “Purchase and sales”. Bai-Murabaha means sale on agreed
upon profit.It is contract between a buyer and a seller under which the seller sells certain
specific goods permissible under the Islamic shariah and law of the land, to the buyer at a
cost plus agreed upon profit.
Important Features of Bai-Murabaha:
 Profit is shared as per agreement

 Loss is beard by the client
 Amount can be paid in installment
 Usual duration 1-2 years
 Rebate may be given on early adjustments.
 It is permissible for the client to offer an order to purchase by the bank particular goods
deciding its specification and committing him to buy the same from the bank on
Murabaha, i.e., cost plus agreed upon profit.
 It is permissible to make type promise binding upon the client to purchase from the bank
that is he is to either satisfy the promise or to indemnify the damages caused by breaking
the promise without excuse.
 Cash / collateral security can be taken to guarantee the implementation.
 Permissible to document the debt resulting from Bai-Murabaha by a guarantor, or a
mortgage, or both like any other debt. This may be taken on the time of signing of the
agreement.
 Stock and availability of the goods is a basic condition for signing the agreement.
Therefore the bank must purchase the goods as per specification of the client to acquire
ownership of the same before signing the agreement with the client.
 The bank must deliver the specific goods to the client on specific place time and date as
per the contact.
Bai-Muajjal: The term Bai- Muajjal has been derived from the Arabic words (Bai’un
and Ajalun) meaning purchase and sale and a fixed period or fixed time respectively. It is
contract between a buyer and a seller under which the seller sells certain specific goods
permissible under the Islamic shariah and law of the land, to the buyer at an agreed fixed
price payable at a fixed future date in lump sum or within a fixed period by fixed
installments. The seller may also sell the goods purchased by him as per order and
specification of the buyer.
Important Features of Bai-Muajjal:
 It is permissible by the client to offer an order tom purchase by the bank particular goods
deciding its specification and committing himself to buy the same from the bank on Bai-
Muajjal i.e., deferred payment sale at fixed price.
 It is permissible to make type promise binding upon the client to purchase from the bank
that is he is to either satisfy the promise or to indemnify the damages caused by breaking
the promise without excuse.
 Cash / collateral security can be taken to guarantee the implementation.
 Permissible to document the debt resulting from Bai-Murabaha by a guarantor, or a
mortgage, or both like any other debt. This may be taken on the time of signing of the
agreement.
 Stock and availability of the goods is a basic condition for signing the agreement.
Therefore the bank must purchase the goods as per specification of the client to acquire
ownership of the same before signing the agreement with the client.
 The bank must deliver the specific goods to the client on specific place time and date as
per the contact.
 The price once fixed as per agreement and deferred cannot be further increased.
 The Bank may sell the goods at one agreed price which will include both the cost price
and the profit.
 Unlike Bai-Murabaha; the bank may not disclose the cost price and the mark up
separately to the client.
Bai Salam: The term Bai Salam has been derived from the Arabic words (Bai’un and
Salamun).The word Bai’un means purchase and sale and the word Salamun means
advance. So the word Bai Salam combindly means the purchase and sale or trading in
advance payment. It is contract between a buyer and a seller under which the seller sells
in advance certain specific goods permissible under the Islamic shariah and law of the
land, to the buyer at an agreed price payable on execution of the said contract and the
commodities/ Products is / are delivered as per specification, size, quality, quantity at a
future time in a particular place.
Important Features of Bai-Salam:
 In other words, Bai – Salam is a sale whereby the seller undertakes to supply some
specific commodities / Products to the buyer at a future time in exchange of an advanced
price fully paid on the spot.
 Here the price is paid in cash, but the delivery of the goods is deferred.
 Bai Salam is a mode of investment allowed by Islamic shariah inn which the
commodities Products can be sold without having physical existence or the
physical/constructive possession of the seller. If the commodities or products is ready
for sale
 Bai-salam is not allowed in shariah, and then the sale may be done either in Bai-
Muajjal or in Bai-Murabaha mode of investment.
 Generally, Industrial and agricultural products are purchased / sold in advance under the
Bai Salam mode of investment to infuse finance so that production is not hindered due
to shortage of fund / cash.
 It is permissible to obtain collateral security from the seller client to secure the
investment from any hazards of production. Non supply / partial supply of commodities
/ products etc.
 It is also permissible to obtain mortgage and or personal guarantee from a third party as
a security before signing the agreement or at the time of signing the agreement.
 Bai-salam on a particular commodities / products or on product of a particular field or
farm cannot be affected. For Agricultural product only.
 The seller (manufacturer) client may be made agent of the bank to sell the goods
delivered to the bank by him provided a separate agency agreement is executed between
the bank and the client (Agent).
Bai-Istisna: Istisna is a contact between a manufacturer /seller and a buyer under which
the manufacturer/seller sells specific goods products after having manufactured,
permissible under Islamic shariah and the law of the land after having manufactured at an
agreed price payable in advance or by installments within a fixed period or on within a
fixed future date on the basis of the order placed by the buyer. some specific features of
the Bai-istisna is given below.
Important Features of Bai-Istisna:
 Istisna is an exceptional mode of investment allowed by Islamic shariah in which

products can be sold without having the same in existence. If the products are ready for
sale, istisna is not allowed in shariah. Then the sale may be done either in Bai-Murabaha
or in Bai-Muajjal mode of investment. In this mode, deliveries of goods are deferred and
payment of price may also be deferred.
 It facilitates the manufacturer sometimes to get the price of the goods in advance, which
he may use as capital for producing the goods.
 It gives the buyer opportunity to pay the price in some future dates or by installments.
 It is a binding contact and no party is allowed to cancel the istisna contact after the price
is paid and received in full or in part or the manufacturer starts the work.
 Istisna is specially practiced in manufacturing and Industrial sectors. However, it can be
practiced in agricultural and construction sectors also.
Share Mechanism of Investment
The share mode of investment is practiced quite more than before now a days. The share mode of
investment implies the practice of investment based on shared liability and possibilities of return
and loss. The share mode of investment of IBBL is basically divided in two ways. Those are
Mudaraba and Musharaka modes of investment.
Mudaraba Mode of Investment: The term mudaraba has been

derived from the Arabic word which means travel. Thus the word
mudaraba means travel for undertaking business.
 Mudaraba is a partnership in profit whereby one party provides capital and the other
party provides skill and labor. The provider of capital is called “Sahib- al- mal” , and
the provider of skill and labor is called “Mudarib”
 So, Mudaraba may be defined as a contract of partnership where the sahib-al-mal

provides capital to the mudarib for investing it in a commercial enterprise by applying
his labor and endeavor. Both the parties share the profit as per agreed ratio and the
loss, if any, being Bourne by the provider of the capital or the sahib – al – mal except
if it is due to breach of trust i.e., misconduct, negliance or violation of the conditions
agreed upon by the mudarib. If there is any loss incurred due to the mentioned above
reasons, the Mudarib will be liable for that.
 There are two types of mudaraba contact practiced by the Islami bank Bangladesh Limited
(IBBL) as follows:-
o Al mudaraba al Muqayadah: Rabbul mal (The financer) may specify particular

