Investment Performance of First Security Islami Bank

Limited.: A Study on Agrabad Branch, Chattogram

(This Internship Report is submitted for the partial fulfillment of the Degree of
Bachelor of Social Science with a major in Economics & Banking)

Department of Economics & Banking

Faculty of Social Sciences
International Islamic University Chittagong
 Investment Performance of First Security Islami Bank
Limited.: A Study on Agrabad Branch, Chattogram
(This Internship Report is submitted for the partial fulfillment of the Degree of
Bachelor of Social Science with a major in Economics & Banking)

Internship Duration: 20th February 2022 to 24th April 2022

Date of Submission: 2 months

Department of Economics & Banking

Faculty of Social Sciences
International Islamic University Chittagong
 EXECUTIVE SUMMARY

This is about the “Investment Performance of First Security Islami Bank Limited: A
Study on Agrabad Branch, Chattogram”, where the information is provided based
upon my experience of two months internship program from this bank. The report
attempts to show the summarized picture of the Investment Department of First Security
Islami bank. The study aimed to evaluate the Investment Performance also to see how
First Security Islami Bank contributes to rendering financial services towards the small
and rural sectors. First Security Islami Bank Limited with rotation on different desks
which includes Accounts Opening, General Banking, Retail Banking, Clearing,
Remittance, Loan and Advance etc.

In this report “Investment Operation of First Security Islami Bank Limited: A

Study on Agrabad Branch, Chattogram.‟‟This report divided will focus on various
aspects of this Bank. Since they are standing at a good position among the private bank,
their financial position, markets share, marketing mechanisms, overall strengths and
weakness, objectives, goals will be cross-examined for analysis fact that how they were
and how they will be in the future. Various types of analysis will help us to understand
the comparative position and a transparent picture of this Bank that will help us to draw
any comment at a glance. For that, I have divided the whole report into five chapters.
The Introduction part of the report contains information about the Scope of the study, the
objective of the report, the methodology of the study, and the limitation of the study. The
second part is the Organizational Description overview. The third part is the description
and the fourth part is an analysis of the investment performance of FSIBL. The next
chapter is findings from the given statement. The employees of the First Security Islami
Bank Limited, Agrabad Branch have been interviewed for finding the approximate data
and to evaluate its effectiveness.

Finally, the conclusion and recommendations are made in the last chapter then
Reference. A survey will be conducted on the employee of First Security Islami Bank
Limited. The objective of this report will be to determine how well First Security Islami
Bank Limited is satisfying the employee. Lastly, the finding will be examined to
prescribe a set of specific recommendations to improve the overall service quality
according to employee expectation and also to solve the existing problems at the whole
organization level.

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 Table of Contents

Particular Page No

LETTER OF SUBMISSION 02
CERTIFICATE 03
DECLARATION 04
CERTIFICATE OF SUPERVISOR 05
ACKNOWLEDGEMENT 06
PREFACE 07
EXECUTIVE SUMMARY 08

Chapter-01 Introduction

1.1 Introduction 14
1.2 Background of the study 14
1.3 Objective of the study 15
1.4 Methodology of the study 15
Secondary Sources 15
1.5 Scope of the study 16
1.6 Limitations of the study 16

Chapter-02 Company Profile

2.1 Introduction 18
2.2 Concept of Islami Bank 18

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2.3 History of First Security Islami Bank 19
2.4 Corporate Information 20
2.5 Mission of Banks 21
2.6 Vision 21
2.7 Core Values 21
2.8 Strategic Objectives 22
2.9 Special Features of FSIBL 24
2.10 Corporate Cultures 24
2.11 Board of Directors 25
2.12 Organizational Hierarchy(Chain of 26
Command)
2.13 Organizational Framework of Agrabad 28
Branch
2.14 Source of Fund 29

2.15 Product and Service 32

2.16 Source of capital of First Security Islami 32

Bank (Agrabad Branch )

Chapter-03 Theoretical aspects of investment activities

of FSIBL Agrabad Branch

3.1 Investment Operation in FSIBL 35

3.2 Objective and Theoretical aspects 35

3.3 Investment process 36
3.4 Modes of Investment 39
3.5 Investment Mechanism of FSIBL 39
3.6 Geographical-Wise Investment 42

Chapter-04 Investment Performance Analysis of FSIBL

Agrabad Branch

4.1 Investment Growth 44

4.2 Deposit Growth 45

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4.3 Investment to Deposit Ratio 46
4.4 Mode-Wise Investment 47
4.5 Sector- wise Investment 53
4.6 Investment Recovery 55
4.7 Investment Income 56
4.8 Overall Profit 57
4.9 Major Findings 58

Chapter-05 Recommendation and Conclusion, Reference

5.1 Recommendation 60
5.2 Conclusion 61
Reference 62

List of Tables

Serial no Particular Page no

2.13 Paid up capital according to 28
shareholders
3.6 Geographical wise 42
investment
4.1 Investment Growth 44
4.2 Deposit Growth 45
4.3 Investment to Deposit Ratio 46
4.4 Mode-Wise Investment 47
4.5 Sector wise Investment 53
4.6 Investment Recovery 55
4.7 Investment Income 56
4.8 Overall Profit 57

List of Figures

Serial no Particular Page no

2.13 Paid up capital according to 28

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 shareholders
2.13.1 Graphical representation of 29
secondary sources
2.14 Sources of Capital of First 30
Security Islami Bank(Agrabad
Branch)
4.1 Investment Growth 44
4.2 Deposit Growth 45
4.3 Investment to Deposit Ratio 46
4.4 Mode-Wise Investment 47
4.5 Sector wise investment 53
4.6 Investment Recovery 55
4.7 Investment Income 56
4.8 Overall Profit 57

