“Growth and Challenges of Islami Bank Bangladesh Limited”

An Internship report submitted to the Department of Management studies

Faculty of Business Studies
Bangladesh University of professionals

Prepared by

Md. Parvez

ID-17241065

Batch-2017 Section-A

Department of Management Studies, FBS, BUP

Supervised by

Mohammad Ali Rana

Assistant Professor

Department of Management Studies, FBS

Bangladesh University of Professionals

Date: April 18, 2021

Declaration of Originality

I, Md. Parvez, a student of Bachelor of Business Administration, under the Department of

Management Studies of Bangladesh University of Professionals (BUP), do hereby declare that the
internship report on “Growth and challenges of Islami Bank Bangladesh Limited”. It has been
prepared by me as a part of my internship program. As a mandatory part of our BBA program to
submit an internship report, this report was prepared with the meticulous precision of my internship
experiences. Moreover, I have been inspired and instructed by my supervisor Mohammad Ali
Rana, Assistant Professor, Faculty of Business Studies, Bangladesh University of Professionals
(BUP). In this regard, I would like to mention that this report is my authentic work, and all
collected information was duly acknowledged.

Md. Parvez

ID: 17241065

Section: A

Batch: 2017

Department of Management Studies

Faculty of Business Studies (FBS)

Bangladesh University of Professionals (BUP)

April 18, 2021

 Letter of Transmittal
April 19, 2020

Mohammad Ali Rana

Assistant Professor

Faculty of Business Administration

Bangladesh University of Professionals Mirpur Cantonment,

Dhaka-1216

Subject: Submission of internship report on “Growth and challenges of Islami Bank Bangladesh
Limited”

Dear Sir, it is my honor and great pleasure to get an opportunity to submit my internship report on
“Growth and challenges of Islami Bank Bangladesh Limited”. In my report, I have mainly focused
on the growth of IBBL in every sector of their business activities. I have also mentioned the
different kinds of challenges that IBBL has been facing. In the duration of working on this report,
I have given my best effort to obtain all related information, documents, and materials to make the
report more reliable and informative.

Furthermore, I am very thankful to you for your constructive guidance and valuable suggestions
about preparing my internship report. Finally, I hope that this report will satisfy your requirements
and meet your expectations.

Sincerely Yours,

----------------------------

Md. Parvez

ID: 17241065

Batch:17

BBA in Management Studies-2017

 Acknowledgment
I would like to start by thanking almighty Allah for giving me the capability and patience to write
and submit this report within due time and protect me from a pandemic covid-19. Without His
mercy and kindness, I could not have been able to complete it. I express my gratitude towards my
parents who have always been a constant supporter of mine. Also, for being there for me whenever
I need financial help and support. Afterward, the valuable suggestions and guidelines provided by
my internship advisor, Mohammad Ali Rana sir, were a great help to write this report properly. He
displayed to me the ways by which I can gain knowledge about my project. I am indebted for his
structural instruction towards writing this report. In addition to that, I also acknowledge the idea
of making the internship program mandatory by the Bangladesh University of Professionals
because it has enriched & practicalized my academic knowledge. Besides that, I would like to
thank my internship supervisor at IBBL, Md. Sazzad Nur, (In-Charge of Branch) for guiding me
and advising me throughout my internship period. Moreover, I want to show my gratitude towards
him for giving me ideas about the Islamic shariah-based baking system and how it is different from
the other conventional interested-related private banks Finally, I am also thankful to my colleagues
who have supported me and helped me adjust to the environment. With all this help, I have had a
wonderful journey in Islami Bank Bangladesh Limited and penned this report successfully.
 Certificate of Supervision of Research

This is to certify that Md. Parvez, ID-17241065, Section-A, has performed his internship under
my supervision. He has worked on this internship report titled Growth and challenges of Islami
Bank Bangladesh Limited”. Which is submitted in fulfilment of the requirement for the award of
the degree of Bachelor of Business Administration in Management Studies, Bangladesh University
of Professionals. This report is prepared with sincerity and dedication carried out by Md. Parvez
himself and to the best of my knowledge.

April 18, 2021 Supervisor

Mohammad Ali Rana

Assistant Professor

Department of Management Studies

Faculty of Business Studies

Bangladesh University of Professionals

Executive summary
The objective of this paper is to evaluate the growth and challenges of IBBL. All information and
data of the paper have been collected from the primary Source and secondary sources. Finally, this
paper is indicating the growth and challenges experienced by IBBL. The Islamic banking system
has been growing rapidly globally since Muslims are nowadays started becoming concerned about
their money management. This is quite similar for Bangladesh as well. In Bangladesh, the overall
banking system has experienced a noticeable growth with expansion also competing amazingly
with other conventional private banks. Islami bank Bangladesh limited is a pioneer of the Islamic
Shariah-based banking system in Bangladesh. Since around 90% of the population of Bangladesh
is Muslim therefore, there was a high demand and a potential country for the Islamic banking
system. With that vision IBBL, it started its journey in the year of 1983 (Hossain, Salam, and Sen,
2019). From then on IBBL has been constantly working on better their policy complies with the
Islami shariah. And with its high performance, IBBL has managed to gain a noticeable annual
growth rate in the banking industry of Bangladesh. This bank is facing growth and expansion in
the deposit, import, export, and remittance section. Though this bank is bettering its performance
to retain the existing customers and attract new more potential customers. Despite the growth of
IBBL, this bank also has some challenges of not having proper individual Laws or Acts to support
or to comply with the Islami baking system. Many people have not known the Arabic terminologies
of this banking system, insufficient number of booths all across the country.
Table of Contents
Declaration of Originality ............................................................................................................... 2

Letter of Transmittal ....................................................................................................................... 3

Acknowledgment ............................................................................................................................ 4

Certificate of Supervision of Research ........................................................................................... 5

Executive summary ......................................................................................................................... 6

Chapter:1 Introduction .................................................................................................................... 9

1.1 Background ........................................................................................................................... 9

1.2 Rationale of the paper ......................................................................................................... 10

