Chapter 01

Introduction

1.1 Introduction:
In order to rehabilitate the war devastated banking system of Bangladesh, after 16 th December 1971, the government promulgated a law called Bangladesh Bank temporary! "rder, 1971 #cting $residents "rder %o & of 1971!' By this order the (tate Bank of $akistan was declared as Bangladesh Bank and the offices, branches and assets of the said (tate Bank was declared to be deemed as offices, branches and assets of Bangladesh Bank' It was also declared by the #foresaid "rder that all currency notes and coins issued by the said (tate Bank and government of $akistan and were in circulation in Bangladesh shall be deemed to have issued by the Bangladesh Bank' By the steps stated above, the banking system of Bangladesh started with a legal shape' $rivate sector banks started functioning during the year 19)*+), with the ob-ective of government policy to make sure effective and meaningful participation of the private sector in the overall national economy' .he number of banks in all now stands at ,9 in Bangladesh' "ut of the ,9 banks, four are %ationali/ed 0ommercial Banks %0Bs!, &) local private commercial banks, 1& foreign banks and the rest five are Development 1inancial Institutions D1Is!' (onali Bank is the largest among the %0Bs while Bank #sia is leading in the private ones' #mong the 1& foreign banks, (tandard 0hartered and 2(B0 has become the largest in the country' Besides the scheduled banks, (amabai 0ooperative! Bank, #nsar+3D$ Bank, 4armasansthan 5mployment! Bank and 6rameen bank are functioning in the financial sector' Bangladesh Bank BB! regulates and supervises the activities of all banks' .he perception of Islamic banking has been bloomed from the inspiration of building up a society on -ustice in accordance with basic socio+economic principles of Islam' .he difference between Islamic bank and conventional bank is on principles' .he functions of this type of bank are completely different' .his bank is established on Islamic (hariah and all types of transactions are free from interest' 7ustified profit is the basis of financial

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transaction of this bank' .his bank is committed to establish socio+economic -ustice' Islami Bank Bangladesh 8imited is the first interest free commercial bank in (outh+5ast #sia' .he bank has opened 196 branches and 19 (:5 centers covering important commercial areas'

Islami Bank Bangladesh is a financial institution whose status, rules and procedures e;pressly state its commitment to the principle of Islamic (hariah' 0onse<uently Islamic banks operate on Islamic principles of profit and loss sharing, strictly avoiding interest, which is the root of all e;ploitation and is responsible for large+scale inflation and unemployment' In this report, we undertake microscopic analysis mainly on =General

Banking, Investment and Foreign E change'>

1.! "rigin o# the report:

.his report is based on an internship program' IB.?# arranges internship program to gather practical knowledge about banking activities followed by IBB8 for @niversity students as @niversities conducted with different organi/ation after the completion of theoretical courses of program of :asters of Business #dministration :B#! A Bachelor of Business #dministration BB#!' 5ach intern must carry out a specific pro-ect, which is assigned by the IB.?#' 0onse<uently a report based on the pro-ects is to be submitted to the authority of IB.?#' Be select Islamic Bank Bangladesh 8imited IBB8! for our internship A since then we have started our realistic orientation program in 6eneral Banking, Investment A foreign e;change department' 2ence we were placed in $anthapath Branch of Islami Bank Bangladesh 8imited from 1&th #pril to &6th :ay, &999'

1.$ "%&ectives o# the stud':

.he first ob-ective of writing the report is fulfilling the partial re<uirements of the BB# program' In this report, we have attempted to give on overview of Islami Bank Bangladesh 8imited in general' 1ollowing are the main ob-ectives .o familiar the history and operations of Islami Banking in Bangladesh' .o show the investment mechanism and product offerings in different modes of IBB8' .o show overall investment proposal, appraisal procedures, documentation system of IBB8 and 0onventional Banks' .o show the differences with conventional banking regarding investments aspects .o identify strength and weakness of investments of IBB8' .o identify the problems related to investments faced by IBB8' .o recommend actions that may be necessary to redesign the investments of IBB8' .o understand and analy/e the Islamic Banking system of Bangladesh and its policies A regulationsC .o understand and analy/e foreign e;change mechanism of Islami bank' .o understand and analy/e foreign remittance role of IBB8 and also contribution to the economy' .o make possible suggestions and recommendations for increasing foreign remittances through Islami bank Bangladesh 8td .o conduct interest free banking' .o establish participatory banking instead of banking on debtor creditor relationship'