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Chapter 01
Introduction

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1.1 Introduction:
The banking sector is uprising and playing a vital role in our modern economy. There
has been some diffidence between Islami Banking systems and conventional banking
systems in Bangladesh. So in a nutshell, it can be defined as a financial institution that
collects deposits from different sources and grants loans to the third party, the surplus is
the profit of the Bank. In this process bank‟s income is the difference between the
landing and deposition rate. This nature of income may have two types, Interest income
which is earning of a conventional bank. This system of interest income is opposite the
Islami Banking system. Mention that it is the source of exploitation of clients in the
conventional system. Profit: it is the earning of the “Islamic Bank” following the Islamic
systems. Profit generated from buying and selling process which has been made halal in
Islam. According to Islamic sharia‟s interest is strictly prohibited. Since Islamic bank is
conducted based on profit and loss sharing approach rather than interest basis, it has
more acceptability to the Muslim mankind. But the basic principle of Islamic banking is
PLS (profit loss shearing system) - based sharia‟s (Islamic principle) financing and
having being exposed to interest rate risk. Because most of the investments of Islamic
banks are in Bai -mode. In this mode, the bank sells specified goods to the client on cost-
plus agreed-upon profit within the fixed period, the Islamic bank cannot impose or
realize additional amounts as income but the conventional banks can continue to charge
interest, or even they can & realize penal interest as income of the bank, therefore a
conventional banking system which is based prefixed interest rate is exposed to less
interest rate risk. So how Islamic banking systems can provide loans & advance
profitably and survive with their huge interest rate risk capitalist economy. That‟s why
the title of the report focuses on the Investment Operations of FSIBL. Islami Bank tries
to abide by the rule of the Holy Quran where mentioned Interest is strictly prohibited and
business makes halal for humanity.

1.2 Background of the study:

The internship report is a basic requirement to fulfill the Economics and Banking
program of International Islamic University Chittagong, Bangladesh. The proposed topic
is “Investment Performance of FSIBL”. This topic has been assigned by Md. Rafiqul
Islam Rafiq and supervised by him also.

This report is the outcome of my practical knowledge during the period of the two-month
internship at FSIBL. The scope of the report was the practice of Investment Performance

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in First security Islami Bank Limited, Agrabad branch. Providing a good loan is very
difficult in the highly competitive business world. When the organization disburses some

Loans to the clients, it faces a lot of challenges to recover the loan. I feel it is a great
scope for study as the organization can understand will be the actual procedure for
granting the loan. The loan sector is the most critical department in banking that why I
am very much interested to study in the relevant field.

1.3 Objective of the study:

The main objective is to analyze the investment operation of First Security Islami
Bank Limited, Agrabad Branch, Chattogram.

Specific objectives
 To evaluate the investment operation of FSIBL, Agrabad Branch,
Chattogram.
 To identify different investment modes of FSIBL, Agrabad Branch,
Chattogram.
 To analyze the investment performance of FSIBL, Agrabad Branch,
Chattagram.
 To analyze major problems and recommend some suggestions to overcome
those problems.

1.4 Methodology of the study:

I have applied in the study like descriptive. The methodology of the report includes
direct observation, oral communication with the employee of different departments. I
also use the survey method to study in this research. To know the in-depth information,
the topic was discussed with the expert professionals related to the bank for several times
of record of FSIBL other related secondary information.

Sources of Data Collection: To prepare this report the data has been collected from
two sources, such as primary sources and secondary sources.

Secondary sources of data:

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  Annual Report of 2020 of First Security Islami Bank Limited and Desk report of
the related department.
 Manuals of First Security Islami Bank Limited (Bai-muajjal, Bai-murabaha, Bai-
salam, Bai-mudarabah).
 General Report.
 Project Profile.
 From Internet.
 Investment Affair of FSIBL Agrabad Branch.

1.5 Scope of the study:

This report is the outcome of my practical knowledge during the period of the two
months internship at FSIBL. The study covered in banking areas are:

* General banking Department (Account opening, Account, Remittance).

* Investment Department (Loans and advance of investment) .

* SME Desk.

1.6 Limitations of the study:

Every task has some limitations. I faced some usual constraints during my internship.
Though I have given utmost effort to prepare this report there are some limitations of the
study. There is a difficult matter to collect sufficient data from the bank. Much expected
data I have failed to collect. So, the lack of sufficient data is one of the big problems
during my paper writing.

 Most of the essential data are confidential for the bank. So there is a lack of
primary data.
 Lack of in-depth knowledge & analytical ability for writing such a report.
 The time for this study was short.
 Some data and information are not available for obvious reasons, which could be
very much useful.
 Lack of enough experience in analyzing data.
 As the research was the first time for me, inexperience was a constraint of this
study.

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Chapter 02
Company Profile

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2.1 Introduction:
At present, the banking sector is the uprising and playing a vital role in our economy. In
the introduction chapter, we need to define „Bank‟ before going to make differences
between Islamic banking systems with the conventional banking systems. So, in the
nutshell, it can be defined as a financial instruction that collects deposits from the surplus
unit and invests in the deficit unit. In this process bank‟s income is the diffidence
between the landing and deposited rate. This nature of income may have two types,

Interest income: it is the earning of a conventional bank following the system of interest
income is prefixed and not allowed to give or take by following per under the Islamic
system. Mention that it is the source of exploitation.

Profit: it is the earning of the “Islamic Bank” following the Islamic system. Profit
generated from buying and selling process which has been made halal in Islam.
According to the Islamic, Shari‟ah interest is strictly prohibited. Since Islamic bank is
conducted based on profit and loss sharing approach rather than interest basis, it has
more acceptability to the Muslim mankind. But the basic principle of Islamic banking is
PLS (profit loss shearing system) - based Shari‟ah (Islamic principles) financing and
thereby having been exposed to interest rate risk. Because most of the investments of
Islamic banks are on Bai-mode. In this mode, the bank sells specified goods to the Client
on cost-plus agreed-upon profit within the fixed period; the Islamic bank cannot impose
or realize an additional amount as income of the bank. But, the conventional banks can
continue to charge interest, or even they can change & realize penal interest as income of
the bank. Therefore conventional banking system which is based on a prefixed interest
rate is exposed to less interest rate risk. So how Islamic banking systems can provide
loans & advances profitably and survive with their huge interest rate risk in the capitalist
economy. That‟s why my topic of the report is to identify the basic differences between
the Islamic and conventional banking systems.

2.2 Concept of Islami Bank:

The bank, which operates under the principles of Islam like based on business and not
based on the interest of general commercial banks, is called the Islami bank. In the broad
sense, an Islami bank is a financial institution that operates to implement and materialize
the economic and financial principles of Islam in the banking arena.