business or a particular place for the mudarib in which case he will invest the
money in that particular business or place. This is called Al Mudaraba al
Muqayadah.
o Al Mudaraba al Mutlaqah: However if Rabbul Mal gives full freedom to
mudarib to undertake whatever business he dreams fit, this is called al Mudaraba al
Mutlaqah.
Musharaka Mode of investment: The word Musharaka has been

derived from the Arabic word Shirkat or Sharikat (Shirk).In Arabic,
Shirkat or Sharikat or Shirk means partnership or sharing. Thus the
literal meaning of Musharaka is sharing, though the connotation of
this term is limited than the
term Shirkat. The term Musharaka has been introduced recently in Islamic banking literature to
mean a particular type of Shirkat.
 Musharaka may be defined as a contract of partnership between two or more

individuals or bodies in which all the partners contribute the capital, participate in the
management, and share the profit in proportion to their capital or as per pre-agreed
ratio and bear the loss, if any, in proportion to their capital or in proportion to equity.
 In Islami Bank Bangladesh Limited (IBBL), the bank may take part in a business with
its client’s, where both the clients and the bank provide capital in fixed proportions,
take part in the management of the business and share the profit in proportion to their
respective capital ratio or pr-agreed ratio and bear the loss if any in proportion to their
equity capital.
Ijara Mechanism of Investment

Under this mode the bank supplies implements /equipment’s/ goods on rental basis. The
ownership of the implements /equipment’s goods will be with the bank and the client jointly and
portion of the client will be authorized to possess the equipment for certain period. The client,
after competition of the installments, will be the owner of the implements/equipment’s/goods.
Hire purchase under shirkatul melk is a special type of contact which has been developed
through practice. Actually; it is a synthesis of three contacts.
 Shirkat
 Ijarah
 Sale
This may be defined as follows:-
 Shirkat: Shirkat means partnership. Shirkatul Melk means share in ownership. When
two or more persons supply equity, purchases an asset, own the same jointly, share the
benefit as per agreement and bear the loss in proportion to their respective equity, the
contract is called Shirkatul melk contract.
 Ijarah: Ijarahas been derived from the Arabic word Air and Ujrat which means
consideration, return, wages or rent. This is really the exchange value or consideration,
return, wages, rent of service of an asset. Ijarah has been defined as a contract between
two parties, the Hire and the Hirer where the hirer enjoys or reaps a specific service or
benefit against a specific consideration or rent from the asset owned by the hire. It is a
hire agreement under which a certain asset is hired out by the hire to a hirer against fixed
rent or rentals for a specified period.
 According to the majority of Fuqaha, there are three general and six detailed
elements of Ijara.
 The wording
 Contracting parties
 Subject matter of the content
 The hire (Muajjir)
 The hirer (Mustajir)
 The rent (Ajr or Ujrat)
 Sale: This is a sale contract between a buyer and as seller under which the ownership of
certain goods or asset is transferred by seller to the buyer against agreed upon price paid /
to be paid by the buyer. Thus in hire purchase under shirkatul melk mode both the bank
and supplier provide equity in equal or unequal proportion for purchase of an Asset like
land building, machinery, transport etc. Purchase the asset with that equity money, own
the same jointly, share benefit as per agreement and bear the loss in proportion to their
respective equity. The share part or portion of the asset owned by the bank is hired out to
the client partner for a fixed rent per unit of time for a fixed period. Lastly the cells and
transferees the ownership of its share / part/ portion to the client against payment of price
fixed for that part either gradually part by part or in lump sum within the hire period or
after the expiracy of the hire agreement.
 Stages of Hire Purchase Under Shirkatul Melk:-

 Purchase under joint ownership
 Hire and
 Sale / transfer of ownership to the other partner Hirer.
 Types of sale contact under the Hire Purchase under the Shirkatul Melk
 HPSM through gradually transfer of legal title or ownership of the hired asset
 HPSM through transfer of title by gift.
 HPSM through transfer of legal title (sale at the end of hire period for a token
consideration.)
 HPSM through transfer of legal title (sale) at the end of Hire Period for
payment of a specified amount to the hire by the hirer.
 HPSM through transfer of legal title (sale) period at the end of the hire term
for a price that is equivalent to the remaining Ijarah/rental instruction.
The Objectives of Investment Operations of the Bank
 To invest fund strictly in accordance with the principles of Islamic Shariah.

 To diversify its investment portfolio by the size of investment, by sectors (public &
private). By economic purpose, by securities and by geographical area including
industrial, commercial, and agricultural.
Welfare-oriented Investment Schemes of IBBL

In addition to the normal commercial and industrial investment operations, IBBL has 12 Special
Investment Schemes targeting different economic groups. The schemes are implemented and
expanded to meet the specific and welfare oriented needs of different groups of people
particularly the under-privileged downtrodden and the neglected section of the population of the
country. To uplift the lifestyle of these people, some welfare-oriented special investment
schemes as under have been undertaken:
 Household Durable Investment Scheme: Low-income people involved in diverse

