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Chapter One: Introduction

Introduction Objective of the Study Scope of the Study Limitation of the Study Methodology

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Introduction
Bangladesh is one of the largest Muslim countries in the world. The people of this country are deeply committed to Islamic way of life as enshrined in the Holy Qur'an and the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their economic lives in accordance with the precepts of Islam. The establishment of Islami Bank Bangladesh Limited on March 13, 1983, is the true reflection of this inner urge of its people, which started functioning with effect from March 30, 1983. This Bank is the first of its kind in Southeast Asia. It is committed to conduct all banking and investment activities on the basis of interest-free profit-loss sharing system. In doing so, it has unveiled a new horizon and ushered in a new silver lining of hope towards materializing a long cherished dream of the people of Bangladesh for doing their banking transactions in line with what is prescribed by Islam. With the active co-operation and participation of Islamic Development Bank (IDB) and some other Islamic banks, financial institutions, government bodies and eminent personalities of the Middle East and the Gulf countries, Islami Bank Bangladesh Limited has by now earned the unique position of a leading private commercial bank in Bangladesh.

Objective of the Study

The major objectives of the present study are: 1. To present the Dividend of IBBL. 2. To highlight the planning & policies of IBBL to their customers. 3. To focus on facilities provided by IBBL to their customers. 4. To find out the practices & policies for providing dividend to their shareholders of IBBL. 5. To identify the problems in planning & polices of the Bank. 6. To recommend the possible lines of actions to overcome the problems & modify the policies of the Bank.
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Scope of the Study

There is a large scope for doing the report in any Bank. This report provides practical knowledge to the students about Banks dividend policies & practices. The students have a great opportunity to acquire knowledge about the Banks policies & practices. After studying this report we will able to know about the Dividend processing, Mission, Vision, Aim & objective & so on about Islami Bank Bangladesh Ltd. By the report one can get information easily of this Bank.

Limitation of the Study

This Bank is different from other traditional bank of Bangladesh for that their information is difficult to understand. The all information of IBBL isnt available & somewhere their information isnt clear. We all are student and we have to face financial difficulties. We have to answer some questions about our University those make us Confident less.

Methodology
This paper has been prepared relying on primary and secondary information. Primary information has been obtained through the annual reports of IBBL and Interviewing concerned personnel of the bank with the help of a semi structured interview schedule. Sources of pertinent secondary information included our analysis and various publications of the Bank, journals, newspapers and websites.

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Chapter Two: Organization Profile

Corporate Information Mission & Vision Aims and Objectives Functions Product & Services

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Organizational Profile

Corporate Information
(as on December 31, 2010)
Date of Incorporation Inauguration of 1st Branch (Local office, Dhaka) 13th March 1983

30th March 1983

Formal Inauguration Share of Capital Local Shareholders Foreign Shareholders Authorized Capital Paid-up Capital Deposits Investment (including Investment in Shares) Foreign Exchange Business: Import Export Remittance Branches Total number of Branches Number of AD Branches Number of Shareholders Manpower

12th August 1983

41.77% 58.23% Tk. 20,000.00 million Tk. 7,413.10 million Tk. 291,347.00 million Tk. 292084.00 million

Tk. 246,281.00 million Tk.148,421.00 million Tk. 214,629.00 million

251 43
52164

10,068

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Mission & Vision

Mission
To establish Islamic Banking through the introduction of a welfare oriented banking system and also ensure equity and justice in the field of 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 uplift and financial services to the low-income community particularly in the rural areas.

Vision
Our vision is to always strive to achieve superior financial performance, be considered a leading Islamic Bank by reputation and performance. Our goal is to establish and maintain the modern banking techniques, to ensure the soundness and development of the financial system based on Islamic principles and to become the strong and efficient organization with highly motivated professionals, working for the benefit of people, based upon accountability, transparency and integrity in order to ensure stability of financial systems. We 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.

Aims and Objectives

1. To conduct interest-free banking. 2. To establish participatory banking instead of banking on debtor-creditor relationship. 3. To invest on profit and risk sharing basis. 4. To accept deposits on Mudaraba & Al-Wadeah basis.
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5. To establish a welfare-oriented banking system. 6. To extend co-operation to the poor, the helpless and the low-income group for their economic upliftment. 7. To play a vital role in human development and employment generation. 8. To contribute towards balanced growth and development of the country through investment operations particularly in the less developed areas. 9. To contribute in achieving the ultimate goal of Islamic economic system.

Functions
The functions of Islami Bank Bangladesh Limited are as under: 1. To maintain all types of deposit accounts. 2. To make investment. 3. To conduct foreign exchange business. 4. To extend other banking services. 5. To conduct social welfare activities through Islami Bank Foundation.