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 the banning of the receipt and payment of interest on
any of its operation.” According to the Islamic Banking Act 1983 of Malaysia, “An

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Islamic Bank is a company, which carries on Islamic banking business and holds a valid
license, and all the offices and branches Malaysia of such a bank shall be deemed to be
one bank. Islamic Banking Business means banking business whose aims and operations
do not involve any element which is not approved by the religion Islam.”

2.3 History of First Security Islami Bank Limited:

The First Security is a national banking sector that was incorporated on the 29th August
1999 as a banking company under the Companies Act 1994 to carry on the banking
business. It obtained permission from Bangladesh Bank on 22nd September to
commence its Business. It has started its operation as a commercial bank on 25th
October 1999 with a branch at Dilkusha. At present, the bank has more than 239
branches all over Bangladesh. It renders all types of commercial banking service to the
customers within the stipulations laid down the Banking Company Act 1991 and rules
and regulations are being compromised by the Bangladesh Bank from time to time.
Diversification of products and services and innovation of products suited to the needs of
the customers in keeping with relevant rules and laws have made it different from other
commercial banks of the country. In 2009, on 1st January they change their system and
converted it into Islamic banking. They also change the name and the new name was
“First security Islami Bank LTD”.

Corporate Banking and personal Banking are the special strength of FSIBL. It maintains
a strong relationship with all the banks of the country and all the customers of the bank.
The first security Islami bank LTD is a solid, forward-looking, and modern local bank to
ensure sound performance. The effort that the first security Islami bank LTD is trying to
portray the bank as a brand image as very strong and successful. The general image is
that it is the “Symbol of Security”.

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2.4 Corporate Information:

FSIBL Corporate Profile

Name of the Company First Security Islami Bank Limited

Chairman Mohamed Saiful Alam

Vice-Chairman Mohamed Abdul Maleque

Managing Director Syed Waseque MD Ali

Type of Company Public Limited Company

Date of Incorporation August 29, 1999

Certificate of Incorporation August 29, 1999

Date of commencement of Business August 29, 1999

Certificate of commencement of Business September 29, 1999

Date of getting license from Bangladesh
September 22, 1999
Bank
Date of opening first branch October 25, 1999
Listing date with Dhaka and Chittagong
September 22, 2008
Stock Exchange Limited
M/S SHAFIQ BASAK & CO.
External Auditor
RAHMAN MOSTAFA ALAM & CO.
The Law Council, Barrister and
Legal Advisor
Advocate
Tax Consultant K.M.Hasan& Co. Chartered Accountants
1/A Road-8, Gulsan-1. Dhaka-
Corporate Head Office
Bangladesh
Paid Up Capital 7128.17 Million

Contact No 8402613-8402625

Fax 880-02-9891915

E-mail info@fsiblbd.com
Practicing Professional for certification of
Ahmed Zaker & Co.
CGC
Bank Web - address www.fsiblbd.com

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2.5 Mission of Bank:
 Conducting interest-free banking.
 Establishing participatory banking instant of banking on the detour.
 Make a positive contribution to society and care for the environment by attaining
the highest level of satisfaction through the extension of services by dedicated
and motivated professionals.
 Provide solutions for the community to the needs of Islamic banking services to
maintain continuous growth of market share by ensuring corporate ethics and
transparency at all levels.
 Provide optimal investment values for investors by ensuring sustainable growth
and establishing the full value of the holders of the honorable shares and above
all to contribute effectively to the national economy.
 Create the best rides as a place of pride for the work and achievement for
employees as a manifestation of worship.
 Provide comfortable access through various means anytime and anywhere.

2.6 Vision:
The vision of the first security Islami bank is to be the most efficient bank in terms of
customer service, probability, and technology application. To be the premier financial
institution in the country based on Islamic Shariah by providing high-quality products
and excellence in services backed by the latest technology and a team of highly
personnel to deliver excellence in banking services.

2.7 Core Values:

 We trust in the Almighty Allah.
 We adherence to the spirit of Islami Sharia‟h.
 We believe in integrity, transparency, and accountability.
 We ensure our client‟s expectations by anticipating their needs and responding
with a sense of urgency.
 We approach business decisions with an emphasis on long-term growth and
sustainable profit.
 We communicate with candor and transparency to provide the best services.

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  We believe that commitment to our faith and families is fundamental to the
overall culture of our institution.
 We share business plans and encourage two-way communications.
 We work together as a team internally and collaborate externally with our
customers to meet or exceed their expectations and help them reach their goals.
 We believe that acting with integrity, servicing clients with the utmost care, and
collaboratively working with them being respectful, loyal, and trusting.
 We encourage our team members with initiatives by creating an environment that
encourages employees to lead and make decisions based on the best interest of
the customer and bank.
 We provide for the welfare of our customers and team members not only physical
safety but financial safety and security as well.
 We work for the economic emancipation and alleviation of poverty in our
country.
 We contribute to the economic development and nation-building activities of our
country.
 We upload the name and fame of the bank and the country through international
trade.
 We work for value-added to the investment of the valued shareholders.

2.8 Strategic Objectives:

 Employing, retaining local qualified personnel and continually developing their
skills and expertise to provide banking services and manage operational risks in
line with industry best practices. Applying the equal opportunity employment
principle to encourage performing personnel to grow within the bank.
 Establishing a set of managerial succession and adopting technological changes
to ensure the development of an Islami Bank as a stable financial institution.
 Achieving financial strength and growth, including the expanded market share
and generating income for its shareholder through strengthening trust and
partnership with our customers and an ongoing focus on providing professional
and quality customer service.
 Designing suitable products and services which are very responsive to meet the
client‟s financial needs and aspirations as well as ensuring adequate risk-adjusted
return for the bank through delivering services with the implementation of world-
class IT infrastructure.
 Introducing existing products into a new market and products to new and existing
markets with our innovative service approach and confirming monetary laws and
regulations.
 Developing and implementing a promotional plan to drive increased business.

