ASA University Bangladesh (ASAUB)

Assignment on: Forms of business ownership A Case Studies on Islami Bank Bangladesh Limited. Subject: Introduction of Business Course Code: BUS-113

Submitted To:
Rebeka Sultana Liza Senior Lecturer, Faculty of Business ASA University Bangladesh

Submitted By:
Name Shakil Ahmed Chowdhury Md. Lias Miah Md. Sanour Hossain Md. Tangilur Rahman Tanzilla Mustafiz ID NO. 12-1-12-0082 12-1-12-0081 12-1-12-0077 11-3-12-0053 12-1-12-0095 Section:C 15st Batch Section

Letter of Transmittal
April 3, 2012 Rebeka Sultana Liza Senior Lecturer Faculty of Business ASA University Bangladesh Subject: Submission of an assignment on Forms of Business Ownership

Dear Sir, With due to respect, we would like to inform you that, it is a great pleasure for us to submit the assignment on Forms of Business Ownership according to your guideline. We put our best effort to include all the relevant information which I have collect both from primary and secondary sources and also our personal observations.

Therefore, we firmly believe that, this assignment will be able to meet your approval. We would genuinely appreciate to make further corrections where it seems necessary by you.

Sincerely yours, Name Shakil Ahmed Chowdhury Md. Lias Miah Md. Sanour Hossain Md. Tangilur Rahman Tanzilla Mustafiz Id No. 12-01-12-0082 12-01-12-0081 12-01-12-0077 11-03-12-0053 12-01-12-0095 Signature

ACKNOWLEDGEMENT

First of all, we are expressing our sincere gratefulness to Almighty for enabling us to prepare this assignment. The success of this assignment depends on the contribution of number of people specially those who have shared their thoughtful guidance and suggestions to complete this assignment. We would like to give our heartiest gratitude Rebeka Sultana Liza to guide and coordinate and for giving us the best and valuable advice, suggestion and moral support to complete the assignment in an appropriate manner. A silent stream of gratitude is for our most adorned parents whose blessings are always with us in this windy world. There is no doubt that, without the physical and mental support of our group members, we could not complete this assignment.
Finally, I liked to add few more words saying that, this assignment is prepared by learner and naturally, there could be unwilling errors and omission which are extremely belonging to us.

EXECUTIVE SUMMARY

Islami Bank Bangladesh Limited is the number one Bank in Bangladesh. Since its started in the year 1983 Islami Bank Bangladesh Limited earned tremendous popularity and credibility among the people for its service. Islami Bank Bangladesh Limited is a public limited company with limited liability under the companies Act, 1913. This Bank provides various types of Shariah based services for clients that are totally halal. Islami Bank Bangladesh Limited is considered to be first interest free bank in South Asia. Its a joint venture multinational bank with sixty four percent of equity being contributed by foreign sources. It can provide efficient banking services to the nation if they are supported with appropriate banking laws, and regulations.

Table of Content

Serial Number 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24.

Topic Chapter 1 : Introduction 1.1 Statement of the Report 1.2 Objectives of the Study 1.3 Methodology of the Study 1.4 Limitation of the study Chapter 2 : Literature Review Literature Review Chapter 3 : Organizational Analysis 3.1 IBBL Corporation at a Glance 3.2 Mission of Islami bank Bangladesh Limited (IBBL) 3.3 Vision of Islami Bank Bangladesh limited (IBBL) 3.4 Goal of IBBL 3.5 Objectives of Islami Bank Bangladesh limited (IBBL) 3.6 Equity position of IBBL 3.7 Function of IBBL 3.8 Products and Services of IBBL: 3.8.i Deposit Schemes 3.8.ii Investment Modes 3.8.iii Rural Development Scheme 3.8.iv Special Scheme 3.8.v ATM Services 3.8.vi Special Services 3.8.vii Foreign Exchange Business 3.9 Islami Bank training & Research Academy (IBTRA) 3.10 SWOC Analysis Findings and Recommendation Conclusion Bibliography
Appendix Reference

Page Number
01 02 03 04 05 06 07 07 07 08 08 09 10 10 10 10 11 11 11 12 13 14-15 16 17

25. 26.