Products & Services

Deposit Scheme
Al-Wadeeah Current Account Mudaraba Savings Account Mudaraba Term Deposit Receipt Mudaraba Special Notice Account Mudaraba Special Savings (Pension ) Account Mudaraba Hajj Savings Account Mudaraba Savings Bond Scheme Account
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Mudaraba Foreign Currency Deposit Scheme (Savings) Mudaraba Waqf Cash Deposit Account Mudaraba Monthly Profit Deposit Scheme Mudaraba Muthor Savings Deposit Scheme

Investment Modes

Bai-Muajjal Bai-Murabaha Hire Purchase under Shirkatul Meelk Murabah Musharaka Bai-Salam Equity & Entrepreneurship Fund Of Bangladesh Bank

Special Schemes
Household Durable Scheme Housing Investment Scheme Real Estate Investment Program Transport Investment Program Car Investment Scheme Investment Scheme For Doctors Small Business Investment Scheme Agriculture Implements Investments Investment Scheme Micro Industries Investment Scheme Mirpur Silk Weavers Investment Scheme

Rural Development Scheme

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ATM Services
Facilities Getting IBBL ATM Card Cash Withdrawal Procedure Issuing Branches Location Of ATM Booths BTTB Bill Payment Procedure IBBL Schemes-Installment payment Procedure

Special Service
Locker Service SWIFT Reuter

Foreign Exchange Business

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Chapter Three: Dividend & Dividend Policy

Dividend Dividend Policy Analysis of Dividend policies of IBBL

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Dividend
Dividend: Dividend refers to that portion of a firms earnings which are paid out to the shareholders. Forms of Dividends: Cash dividend Dividend can be paid in the forms other than cash: Stock Dividend Stock Repurchases

Stock Dividend (Bonus Share): The payment of dividend to the existing shareholders in the form of stock. Often firm pay stock dividends as a replacement for or a supplement to cash dividend. Firm find the stock dividend a way to give owners something without having to use cash. Generally, when a firm needs to preserve cash to finance rapid growth, a stock dividend is used. Stock Repurchase: The repurchase by the firm of outstanding common stock in the market place. Stock repurchase enhance shareholders value by; o Reducing the number of share outstanding and thereby raising earnings per share, o Sending a positive signal to investors in the market place that management believes that the stock is undervalued, and o Providing a temporary floor for the stock price, which may have been decline. Right Share: Existing shareholders will get priority to purchase share at the time of issuing of new common stock. This right is known as Pre-emptive Right.

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Stock Splits: Stock split has no effect on firms capital structure. A stock split is a method commonly used to lower the market price of a firms stock by increasing the number of shares belonging to each shareholder. The reason for stock split is that, the firm believes that its stock is priced too high and that lowering the market price will enhance trading activity. Reverse Stock Split: Sometimes it can also happen .For example: 1-for-4 split, one new share is exchanged for four old shares. Reverse stock splits are initiated to raise the market price of a firms stock when it is selling at too low price. Cash dividend payment procedures: 1. Board of Directors Meeting: Dividend decision- whether to declare dividend and what amount to pay cash dividends to stockholders is decided by the board of directors of a corporation. 2. Amount of Dividend: What amount or percentage of net income will be declared as dividend and payment period is a key decision of the board meeting. 3. Relevant Date: If the directors of the firm declare a dividend, they also typically issue a statement indicating the dividend decision, the record date and the payment date. 4. Record Date: All persons whose names are recorded as stockholders on the date of record, receive a declared dividend at a specified future time. 5. Ex dividend Date: Period, beginning 4 business days prior to the date of record, during which a stock is sold without the right to receive the current dividend. This 4 days remain for updating or transfer of ownership. 6.Payment Date: The actual date on which the firm mails the dividend payment to the holders of the record.
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#Owner Considerations: Before establishing the dividend policy, the firm must consider some subject which are related to its majority of shareholders. (1) Tax status: If a firm has a large percentage of wealthy stockholders who are in high tax bracket, it may decide to pay out a lower percentage of its earnings. (2) Owners investment opportunities: A firm should not retain funds for investment in projects yielding lower returns than the owners could obtain from external investments of equal risk. (3)Potential dilution of ownership: If a firm pays out a high percentage of earnings, new capital will have to be raised with common stock. The result of a new stock issue may be dilution of both control and earnings for the existing owners. # Market Consideration: Shareholders often view a dividend payment as a signal of the firms future success. A stable and continuous dividend is a positive signal, conveying the firms good health. Shareholders are likely to interpret a passed dividend payment due to loss or to very low earnings as negative signal

Dividend Policy
Types of Dividend Policies: The firms dividend policy must be formulated with two basic objectives in mind: providing for sufficient financing and maximizing the wealth of the firms owners. Constant-Payout-Ratio Dividend Policy: The dividend payout ratio indicates the percentage of each dollar earned that is distributed to the owners in the form of cash. It is calculated by dividing the firms cash dividend per share by its earnings per share .With a constant-payout-ratio dividend policy, the firm establishes that a certain percentage of earnings is paid to owners in each dividend period.
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Regular Dividend Policy: The regular dividend policy is based on the payment of a fixed dollar dividend in each period. This policy provides the owners with generally positive information thereby minimize their uncertainties .Under this policy dividends are almost never decreased. Low-Regular-and-Extra Dividend Policy: Under this dividend policy, a firm is paying a low regular dividend, supplemented by an additional dividend when earnings are higher than normal in given period. By giving the low regular dividend the firm gives investors a stable income necessary to build confidence in the firm, and the extra dividend permits them to share in earnings from an especially good period. The extra dividend should not be regular event.