1.()ethodolog' o# the stud':

1or carrying out this pro-ect paper we had to study the actual banking operations of IBB8' In order to carry out this study, two sources of data and information have been usedD

a) Primary data
Be discussed with the e;ecutives A officials of the IBB8 and found the appro;imate data, which has been presented in the report' Be also discussed with the officials of conventional Banks A IB.?# regarding the issue and found necessary information, which has been presented in the report'

b) Secondary data
#nnual ?eports of &99*+&997 of Islami Bank Bangladesh 8td' Desk report of the related department :anuals of Islami Bank Bangladesh 8imited Bai+:urabaha, Bai+:ua--al, Bai+(alam, :usharaka! .raining sheets which are provided by Islami Bank .raining and ?esearch #cademy IB.?#!' #udit ?eports Bebsite ?elevant books, ?esearch papers, %ewspapers and 7ournals' Internet and various study selected reports'

1.* +cope o# the +tud':

.he scope of the organi/ation part covers the organi/ational structure, background, and ob-ectives, functional departmentali/ation and business operation of IBB8 as a whole and especially this report focuses on general banking and investment operation of IBB8'

1., -imitation o# the stud':

.here are some limitations in our study' Be faced some problems during the study which we are mentioning them as below+

i) Lack of time:
.he time period of this study is very short' I had only ) weeks in my hand to complete this report, which was not enough' (o I could not go in depth of the study' :ost of the times the officials were busy and were not able to give us much time'

ii) Insufficient data:

(ome desired information could not be collected due to confidentiality of business'

iii) Lack of monitory support:

1ew officers sometime felt disturbed, as they were busy in their -ob' (ometime they didnFt want to supervise us out of their official work'

iv) Other limitation:

#s we are newcomer, there is a lack of previous e;perience in this concern' #nd many practical matters have been written from our own observation that may vary from person to person'

Chapter 0!

Corporate .ro#ile o# IBB-

!.1 /e#inition o# Islamic %anking:

#n Islamic bank is a financial institution which operates with the ob-ective to implement and materiali/e the economic and financial principles of Islam in the arena of banking' =#n Islamic Bank is a financial institution whose status, rules and procedures e;pressly state its commitment to the principle of Islamic (hariah and to the banning of the receipt of interest on any of its operations>+OIC. .he "rgani/ation of #li A (haskar 199E, pp+&9+&E! Islamic bank is a Gcompany which carries on Islamic banking business' Islamic banking business means banking business whose aims and operations do not involve any element which is not approved by the religion IslamG #ct %o ,'&76!'

0iauddin 1hmed says, GIslamic banking is essentially a normative concept and could be defined as conduct of banking in consonance with the ethos of the value system of IslamG lbid!'

!.! Bangladesh Bank -icense #or IBB- operation:

.he bank operates within the frame work of the e;isting banking laws, rules and regulation sub-ect to such minor ad-ustment that may be considered for an Islami Bank to )

function' In addition to the above all re<uirements of Banking 0ompanies "rdinance 196& as adapted in Bangladesh! as also the relevant position of Bangladesh Bank "rder, 197& $'"' %o' 1&7 of 197&! and instructions issued from time to time there under by Bangladesh Bank will also apply to the bank>'

!.$ 2istorical Background:

Islami Bank Bangladesh 8imited IBB8! was incorporated on :arch 1*, 19)* under the 0ompany #ct 191* as the first interest free (hariah based commercial bank in (outh+5ast #sia' %ormally, its modes of operations are different from conventional commercial Banks' IBB8 started its functioning through formal inauguration on #ugust 1&,19)*' .wenty+three local sponsors and thirteen foreign sponsors promoted the Bank in 19)*' Before that in #ugust 197,, Bangladesh signed the 0harter of Islamic Development Bank IDB! and committed itself to recogni/e its economic financial system as per Islami (hariah' In 7anuary 19)1, the $resident of $eopleFs ?epublic of Bangladesh while addressing the *rd Islamic (ummit 0onference held at :akkah and .aif suggested =.he Islamic countries should develop and separate Banking system of their own in order to facilitate their trade and commerce>' .he statement of the $resident indicate favorable attitude of the 6overnment of the $eopleFs ?epublic of Bangladesh towards establishing Islami Bank and financial institutions in the country' 5arlier in %ovember 19)9, Bangladesh Bank, the countryFs 0entral Bank, sent a representative to study the working of several Islamic Bank abroad' .he Bank has grown significantly over last two decades of its operation

!.( "%&ectives o# Islami Bank:

It is a golden desire of every :uslim that his social and political lives should be in accordance with the divine guides prescribed in the holy Huran and the (unnah' In the same tune of aspiration as above, he desires to follow a unified life in financial and

business life' (o, the ob-ectives of the Islamic Banking may be derived from the broader ob-ectives of the Islamic economy' .wo <uotations may help us understand our ob-ectives' Ibn al+ Hayyim says' .he basis of the (hariah is the wisdom and welfare of the people in this world as well as the hereafter' .his welfare lies in complete -ustice, mercy, well+ being and wisdom' #nything that departs from -ustice to oppression, from mercy to harshness, from welfare to misery and from wisdom to folly, has nothing to do with the (hariah #l+6ha/ali says, G.he very ob-ective of the shariah is to promote the welfare of the people which lies in safeguarding their faith, their life, their intellect, their posterity and their property' Bhatever ensures the safeguard of these five serves public interest and is desirable'G 2owever :' @mer 0hapra, in his book G.owards a -ust :onetary (ystem discussed some of the most fundamental characteristics of Islamic money and banking system' .hose are as followsD 1. Broad+based economic well+being with full employment and optimum rate for economic groundC !. (ocio+economic -ustice and e<uitable distribution of income and wealthC $. (tability in the value of money to enable the medium of e;change to be a reliable unit of account, a -ust standard of deferred payments, and a stable store or value' (. :obili/ation and investment of savings for economic development in an e<uitable manner such that a -ust return is ensured to all parties concerned, and *. 5ffective rendering of all services normally e;pected from the banking system' Islamic economy including Islamic banking is now entering a new phase which calls fore more integrative as well as a more critical approach to meet the present day comple; financial needs' %ow the economists are faced with the challenging task of reviewing the whole situation emerging at least in three areas' Firstl' to bring together the works done by different economists into a comprehensive view of the monetary system of Islam in its fullness as against concentrating on specific, sometimes even dis-ointed, elements of money and banking'

19

+econdl' to review critically the different models of Islamic banking presented over the years in the conte;t of the practice of Islamic banking with a view to refining the theory as well as improving the practice' 3hirdl' it is essential to put the whole theory and practice of Islamic banking in the perspective of an Islamic economy and the Islamic moral and social order' #ny element of the Islamic system however important cannot produce the desired results if it is allowed to operate in isolation' It must lead to other complementary changes to complete the process'

!.* 4ole o# contri%ution o# IBB- to Bangladesh Econom':

Islami Bank Bangladesh 8imited has many success stories of achievements' .hese are summari/ed belowD IBB8 is the pioneer institution of Islamic Banking in Bangladesh' .he success of IBB8 has imbibed other sponsors at home and abroad to establish Islamic Banking in Bangladesh' 1our national, one international Islamic Banks have since been established in the country' # private sector traditional bank has also established two full+fledged Islamic Banking branches' (everal other e;isting and proposed traditional banks have also e;pressed their intention to introduce Islamic Banking' IBB8 has successfully mobili/ed deposits from a section of people who hither+to+ before did not make any deposit with interest based banks' .he Islamic Banking products which are offered by IBB8 through its 196 branches located at important centers all over the country and spontaneous acceptance of those products by the people proves the superiority of Islamic by the people proves the superiority of Islamic banking' IBB8Is market share of deposit investment and ancillary business is steadily increasing IBB8 through still a tiny bank handless more than 19J of countryIs e;port and import trade'