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 Investing infrastructure that unlocks the potential of the private sector,
championing equality and community participation. It will help improve skills for
competitiveness, ensuring that those skills better match the opportunities and
requirements of local job markets.
 Contributing actively to the national economic growth through attracting foreign
investment, financing investment projects in the country, and promoting foreign
trade with locals.
 Ensuring corporate governance in conformity with laws and regulations and
undertaking all our activities honestly, responsibly, and ethically.
 Devising suitable programs and action plans to accelerate our recovery drive and
cost rationalization initiatives.
 Pursuing earnings growth by increasing its penetration in the banking service
market while maintaining its focus on asset quality.
 Continually pursuing its international expansion program to gain both market
share and protect itself through geographical and economic diversification.
 Ensuring “Green Banking” in the context of prevailing regulations of the central
bank and establishing one new strategic alliance annually.

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2.9 Special Features of FSIBL:
 All activities of the bank are conducted according to Islamic Shariah where profit
is the legal alternative to interest.
 The bank‟s investment policy follows different modes approved by Islamic
shariah based on the Quran & Sunnah.
 The bank is committed to establishing welfare-oriented banking system,
economic liftmen of the low-income group of people, create employment
opportunists.
 According to the need and demands of society and the country as a whole, the
bank invests money in different „Halal‟ businesses. The bank participates in
different activities aiming at creating jobs, implementing development projects of
the government, and creating infrastructure.
 The bank is committed to establishing an economic system resulting in social
justice and equitable distribution of wealth. It is committed to bringing about
changes in the underdeveloped rural areas for ensuring balanced socio-economic
development of the country through micro-credit programs and financing of
SMEs as well.

2.10 Corporate Culture:

FSIBL is one of the most disciplined Banks with a distinctive corporate culture. In this
bank, believes in shared meaning, shared understanding, and shared sense-making. The
people of the bank can see and understand events, activities, objects, and situations
distinctively. The people of the bank see themselves as a tight-knit team/family that
believes in working together for growth. The corporate culture they belong to has not
been imposed. It has rather been achieving through their corporate culture.

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2.11 Board of Directors:

Chairman

Directors

Managing Director

Deputy Managing Director

Executive Auditing
Committee Committee

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.

2.12 Organizational Hierarchy (Chain of Command):

Chairman

T Managing Director Top Level

Additional Managing
Director

Deputy Managing Director

Senior Executive Vice

President
Executive Level
Executive Vice President

Senior Vice President

Vice President

Senior Assistant Vice President

Mid- Level

Assistant Vice President

First Assistant Vice President

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Senior Principal Officer

Principal Officer

Junior Level
Senior Officer

Officer

Probationary Officer

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2.13 Organizational Framework of Agrabad Branch:

Senior Vice President

Vice President

First Assistant Vice President

Senior Principal Officer

Principal Officer

Senior Officer

Officer

Junior Officer

Assistant Officer

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2.14 Source of Funds:
The financial resource of the Islamic banks consists of original capital resources
comprising paid-up capital and reserves and funds rose through borrowing from the
central bank and other banks according to the Islamic Shari‟ah, and issue of Islamic
financial instruments. The major part of their operational fund is, however, derived from
the different categories of deposits accepted on Islamic principles of AL-Wadiah and
Mudaraba. For the sake of ease of understanding, we call these two sources „Primary‟
and „secondary‟. These are discussed as under.

Primary Source
A. Paid-up Capital
Paid-up Capital is the amount of money a company has received from
shareholders in exchange for money.
Islamic banks are public limited companies incorporated under the Companies
Act, which is listed on the stock exchange. Individual, institutions, local and
foreign, have subscribed there.
Name of the No. of No. of shares Percentage
Category shareholders
Sponsor-Directors 14 216488078 30.37%
Foreign Investors 52 35366750 4.96%
Financial Institutions 338 89604892 12.57%
General Public 55275 371357862 52.09%
Total 55679 712817582 100.00%

Table 2.13: Paid up capital according to shareholders

GRAPHICAL REPRESENTAION OF PRIMARY SOURCE

OF CAPITAL

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 Paid up Capital According Shareholders
General Public Sponsor Directors Financial Institutions Foreign Investor

5%
13%

52%

30%

Figure: 2.13 GRAPHICAL REPRESENTAION OF PRIMARY SOURCE OF CAPITAL

Secondary Sources
Mobilization of deposit

Like interest-based conventional banks, the main function of Islamic banks is to mobilize
savings and provide financial support to the entrepreneurs. But Islami bank doesn‟t pay
direct interest rather they pay profit which they make by investing the deposits of the
bank. They collect deposit through different types of savings account. These can be
broadly divided into two types.

1. Al Wadeeah Account
2. Mudarabah Account

Mudarabah Accounts again can be divided into the following types.

 Mudaraba Savings Account

 Mudarabah Current Deposit
 Mudarabah Term deposit
 Mudarabah Monthly Profit distribution Scheme
 Muraeabah Sort Notice Account
 Deposit Schemes
 Monthly Installment Based Term Deposit (ITD)
 Monthly Installment Based Hajj Deposit (MHD)
 Marriage & Investment (MIS)

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GRAPHICAL REPRESENTATION OF SECONDARY
SOURCES

Mixed Deposit
7

0
Current Deposit Bills payable Savings Term Deposit

Figure: 2.13.1GRAPHICAL REPRESENTATION OF SECONDARY SOURCES

Secondary reserves provide protective liquidity for forecastle cash as well as for more
remote contingencies. The secondary reserve of traditional banks consists of short-term
open market securities. Islamic banks can also hold Islamic bonds and securities
Mudaraba and Musharaka or other securities approved by Islamic Shariah. In contrast to
primary reserves, the secondary reserves can earn an explicit return, thus enhancing the
profitability of the institution. The average maturity of securities includes in secondary
may vary. In addition to having near-term maturates, the securities in this category must
have a low default risk and market value with limited exposer interest rate movements.
Being highly marketable and reversible, the secondary reserve provides the commercial
bank with its principal source of liquidity.