1.3 The objective of the studies ................................................................................................ 10

1.4 Methodology ....................................................................................................................... 11

Chapter 2: Overview of the Organization ..................................................................................... 12

2.1 Brief Discussion of IBBL ................................................................................................... 12

2.2 Hierarchy of IBBL .............................................................................................................. 13

2.3 Vision and Mission of IBBL ............................................................................................... 14

2.3 Characteristics of IBBL ...................................................................................................... 14

2.4 Subsidiaries Companies of IBBL........................................................................................ 16

2.5 Some Deposit Products of IBBL......................................................................................... 17

2.7 SWOT Analysis of IBBL .................................................................................................... 19

Chapter 03 Literature Review ....................................................................................................... 21

Chapter 04 ..................................................................................................................................... 23

4.1 The world Economy ............................................................................................................ 23

4.2 The Economy of Bangladesh .............................................................................................. 24

4.3 World Islamic banking industry.......................................................................................... 24

 4.4 Banking industry of Bangladesh ......................................................................................... 25

Chapter 05-Growth of IBBL ......................................................................................................... 26

5.1 Growth of Account opening trend of IBBL ........................................................................ 26

5.2 Growth of total general investment of IBBL ...................................................................... 27

5.3 Growth of MI and MEI clients............................................................................................ 28

5.4 Growth of investment under MI and MEI .......................................................................... 28

5.5 Growth of import, export, and remittance .......................................................................... 29

5.5.1 Growth in import.......................................................................................................... 30

5.5.2 Growth in Export ......................................................................................................... 31

5.5.3 Growth in Remittance .................................................................................................. 32

Chapter 06-Challenges .................................................................................................................. 33

Chapter 07 ..................................................................................................................................... 37

Discussion and Summary .......................................................................................................... 37

Chapter-08..................................................................................................................................... 38

8.1 Conclusion .......................................................................................................................... 38

8.2 Implication .......................................................................................................................... 39

Chapter 09 ..................................................................................................................................... 40

References ..................................................................................................................................... 40
 Chapter:1 Introduction

1.1 Background
Islami Bank Bangladesh Limited is and the first bank in the Shariah-based Islami banking industry
in Bangladesh. It is also the first bank in the Islamic banking industry of South-East Asia. It is
constantly increasing the branches to reach out to the maximum number of customers. Therefore,
the network of this bank extended across the country also, larger than any other private banks in
Bangladesh (Uddin, 2017). It is a joint venture company since 43.26 percent of the total share has
been owned by Islamic Development Bank (IDB) and foreign shareholders, and the local
shareholders are owning the remaining 56.74 percent. It has been providing the service of a wide
variety of deposit systems, foreign exchange, and investment-related banking based on Islami
shariah from the moment this bank started its journey. IBBL has been taking shariah-based Islami
banking to a whole different level that many Muslims are now moving towards this bank. IBBL
not only has been in a top position in Bangladesh but also in the world positioning 943rd.
Currently, the authorized capital of this bank is around TK 20000 million and the paid-up capital
of this bank is around TK 16099.91 million (Hossain, Salam, and Sen, 2019). In 2019, the number
of depositors increased by around 1,436,848 with a growth rate of 12.63% (2019). That is again a
huge growth rate for IBBL. The total income Islami bank Bangladesh ltd. Was Tk. 88,131 million
and the total expenditure of IBBL was Tk. 66,217 million. And thus, the total profit before tax of
IBBL stood at Tk. 14,100 million. In the general meeting, the board of directors and members had
set up a cash dividend of 10% to its shareholders (2019). Still, there is a lack of individual Laws
or Acts to support or to comply with the Islami baking system. Many people have not known the
Arabic terminologies of this banking system, the insufficient number of booths across the country.
Finally, this report is going to describe the growth in different sectors of IBBL’s Business activities
and the challenges faced by the IBBL.
1.2 Rationale of the paper
For every country’s economy in the world, a bank is like the heart. Banks circulate money in a
County the heart circulates the blood in a human body. No economy of a country can survives
properly without a bank and its system. Because it performs a crucial role to fulfil the needs of the
society in different sectors such as the growth of depositors, savings, export, import, remittances,
micro-investment, etc. In a Muslim populated country like Bangladesh IBBL has emerged on
serving the welfare of the people, society, and country. This bank is recognized globally due to its
interest-free shariah-based general banking and investment, Foreign exchange, and trade. Besides
that, this bank has some challenges too. This paper will help any student to Understand the growth
and challenges of IBBL. This report will also be helpful for investors. They will get to know about
this bank and can decide on investing. Others Islami banks and conventional private can be
benefitted by studying this report for deciding.

1.3 The objective of the study

✓ To identify the current overall performance of IBBL.
✓ This report will focus on the current global and domestic economy and banking industry
(Islamic and Non-Islamic).
✓ The prime objective of this report is to find out certain sectors in which IBBL has a
noticeable growth rate and a comparison of those growth rates for the past 5 years. Finally,
to find out different kinds of challenges that the bank has been facing to operate their
banking activities and to provide some implications for the bank to overcome the
challenges.
1.4 Limitations of the study

Time limitation: To complete the study time was limited by three months. It was really very short
time to know about such a large banking organization like IBBL. Also due to ongoing Covid-19 I
could not go to workplace regularly.

Inadequate Data: Due to Covid-19 pandemic the necessary data collection for primary data
became hard. colleting secondary was hard because there are a few quality and informative reports
specifically on IBBL and most of them had not been made in recent years.

Lack of Experiences: Due to lack of experience, there is a chance of having some mistakes in the
report though best effort has been applied to avoid may big mistakes.

1.5 Scope of the study

This bank has multidimensional banking activities and services. Though three months is not
enough time learn the vast banking activities, services, growth, and challenges. But the preparation
of this report provides a great opportunity to have an in-depth knowledge. The study is focused on
the following areas of the IBBL.

✓ An overview of IBBL.
✓ Discussion of the current global and national economy.
✓ Discussion of the international and domestic banking industry.
✓ Some Sectors in which the IBBL has been having growth.
✓ Different kinds of challenges the bank has been facing so far.