18 18

Chapter 1: Introduction
1.1 Statement of the report Islami Bank Bangladesh Ltd. was incorporated on 14th March, 1983, went into operation on 30th March, 1983 and introduced a full package of banking services in August 1983. Islami Bank Bangladesh Limited is considered to be first interest-bank in South East Asia. IBBL is a public limited company with limited liability under the companies Act, 1913. It is a joint venture multinational bank with sixty four percent of equity being contributed by the foreign sources. Regarding shareholding structure of the bank, the local shareholders hold shares in the ratio of forty two to fifty eight. In December, 1997 the number of its shareholders stood at 6863, its shares are quoted in the two stock markets of the country namely Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE), being in high demand the shares are presently sold at three times higher than the face value. Authorized capital of this bank is Tk. 20,000.00 million. At present IBBL has a paid-up capital of Tk. 7,413.10 million. The Bank is managed by 13 members Board of Directors elected by the shareholders. A representative from the Shariah Council also takes part in the above committee. Powers and functions are suitably distributed amongst these bodies. The bank has also a 14 member Shariah council consisting of Fuquah, Islamic Economists and a Lawyer. The council gives decision on Islamic issues, which are generally followed in the Bank. The Council conducts audits the operation of Bank branches each year on selective basis and put forward report identify the deviations and suggestions for purification of the banking transactions. Besides, these committees and Council, types of activities for improvement of the Banks overall position.

1.2 Objectives of the study Objective of the study acts as a bridge between the starting point and the goals of the study. To illustrate the objectives properly, presented into two parts:

a) General Objective of the Report: The general objective of the report is to prepare & submit a report on the topic Forms of Business Ownership, IBBL.

b) Specific Objective of the Report: The specific of objectives of the study are as follows: 1. To gather knowledge about the transaction of different department of the branch especially Investment department. 2. Besides fulfilling the degree of requirement, the study intends to cover a comprehensive analysis of overall activities of Islami Bank Bangladesh Limited. 3. To have overview of Islami Bank Bangladesh Limited. 4. To know how to deliver their service to the customer and to know different modes and design of Investment. 5. To suggest some possible measures to overcome the problem. 6. To know the relation between courses and the practical life.

1.3 Methodology of the study In preparing this report, both primary and secondary sources of information have been used. This study used mainly secondary sources of data. I have also collected some published and unpublished research report, books, journals, articles to fill up the information gap. Both primary and secondary sources of information were being pursued with regards to the presentations of this study.

a) Primary Sources of Data When data are collected through direct searching in the field then it is called primary source of data. Data were collected from primary sources using the following techniques: Training classes at Islami Bank Training and Research Academy (IBTRA). Asking the respective officers. Direct communication with the clients. Exposure on different desk of the bank.

b) Secondary Sources of Data The secondary data are collected from Internet, different article published in the journals and magazines. Secondary sources are: Annual Report of Islami Bank Bangladesh Ltd. Searching related information from the Internet. Statements of Branch regarding their activities. Islami Bank Training & Research Academy (IBTRA) Islami Bank Bangladesh Ltd. Dairy, 2011. Different investment manual of IBBL. Different publications regarding banking functions during 2004-2010.

1.4 Limitation of the study Though I have given utmost effort to prepare this paper but there are some limitations of the study. Such are as follows: 1. 2. Lack of sufficient & updated information of IBBL web site. Every Company or Bank has some common strategy of secrecy. So the bank authority hesitated to disclose important information to maintain business secrecy. 3. The employees were always busy on their tremendous workload. So they couldnt extend their cooperation properly. 4. Finally 2 month is too short to know about the whole Banking system.

Chapter 2: Literature review

Based on Islamic principles and shariah or Islamic law, with an authorized capital of TK. 500 million (now Tk. 20,000.00 million), the Islamic bank in Bangladesh, called Islami Bank Bangladesh Limited (IBBL) was incorporated on March 13, 1983 as a Public Limited Company under the companies Act of 1913. The bank started its financial activities with effect from March 30, 1983. This is one of the first interest free banks in South Asia. The opening of Islami bank brought a new era in the history of the Bangladeshs financial market. The long cherished desire of many Muslims in the Bangladesh was realized. The total number of branches of the bank as on December 31, 2010 stood at 251. The bank had taken steps to spread its activities towards the rural areas of Bangladesh. With the implementation of the expansion program in the year 2011, almost all-important commercial places of the country would come under the operational activities of the bank. In Bangladesh, which is the second largest Muslim country of the world, Islami Bank Bangladesh Limited (IBBL) started as a joint venture multinational bank with 63.92% of equity contributed by the Islamic Development Bank and financial institutions like Al-Raji Company for Currency Exchange and Commerce of Saudi Arabia, Kuwait Finance House, Jordan Islamic Bank, Islamic Investment and Exchange Corporation of Qatar, Bahrain Islamic Bank, Islamic Banking System International Holding, S.A, Dubai Islamic Bank, Kuwait Ministry of Awqaf and Islamic Affairs. Two eminent personalities of Saudi Arabia namely Fouad Abdul Hameed Al-Khateeb and Ahmed Salah Jamjoom, are also the sponsors of the Islami Bank Bangladesh Limited. The responsibility for management and formulation policy of the IBBL is vested in the board of directors. The board consists of 14 local and 9 foreign directors. As a rule in the Article of Association, a Bangladeshi director is to be elected as the chairman of the company. A high powered Executive Committee has been formed to assist the chairman. There are six members in this committee, nominated by the board of directors. In addition to this there is a Management Committee consisting of the most senior executives of the bank. There is also a Shariah Council comprising famous Islamic scholars, economists and