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2.15 Product & Service:

 Deposit
 Investment
 Foreign Trade
 Remittance
 Services

Other Services
 ATM, Debit, Credit card service
 Online banking (FSIBL Cloud)
 Automated Clearing House (ACH) transaction.
 Cash management
 Balance inquiry
 Fund Transfer
 Loan Application
 Investment Activity

2.16 Sources of Capital of First Security Islami Bank (Agrabad

Branch)
Sources of the capital of a branch can be mainly divided into two types first one is the
deposit and the second one is from the investment. Here below are the sources of capital
of the Agrabad branch (2017-2021) -

 Deposit – 67296.2 Crore

 Investment – 17444.9 Crore
 Others – 17561 Crore

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 Sales

17%

17%
Deposit

66% Investment
Others

Figure 2.14 Sources of Capital of First Security IslamiBank (Agrabad Branch)

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 Chapter 03
Theoretical aspects of
investment activities of FSIBL –
Agrabad Branch

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3.1 Investment Operation of FSIBL:
Islamic Banks emphasize on legitimate (Halal) business. Islamic bank does not invest in
loans and fixed interest securities. It can invest in ordinary shares only while interest-
based banks can invest in loans and different kinds of securities. FSIBL establishes and
participates in the project with its client as a partner and bears the risk along with the
client on a proportionate basis. Finally, the concept of FSIBL is to establish an
egalitarian society based on principles of social justice and equity. We have gathered the
fact that investment management is the theme of FSIBL. The banks take deposits and
invest the same based on the profit-loss sharing. The bank goes for the investment
mainly which are long term and profitable. FSIBL also gives a high concentration on the
investment that will generate more employment. As investment is one of the most
priority areas for the FSIBL, it needs to be cautious in investment decisions. To ensure
proper investment FSIBL always goes with in-depth study before investing. So in the
next phase, we are going to demonstrate the way FSIBL manages an investment.

First Security Islami Bank Ltd has made a positive contribution towards the socio-
economic development of the country by opening 190 branches in which 60 authorized
dealers throughout the country.

First Security Islami Bank Ltd is involved in many investment activities. Some of these
are:

a) Investment in Agricultural Sector.

b) Investment in Industrial Sector.
c) Investment in Business Sector.
d) Investment in Foreign Trade.
e) Investment in Construction and Housing.
f) Investment in Transportation Sector.
g) Hire Purchase (HPSM).
h) Investment In Real Estate Material.
i) Bai-Murabaha HYPO/PLEDGE.
j) HPSM Industrial.
k) Bai-Muajjal.
l) Foreign Bill Purchase.
m) Quard against car scheme.

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3.2 Objective and Theoretical aspects:
The Objective and theoretical aspects of the investment operation of FSIBL are too inept
funding strictly by following per under the principles of Islamic Shari‟ah and those are:

 To do away with disparity and establish justice in trade, commerce, and Industry.
 To diversity its investment portfolio by the size of investment portfolio by
sectors, by economic purpose, by securities, and by geographical area including
industrial, commercial & agriculture.
 To ensure mutual benefits both of the bank and the investment client by
professional appraisal of investment proposals, judicious sanction of investment,
close and constant supervision and monitoring thereof.
 To invest keeping the socio-economic requirement of the country in view.
 To increase the number of potential investors by making the participatory and
productive investments.
 Employment generation with a view to accurate sustainable socio-economic
growth and up liftmen of the society.
 To shun even highly profitable investment in the fields forbidden under Islamic
Shari‟ah and are harmful to society.
 The bank extends investment under the principle of Bai-Murabaha, Bai-Muazzal,
and Hire Purchase under Shirkatulmelk, and Maskaraka. The bank is making
sincere efforts to go for the finance various development scheme of poverty
alleviation, income and investment under the Mudaraba principle in near future.
 To invest in form of goods and commodities rather than give out cash to the
investment clients.
 To contribute to social up liftmen, and sustained economic growth of the country.
 Investment to trade, commerce, industry, foreign trade, small scale industry,
transportation, service sector.

3.3 Investment Process:

1. Selection of the client

First of all, the client approaches any of the branches of (FSIBL). Then, he talks with the
manager or respective officer (Investment). Secondly, the bank considers the five C‟s of
the client. After successful completion of the discussion between the client and the bank,
the bank selects the client for its proposed investment. It is to be noted that the
client/customer must agree with the bank‟s rules & regulations before availing of
investment. Generally, the bank analyses the following five C‟s of the client:

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  Character.
 Capacity.
 Collateral.
 Capital.
 Condition.

2. Application stage:

At this stage, the bank will collect necessary information about the prospective client.
For this reason, the bank informs the prospective client to provide and/or fill duly
respective information which is crucial for the initiation of an investment proposal.
Generally, here, all the required documents for taking investment have to prepare by the
client himself.

 Trade License photocopy (for proprietorship).

 Abridged pro forma income statement.
 Attested copy of partnership deed (for partnership business).
 Prior three (03) years‟ audited balance sheet (for joint-stock Company).
 Attested a copy of the Memorandum of Association (MOA) & Articles 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); viii. A detailed summary of
the sundry debtors and creditors (including both time & schedule).
 Summary of the personal movable & immovable assets; and others.

3. Appraisal stage:

At this stage, the bank evaluates the client and his/her business. It is the most important
stage. This is because; bank usually goes for sanctioning the proposed investment
limit/proposal based on this stage. If anything goes wrong here, the bank suddenly stops
making payments for the investment.

In order to appraise the client (FSIBL) provides a standard which is given below:

 Company‟s/Client‟s Information.
 Owner‟s Information.
 List of Partners/Directors.
 Purpose of Investment/Facilities.
 Other Liabilities of the Client/Group.
 Business/Industry Analysis.
 Asset-Liability position of the client.
 Working Capital Assessment.
 Risk Grade.
 Insurance Coverage.

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 4. Sanction stage:

At this stage, the bank officially approves the investment proposal of the respective
client. In this case, client receives the bank‟s sanction letter. First Security Islami banks
sanction letter contains the following elements:

 Investment Limit in million.

 Mode & amount of investment.
 Purpose of investment.
 Period of investment.
 Rate of return.
 Securities.

5. Document stage:

At this stage, usually, the bank analyses whether required documents are in order. In the
documentation following documents are needed.

 Tax Payment Certificate.