1.6 Methodology
This is a descriptive report that has used mostly secondary data. This report has been made with
help of an annual report of IBBL along with other secondary sources. That includes the Internet
and websites, different kinds of journals related to the international and domestic banking industry,
newspaper articles on the financial performance of the Islami banking sectors.
 Chapter 2: Overview of the Organization
2.1 Brief Discussion of IBBL
IBBL started its journey as a public limited company in Bangladesh on March 13, 1983,
Bangladesh with an authorized capital of 12.5 million USD (Tk 500 million). This is a pioneer of
the Islami banking industry in Bangladesh complies with the rule and regulations of Islami Shariah
(Chakraborty, 2017). This is not only the largest bank in Bangladesh but also the largest in South
Asia. Currently, the percentage of local shareholders and foreign shareholders is 56.74% and
43.26% respectively. The total number of the branch is 357, subbranch is 21. The number of
offshore banking units is 30. IBBL has more than 650 ATM booths across the country. This bank
expanded its activities and grabbed new more customers by increasing the total number of Agent
banking outlets which surpassed 1000 (2019).
2.2 Hierarchy of IBBL
2.3 Vision and Mission of IBBL

vision is to always strive to achieve superior financial performance and to establish, maintain
modern banking techniques. The vision of IBBL is also to ensure soundness and development of
the financial system based on Islamic principles and to become a strong and efficient organization
with highly motivated professionals. They will make sure of working for the benefit of people,
based on accountability, transparency, and integrity to ensure the stability of the financial systems.
They 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 (2019).

The mission of the company is to establish Islamic Banking through the introduction of a welfare-
oriented banking system and ensure equity and justice in all economic activities, achieve balanced
growth and equitable development through diversified investment operations particularly in the
priority sectors and less developed areas of the country. To encourage socio-economic
development and financial services to the low-income community particularly in the rural areas
(2019).

2.3 Characteristics of IBBL

2.3.1 Interest-free banking

Holy Quran has transparently prohibited Interest. The Arabic word of interest is Riva. The prime
differences between Islami bank Bangladesh ltd and any other conventional banks in Bangladesh.
the conventional bank is involved with interest directly. whereas the Islami bank Bangladesh ltd
is quite detached from the interest-related banking system (2019).

2.3.2 Shariah-based compliance

Islami bank Bangladesh ltd. Has always been complying with the rules and regulations of shariah.
this bank makes sure that they are following the Islamic shariah in every sector of their banking
activities (2019).
2.3.3 Welfare-entered banking

The major goal of any conventional bank and financial institute is to maximize their profit. Profit
is also a matter of concern for IBBL. But IBBL also focuses more on welfare-related activities all
around the country through establishing and maintain justice and equity to the public of society
(2019).

2.3.4 Versatile banking

IBBL has been offering a variety of services to its customers. this bank not only serve as a
commercial bank rather it has a various purpose. For example, the equity-oriented investment of
IBBL does not permit itself to borrow money for the short term and lending that money for long-
term investment. whereas the conventional banking system is quite the opposite (2019).

2.3.5 Careful evaluation of investment demand

IBBL is quite sincere about assessing the applications when it comes to risk-sharing equity finance.
conventional banks are usually taking collateral as security when they lend their money to their
customers. On the other hand, the risk-sharing mechanism of IBBL itself works as security (2019).

2.3.6 Mass and need-based banking.

IBBL has been focusing on mass and need-based banking to grab new more customers. Under the
Rural development scheme, to serve about 4.57% of the total investment 1/6th of their manpower
has been engaged.

2.3.6 Widening network oriented.

IBBL has been expanding its network by launching some new more branches and agent banking
systems all over the country. which help the bank get new more customer IBBL has also been
expanding the amount of booth in Bangladesh. this bank currently has about 10000 ATM booths
all over the country. this bank also has 47 Sheba gears, around 1012 agent banking outlets, and
around 21 sub-branches to bring their banking service to the doorstep of the customers. In the year
2019, IBBL has launched around new 707 agent banking outlets and 15 new more branches (2019).
The eventually increases the number of total branches from 442 to 457 in rural areas all over the
country.
2.3.7 Financial Inclusion and Sustainable Development

IBBL has frequently been introducing modern & welfare orientated banking products & services
to ensure the sustainability and socio-economic development of the country (2019). for instance,
they provide Micro investment facilities to rural people. also, this bank rural development scheme
for the welfare of the society.

2.4 Subsidiaries Companies of IBBL

2.4.1 Islami bank capital management limited (IBCML)

This is a public ltd. Company. This bank was introduced as a subsidiary bank of IBBL in 2010.
The authorized capital of this bank is Tk 1000 Million, and the paid-up capital of this bank is TK
300 million. This banking company performs its activities under The Company Act 1994 (2019).
This bank provides so many facilities to the customers. These banks provide the facilities of
merchant banking including selling and buying Securities such as shares, stocks, bonds, and
debentures. This bank also provides the facilities of managing portfolio investment of any kind of
company or personnel, transferring fund management for clients.

2.4.2 Islami Bank Securities Ltd.

This is a subsidiary company of IBBL. It was incorporated with IBBL as a public ltd. Company in
2010. Since initially there was no such Islami Shariah-based stock dealer and stockbroker in
Bangladesh that is why IBBL launch this as their subsidiary to provide trading facilities to the
customers. In the Bangladesh capital market, this bank is one of the largest as well as leading
corporate entities. The Authorised capital of this bank is TK 5000 million and the paid-up capital
of this is TK 2700 million (2019). This bank follows musharaka mode based on margin rules 1999
of BSEC when it comes to providing investment-related facilities to their customers.
2.4.3 IBBL Exchange Singapore Pte. Ltd

This bank was introduced as a subsidiary of IBBL in Singapore. This public limited company
provides the benefits of remittance Services to the customers. Since many of the clients of IBBL
are working outside the country. Therefore, this is a huge opportunity for IBBL to grab a new
segment of customers (2019).