bankers. This Council is responsible for supervising the day to day affairs of the Islamic bank from the viewpoint of the Islamic Shariah.

Chapter 3: Organizational Analysis

3.1 IBBL Corporation at a Glance: As on December 31, 2010

Date of Incorporation Inauguration of 1st Branch(Local office, Dhaka) Formal Inauguration

13th March 1983 30th March 1983 12th August 1983

Share of Capital
Local Shareholders Foreign Shareholders Authorized Capital Paid-up Capital Deposits Investment including Investment in Shares 41.77% 58.23% Tk. 20,000.00 million Tk. 7,413.10 million Tk. 291,347.00 million Tk. 292084.00 million

Foreign Exchange Business:

Import Export Remittance Tk. 246,281.00 million Tk.148,421.00 million Tk. 214,629.00 million

Branches
Total number of Branches Number of AD Branches Number of Shareholders Manpower 251 43 52164 10,068

3.2 Mission of Islami Bank Bangladesh Limited (IBBL): To establish Islami Banking through introduction of welfare oriented banking system, To ensure equity and justice in the field of economic activities. To achieve balanced growth and equitable development through diversified investment operation particularly in the priority sector and less developed areas. To encourage socio economic up-liftment and provide financial services to the rural and low income community.

3.3 Vision of Islami Bank Bangladesh Limited (IBBL): Their vision is to always strive to achieve superior financial performance, be considered a leading Islamic Bank by reputation and performance. To achieve superior financial performance and become a model of Shariah compliment Bank. To achieve leading position by virtue of performance and reputation. To established a modern banking technique and offer all types of financial services. To ensure soundness, healthy and ethical financial system. To make an efficient organization with highly motivated and devoted professionals.

3.4 Goal of IBBL: Their 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.

3.5 Objectives of Islami Bank Bangladesh Limited (IBBL) The main object of the Islami Bank Bangladesh Limited (IBBL) had been to offer an interest free banking system in the financial market. Apart from that, the bank started its operation in the country with a view to realizing the following objectives: To establish a partnership relationship with customers and to eliminate the idea of the debtor-creditor relationship of traditional banks. To establish welfare oriented banking system. To mobilize savings towards productive sectors. To invest on profit and risk sharing basis. To invest to those businesses sectors that is found legal from the religious point of view. To accept deposits on profit and loss sharing basis. To create employment opportunities by investing savings towards prospective economic sectors. To extend banking services towards the poor, helpless and low-income group of people in the society in order to uplift of their standard of living. To contribute to establishment of a society by equitable distribution of wealth. To establish justice in trade and commerce in the country. To render services for the economic development of the nation. To contribute towards establishment of an Islamic Economic System in the Country.

3.6 Equity Position of IBBL:

As per Capital Adequacy Policy prescribed by Bangladesh Bank, the Central Bank of the Country, banks has maintained 10.81% Capital on its Risk-Weighted Assets against which total equity of the Bank as on October 31, 2010 stood at Taka 27,020 million (Un-Audited).According to the annual report of IBBL the total equity of the Bank as in 31st December 2009 stood at Taka 23,619.81million against Taka 18,572.08 million as on 31st December 2008. The bank achieved a good progress with regard to increase in its reserve position during the recent years.

3.7 Functions of IBBL: Islamic banks render almost similar services to their customers conventional banks do. However, differences exist in administering incentives for deposits and charging for capital investments, in so far as techniques of calculating the incentive or the cost of the capital are concerned. Like a conventional bank, the Islami bank also accepts deposits from customers and advances loans. The bank invests its funds for short as well as long term deposits. The Islami bank also acts as a custodian of its customers and performs all foreign transactions on behalf of them. The IBBL perform mainly three different types of functions. They are following: Banking services, Investment, and Foreign exchange services.