professions get benefit out of this scheme. They are provided with household products like
refrigerator, TV, motor-cycle, furniture, ornaments, computer etc. under this financing
scheme
 Housing Investment Scheme: The bank has introduced this scheme to ease the serious
housing problem in the urban areas and to make arrangement for comfortable
accommodation of the fixed income group such as: officials of the defense services,
permanent officials of government, semi-government and autonomous organizations,
faculty members of the established universities, university colleges & medical colleges,
graduate engineers, doctors and established professionals, international financial
organizations, donor agencies, foreign embassies etc. officials of reputed local public
limited companies.
 Transport Investment Scheme: To ease the existing transportation problem and to
accelerate the pace of economic growth and development of the country, particularly
through expansion of trade, commerce and industry, the bank has taken up this scheme.
 Real Estate Investment Scheme: Real Estate Finance plays a pivotal role in improving
standard of living, empowering the middle-income and lower-income groups and thereby
promoting equitable growth in the society. It does not only provide physical shelter but also
upgrade the lives of the dwellers in terms of skills enhancement, income generation,
increased security, health, self-confidence and human dignity. IBBL has steady growth in
the Real Estate Sector.
 Car Investment Scheme: To enable officials, business houses and business executives
and professionals to move by transports in discharging their responsibilities punctually,
IBBL has introduced car investment scheme for the mid and high ranking officials of the
government and semi-government organizations, corporations, executives and directors of
big business houses and companies and also for persons of different professional groups on
easy payment terms and conditions.
 Investment Scheme for Doctors: The scheme is meant for fresh medical graduates
intending to meet up medical centers. IBBL comes forward to their aid to help them
procure medical equipment or to set up diagnostic laboratory, pharmacy, clinic etc.
 Small Business Investment Scheme: Small business persons and entrepreneurs of
different cities and villages get investment facilities from this scheme which is contributing
greatly to generate income and employment and to develop standard of life of different
segments of low income people. This bank provides different types of agricultural
instruments, equipment for operating small trade and finance, small shop, light transport,
photocopy machine, tailoring machine, machinery for small and cottage industry etc. under
this scheme.
 Agricultural Implements Investment Scheme: Keeping the view of the people-
orientation and welfare objectives of the Bank, this scheme has been introduced to provide
powers tillers, power pumps, shallow tube-wells, thresher machines etc. on easy terms to
the unemployed rural youths for self-employment and to farmers to help them augment
production in the agriculture sector.
 Micro-Industries Investment Scheme: To create a wider base for industries and to
encourage the establishment of micro-industries in different areas of the country by the
potential entrepreneurs and to diversify the Bank’s investment portfolio, the bank has
introduced Micro Industries investment Scheme. Different sectors including food and
agriculture based industries, plastic & rubber industries, forestry and furniture industries,
engineering industries, service industries, electrical accessories industries, computer
technology industries, paper products industries, handicraft industries, fishery & livestock
farming, hollow bricks, roof tiles and any other viable micro-industries have been
identified for financing under the scheme.
 Rural Housing Investment Scheme: This scheme was launched to extend housing
facility to the rural people living within 5 kilometers area of an IBBL branch. Employees of
the public, semipublic or autonomous institutions, non-resident Bangladeshis and business
persons are preferred for this investment. Easy term investment is given for constructing
new houses, repair of old houses and purchasing ready-made flats and houses etc.
 Women Entrepreneurs Scheme: IBBL has introduced “Women Entrepreneurs
Investment Scheme” to help women contribute to GDP, generate income & employment
and to develop their socioeconomic condition. Under this scheme Bangladeshi nationals
aged between 18-50 years, genuine women entrepreneurs, women already engaged in
business, self-employment activities as owners, skilled and semi-skilled female persons
having practical experience in the respective field may apply for investment.
 NRB Investment Scheme: For promoting investment among non-resident Bangladeshis
and for encouraging them to remit money through banking channel, IBBL has launched
NRB Entrepreneurs Scheme. Expatriates aged between 18 to 60 years or their family
members who run account with IBBL for remitting money are eligible for this investment.
Investment Classification
After the date of expiry, if the borrowers do not adjust their loan, IBBL at first gives a notice to
them. The period of giving notice depends on the nature of the loan. For continuous loan, IBBL
gives notice for three months. For five-year term loan, IBBL gives notice for six months. And for
more than five-year term loan, IBBL gives notice for more than 12 months.
After giving notice, if the borrower does not repay the loan, the loan will be considered as
classified. Pursuant to Bangladesh Bank's Banking Regulation and policy Department's Circular
No. 16 (1998), loans and advances are classified both on aging and functional criteria as follows:
Investment
Classification
Unclassified Classified
Investment Investment
Figure 3.8: Investment Classification (Source-Self)
Unclassified Investment:
The loan account is performing satisfactorily in the terms of its installments and no overdue is
occurred. This type of loan and advances are fall into this class.
Classification Status Length of Overdue Rate of Provision

Unclassified Below 3 months 1%
Classified Investment
These are the loans which the bank finds overdue after the due date. The bank applies its
predefined policy and procedures, after a loan becomes classified.
Special Mention Account (SMA)
When loan installment is first missed by the borrower, the loan account is classified as a special
mention account (SMA). The tenure of SMA varies with the category of loans.
Sub-Standard
If a loan is not repaid of reschedule within the SMA period, it becomes sub-standard
loan. From this stage the loan is treated as defaulted. Interest is treated the same way as in
SMA. This classification contains where irregularities have occurred but such irregularities.
The main criterion for a substandard advance is that despite these technicalities or irregularities
no loss is expected to rise for the bank. These accounts will require close supervision by
management to ensure that the situation does not deteriorate further.
Doubtful
This classification contains where doubt exists on the full recovery of the loan and advance along
with a loss is anticipated but cannot be quantifiable at this stage.
If a loan is not repaid or reschedule within the sub-standard period, it becomes a doubtful loan
interest will be treated as before in this stage.
Bad and Loss

A particular loan and advance fall in this class when it seems that this loan and advance is not
collectable or worthless even after all the security has been exhausted.
If a loan is not repaid or reschedule within the doubtful stage, it is termed as bad and loss.
Serious doubts exist as to the recovery of such loans.
Chapter-Four
Analysis of Investment Activities

Year Wise deposit and growth rate of Deposit of IBBL
Year 2009 2010 2011 2012 2013 2014
Amount (TK 244,292 291,935 341,854 417,844 473,141 560,696
in Millions)
Growth Rate - 19.5% 17.1% 22.23% 13.23% 18.51%
(%)
Table 4.1: Year Wise Trend of Deposits (Source: Annual report of IBBL)
Deposits
TK in Million
Year
Figure 4.1: Year wise Deposit of IBBL
Growth Rate of Year Eise Deposit
Figure 4.2: Year wise Deposit Growth rate of IBBL

Interpretation: There is an increasing trend of deposit of IBBL. From the above chart we can
see the graph (Figure 4.1) that the lowest deposit was TK 291,935 million in 2010and the
highest amount is TK 560,696 million in 2014 that year increased the deposit trend line and not
decreased. Because Customers are satisfied there service and IBBL has many branches and it
also rules follow to Islamic Shariah and then IBBL can’t provide interest, so many customer
satisfy and trusted then they deposit the bank.
However, we can see the graph(Figure 4.2) that the growth rates of deposit of IBBL were
fluctuating. Growth rate of deposit 19.50% to 17.10% in 2010 to 2011 and this trend line was
decreased and also decreased 22.23% to 13.23% in 2012 to 2013 because in this year to
occurrence political instability, economic terminate and then break down the capital market so
the deposit growth rate decreased from 13.23% but in the next year 2014 the growth rate of
deposit increased 18.51%. But in the others year increased the growth rate of deposit 17.10% to
22.23% in 2011 to 2012 and also increased 13.23% to18.51% in 2013 to 2014. Because that year
some political instability and economic unrest so client’s mental satisfaction about job which
helps to provide better customer service.
Year Wise Investment & Growth Rate of Investment of IBBL