2.5 Some Deposit Products of IBBL

2.5.1 Mudaraba Waqf Cash Deposit Account (MWCDA)

This deposit system product of IBBL offers facilities for various types of Unique Investment. This
deposit system is for the welfare of society. Around 1000 TK is needed to open this account. In
the year 2019, the number of accounts that had been opened was 2518. Thus, the total number of
accounts stood at 74,683 (Chakraborty, 2017).

2.5.2 Mudaraba Hajj Shavings Account (MHSA)

IBBL has introduced this account for those who are unable to manage all Money for hajj at once.
This Mudaraba account policy provides the opportunity for installment. The total number of hajjes
saving account has been opened is 11,670 (Chakraborty, 2017).

2.5.3 Students Mudaraba Savings Account (SMSA)

IBBL has introduced this savings account mode for students from any educational institution. Only
with TK 100, any students will be able to avail the opportunity of this account. Under this account,
IBBL provides an ATM/VISA card free of charge. Students who are not adults can eventually turn
this account to their name they become adults. So far around 94,434 accounts for students have
been opened (Chakraborty, 2017).
2.5.4 Mudaraba Farmers Shavings Account (MFSA)

IBBL has introduced this deposit account policy for providing the facilities to the farmers. To open
this deposit account initially a farmer needs only Tk 10. (Chakraborty, 2017) There is an
association for farmer's welfare called the Co-operative society of farmers can also open an
account under this deposit system. So far around 459,946 farmer's savings account has been
opened.

2.5.5 Mudaraba industry employees Savings (MIES)

Many employees are working in the ready-made Garment industry, leather, and footwear industry
with a relatively low amount of salary. this deposit policy has been introduced for the welfare of
the workers. A worker can open an account with only 100TK and free of charges except for tax
and other related duties. Workers can also avail themselves of the opportunity of ATM/VISA debit
cards with no charges.

2.6 Micro-welfare investment activities of IBBL

IBBL generally has two kinds of investment product one is micro-investment (collateral free) and
the other one is Micro investment (with collateral) IBBL offers 100000 Tk for collateral-free micro
investment for RDS member and 500000 TK for Microenterprise investment with collateral. This
sort of microfinance program of IBBL is under the Rural Development Scheme (RDS). The
objective of This investment policy is the welfare of the rural poor people and the improvement of
agriculture. It also helps increase the employment rate, the income level of the rural society and
reduce the rate of poverty. Around 271 branches of IBBL have been offering this investment
opportunity. Also spread in 64 districts of Bangladesh. With the success of this investment scheme,
IBBL introduced another micro-financing investment scheme in the name of the Urban Poor
Development Scheme (UPDS). The objective of this certain scheme is to improve the living
standard of urban poor people. IBBL offering this scheme through 24 urban branches in
Metropolitan cities like Dhaka, Sylhet, Chittagong.IBBL also provides the guard-al-hasna amount
to Tk 10000 to the poor people (RDS member) for rehabilitation due to natural disaster.

2.7 SWOT Analysis of IBBL

Each company has some strengths, weaknesses (internal), and opportunities and threats (external).
IBBL has these factors through which this bank can take the best decisions for itself by SWOT
analysis. This analysis is discussed below:

2.7.1 Strength of IBBL

This bank is financially efficient and provides lucrative and welfare-oriented services based on
Islami Shariah. IBBL does not need to borrow that much money from the Central bank or other
financial institutions because of its sufficient financial ability. They are providing different kinds
of investment facilities to their customers. Most of the employees of IBBL is honest and abide by
the rules and regulation of Islami Shariah. They are sincere, supportive of their customers.

2.7.2 Weakness of IBBL

This has no sufficient well-trained employees in most of the areas. This bank does not concern that
much about advertising and marketing. Some customers find this Banking system hard to
understand the credit loan facilities is relatively longer than that of other banks.

2.7.3 Opportunities of IBBL

IBBL can emerge an E-banking system through which it can attract and capture new customer
range. This bank can launch a higher number of branches across the country to serve new
customers This bank can introduce more agent banking systems in rural areas for the welfare of
rural living standards. Efficient and qualified employees can be hired for the bank to serve the
customers sincerely.

2.7.4 Threats of IBBL

The constantly fluctuating Foreign exchange rate and devaluation of TK can be threatening for
IBBL New entrants of banks with lucrative banking policy and service can capture the existing
customers of IBBL Bangladesh bank can imply rules and regulations which are not optimum for
Islami banking industry.
 Chapter 03 Literature Review

All banking activities of Islami Bank Bangladesh Limited are based on 2 major principles. The
first one of them is sharing profit and losses and the other one is about the interest-free transaction.
With these IBBL first made an entry into the banking industry of Bangladesh.

Mohammad et.al., (2015) seeks out the efficiency and effectiveness of Islami banks in Bangladesh.
Ratio analysis, the performance measurement tool of the bank has been discussed in the paper.
What is found in the paper is that the new Account opening trend of IBBL has been rising. Because
IBBL has taken up some lucrative policies for the welfare of the clients and some schemes for the
welfare of the rural society.

Md names et. all., (2016) evaluated the performance of Islami bank Bangladesh ltd. The variables
of that paper were. The number of branches. The total amount of deposits, export, import, and
remittances. What have found from that paper is that. The number of deposits and growth rate has
been increased whereas the total amount and the growth rate have somewhat been reduced. But
remittance income was up to the standard IBBL with a noticeable growth rate. Alam. M.N analyzed
the trend of investment and deposit growth of IBBL. What has been found in the paper is that
IBBL made the investment system such as Murabaha, Musharaka, bai-Muajjal has experienced
relatively lower growth rate.

Hasan.,M, Kabir (2010) described elaborately the fundamental elements of interest-free Islami
Shariah-based Banking in Bangladesh. What has been found from the paper is that the performance
of IBBL such as the growth and expansion of IBBL, also the growing amount and rate of deposits,
investment, profit, export, import, remittances. Also, the comparison between IBBL and other
conventional private banked related to interest. How IBBL growing faster in terms of its customer
baseline than that of conventional Private banks in Bangladesh.