Banking services comprise three regular types of operations related to acceptance of deposits in the different customers accounts as mentioned earlier, as well as, different transactional services to the customers, safekeeping of personal valuables and securities, collection of bills, agency services, etc. The bank lends its funds for the rapid growth and development of industrial sectors and the promotion of trade and commerce in the country. The bank also invests its funds in various socio-economic schemes such as, Rural Investment Scheme, Small Traders Investment Scheme, Doctors Investment Scheme, Small Transport Scheme, Small and Cottage Industry Project, Hawkers Investment Scheme, Household Durable Scheme and Low Cost Housing Scheme. The third important function of the bank is to render services to customers regarding foreign exchange transactions plus services to its customers for import and export of different industrial, commercial, agricultural and other items.

3.8 Products and Services of IBBL: 3.8.I Deposit Schemes: There are many deposit schemes or products of IBBL. They are following: 3.8.II 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. Mudaraba Foreign Currency Deposit Scheme (Savings). Mudaraba Waqf Cash Deposit Account. Mudaraba Monthly Profit Deposit Scheme. Mudaraba Muhor Savings Deposit Scheme.

Investment Modes: Bai- Muajjal. Bai- Murabaha. Hire purchase under Shirkatul Meelk. Mudarabah. Musharaka. Bai- Salam. Equity and Entrepreneurship Fund of Bangladesh Bank.

3.8.III

Rural Development Scheme: Islami Bank Bangladesh Limited (IBBL) launched

its Rural Development Scheme (RDS) in 1995, to cater to the investment needs of the agriculture and rural sector of the country to create opportunity for employment and raising income of the rural people with a view to alleviating poverty. The scheme has been aimed at achieving an integrated development in rural areas and gradually developing model village within 16 kilometers radius of the selected Branches.

3.8.IV

Special Scheme: 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 Investment Scheme. Micro Industries Investment Scheme. Mirpur Silk Weavers Investment Scheme.

3.8.V

ATM Services: Automated Teller Machine (ATM), interalia, has unveiled the

horizon of Electronic Banking of 21st Century. Through ATM, customers can avail nonstop online teller service without going to the specific branch of the member bank. They can withdraw or deposit cash or cheque as well as pay utility bills like BTTB, Grameen, AKTEL, City Cell Phone, DESA, WASA, TITAS etc. with the help of this modern computer controlled machine. The service is now offered by ETN and eleven member banks including Islami Bank Bangladesh Limited.

3.8.VI

Special Services: There are three special services. They are following:

Locker Services: Secured Locker Service is provided in some branches of the Bank. Customers may avail this service and secure their valuables. Locker size Yearly Charge (Tk.) Security Deposit (Tk.) Small Medium Large 700.00 1,000.00 1,500.00 500.00 (refundable)

SWIFT: Society for Worldwide Inter-Bank Financial Telecommunication (SWIFT) is a bank owned co-operative serving the financial community worldwide. The SWIFT Transport Network (STN) is a dedicated global network for secure communication between SWIFT Customers. SWIFT supports the financial data communication and processing needs of financial institutions, through a range of financial messaging services and value-added processing, as well as, access through the STN and interface and application software. In short SWIFT is a pioneer in the automation of the global financial industries. Islami Bank Bangladesh Limited has introduced this SWIFT alliance entry system firstly in October 1999 and introduced SWIFT alliance access in October 2001. Presently all the 31 AD branches are connected to SWIFT. Reuter: Reuters is a world-renowned news service and financial market intermediary. Reuters supplies the global financial markets and news media with timely and relevant market data, research and analytical services, trading platforms, investment information and news. Reuters primarily makes money from the sale of content, images and video to its subscribers.

3.8.VII

Foreign Exchange Business: Islami Bank Bangladesh Limited (IBBL) helps

foreign exchange business by making relationship between two parties. International trade is exchange of capital, goods, and services across international borders or territories. Company is doing business across international borders face many risks, Such as: Non-acceptance: buyer rejects goods as different from the agreed upon specifications Credit risk: allowing the buyer to take possession of goods prior to payment Regulatory risk : a change in rules that prevents the transaction

In order to overcome such types of problem, IBBL intermediate between two parties. Here IBBL play important role as an intermediary.