Factors Affecting Dividend Policy:

Some factors affecting dividend policy. These are given bellow: 1. Legal Constraints: An earnings requirement limiting the amount of dividends is sometimes imposed. With this restriction, the firm cannot pay more in cash dividends than the sum of its most recent and past retained earnings. However, the firm is not prohibited from paying more in dividend than its current earnings. 2. Contractual Constraints: Often the firms ability to pay cash dividends is constrained by restrictive provision in a loan agreement. Constraints on dividends help to protect creditors from losses due to the firms insolvency. 3. Internal Constraints: The firms ability to pay cash dividends is generally constrained by the amount of liquid assets (cash and marketable securities) available. Although it is possible for a firm to borrow funds to pay dividends. 4. Growth Prospects: The financial requirements are directly related to how much it expects to grow and what assets it will need to acquire. A large, mature firm has adequate access to
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new capital, whereas a growing firm may not have sufficient funds available. A growing firm like to have to depend on internal financing, so it is likely to pay out less amount of income as dividend. On the other hand, a more established firm is in better position to pay out large amount of income as dividend. .

Analysis of Dividend policies of IBBL

By the information of Islami Bank Bangladesh Ltd. we are not able to get information about what type of dividend policy they maintaining. So we have analyzed the financial statement of IBBL of the last 5 years. The working is given bellow:

Particular s Cash Dividend Stock Dividend Total

2006 15% 10% 25%

2007 25% 25% 95,04,00000 142,73,60,000 66.58% 3,80,16,000 25

2008 30% 30% 142,56,00000 267,48,00000 53.30% 4,75,20,000 30

2009 10% 20% 30% 185,32,80,000 340,35,50,000 54.45% 6,17,76,000 30

2010 35% 35% 259,45,90,000 446,34,70,000 58.13% 7,41,31,200 35

Amount of 86,40,00000 dividend in TK. Net Income Div. % of Earning No. of Share Dividend per Share 140,05,90000 61.69 % 34,56,000 250*

*In 2006 the value of share was 1000 tk. & the number of share was low.
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Result of Analysis
2006: In 2006 the number of share was 34,56,000 & the value of per share were
tk.1,000. They issued 15% cash and 10% stock dividend which was 61.69% of their total earnings. In 2006 their dividend per share was 250 tk.

2007: In 2007 the number of share was 3,80,16,000 & the value of per share were
tk.100. They issued 25% stock dividend which was 66.58% of their total earnings. In 2007 their dividend per share was 25 tk.

2008: In 2008 the number of share was 4,75,20,000 & the value of per share were
tk.100. They issued 30% stock dividend which was 53.30% of their total earnings. In 2008 their dividend per share was 30 tk.

2009: In 2009 the number of share was 6,17,76,000 & the value of per share were
tk.100. They issued 10% cash and 20% stock dividend which was 54.45% of their total earnings. In 2009 their dividend per share was 30tk.

2010: In 2010 the number of share was 7,41,31,200 & the value of per share were
tk.100. They issued 35% stock dividend which was 58.13% of their total earnings. In 2010 their dividend per share was 35 tk.

By measuring the last 5 years financial statement, we can say that IBBL pay nearly same amount of dividend per year. So that IBBL follows regular dividend policy depending on DPS.

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Total Dividend (%)

35% 35% 30% 25% 20% 15% 10% 5% 0% 2006 2007 2008 2009 2010 25% 25% 30% 30%

Dividend per Share (Tk.)

300 250 200 150 100 50 0

250

25

30

30

35

2006

2007

2008

2009

2010

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Chapter Four: Findings, Conclusion, Recommendation

Findings Conclusion Recommendation

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Findings
# IBBL maintain Islamic banking systes. # A lot of services provided by IBBL. # Their website isnt improved. # Their services are very difficult to understand. # Their dividend policy isnt mentioned. # Their banking system is better than others.

Conclusion
IBBL introduce different types of banking system in Bangladesh. They provided banking services according to Islam. IBBL provided a regular amount of dividend to their shareholders and their service is better than other some banks of Bangladesh. Although they have some problems but those are very easy to overcome. If IBBL able to overcome those problems than it may be the best Bank of Bangladesh.

Recommendation
# They should mention their dividend policy on their annual report. # They should modify their website. # They should make easy the name of their services. # IBBL should inspire their employees to be more co operative with their customers.

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Reference

Web Site: www.islamibankbd.com

Report: Annual report of IBBL 2006 Annual report of IBBL 2007 Annual report of IBBL 2008 Annual report of IBBL 2009 Annual report of IBBL 2010

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