 Stock Report.
 Trade License (renewal).
 VAT certificate.
 Liability statement from different parties.
 Receivable from different clients.
 Other assets statement.

6. Disbursement stage:

At this stage, the bank decides to pay out 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 mortgaged property needs to be physically verified.

7. Monitoring and Recovery stage:

At this final stage, the bank will contact the client continually, for example- the bank can
obtain monthly stock report from the client in case of micro-investment. Here the bank
will keep its eye on the investment taker. If needed, the bank will physically verify the
client‟s operations. Also is dank feels that anything is going wrong then it tries to recover
its investment fund from the client.

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3.4 Modes of Investment:
Here is a graphical representation of modes of investment of FSIBL.

Modes of Investment

Share Bai Mode Ijara Mode

Mode

1. Mudaraba 1. Bai- 1. Hire-Purchase

2. Musharaka Murabaha
2. Hire Purchase
2. Bai-Muajjal under
SirkatulMeelk
3. Bai-Salam

3.5 Investment Mechanism of FSIBL:

The special feature of the investment of the Islamic bank is to invest based on the profit-
loss sharing system by following per under the tenets and principles of Islamic Shari‟ah.
Earning profit is not the only motive and objective of the Islamic Banks investment
policy rather emphasis is given to attaining social good and in creating employment
opportunities. FSIBL investment Mechanism mode is divided into three parts and those
are described below:

Profit & Loss Sharing Mode:

Profit and loss sharing mode is mainly related to the FSIBL investment department. It is
a major part of the bank. The marked-up profit may be fixed in a lump sum or

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Percentage of the cost price of the goods. This mode is categorized into two different
systems and those are:

A. Mudrarba: It is a form of partnership where one party provides the funds while
the other provides the expertise and management. The first party is called Sahib-
Al-Maal and the letter is referred to as the Mudarib. Any profit accrued is shared
on a pre-agreed basis, while capital loss is exclusively borne by the partner
providing the capital.

Important Feature:

 Bank supplies capital as Sahib-Al-Mall and the client invest in the business with
his experience.
 Administration and Management are maintained by the client.
 Profit is divided as per management.
 Banks bear the actual loss alone.
 A client can take another investment for the specific business without the
permission of the bank.

B. Musharak: An Islamic financial technique that adopt “equity Sharing” as means

of financing projects. Thus, it embraces different types of profit and loss sharing
partnerships. The partners share both capital and management of the project so
that profits will be distributed among them as per rations, where loss is shared
according to rations of the equity participation.

Important Feature:

 The investment client will normally run and manage the business.
 The bank shall take part in the policy and decision making as well as oversee the
operations of the business of the client.
 As the investment client shall manage the enterprise, the bank may pay more
share of the profit to him than that of his proportionate capital contribution.
 Loss, if any, shall be shared based on capital ratio.

Bai-Mode (Buying and selling):

Bai mode is mainly related to buying and selling. The terms “Bai” have been derived
from Arabic words and the word mean to purchase and sale. Bai 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. This mode has three different criteria and those are discussed below:

A. Bai-Murabaha: The word Bai means to purchase and sales and the word
Murabaha means an agreed-upon profit. Bai-Murabaha may be defined as a

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 contract between a buyer and seller under which a seller sells a product to the
buyer at a cost plus agreed profit payable in cash or on any fixed future date I
lump-sum or by installments. The seller may also sell goods purchased by him
as per the order and specification of the buyer.
B. Bai-Muajjai: Bai-Muajjai may be defined as a contract between a buyer and
seller which under the seller sells certain specific goods, to the buyer at an
agreed fixed price payable at a certain fixed future date in lump-sum or within
a fixed period or fixed installments. The seller may also sell the goods
purchased by him as per the order and specifications of the buyer.
C. Bai-salam: Under this mode, Bank will execute a purchase contract with the
client and make payment gains purchase of the product, which is under
production. Bai-salam contract will be executed after making any investment
showing price, quality, quantity, time, place, and node of delivery. The profit
is to be negotiated. In this mode, the payment as the price of the goods is made
at the time of agreement and the delivery of the goods is deferred.

Rent Sharing Mode:

The term Rent Sharing Mode has been derived from the Arabic words Ajr and ujrat
which means consideration, return, wages or rent. This is the exchange value or
consideration, return, wages, rent of the service of an asset. Rant sharing mode has two
categories and those are given below:

A. Hire Purchase / Ijarah: The term Ijarah is derived from the Arabic words
Air and ijarah which means consideration, return, wages or rent. This is
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 Hirer
where the hirer enjoys or reaps a specific service on benefit under specific
consideration or rent from the asset owned by the Hirer. It is a hire agreement
under which a certain asset is hired out by the hire to the Hirer against fixed
rent or rentals for a specific period.
B. Hire Purchase under Sirkatul Meelk: under this mode, bank may supply
implements/ equipment/ goods on a rental basis. The owner of the
implements/ equipment/ goods will be with the bank and client jointly and the
portion of the client will remain to the bank as mortgage until the closure of
the investment account, the client will be authorized to process the equipment
for a certain period. The client, after completion of the installments, will be
owned of the implements/equipment/ goods.

Meaning and definition:

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Hire purchase under Shirkatul Melk is a special type of contract which has been
developed through practice. It is a synthesis of three contracts:

 Shirkatul Melk.
 Ijarah.
 Sale.

ShirkatulMelk: Shirkat means partnership. Shirkatul Melk means share in ownership.

When two or more persons supply equity, purchase an asset, own the same jointly and
share the benefit as per agreement and bear the loss in proportion to their respective
equity, the contract is called Shirkatul Melk.

Ijarah: Ijarah is derived from the Arabic words Air and Ujrat which means
consideration, return, wages or rent. This is exchange value or consideration, return,
wages, rent of service of an Asset.