Ahmed, A.U.F., & Hassan, M. K. (2007) Described the legal and regulatory issues of Islami banks
in Bangladesh also the major issues such as the absence of a strong money market of Islami banks.
Also, the absence of legal support and protection of Bangladesh bank. What has been found from
the paper is that all shariah-based Islami bank should have an independent banking Act that
controls and monitors the operation of them. Whereas there is a certain Act for conventional private
banks. Admittedly well-developed regulation system and support from BB will help Islami banks
to compete with conventional private banks.
 Chapter 04

4.1 The world Economy

The world economy was expected to grow at the rate of 3.5-7 percent. but few issues occurred that
have an immense impact on the world economy and banking industry. The trade war between US-
China and their imposition of rules and regulations on exports and imports is one of them. Due to
this incident many imports- export-oriented business is facing hindrance to run Their business
smoothly. Brexit is another reason for having difficulty and uncertainty in terms of investment. In
many countries, unemployment rates are getting higher. Despite having such issues banking
industry is somewhat in good shape after the financial Crisis in 2008 (Badinger, 2019). But, In
2019, the global economy was facing more challenges than previous years after the financial crisis
in 2008. Increasing the trade varier among countries. Country-specific weakness in Brazil, Mexico,
India, Russia. Iran is a threatening country for geopolitical unstableness. Libya, Yemen is facing
social unrest. Due to covid 19 Global economy is facing huge damage. Many economists are
predicting that this pandemic situation will be causing a huge disruption to the global economy.
The International Monetary fund (IMF) admonished that this pandemic situation will put the
economic position into a great recession also deducted that this pandemic would cause the global
economy to be contracted by 3 percent while the world bank deducted that the global economy
will shrink by 5.2 percent. World bank also deducted that after world war two this pandemic can
put the global economy in recession again. According to Asian Development Bank (ADB), this
pandemic situation will make the global economy lose about $5.8 trillion - $ 8.8 trillion. According
to the world trade center (WTO), about 13-32 percent of the world trade merchandise would be
cut down. A report of Global Economic prospect shows, that the growth rate of the overall
economy of South Asia will be cut down by 2.7 percent (Badinger, 2019).
4.2 The Economy of Bangladesh

Even though the world economy is having a little bit of backlash in recent years. But the economic
conditions of Bangladesh relatively are in a better position. The health sector, the education sector
have also been improved in Bangladesh. The banking industry has been facing challenges in terms
of managing NPIs. The rate of deposit has gone down to 6 percent and the investment has gone
down to 9 percent. This industry faced mismatches in import, export growth also in the forex
market. Other than that, the overall economic growth and development of Bangladesh have been
maintained, even though the international market has been facing adversity. According to the
Bangladesh Bureau of statistics, the previous year (the fiscal Year 2017-18) GDP rate was 7.86
parents, whereas the rate of GDP in the fiscal year of 2018-19 has been raising to 8.15 percent
with the growth rate of .29 percent (Ahmed, 2019). increase of export and remittance earnings play
a vital role to drive economic growth with a growth rate of 9.8 percent. Gross national income per
capital raised from form 1675 USD to 1828 USD. The export and import rate have been increased
by 10.5% from the previous year. RMG sector also boosting because of high quantity of orders
from China. the rate of Net foreign direct investment raised by 42.9 percent also the rate of private
consumption raised by 5.4 percent (Ahmed, 2019).

4.3 World Islamic banking industry

Nowadays majority of the Muslims are very much concerned with Their income source. They are
seeking ways for Their Financial management which are complying with the rules or regulations
of Islamic Shariah and backed by tangible assets. Therefore, the industry of Islamic finance has
been growing throughout the years. Islamic finance industry includes Three sectors such as the
banking sector, capital market sector, and Insurance baking sector (takaful). In the year 2019, the
Islamic finance industry experiences A total worth of $2.19 trillion (Ahmed, 2020). There were a
huge improvement and growth in the three sectors of the Islamic finance industry. The Islamic
banking industry has been improving on the domestic front as well. Almost one-fourth share is
controlled by the Islamic banking industry because of the Islami bank's Shariah-based activities in
Muslim countries like Bangladesh. IBBL, as a vital and largest part of the Islamic banking industry
of Bangladesh, has been performing a crucial role. This bank provides banking service comply
with the rules and regulations of Islami Shariah. Also, provides E-banking facilities to the
satisfaction of customers to make the banking activities, even more, smoother, and easy-going.

4.4 Banking industry of Bangladesh

After the financial crisis of 2008 E-banking industry has been improving. It is because the
traditional manual banking system has been turning into a digital banking system. Which has a lot
of benefits. This banking system has constantly been launching new policies to attract and grab
new more customers to generate revenue. Customers are finding the digital banking system very
much comfortable and attractive. The electronic banking system has also been making the bank’s
activities smoother and easy-going. This banking sector has the noticeable investment growth
throughout the years. Nowadays many a bank is investing in installing or expanding booth here
and there to make the withdrawal system of customer smoother and easier.
 Chapter 05-Growth of IBBL
IBBL has been taking shariah-based Islami banking to a whole different level that many Muslims
are now moving towards this bank. IBBL not only has been in a top position in Bangladesh but
also in the world positioning 943rd. The total income Islami bank Bangladesh ltd. Was Tk. 88,131
million and the total expenditure of IBBL was Tk. 66,217 million. And thus, the total profit before
tax of IBBL stood at Tk. 14,100 million. Also, this bank has experienced an outstanding growth
rate in the following sectors:

5.1 Growth of Account opening trend of IBBL

Since IBBL has been offering new more benefits to the customer. Therefore, many an existing
customer is suggesting other potential customers which are called “word of mouth”. This is one of
the reasons for increasing the number of new accounts of IBBL for the last 6 years (2019).