Year 2009 2010 2011 2012 2013 2014
Amount (TK in 214,615 263,225 305,841 406,817 403,195 463,475
Millions)
Growth Rate % - 22.65% 16.19% 21.93% 9.09% 13.93%
Table 4.2: Year Wise Investment & Growth Rate (Source: Annual report of IBBL)
Trend of Investment
In Million TK
Year
Figure 4.3: Year wise Investment of IBBL
Investment Growth Rate of IBBL
Figure 4.4: Investment Growth Rate of IBBL
Interpretation: There is an increasing trend of investment of IBBL. From the above chart we
can see the graph (Figure 4.3) that the lowest deposit was TK 263,225 million in 2010 and the
highest amount is TK 463,475 million in 2014 that year increased the deposit trend line and 2013
year some decreased TK 406,817 to 403,195 million. The reason of increasing trend of
investment because IBBL invest in diversified (including microcredit to large).The reason of
decreasing trend of investment in 2012 to 2013 the amount was TK 406,817 to 403,195 million
because that time IBBL faces many problems like as politically instability, economic unrest, lack
of proper utility facility.
However, we can see the graph (Figure 4.4) that the growth rates of deposit of IBBL were
fluctuating. Growth rate of deposit 22.65% to 13.93% in 2010 to 2014 and this trend line was
decreased. We can see in 2011 to 2012 the growth rate investment was increased in 16.19% to
21.93% and also increased in 2013 to 2014 the growth rate was 9.09% to 13.93%. The reasons of
increasing the growth rate investment are that year IBBL properly invested because economic
condition was good could not faces political problem. The reasons of decreasing in trend in this
year to occurrence political instability, economic terminate and then break down the capital
market so the investment growth rate decreased and also many new industry and factory came in
the market so the trend line decreased in the growth of investment.
Year Wise Investment to Deposit Ratio Analysis
Investment to Deposit Ratio:
Investment to deposit ratio measures the portion of deposit used for investment in loan products.
The more the ratio the more the bank is using its deposit as investment.
Year 2010 2011 2012 2013 2014

Ratio 90.17% 89.47% 85.18% 82.35% 79.88%
Table 4.3: Year wise Investment to deposit ratio (Source: Annual report of IBBL)
Investment to Deposit Ratio
Figure 4.5: Investment to Deposit Ratio of IBBL
Interpretation: The graph shows that investment to deposit ratio has fluctuated over the years.
In the graph (Figure 4.5) we have seen that the ratio has decreased from 90.17% in 2010 to
79.88% in 2014. The reasons of decreased because IBBL has hold deposits amount year by year
and then they have now surplus of money but they can’t properly invested the money because
some of political unrest, economic terminate faces every year and then the IBBL securities are
strong all the investment documents. So, they can’t find the good business holder to invest them.
We know if Investment increase and on the other hand total investment increased than ultimately
investment ratio decreased.
Mode Wise Investment in 2014
2013 2014
Sl Mode Amount % to Total Amount % to Total
No: (Million Investment (Million Investment
TK) TK)
1 Bai-Murabaha 225,876 55.52% 281,556 60.75%
2 HPSM 95,481 23.47% 109,941 23.72%
3 Bai-Muajjal 24,053 5.91% 15,443 3.33%
4 Bill Purchased & 29,686 7.30% 30,424 6.56%
Negotiation
5 Quard 13,670 3.36% 15,478 3.34%
6 Bai-Salam 4,200 1.03% 4,808 1.04%
7 Mudaraba - 0% 3,000 0.65%
8 Musharaka 13,838 3.40% 2,825 0.61%
Total 406,805 100% 463,475 100%
Table 4.4: Mode Wise Investment in 2014 (Source: Annual report of IBBL)
Bai-Murabaha HPSM
1% Bai Muajjal
Bill Purchased & Negotiation Quard
3%3%
7% Bai-Salam Musharaka
6%
56%
24%
Figure 4.6: Mode Wise Investment in 2013 of IBBL

1% Bai-Murabaha HPSM
1% 1% Bai Muajjal
3% 7%3% Bill Purchased & Negotiation Quard
Bai-Salam Mudaraba Musharaka
24% 61%
Figure 4.7: Mode Wise Investment in 2014 of IBBL
Interpretation: From the above graph (Figure 4.6 & 4.7) we can see that in the year 2013 and
2014, IBBL invested their maximum portion in Bai-Murabaha mode (56% and 61%) which is
amount of TK 225,876 and 281,556 million that means sale for which payment is made at a
future fixed date or within a fixed period in short, it is a sale on credit. The main reason is the
clients choose the Bai-Murabaha because it can’t faces many documentation problem so clients
freely select the Bai-Murabaha. The second maximum portion of investment is in HPSM mode
which percentage are 24% both the year in 2013 and 2014.The HPSM mainly used in Ijara
mechanism so clients choose secondly the HPSM. The bank invests in other modes at lower
percentage. The lowest portion was invested in Bai-salam at 1%.Bai-salam can’t choose many
clients because it uses export in outside country so clients face many problems in the documents.
Trend of Mode Wise Investment in Bai-Murabaha from 2010 to 2014
Year 2010 2011 2012 2013 2014

Investment in Bai-Murabaha (Million 117,180 177,136 221,632 225876 281,556
TK)
Percentage of Total Investment 54.60% 57.92% 59.43% 55.52% 60.75%
Table 4.5: Year Wise Investment in Bai-Murabaha (Source: Annual report of IBBL)
Investment in Bai-Murabaha
TK in Million
Year
Figure 4.8: Year wise Investment in Bai-Murabaha
Percentage of Total Investment in Bai- Murabaha
Figure 4.9: Percentage of Investment in Bai-Murabaha

Interpretation: There is an increasing trend of investment in Bai-Murabaha of IBBL. From the
above chart we can see the graph (Figure 4.8) that the lowest deposit was TK 117,180 million in
2010 and the highest amount is TK 281,556 million in 2014 that year increased the deposit trend
line and not decreased. Because Customers are satisfied there service and then they cannot faces
many problem because Bai-Murabaha documents some of papers and it also rules follow to
Islamic Shariah and then IBBL can’t provide interest, so many customer satisfy and trusted then
they deposit the bank.
However, we can see the graph (Figure 4.9) that the percentage rates of total investment in Bai-
Murabaha of IBBL were fluctuating. Percentage rate of total investment are 54.60% to 60.75%
in 2010 to 2014 and other years trend line was decreased in 2012 to 2013 the percentage are
59.43% to 55.52% because in this year to occurrence political instability, economic terminate
and then break down the capital market so they properly cannot invest the Bai-Murabaha. In the
other all years the trend line percentage rates of total investment are increased, So client’s mental
satisfaction about job which helps to provide better customer service.
Investment in Hire Purchase under Shirkatul Melk (HPSM)
Year 2010 2011 2012 2013 2014

Investment in HPSM (Million TK) 73,871 89,070 96,056 96,481 109,941
Table 4.6: Year Wise Investment in HPSM (Source: Annual report of IBBL)
Investment in HPSM
Tk in Million
Year
Figure 4.10: Year Wise Investment in HPSM
Percentage of Total Investment in HPSM
Figure 4.11: Percentage of Investment in HPSM