3.6 Geographical-Wise Investments:

Here is the geographical wise investment (Figure in Crore)

Name of the 2018 2019 2020 2021

Zone
Dhaka 95000 125000 135000 148500
Chattogram 75000 95000 115000 126500
Sylhet 60000 55000 40000 42000
Rajhshahi 40000 45000 50000 52500
Khulna 10000 20000 25000 25750
Cumilla 20000 10000 25000 25750
Barisal 10000 15000 20000 21000
Total 310000 365000 410000 442000
Table 3.6: Geographical-wise investment

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 Chapter 04
Investment Performance Analysis
of FSIBL – Agrabad Branch

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4.1 Investment Growth:
Investment growth of Agrabad Branch is given below:

Table 4.1 Growth rate of Total Investment

Year Investment Amount Growth

( in Million BDT)
2017 3618.25 -
2018 3815.68 5.46%
2019 4298.34 12.64%
2020 4084.60 4.97%
2021 4366.87 6.91%
Source: Record of the Agrabad Branch

5000

4500 4298.34 4366.87

4084.6
4000 3815.68
3618.25
3500

3000

2500

2000

1500

1000

500

0
2017 2018 2019 2020 2021

Investment Growth

Figure 4.1 Investment Growth

Analysis:

The graph shows the year-wise investment of Agrabad Branch from 2017 to 2021.The
amount of investment gradually increased over the years till 2019. But in the year 2020
is decreased. In 2021 again it reached a maximum of 4366.87 (million in BDT). But the
highest growth rate was recorded as 12.64% in 2019.

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4.2 Deposit Growth:
Deposit growth of Agrabad Branch in the below:

Table 4.2: Growth rate of Total Deposit

Year Deposit Amount Growth

(in Million BDT)
2017 12580 -
2018 13500 7.31%
2019 14100 4.44%
2020 14283 1.29%
2021 12563 12.04%
Source: Record of the Agrabad Branch

14500 14283
14100
14000

13500
13500

13000
12580 12563
12500

12000

11500
2017 2018 2019 2020 2021

Deposit Amount

Figure 4.2: Deposit Amount

Analysis:

The graph shows that the amount of total deposit was 12580 (million in BDT) in 2017
and till 2021 it was 12563 (million in BDT). The amount of total deposit was in a
fluctuating trend. In 2020 it has a maximum amount of 14283(million in BDT) and in
2021 maximum growth rate was 12.04%.

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4.3 Investment to Deposit Ratio:
Investment to Deposit Ratio = Total Investment / Total Deposit.

Table 4.3: Investment to Deposit Ratio.

Year Investment Deposit Investment to

(in Million BDT ) (in Million BDT) Deposit Ratio
2017 3618.25 12580 28.76%
2018 3815.68 13500 28.26%
2019 4298.34 14100 30.48%
2020 4084.60 14283 28.59%
2021 4366.87 12563 34.76%
Source: Record of the Agrabad Branch

Investment to Deposit Ratio

40

35

30

25

20
Investment to Deposit Ratio
15

10

0
2016 2017 2018 2019 2020 2021 2022

Figure 4.3 Investments to Deposit Ratio

Analysis:

In this figure, we can see that ratio of investment to deposit fluctuated year by year. In
2017 it was 287.6%, after one year it decreased to 28.26% in 2018. The ratio was highest
in 2021 and it was 34.76%. The High ratio means low liquidity and high investment
income.

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4.4 Mode-Wise Investment:
Mode-wise investment of the Agrabad branch in shown below:

Table 4.4: Growth rate of Mode-Wise Investment ( in Million BDT)

Investment 2017 2018 2019 2020 2021

Modes
Murabaha 3260.27 3520.04 3682.50 3792.60 3801.20
Bai-Salam 5.22 4.99 5.12 5.11 5.50
HPSM 323.73 310.00 295.00 280.50 260.00
Quard 0.16 0.14 0.12 0.10 0.08
Total 3589.38 3835.17 3982.74 4078.31 4066.78
Growth - 6.85% 3.85% 2.39% 2.83%
Source: Record of the Agrabad Branch

Mode-Wise Investment
4000
3500
3000
2500
2000
1500
1000
500
0
2017 2018 2019 2020 2021
Murabaha 3260.27 3520.04 3682.5 3792.6 3801.2
Bai-Salam 5.22 4.99 5.12 5.11 5.5
HPSM 323.73 310 295 280.5 260
Quard 0.16 0.14 0.12 0.1 0.08

Figure 4.4: Mode-Wise Investment

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Analysis:

The graph compares mode-wise investments. In these modes, Murabaha is prominent. It

increased year by year, and in 2021, it was as higher as 3801.2 million BDT. Then it
deals with the HPSM mode of investment but this investment decreased year by year,
and in 2017, it was at a maximum of 323.73 million BDT. Bai-salam is in a better
position than Qquard in these investments. Although Bai-salam and Quard decreased
but Quard decreased mostly. In 2017, the Quard reached at a maximum amount of 1.6
where Bai-salam was 5.22 million BDT, but in 2021, the Quard was 0.08 where Bai-
salam was 5.50 million BDT. Investment in Murabaha, Bai-salam and HPSM has been
high despite the decline.

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4.5 Sector-Wise Investment:
Sector-wise Investment of the Agrabad Branch shown below:

Table 4.5: Growth rate of Sector Wise Investment (Amount in Million BDT)

Investment 2017 2018 2019 2020 2021

sector
Agriculture 0.01 0.01 2.00 1.95 1.90
SME 113.95 108.2 106 120 122
Real Estate 2.85 260 250 230 215
Transport 44.47 43.50 42.00 41.50 40.00
Staff Loan 2.66 2.30 2.10 1.90 1.80
Total 163.94 414.01 402.1 395.35 380.7
Growth - 152.53% 2.88% 1.68% 3.71%
Source: Record of the Agrabad Branch

300
260
250
250 230
215

200

150
120 122
113.95 108.2 106
100

44.47 43.5 42 41.5 40

50

0.01 2.85 2.66 0.01 2.3 2 2.1 1.95 1.9 1.9 1.8
0
2017 2018 2019 2020 2021

Agriculture SME Real Estate Transport Staff Loan

Figure 4.5: Sector-Wise Investment

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Analysis:

The graph shows the sector-wise investment of Agrabad Branch. In the sector wise
investments real estate investment was the highest. In 2018 it was a maximum amount of
260 (in million BDT). Then it dealt with the SME investment. In 2021 it was a maximum
amount of 122(in million BDT). While investing in agriculture, staff loans, and transport,
the highest investment was in transport. In 2017 the maximum amount of transport was
44.47(in million BDT).