Figure 1 Growth in account opening trend (Annual report of IBBL, 2019)

Account opening trend in 2014, the number of depositors increased by 1048489 with the growth a
huge rate of 12.28%. For the next 4 years (2015- 2018) the growth rate was comparatively lower
than that of 2014. In 2018, the total number of depositors was around 11,374,419 with a growth
rate of 5.2%. In 2019, the number of depositors increased by around 1,436,848 with a growth rate
of 12.63%. That is again a huge growth rate for IBBL (2019).

5.2 Growth of total general investment of IBBL

General Investment of IBBL contains sector wise investment (industrial, trade commerce, real
state. etc.), Mode wise Investment (Mudaraba, Murabaha, Musharaka, etc), Division wise
Investment (Dhaka, Khulna, Barisal ,etc).Total general investment in 2015, the total amount of
general investment was Tk. 530,194 million with a growth rate of 14.40 percent. In 2016, the total
amount of general investment of IBBL was Tk. 616,422 with a growth rate of 16.26 percent. In
2017, the growth rate of general investment stood at 15.30% (2019).

Figure 2 Growth of General Investment (Annual report of IBBL, 2019)

It was 13.57% in 2018 with a total of 805,760 million. In 2019, the total amount of general
investment stood at around Tk. 899,013 million (2019).
5.3 Growth of MI and MEI clients
A comparative chart of the growth of clients under MI and MEI is shown below in 2015, the Total
number of MI and MEI clients was 569,820. In 2016, the amount has been increased to 582,852.
In the Next year, that number has been increased to 657,385 and in 2018, that becomes 625,532.
In 2019, the total number of clients increased by 58702 (2019).

Figure 3 Growth in MI & MEI Clients (Annual report of IBBL, 2019)

5.4 Growth of investment under MI and MEI

The total outstanding under MI (Micro- Enterprise) clients was Tk. 13,645,88 million in 2016 with
a growth rate of 16 percent. Next year the total amount of outstanding became Tk. 15,984,98
million with a growth rate of 5 percent. In 2019, the Total amount of outstanding stood at Tk.
19,168,52 million with a huge growth rate of 14 percent. On the other hand, the Total amount of
outstanding and growth rate under Macro Enterprise investment (MEI) was Tk. 10,831,11 million
and 20 percent respectively in 2016. Next year the growth of MEI outstanding has been increased
to 15 percent and in 2018, the growth rate was the lowest of only 1 percent. But in 2019, the growth
rate has been raised by 6 percent (2019).

Table 1 Investment outstanding under MI and MEI schemes (Annual report of IBBL, 2019)

5.5 Growth of import, export, and remittance

In the year 2019, the total amount of imports increased to Tk. 399,884 million from Tk. 399,816
million with the growth rate and market share rate of 0.02 percent and 9.32% respectively. The
amount of Export has been increased to Tk. 234,443 million from Tk. 251,592 million with a
negative growth rate and market share rate of -6.82 percent and 7.66 percent, respectively. On the
other hand, the remittance increased to Tk. 305,514 million from Tk. 275,212 million with a huge
growth rate and market share rate of 10.81 percent and 19.28 percent respectively (2019).
Table 2 Growth of import, export, and remittance (Annual report of IBBL, 2019)

5.5.1 Growth in import

Import In 2016, the total amount of imports increased to Tk.343,668 million from Tk. 343,668
million with a growth rate of 8 percent. But in 2017, IBBL experienced negative growth of 1
percent though the rate of market share was 10% (2019).

Figure 4 Growth in Import (Annual report of IBBL, 2019)

in the next year, IBBL managed to increase the growth rate to 4.82 percent with a market share
rate of 9.20 percent. IBBL again faced a negative growth rate of 7 percent with a market share of
8%. The growth rate and market share rate were 4 percent and 9 percent respectively in the Next
year. In the year 2019.

5.5.2 Growth in Export

Export In 2016, the total amount of exports was Tk. 224,236 million with a growth rate of 9
percent. In the next year, IBBL experienced a negative growth rate of 1.49 percent. But in 2018,

Figure 5 Growth in Export (Annual report of IBBL, 2019)

IBBL again experienced a growth rate of 4.82 percent with a market share of 9.20 percent. In the
next year, the growth rate of IBBL again dropped negatively to - 7 percent with a market share of
8 percent (2019).
5.5.3 Growth in Remittance
Remittance In 2015, The total volume was Tk. 321,066 million with a growth rate of 4 percent. In
the next two years (2016-17), the growth rate was dropped to -13 percent and -16.76 percent,
respectively. In the next year of 2018 & 2019, the growth rate again was 18.09 percent and 10.80
percent, respectively. Which is a pick stage in terms of growth rate for IBBL (2019).

Figure 6 Growth in Remittance (Annual report of IBBL, 2019)

 Chapter 06-Challenges

6.1.1 No specific and sufficient laws for Islamic banking

The operation of Islami bank Bangladesh ltd is based on a profit-loss sharing policy. But, to
regulate the Islamic banking industry in Bangladesh there is no such specific Act. There is an Act
called the Bank company Act, 1991 for the overall banking industry of Bangladesh. Although
Bangladesh Bank (Central Bank of Bangladesh) imposes rules and regulations over Islamic banks
of Bangladesh under some clauses incorporated in the bank company Act 1991, which has been
found insufficient in many cases. (Miah, Saha, and Karim, 2019). Normally this Act is used to
control and monitor interest-based traditional banking. That is why this Act cannot resolve any
dispute or issues raised in the operation of Islami bank Bangladesh ltd.

6.1.2 Lack of money market instrument of IBBL

When it comes to the management of liquidity of any sort of bank, through short-term tradeable
financial instruments Money market performs a crucial role. because no industry cannot survive
without the effective and efficient use of liquidity management the funds of shariah-compliant are
not that sufficient in Bangladesh. Islami bank Bangladesh limited, for borrowing funds, can either
go for Islami inter-bank money market or can go for Islamic Investment Bond Fund. Thus, Due to
lack of sufficient interest-free securities Islami bank Bangladesh limited faces huge difficulty in
managing liquidity for running their operation in Bangladesh. Also, a bank cannot invest if there
is any excess amount (Miah, Saha, and Karim, 2019).