Interpretation: There is an increasing trend of investment in HPSM of IBBL. From the above
chart we can see the graph (Figure 4.10) that the lowest deposit was TK 73,871 million in 2010
and the highest amount is TK 109,141 million in 2014 that year increased the deposit trend line
and not decreased. Because Customers are satisfied there service and then they cannot faces
many problem because HPSM documents some of papers are strong secured. So many customers
However, we can see the graph (Figure 4.11) that the percentage rates of total investment in
HPSM of IBBL were fluctuating. Percentage rate of total investment in HPSM are 34.42% to
23.72% in 2010 to 2014 and this trend line was decreased because in this year to occurrence
political instability, economic terminate and then break down the capital market so they properly
cannot invest the HPSM.
Investment in Bai-Muajjal
Year 2010 2011 2012 2013 2014
Investment in Bai-Muajjal (Million TK) 7,318 15,912 18,295 24,053 15,443
Table 4.7: Year Wise Investment in Bai-Muajjal (Source: Annual report of IBBL)
Investment in Bai Muajjal

Tk in Million
Year
Figure 4.12: Year Wise Investment in Bai-Muajjal

Percentage of Total Investment in Bai Muajjal
Figure 4.13: Percentage of Investment in Bai-Muajjal
Interpretation: There is an increasing trend of investment in Bai-Muajjal of IBBL. From the

line and in the 2013 from 2014 the trend line of total investment are decreased in TK 24,053 to
15,443 million. Because Customers are afraid and that year political unrest and client business
can’t run properly they are also loss project in that year so they withdraw the deposit in the fund
and that reason IBBL can’t invest. But another year the trend line increased because clients are
satisfied there service and then they cannot faces many problem. So many customers satisfy and
trusted then they deposit the bank.
Muajjal of IBBL were fluctuating. Percentage rate of total investment in Bai-Muajjal are 3.41%
to 3.33% in 2010 to 2014 and this trend line was decreased because in this year to occurrence
cannot invest the Bai-Muajjal.
Investment in Quard E Hasana
Year 2010 2011 2012 2013 2014

Investment in Quard E Hasana (Million 2,095 5,614 9,156 13,670 15,478
TK)
Table 4.8: Year Wise Investment in Quard E Hasana (Source: Annual report of IBBL)
Investment in Quard E Hasana
Figure 4.14: Year Wise Investment in Quard E Hasana
Percentage of Investment in Quard E Hasana
Figure 4.15: Percentage of Investment in Quard E Hasana

Interpretation: There is an increasing trend of investment in Quard E Hasana of IBBL. From
the above chart we can see the graph (Figure 4.14) that the lowest deposit was TK 2,095 million
in 2010 and the highest amount is TK 15,478 million in 2014 that year increased the deposit
trend line and not decreased. Because Customers are satisfied there service and then they cannot
faces many problem because Quard E Hasana are strong secured Quard. so many customer
However, we can see the graph (Figure 4.15) that the percentage rates of total investment in
Quard E Hasana of IBBL was increased. Percentage rate of total investment in Quard E Hasana
are 0.80% to 3.34% in 2010 to 2014 and this trend line was increased because clients need strong
security so IBBL provide the Quard clients and then clients.
Investment in Bai Salam
Year 2010 2011 2012 2013 2014

Investment in Bai Salam (Million TK) 3,624 3,528 4,532 4,200 4,808
Table 4.9: Year Wise Investment in Bai Salam (Source: Annual report of IBBL)
Investment in Bai Salam
Figure 4.16: Year Wise Investment in Bai Salam

Percentage of Investment in Bai Salam
Figure 4.17: Percentage of Investment in Bai Salam
Interpretation: There is an increasing trend of investment in Bai-Salam of IBBL. From the

line and in the 2010 from 2011 the amount was TK 3624 to 3528 million and 2012 from 2013
the trend line of total investment are decreased in TK 4532 to 4200million. Because Customers
are afraid and that year political unrest and client business can’t run properly they are also loss
project in that year so they withdraw the deposit in the fund and that reason IBBL can’t invest.
But another year the trend line increased because clients are satisfied there service and then they
cannot faces many problem. So many customers satisfy and trusted then they deposit the bank.
Salam of IBBL were fluctuating. Percentage rate of total investment in Bai-Salam are 1.38% to
1.04% in 2010 to 2014 and this trend line was decreased because in this year to occurrence
cannot invest the Bai-Salam.
4.10 Investment in Musharaka
Year 2010 2011 2012 2013 2014

Investment in Musharaka (Million TK) 12,244 9,571 13,719 13,838 2825
Percentage of Total Investment 4.65% 3.13% 3.68% 3.40% .61%
Table 4.10: Year Wise Investment in Musharaka (Source: Annual report of IBBL)
Investment in Musharaka
Figure 4.18: Year Wise Investment in Musharaka
Percentage of Total Investment in Musharaka
Figure 4.19: Percentage of Investment in Musharaka
Interpretation: The graph (Figure 4.18 & 4.19) shows an upward trend in investment under
Musharaka. The graph shows fluctuating trend in investment under Musharaka, The investment
under Musharaka was 4.65% in 2010. However, the Musharaka investment as a percentage of
total investment has fluctuated from 2011 to 2014. Investment in Musharaka mode was 3.13% in
2011 and in 2014 it was decreased 0.61%. The reasons of decreased because in 2013 and 2014
situated have many problem like as political unrest, economic terminate, businessman are
withdraw their deposit so that year decreased the trend line.
Sector Wise Investment in 2014

Sector Industry Commerc Real Agriculture Transport SME Others
e Estate
Amount 247,350.99 129,544.05 37,680.39 11,131.09 6,435.45 201,127 31,333.50
(TK in
millions)
In 34% 9% 8% 2% 1% 42% 4%
Percentage
Table 4.11: Sector Wise Investment (Source: Annual report of IBBL)
Sector Wise Investment in 2014

Industry Commercial Real Estate Agriculture Transport SME
Others
4%
34%
42%
2% 9%
1% 8%
Figure 4.20: Sector Wise Investment of IBBL in 2014
Interpretation: From above graph (Figure 4.20) we can see that in 2014, IBBL invested their
maximum amount in the sector of SME TK 201,127 million which is 42% of total investment,
TK 247,350.99 million in Industry sector which is 34% of total investment and comparatively
very poor investment in Real Estate 8%, Agriculture 2% than Transport 1% and Others 4%
respectively.
Division wise distribution of Investment
2013 2014
Divisions Taka in Percentage Divisions Taka in Percentage
Million Million
Dhaka 238,916.31 58% Dhaka 272,135.19 59%
Chittagong 82,622.00 20% Chittagong 92,698.69 20%
Khulna 27,662.71 7% Khulna 29,491.57 6%
Rajshahi 33,602.06 9% Rajshahi 40,518.23 9%
Barishal 4,963.02 2% Barishal 6,194.63 1%
Sylhet 8,298.81 2% Sylhet 9,364.33 2%
Rangpur 10,739.64 2% Rangpur 13,072.83 3%
Total 406,804.55 100% Total 463,475.47 100%
Table 4.12: Division wise distribution of Investment
Dhaka
C hittagong
2% Dhaka 1%
2% 2% Khulna
Chittagong 2% R ajshahi
9% Khulna 9% 3% Barishal
7% 6%
Rajshahi Rangpur
58% Barishal 59% S ylhet
20% 20%
Rangpur
Sylhet
2013 2014
Figure 4.21: Division Wise Investment
Interpretation: The above diagram shows that IBBL distribute a large portion of investment in
Dhaka Division both the Year in 2013 & 2014. In Dhaka Division IBBL distribute 58% & 59%
where bank distribute 20% in Chittagong both the year. Except Dhaka and Chittagong Division
the bank does not concern other division.
Geographical Location Wise Investment
Geographical Location 2013 2014