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4.6 Investment Recovery:
Investment recovery of the Agrabad Branch shown in below:

Table 4.6 Percentage of Investment Recovery (in Million BDT)

Year Disbursement Recovery Percentage

2017 1260 1480 117.46%
2018 1360 1500 110.29%
2019 1350 1550 114.81%
2020 1668 1800 107.91%
2021 1457 1651 113.31%
Source: Record of the Agrabad Branch

Investment Recovery
118
2017, 117.46
116
2019, 114.81
114
Percentage

2021, 113.31
112
Y-Values
110 2018, 110.29

108 2020, 107.91

106
2016 2017 2018 2019 2020 2021 2022
Year

Figure 4.6: Investment Recovery

Analysis:

The figure shows the percentage of investment recovery. It increased in 2017 and 2021.
But in 2018 and 2020, it decreased. In 2019, it was higher than the year mentioned which
is 114.81%.

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4.7 Investment Income:
Investment income of the Agrabad Branch shown in below:

Table 4.7: Growth of Investment Income (in million BDT)

Year Murabaha HPSM Quard Bai- Total Growth

Salam
2017 155 110 Nil .09 265.09 -
2018 175 130 Nil .15 305.15 15.11%
2019 198 157 Nil .10 355.1 16.37%
2020 190 152 Nil .06 342.06 3.67%
2021 67 102 Nil .05 169.05 50.58%
Source: Record of the Agrabad Branch

Investment income
0.6

0.5 2021, 50.58%

Mode-Wise Investment

0.4

0.3
Investment income
0.2 2019, 16.37%
2018, 15.11%
0.1
2020, 3.67%
0 2017, 0
2016 2017 2018 2019 2020 2021 2022
Year

Figure 4.7: Investment Income

Analysis:

The figure shows the mode-wise investment income from 2017 to 2021. Income from
investment activities has decreased gradually to the dire economic condition.

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4.8 Overall Profit:
Over profit of the Agrabad Branch shown in below:

Table 4.8: Growth rate of Overall Profit (in million BDT)

Year Profit Amount Growth

(in Million BDT)
2017 24 -
2018 23 4.17%
2019 22 8.69%
2020 25 4.00%
2021 26 15.38%
Source: Record of the Agrabad Branch

Profit Amount
35

30

25
Axis Title

20

15

10

0
2017 2018 2019 2020 2021
Profit Amount 24 23 25 26 30

Figure 4.8: Profit Amount

Analysis:

The graph shows that the amount of profit of Agrabad Branch which has increased year
by year. In 2021 the growth rate of overall profit was higher than the previous years,
which was 15.38%.

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4.9 Major Findings:
During my Internship Study following things is found out from my practical observation:

 The growth of investment is increasing per annual but in 2020 it was decreased
for the effect of Covid 19 pandemic situations.
 The deposit growth and the amount of total deposit are increasing annually but in
2021 for the effect of Covid 19 pandemic situation the total deposit amount
decreased but the growth were increased.
 The deposit to income ratio has fluctuated per annum but in 2021 it was
increased.
 Mode-wise investment is imbalanced. In these investments, Murabaha has
increased year by year but Bai-Salam, HPSM, and Quard have decreased per
yearlong.
 Sector-wise investments have decreased in the last few years.
 Investment recovery has increased till 2020 but the percentage of recovery has
fluctuated.
 Investment income activities have decreased till 2020 to the dire economic
condition.
 The amount of overall profit has increased 2017 to 2021.

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 Chapter 05
Recommendations & Conclusion

49 | P a g e
5.1 Recommendations:
According to my observation, I want to give some recommendations which can help
them to increase their position in the market. Those are given below:

 FSIBL should focus on the investment growth rate. The investment amount is
increasing every year but the growth rate is declining so it should focus on the
investment growth rate.
 It should focus on the deposit amount and deposit growth rate so that it can be
balanced because the deposit amount and growth is fluctuating every year.
 It should focus on the deposit to investment ratio so that it can be balanced.
 It should focus on all the modes of investment, not just Bai-Salam, HPSM, and
Quard. Because customer wants diversified products. It should follow current
trends to achieve success within the banking industry.
 It needs to diversify the investment sector-wise. FSIBL should make its
investment schemes more attractive for availing high-return projects.
 The investment recovery percentage has fluctuated so it should focus on the
percentage so that the percentage rate can be balanced.
 It should focus on the investment income activities so that they can be balanced
for the condition of economics.
 The authority of FSIBL should introduce more innovative and modem Customer
service to remain competitive like a mobile app for payment. Inclusion of more
modes of investment and deposit mechanism based on the Quran and Sunnah.
Market them as true Islamic Shariah-based banks to reduce misconception among
people who think they renamed interest, to profit for misleading them.

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5.2 Conclusion:
FSIBL has grown in a Hugh margin over the 22 years from its establishment in 1999. In
this report, I tried to show all activates of FSIBL in different sectors. For development in
the future, they can have a glance at this report and find good ways to achieve their goal
in a competitive environment. It was difficult for me to find the drawbacks of any branch
in 3 months but I have tried my best to give something for my observation. I have tried to
give a whole view of FSIBL throughout the report and gave some recommendations to
improve their current conditions. I took face to face interviews with the manager and
customers of FSIBL to have a good idea of the bank. The bank has to take necessary
steps to innovate and develop their banking system to be more comparative in the market
because if they do not they will lack behind from the market.

So in the end I want to say that this is the best experience of my life to work in an
organization with a good supervisor. I have learned a lot of things from this involvement
with a reputed bank in our country. This experience will help me a lot in the future when
I will be a fixed employee in an organization.

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References

 Personally, collected data from (Investment in-charge, FSIBL Agrabad branch,

Chattogram)
 Annual Report of First Security Islami Bank Ltd 2017 -2021.
 Annual Report of First Security Islami Bank Ltd, Agrabad branch 2017 -2021.
 Statement of affairs, First SecurityIslami Bank Ltd. HB branch 2017-2021 and
Working manual for different departments.
 Several booklets from FSIBL.

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