6.1.3 Lack of Role in Government Project Financing

the Government of Bangladesh needs to finance many development projects of Bangladesh

towards the improvement of instructors and creating job opportunities for the mass unemployed
people. But, for that to happen government needs a huge amount of funds. Treasury bills and bonds
are some of the key tools for generating that funds. government generating funds by borrowing
from conventional (interest-related) banks. Through instruments like treasury bills and bonds. on
the other hand, Islami bank Bangladesh ltd. even though provides a big amount of money to the
government treasury in the name of corporate and other tax. But, due to the shariah-based
instrument and legal boundary of the framework, they cannot participate in developing many
public projects line any other conventional bank in Bangladesh (Miah, Saha, and Karim, 2019).

6.1.4 Insufficient Number of Islamic Insurance companies (Takaful)

To sustain in the competitive market and to ensure smooth expansion, the advancement of Islami
banking in Bangladesh, there need to have enough Islami insurance companies (takaful). In
Bangladesh, there are only a few general Islamic insurance banks (takaful). The total number of
islami insurance companies 8 and 3 are the life and non-life insurance companies, respectively.
Which is less than 3 percent in the Islamic financial industry (Miah, Saha, and Karim, 2019). This
insufficient number of Islamic insurance banks (Takaful) cannot help Islami bank Bangladesh that
much to protect investors against invisible imminent pitfall. In most of the cases, Islami bank
Bangladesh must depend somewhat on interest-based conventional insurance banks to trade and
business with other countries when it comes to insurance-related issues.

6.1.5 Lack of skilful labour

There is a lack of skilled human resources in the Islami banking industry of Bangladesh. Because
the lower number of employees have a better understanding of what shariah-based Islami bank
Bangladesh is all about. on the other hand, those employees who have worked in an interest-based
conventional bank have a better idea about bank’s financial transaction different policy and scheme
(Khan and Mohomed, 2017).

6.1.6 Lack of Islamic Financial Literacy program

Many a customer of IBBL is not literate and live-in rural area. even though IBBL has a growth of
36 years yet consumers Are not familiar with the shariah-based deposit system. Because this
banking system has a certain policy which is mainly in an Arabic form. Therefore, many customers
cannot understand the terms and policy of IBBL (Khan and Mohomed, 2017). Therefore, a lack of
programs regarding Islamic finance can cause the bank to lose many existing and potential
customers.

6.1.7 High Competition and Low Switching cost

There is high competition in the banking industry of Bangladesh. The total number of banks is as
many as 61 in Bangladesh. Also, there are around 8 Islamic banks that comply with Islami Shariah.
Each of the Islamic Shariah-based banks has a huge existing customer. Therefore, to generate
revenue IBBL must always keep bringing new policies to attract new more customers and SME
entrepreneurs (M. Anwarul Islam, 2016).

There are some banks in Bangladesh and customers can shift from one bank to the other very
easily. Because there is not that much complicity in opening a new account to a certain bank.
Therefore, the switching cost in the banking industry is low (M. Anwarul Islam, 2016). It is the
same for Islami shariah-based banks too. That is why IBBL must provide lucrative offers to the
customers to retain them.
6.1.8 Lack of sufficient number of ATM booths of IBBL

ATM booths are nowadays playing the vital role to make the banking activities even smoother for
all types of customers. The very popular bank in Bangladesh called Dutch Bangladesh banks has
the maximum number of ATM booths across the country. The total number ATM booths of DBBL
is as many as 4700 which led tis bank to capture many customers of all category including students,
garments workers, official personnel, etc. whereas the total number of ATM booths of IBBL is
only around 660. Which is very less in comparison to the DBBL.