In Rural Areas 13% 5%
In Urban Areas 87% 95%
Table 4.13: Geographical Location Wise Investment (Source: Annual report of IBBL)
Area Wise Investment Area Wise Investment
5%
13%
Rural Area
Urban Area
87% 95%
2013 2014
Figure 4.22: Geographical Wise Investment
Interpretation: The above diagram shows that IBBL distribute large portion of investment in
urban areas both the year 2013 & 2014. But the bank does not concern in rural areas to distribute
the investment.
Analysis of Classified Investment
These are the loans which the bank finds overdue after the due date. The bank applies its
predefined policy and procedures, after a loan becomes classified.
Amount of Classified Investment
Year 2010 2011 2012 2013 2014

Amount in Million Taka 4,655.63 8,292.32 14,212.80 14,941.90 22,807.24
Table 4.14: Classified Investment (Source: Annual report of IBBL)
Amount of Classified Investment
Figure 4.23: Amount of Classified Investment of IBBL
Interpretation: From the above graph (Figure 4.23) it has been seen that, the amount of
classified investment are increasing over the years 2010 to 2014. Bank should try to give more
concentration to reduce their classified investment and to become more efficient in managing its
classified investment.
Percentage of Classified Investment to Total Investment
Year 2010 2011 2012 2013 2014
Percentage 1.77% 2.71% 3.81% 3.67% 4.92%
Table 4.15: Percentage of Classified Investment (Source: Annual report of IBBL)
Percentage of Classified Investment
Figure 4.24: Percentage of Classified Investment
Interpretation: From the above figure it has been seen that, the percentage of classified
investment are increasing over the years. But it has slowly increased from 2010 to 2014. Bank
should try to give more concentration to reduce their classified investment and to become more
efficient in managing its classified investment.
Bad or Loss as a percentage of Total Classified Investment
Year 2010 2011 2012 2013 2014

Bad and Loss 2,735 3,238 10,823 12,581 19,059
Total Classified Investment 4,655.63 8,292.32 14,212.8 14,941.9 22,807.2
Bad or Loss as a % of Total 58.74% 39.04% 76.15% 84.20% 90%
Investment
Table 4.16: Bad or Loss as a percentage of Total Classified Investment
Bad or Loss as a percentage of Total Classified Investment
Figure 4.25: Bad or Loss as a percentage of Total Classified Investment
Interpretation: The above graph shows that bad or loss as a percentage of total classified
investment of IBBL is fluctuating from the year 2010 to 2014. From 2011 to 2014 the bad or loss
as a percentage of classified loans and advances has increased from 39.04% to 84.20%. The
reasons of increasing trend line because clients are satisfied and trusted the IBBL they can’t
faces many problem on the other hand many new industry and factory comes in the market and
IBBL invested their company. The reasons of decreasing trend line in 2010 to 2011 because that
time political unrest, economic terminate and clients can’t trusted the IBBL.
Provision kept against classified Investment:
Year 2010 2011 2012 2013 2014
Amount in 1,840.00 3,054.00 6,054.35 9,037.80 13,354.72
Million Taka
Table 4.17: Provision kept against classified (Source: Annual report of IBBL)
Provision Classified Investment
Figure 4.26: Provision kept against classified
Interpretation: The above figure shows the provision against classified investment of IBBL
from the year 2010 to 2014. The provision against classified investment has increased over the
year except 2010. It can be said that overall trend of provision is increasing.
Income from Investment
Year 2010 2011 2012 2013 2014
Amount in 24,766.26 32,019.53 43,672.23 48,145.46 49,109.96
Million Taka
Table 4.18: Year Wise Income from Investment (Source: Annual report of IBBL)
Income from Investment
Figure 4.27: Amount of Income from Investment
Interpretation: The graph shows that the income from Investment has upward trend over the
years. The income from investment has increased from 24,766.26 in 2010 to 49,109.96 in 2014.
This indicates the efficiency of the investment of IBBL. The reason of increased the trend line
because IBBL has many client’s they believe in Islam. So, they are deposits huge of money and
IBBL used their assets to invest and get a profit. So this reason amount of income from
investment was increased day by day.
Return on Investment (ROI) of IBBL
ROI primarily an indicator of managerial efficiency; It indicates how capable management has
been in converting assets into net earnings. Higher the firm’s return on total assets is better. The
ROI of IBBL has given below:
Year 2010 2011 2012 2013 2014

Percentage 10.08% 10.87% 12.21% 11.49% 9.86%
Table 4.19: Return on Investment (ROI) of IBBL(Source: Annual report of IBBL)
Percentage of Return on Investment
Figure 4.28: Percentage of Return on Investment
Interpretation: The above graph shows the return on investment of the total investment from
the year 2010 to 2014. The ROI of IBBL has decreased from 2012 to 2014. However, now The
ROI has decreased over the last three years. So this is a bad sign for the bank. The reason of
decreased the trend line because last three years IBBL faces many problem like as political
unrest, economic terminate and many businessman afraid some of reason so this reason the
percentage of ROI was decreased.
SME Investment
Year 2010 2011 2012 2013 2014
Investment in SME (TK in Millions) 49,337 100,991 176,107 173,660 201,127
Percentage of Total Investment 22.99% 33.02% 47.22% 41.25% 42%
Table 4.20: Year Wise SME Investment (Source: Annual report of IBBL)
Investment of SME
TK in Million
Year
Figure 4.28: Amount of Investment in SME
Percentage of Investment in SME
Table 4.30: Percentage of Investment in SME
Interpretation: The graph shows that the investment in SME has upward trend over the years.
However, the investment in SME as percentage of total investment increased rapidly from 2010
to 2014.In 2013 percentage of investment in SME decreased 41.25% but the next year 2014 has
increased from 42.00%. The reason of decreased the trend line because last three years IBBL
faces many problem like as political unrest, economic terminate and many businessman afraid
some of reason so this reason the percentage of investment SME was decreased.
Chapter-Five
Major Findings, Recommendations & Conclusion