3.9 Islami Bank Training & Research Academy (IBTRA): Development of Manpower, Research, Training and Motivation. The principles and working procedures of Islamic Banks are completely new and different from the conventional banks. There is an inevitable need for training of the employees of the banks to orient and attune them to the new system of Islami banking. To cater to this need, Islami Bank training and Research Academy (IBTRA) was established in 1984, soon after the inception of the Bank. The activities of IBTRA cover both training and research on various aspects of Islamic banking. The Academy developed a rich library of its own with a treasure of valuable books on different subjects including Islamic economics, banking, comparative philosophies and journals of home and abroad and research articles and documents. Employees of the Bank, learners and researchers have been taking full advantage of the library. The Academy edited books on "Readings in Islamic Banking" and "Investment Operations". It also edited and published a brochure on "Investment and Trade Opportunities in Bangladesh." Keeping in view the existing and future training requirement of the Bank and also to generally cater such needs of different Islamic banking & financial institutions of the region, the management of Islami Bank Training and Research Academy has been placed at the disposal of an Academic Council consisting of 3 Directors of the Board, Management Executives of the Bank, Shariah scholar, renowned academicians and representatives of reputed institutions engaged in the training of bank officials of the country.

3.10 SWOC Analysis of IBBL SWOC analysis provides an overall picture of an initials position. SWOC also provides the strength and weakness of activities, the opportunities they can get and challenges for the company. The study is focused on Forms of Business Ownership, IBBL. Now I will discuss in brief, what I have found after this research under the strength, weakness, opportunity and challenges status of Investment activities. Strength Islami Bank Bangladesh Limited has already established a favorable reputation in the banking industry in Bangladesh. The bank has already shown a tremendous growth deposits sector. There are many strength of IBBL in Bangladesh. They are following: General Banking department has the reputation of being the provider of good quality services to its potential customers. IBBL provide good investment opportunities to their customer. IBBL dont give direct money to their customers they provide money as investment. IBBL invest in the productive sector in Bangladesh. General Banking department provides attractive product. Islami Bank is a member of SWIFT. Many international money transfer organization are included with Islami Bank. Weakness Not enough ATM booth of Islami Bank. Lack of experience of many of the General Banking staff. All the charges and Interest are maintained as per conventional system. The software using for Islami Bank is old version and cannot connect with their conventional software.

Opportunity Increasing demand for account opening section. Different types of new special scheme may be offered. Islami Bank has opportunity to increases ATM booth. By hiring efficient employees general Banking department may ensure better service.

Challenges Market pressure for lowering of investment rate. Challenge of new entries such as opening Islami banking wing of other traditional bank. Challenges related to substitute organizations. Worldwide terrorism in the name of Islam and western propaganda against Islamic rules are creating bad impression against Islamic banking.

Findings and recommendation

Findings of General Banking 1. The bank constantly expanding and improving its performance in terms of deposits, profits etc. 2. Modern technical equipment such as computer is not sufficient in General Banking department. 3. IBBL local remittance business is not satisfactory. 4. There is limited number of ATM booth. 5. The bank is constantly expanding and improving performance.

Recommendation: The following points are recommended after the study 1. Local Remittance business should be focused more. 2. The management should give more emphasis on the advertisement of the bank about their operations. 3. Computer facilities should be increased. 4. Training should be arranged for the employees for increasing expertise in using modern technology. 5. Full computerization of the branch will less the time consumption of manual process. 6. The bank should take new marketing strategy which will responds and take effective steps to increase faith on them. 7. Special initiative should be taken by the authority of IBBL to distribute more profit to the depositors by investing the banks funds more efficiently.

8. Investment project should be increased. 9. Sufficient authority should be providing to the Zonal office so that they can operate the medium & small range investment. 10. Investment power should be decentralized. 11. Operational cost should be minimized for increasing profitability. 12. IBBL should try to improve the deposit investment ratio for higher productivity.

Conclusion

From the above discussion, it may be concluded that the IBBL shows an overall in both positions. Since if started its banking activities. islami bank Bangladesh Ltd. Is one of the first interest free banks in south Asia . The opening of islami bank brought new era in the history of the Bangladeshs financial market .the bank had taken steps to spread its activities to wards the rural areas of Bangladesh. islami bank Bangladesh Ltd. Lunched its rural Development scheme in 1995 , to cater to the investment needs of the agricultural and rural sector of the country to create opportunity for employment and raising income of the rural people with a view to alleviating poverty.

BIBLIOGRAPHY

Appendix
IBBL = Islami Bank Bangladesh Limited. DSE = Dhaka Stock Exchange. CSE = Chittagong Stock Exchange. IBTRA = Islami Bank Training and Research Academy. RDS = Rural Development Scheme . ATM = Automated Teller Machine. SWIFT = Society for Worldwide Inter-Bank Financial Telecommunication.

Reference

www.islamibankbd.com www.Thedailystar.net www.thefinancialexpress-bd.com Material from IBTRA.

Manual of General Banking , Published by Islami Bank Bangladesh Limited