6.1.9 The negative impact of ongoing Covid-19

Due to covid 19 Global economy is facing huge damage. Many economists are predicting that this
pandemic situation will be causing a huge disruption to the global economy. The International
Monetary fund (IMF) admonished that this pandemic situation will put the economic position into
a great recession also deducted that this pandemic would cause the Global economy to be
contracted by 3 percent while the world bank deducted that the global economy would shrink by
5.2 percent. World bank also deducted that after world war two this pandemic can put the global
economy in recession again. According to Asian Development Bank (ADB), this pandemic
situation will make the global economy lose about $5.8 trillion - $ 8.8 trillion. According to the
world trade center (WTO), about 13-32 percent of the world trade merchandise would be cut down.
A report of Global Economic prospect shows, that the growth rate of the overall economy of South
Asia will be cut down by 2.7 percent (Badinger, 2020). Covid 19 has eventually caused problems
to the economy of Bangladesh. The problems include production, savings of People, investment
flow, employment rate the banking industry is expected to face even more backward. Because it
deals with a broader range of risks compared to other industries. And due to this ongoing pandemic
crisis regarding liquidity, credit, Non-performing loan (NPL) of banks has been increasing. Also,
the credit and deposit system of the Islamic banking industry has declined by 1.29 percent (in the
year 2019) and 1.54 percent (in the year 2020) respectively the banking industry of Developing
countries like Bangladesh has been facing even more risk. For instance, the number of the loan-
default can be increased, savings of lower, lower-middle-class people has been decreased to for
Their survival. The demand for new investment by customers has been dropping. During this
pandemic, the amount of NPL of IBBL has increased. Also, 90 percent of the total banking
transection of IBBL takes place only under Murabaha mode (mark-up investment). Whereas only
10 percent of the total banking transaction took place under profit-loss sharing modes such as
Mudaraba and Musharaka.
 Chapter 07
Discussion and Summary
IBBL has been taking shariah-based Islami banking to a whole different level that many Muslims
are now moving towards this bank. IBBL not only has been in a top position in Bangladesh but
also in the world positioning 943rd. Currently, the authorized capital of this bank is around TK
20000 million and the paid-up capital of this bank is around TK 16099.91 million. In 2019, the
number of depositors increased by around 1,436,848 with a growth rate of 12.63 percent. That is
again a huge growth rate for IBBL. The total income Islami bank Bangladesh ltd. Was Tk. 88,131
million and the total expenditure of IBBL was Tk. 66,217 million. And thus, the total profit before
tax of IBBL stood at Tk. 14,100 million. Also, this bank has experienced an outstanding growth
rate over the years in new account opening trends, the number of depositors, investment under MI
And MEI. In the general meeting, the board of directors and members had set up a cash dividend
of 10% to its shareholders. This bank is financially efficient and provides lucrative and welfare-
oriented services based on Islami Shariah. IBBL does not need to borrow that much money from
Central bank or other financial institutions because of its sufficient financial ability. They are
providing different kinds of investment facilities to their customers. Most of the employees of
IBBL is honest and abide by the rules and regulation of Islami Shariah. They are sincere,
supportive of their customers. on the other hand, IBBL has some challenges as well. There are No
sufficient laws for Islamic banking in Bangladesh. there is a Lack of money market instrument of
IBBL and a lack of Role in Government Project Financing. due to the Insufficient Number of
Islamic Insurance companies is and skilful labour this bank cannot capture new more customers.
The ongoing covid-19 has caused the banks increase the number of non-performing loan and
decrease banking transaction took place under profit-loss sharing modes such as Mudaraba and
Musharaka.
 Chapter-08
8.1 Conclusion
In every aspect, the holy Quran has guided us with rules and regulations. And in Islam, Riba
(interest) is strictly prohibited Therefore, Islami bank Bangladesh limited is trying to follow the
rules and regulations of Islam and established an Islami Shariah-based banking system. Through
which sincere Muslims are getting banking facilities. IBBL also introduced some schemes through
micro investment for the welfare of the rural people. IBBL started Its journey in the year of 1983.
From then on, this bank has constantly been growing in each sector of the banking system. IBBL
has been taking shariah-based Islami banking to a whole different level that many Muslims are
now moving towards this bank. IBBL not only has been in a top position in Bangladesh but also
in the world positioning. this bank has been facing growth for last couple of years in the total
number of deposit products, new opening account trends, micro-investments, rural investment etc.
this bank also has experienced expansion and growth in export and remittance. The world banking
system is facing somewhat backwards due to covid-19. IBBL has got some challenges such as no
individual Act from Bangladesh bank. Inadequate number of Islami insurance banking (talaful)
and literacy programs regarding the operation of IBBL shariah based etc.
8.2 Implication
There is no doubt that the banking performance of IBBL is excellent. But competitors of IBBL are
offering better banking to their existing customers also offering lucrative policy and E-banking
facilities to attract new more potential customers. Therefore, to hold its position in the banking
industry of Bangladesh IBBL should focus on something that will help sustain existing customers
also attract potential customers. IBBL should focus on Money market. If ever this bank needs to
borrow, this bank either go for Islami inter-bank money market or can go for Islamic Investment
Bond Fund. Thus, Due to lack of sufficient interest-free securities this bank faces huge difficulty
in managing liquidity for running their operation in Bangladesh. IBBL should increase the number
of the ATM booth so that customers can easily get the banking service. one of the competitors of
IBBL, Dutch Bangla bank ltd. (DBBL) has popular because of Their plenty of booth installed
across the country and has got a huge existing customer. Even though IBBL is so familiar that is
known too almost everyone, but very few people know about the Mobile app of this bank. Still,
IBBL should go for advertisements, digital marketing to promote its Mobile App “iSmart” as a
part of Internet Banking service. Also, IBBL can use digital marketing platform to make people
understand about the different types of Arabic terms and to resolve controversy regarding the
Islami Shariah based banking activities of IBBL. Also, this bank should introduce more agent
banking specially to the rural area to make customers aware of the Islami Shariah-based banking
system. which helps the bank get more customer base relatively to other Islamic and conventional
private banks.
 Chapter 09

References
Chakraborty, J., 2017. Financial Performance Analysis of Islamic Banks in Bangladesh: A Case
Study on Islami Bank Bangladesh Limited (IBBL). International Journal of Economics, Finance
and Management Sciences, 3(2), p.99.

Hossain, M., Salam, M. and Sen, T., 2019. Measurement of Financial Performance of a
Commercial Bank from Varied Perspectives: A Case Study of Islami Bank Bangladesh
Limited. Khulna University Business Review, pp.53-64.

Islam, M., 2016. THE PERFORMANCE OF RURAL DEVELOPMENT SCHEME IN ISLAMI

BANK BANGLADESH FROM AN ISLAMIC PERSPECTIVE. Share: Jurnal Ekonomi dan
Keuangan Islam, 5(1).

Islamibankbd.com. 2019. [online] Available at:

<https://www.islamibankbd.com/annual_report/Annual%20Report%202019.pdf?fbclid=IwAR3
EHD8Rlhwf-t9EImDy--0iE8FW2TZG8nEBMlqbWfPXgg4df6XgRGoqYbY> [Accessed 6 April
2021].

Khan, T. and Mohomed, A., 2017. Ethical Banking and Islamic Banking: A Comparison of
Triodos Bank and Islami Bank Bangladesh Limited. Islamic Economic Studies, 25(Special Issue),
pp.111-154.

M. Anwarul Islam, K., 2016. Rural Development Scheme: A Case Study on Islami Bank
Bangladesh Limited. International Journal of Finance and Banking Research, 2(4), p.129.

Miah, M., Saha, K. and Karim, R., 2019. The Role of Private Commercial Bank in Corporate
Social Responsibility regarding Islami Bank Bangladesh Limited. OALib, 06(05), pp.1-14.

Uddin, M., 2017. Credit for the Poor: The Experience of Rural Development Scheme of Islami
Bank Bangladesh Ltd. Journal of Nepalese Business Studies, 5(1), pp.62-75.
Ur Rehman, S. and Ahmad, A., 2013. Corporate Social Responsibility in Bangladesh: The Role of
Islami Bank Bangladesh Limited. The International Journal of Excellence in Islamic Banking and
Finance, 3(1), pp.1-15.

Badinger, H., 2020. Measuring the World Economy. The World Economy, 36(1), pp.12-30.