Findings
The main objective of the report is to analysis the investment activities of Islami Bank
Bangladesh Limited (IBBL). The study of investment activities of Islami Bank Bangladesh
Limited reveals the following major findings:
 There is an upward trend in total deposit of Islami Bank Bangladesh Limited from 2010
to 2014 and the deposit of IBBL as growth rate has increased over the years from 13.23%
to 18.51% in 2013 to 2014 but in 2012 to 2013 the growth rate deposit was decreased
22.23% to 13.23%
 There is an increasing trend of investment of IBBL. But the investment as percentage of
growth tare of total Investment has decreased over the years from 22.65% in 2010 to
13.93% in 2014. But the growth rate of investment was increased the year from 9.09% in
2013 to 13.93% in 2014. This upward trend of invest is positive sign for the bank.
 There is a decreasing trend in investment to deposit ratio of IBBL is decreasing from
2011 to 2014. In 2014, investment to deposit ratio of IBBL is 79.88% and industry
average is 90.17%. So the bank should increase its investment from its deposit.
 IBBL invested their major portion in Bai-Murabaha that is 56% in 2013 and 61% in
2014.
 There is an increasing trend of investment in SME from 2010 to 2014. IBBL invested
major portion in SME.
 IBBL invested their maximum portion in Dhaka division which percentage is 59%. The
second maximum portion of investment is in Chittagong division which percentage is
20%.
 The classified investment as percentage of total investment has increased from 2010 to
2014. This increased trend line indicates that the recovery performance of IBBL is good.
 From 2011 to 2014 the bad or loss as a percentage of classified loans and advances has
increased from 39.04% to 90%.
Also from the report, it is observed that IBBL has some problems as:
 IBBL does not charge interest to invest in agriculture sector.

 IBBL has a research division but not so strong.
 The internal audit section of IBBL is very poor.
 Lots of new banks are coming in the scenario with new service.
 Local competitors can capture huge market share by offering similar products.
 IBBL lacks well-trained human resource in some area.
 IBBL lacks aggressive advertising
 The procedure of credit facility is to long compare to other banks.
 Employees are not motivated in some areas.
Recommendations
Putting recommendation is very complex for me with my short experience & knowledge but with
my shallow knowledge. Though Islami Bank Bangladesh Ltd. (IBBL) is performing well but it
has some crucial areas to improve which are prescribed below:
 The growth rate of deposit of IBBL has increased over the years. Bank should give more
effort to maintain and improve its growth of deposit by increasing their branches,
providing more customer services like-prompt service, developing new savings scheme.
 The growth rate of investment of Islami Bank Bangladesh Limited has increased in 2014
but Bank should try more to increase investment by enlarging its investment sectors.
 In 2014, investment to deposit ratio of IBBL is 79.88% and industry average 90.17%. So,
the bank should increase its investment from its deposit.
 Islami Banks in Bangladesh may expand their network in other division by expanding
branches.
 As the major portion of classified investment is in bad and loss category and the portion
of bad and loss increased in recent years, the bank should try to reduce his portion.
Conclusion
Islam is a relation of peace and also a complete code of life. Allah’sguidance extends into all
areas of our lives. Islam has given detail guidelines for our economic life. Therefore, Islami Bank
Bangladesh Limited (IBBL) is trying to set up the maximum happiness of the society by
maintaining the morality of Islamic Shariah which is based on “Quran” and “Sunnah”. Since
1983, IBBL is the pioneer in welfare banking in this subcontinent and it is trying to do all its
activities for the betterment of its depositors. For the greater interest of the depositors the
investment policy of IBBL is to invest on the basis of profit and loss sharing in accordance with
the tents and principles of Islamic Shariah. Profit earning is not the only motive and objective of
the bank’s investment policy rather emphasis is given in attaining social good and in creation
employment opportunities.
Investment mechanism and modes is recognized the world over as the main engine that runs the
economy, creating work not only for masons and managers, accountants & architects, but also
for makers and sellers of building materials. It means work for maintenances, security, cleaning
and other services work for makers and sellers of appliances, furniture and vehicles; work for
bankers and bureaucrats, lenders and lawyer. May suggest the following recommendations for
sound and success investment in the by Islami Bank Bangladesh Limited.
Everyday IBBL do their banking work with other conventional bank. In Bangladesh there is no
Islamic environment. It is one kind of problem to maintain Shari’ah base banking activity for
IBBL. Although IBBL facing some problems. It has bright future day by day. It is enhancing its
financial modes of over the country.
Finally, Islami Bank Bangladesh Limited (IBBL) has been established with a view to conduct
interest free banking to establish participatory banking instead of debtor-creditor relationship and
finally to establish welfare oriented banking through its investment operations that would lead to
a just society.
Bibliography
Books
Lawrence, J Gitman, “Principle of Managerial Finance” 12th edition.
Prospectors
 Annual Report (2010-2014)

 Handout Provided by IBTRA
 Investment MECHANISM BOOK OF IBBL
Website
 http://www.islamibankbd.com/
 http://www.islamibankbd.com/
 http://www.google.com.bd/
 http://www.wikipedia.org/
 http://www.assignmentpoint.com/
Performance at a glance
Five Years Financial Summary

Sl Particulars 2010 2011 2012 2013 2014
No.
Balance Sheet (Financial Position)
1 Authorized Capital 10000.00 20000.00 20000.00 20000.00 20000.00
2 Paid up Capital 7413.12 10007.71 12509.64 14636.28 16099.91
3 Share Premium 1.99 1.99 1.99 1.99 1.99
4 Reserve Fund 16,081.14 17,792.50 24,116.47 26,512.48 28,.097.92
5 Retained Earnings 2,594.59 3,202.47 3,152.25 2,634.53 2,414.99
6 Shareholders’ Equity 28,400.03 33,716.73 39,780.35 43,760.68 46,612.81
7 Deposits (including Bills Payable) 291,934.60 341,853.67 417,844.14 473,140.96 560,696.30
8 Investments (including Investment in 275,493.94 322,772.83 399,930.79 474,015.95 564,332.00
Shares
and Securities)
9 Investments (excluding Investment 263,225.13 305,840.56 372,920.72 403,194.80 463,475.47
in Shares
and Securities)
10 Investment Deposit Ratio (as per BB 90.17% 89.47% 85.18% 82.35% 79,88%
guidelines)
11 Total Assets (including Contra) 443,684.79 502,613.05 592,580.50 664,554.96 765,241.27
12 Total Assets (excluding Contra) 330,586.12 389,192.12 482,536.32 547,229.63 652,422.04
13 Fixed Assets 6,748.44 7,100.19 14,808.23 15,732.81 15,926.36
Capital Measures
14 Total Risk Weighted Assets (RWA) 256,804.90 257,564,30 311,511.60 319,215.90 378,742.72
15 Corer Capital- Tier- I 18,559.80 23,401.24 28,249.95 32,222.40 35,025.95
16 Supplementary Capital (Tier- II) 9,840.20 10,315.49 13,803.20 13,189.60 13,543.92
17 Regulatory Capital (Tier I, II & III) 28,400.00 33,716.73 42,053.16 45,487.38 48,569.86
18 Statutory Capital (Paid up Capital & 15,348.08 20,012.14 24,933.30 29,274.89 32,199.82
Statutory
Reserve)
19 Equity/Capital Surplus/Deficit 5,287.58 7,960.24 10,901.96 13,599.40 10,695.59
20 Capital Adequacy Ratio 11.06% 13.09% 13.49% 14.26% 12.83%
Assets Quality
21 Classified Investment 4,655.63 8,292.32 14,212.80 14,941.9 22,807.24
22 Classified Investment to Total 1.77% 2.71% 3.81% 3.71% 4.92%
Investment
23 Provision against Classified 1,840.00 3,054.00 6,054.35 9,037.80 13,354.72
Investment
24 General Provision against 3,443.00 3,996.00 3,935.90 3,371.60 3,625.48
Unclassified
Investment
25 General Provision on Off Balance 930.00 1,120.00 1,100.45 1,137.20 1,128.20
Sheet Items
Operating Performance (Income
Statement)
26 Investment Income 24,766.26 32,019.53 43,672.23 48,145.46 49,109.96
27 Profit Paid on deposit 14,471.89 18,401.22 25,870.43 30,975.19 30,650.27
28 Net Investment Income 10,294.37 13,618.31 17,801.80 17,170.27 18,459.69
Sl. Particulars 2010 2011 2012 2013 2014

No
29 Non-Investment Income 5,362.64 6,381.76 6,345.56 7,972.88 8,937.07
30 Total Income 30,128.90 38,401.29 50,017.79 56,093.75 58,047.03
31 Administrative & other Exp. 7,202.31 9,652.76 8,724.65 11,039.15 12,074.13
32 Total Expenditure Excluding 21,674.20 28,053.98 34,595.09 42,014.33 42,724.40
Provision
33 Provision for Investment, Off 1,114.99 2,384.31 3,512.07 3,029.26 4,790.91
Balance Sheet Items & Other Assets
34 Total Expenditure Including 21,674.20 28,053.98 38,107.16 45,043.59 47,515.31
Provision
35 Net Profit before Tax 8,454.71 10,347.31 11,910.65 11,074.76 10,531.71
36 Net Profit after Tax 4,463.47 4,841.45 5,338.91 4,948.58 3,999.06
37 Provision for Income Tax 4,108.98 5,515.56 6,571.74 6,101.57 6532.65
Foreign Exchange Business
38 Import 246,281.00 301,207.00 284,588.00 285,890.00 316,971.00
39 Export 148,421.00 178,244.00 197,095.00 205,269.00 222,753.00
40 Remittance 214,629.00 236,607.00 300,915.00 286,956.00 308,722.00
41 Total Foreign Exchange Business 609,331.00 716,058.00 782,598.00 778,115.00 848,447.00
Distribution Network
42 Number of Correspondent Banks 295 313 320 331 597
43 Number of Foreign Correspondents 919 935 676 690 723
44 Number of Shareholders 58,923 60,550 60,302 62,772 60,857
45 Number of Employees 10,349 11,465 12,188 12,980 13,574
46 Number of Branches 251* 266* 276* 286* 294*
Shareholders Information
47 Cash Dividend - 7% 8% 8% 15%
48 Stock Dividend 35% 25% 17% 10% -
49 Earnings per Share (Taka) (original) 6.02 4.84 4.42 3.40 2.48
50 Earnings per Share (Taka) (restated) 3.57 3.87 3.65 3.07 2.48
51 Market Value per Share (Taka) 90.00 83.98 59.00 45.00 36.80
(Highest)
52 Net Assets Value (NAV) per Share 23.48 27.78 27.18 27.18 28.95
(Taka)
Efficiency Ratio
53 Gross Profit Ratio 51.97% 52.08% 48.28% 44.80% 47.20%
54 Cost of Fund 8.65% 8.86% 9.32% 9.45% 8.55%
55 Cost Income Ratio ( Per Taka) 0.72 0.73 0.76 0.75 0.74
56 Return on Equity (ROE) 19.00% 17.42% 13.42% 11.36% 8.85%
57 Return on Assets (ROA) 1.47% 1.35% 1.27% 0.96% 0.67%
58 Price Earnings Ratio (Times) 13.29 11.27 12.21 12.35 11.24
59 Spread 4.87% 4.03% 4.10% 3.79% 4.27%
Table 4.19: Performances at a glance

Final Internship Report

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Final Internship Report

Uploaded by

Copyright:

Available Formats

Internship Report on

Financial Statement Analysis of First Security Islami

Dr. Md. Abdur Rouf

Submission Date: 17-06-2020

Banking system occupies an important place in a nation’s economy. A banking institution is

Origin of the report

Significance of the study

Scope of the study

Objective of the study

 To apply theoretical knowledge in the practical field.

Methodology of the study

 Practical work experience,

 Annual report of Islami Bank Bangladesh Limited.

Limitation of the Report

An Overview of the IBBL

1) Al-ArafahIslami Bank Limited

The Organization of Islamic Conference (OIC) defined an “Islamic Bank as a financial

History of Islami Bank of Bangladesh Limited

Concept of ‘Islamic Banking

What is Islamic Banking?

Objective of “Islamic Banking”

 To offer contemporary financial services in conformity with Islamic Shariah;

These objectives are discussed below.

 Offer Financial Services: Interest-based banking, which is considered a practice of

 Islamic Banking for Development: Islamic banking is claimed to be more

 Optimum Allocation of Resources: Another important objective of Islamic banking is

 Islamic Banking for Equitable Distribution of Resources: Perhaps they must

Features of 'Islamic Banking

 Investment is made through different modes permitted under Islamic Shariah.

 Investment-income of the bank is shared with the Mudaraba depositors according to a

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

IBBL vision is to always strive to achieve superior financial performance, be considered a

 To establish Islamic Banking through introduction of welfare oriented banking system.

Shariah Council of IBBL

4. Lawyer: A member representing this group should be a successful practitioner lawyer.

 To ensure customers' satisfaction.

Present Program of IBBL

Islami Bank Bangladesh Limited

General Banking Investment Foreign Exchange

Figure 2.1: Present Program of the Organization

SL NO Conventional Banks Islamic Banks

2.13 Difference between Riba and Profit

 Transformation through Bai /Buying Selling of goods.

 Trust in Almighty Allah

Name of the Company : Islami Bank Bangladesh Limited

Risk Management Executive Audit

Islami Bank Islami Bank Capital Islami Bank

Shari’ah Secretariat Board Secretariat

Management Asset Liability

Islami Bank Training Human Resources Research & Development

VIGILANCE Squad MD’s Secretariat

Zones & Corporate

13 49 90 116 169 251 286 294 301

Products and Services of Islami Bank Bangladesh Limited

 Al-Wadeah Current Account (AWCA)

 Mudaraba Savings Account (MSA)

 Mudaraba Term Deposit Account (MTDR)

 Mudaraba Special Notice Account (MSNA)

 Mudaraba Special Savings (Pension) Account (MSSA)

 Mudaraba Hajj Savings Account (MHSA)

 Mudaraba Savings Bond Account (MSBA)

 Mudaraba Waqf Cash Deposit Account (MWCDA)

 Mudaraba Muhor Savings Deposit Account (MMSA)