11

 #mong the contemporary commercial Banks IBB8Is position is first in respect of mobili/ation of deposit, deployment of found and earning profit' Investment in industrial sector occupies nearly ,9'19J of IBB8Is investment portfolio' .his is a uni<ue e;ample of industrial finance by a commercial Bank' :ore than 1'1E,999 workers are employed in the industrial pro-ects financed by IBB8' IBB8 has thus made significant contribution to solving unemployment problem of the country' Dhaka+the capital of Bangladesh being a :ega city has acute transport problem' IBB8 has -oined hands with an enterprising group to introduce a fleet of $remium Bus service, which has attracted the attention of all section of the people and mitigated transportation problem of the city to some e;tent'

!., /istinguishing Features o# IBB-:

#n Islamic bank has several distinctive features as compared to its conventional counterpart' 0hapra had outlined si; essential differences as belowD 5i6 1%olition o# interest 54i%a6: (ince riba is prohibited in the 2oly Huran and interest in all its forms is akin to riba as confirmed by 1ukaha and :uslim economists with rare e;ceptions the first distinguishing feature of an Islamic bank must be that it is interest+ free' 5ii6 1dherence to .u%lic Interest: #ctivity of commercial banks being primarily based on the use of public funds, public interest rather than individual or group interest will be served by Islamic commercial banks' .he Islamic banks should use all deposits which come from the public for serving public interest and reali/ing the relevant socio+ economic goals of Islam' .hey should play a goal+oriented rather than merely a profit+ ma;imising role and should ad-ust themselves to the different needs of the Islamic economy' 5iii6 )ulti7purpose %ank: #nother substantial distinguishing feature is that Islamic banks will be universal or multi+purpose banks and not purely commercial banks' .hese banks are conceived to be a crossbreed of commercial and investment banks, investment trusts and investment management institutions and would offer a variety of services to

1&

their customers' # substantial part of their financing would be for specific pro-ects or ventures' .heir e<uity+oriented investments would not permit them to borrow short+term funds and lend to long+term investments' .his should make them less crisis+prone compared to their capitalist counterparts since they would have to make a greater effort to match the maturity of their liabilities with the maturity of their assets' 5iv6 )ore Care#ul Evaluation o# Investment /emand: #nother very important feature of an Islamic bank is its very careful attitude towards evaluation of applications for e<uity oriented financing' It is customary that conventional banks evaluate applications, consider collateral and avoid risk as much as possible' .heir main concern does not go beyond ensuring the security of their principal and interest receipts' (ince the Islamic bank has a built in mechanism of risk sharing, it would need to be more careful in how it evaluates financing re<uests' It adds a healthy dimension in the whole lending business and eliminates a whole range of undesirable lending practices' 5v6 8ork as Catal'st o# /evelopment : $rofit+loss sharing being a distinctive characteristic of an Islamic bank fosters closer relations between banks and entrepreneurs' It helps develop financial e;pertise in non+financial firms and also enables the bank to assume the role of technical consultant and financial adviser which acts as catalyst in the process of industriali/ation and development'

!.9 )ission "# IBB-:

1' .o establish Islamic Banking through the introduction of a welfare oriented
banking system' &' .o ensure e<uity and -ustice in the field of all economic activities' *' .o achieve balanced growth and e<uitable development through diversified investment operations particularly in the priority sectors and less development areas of the country' ,' .o encourage socio+economic upliftment and financial services to the low income community particularly in the rural areas'

!.: ;ision "# IBB-:

1*

"ur vision is to always strive to achieve superior financial performance, be concidered a leading Islamic bank by repuyation and performance' "ur goal is to establish and maintain the modern banking techni<ues to ensure soundness and development of the financial system based on Islamic principles and to become the strong and efficient organi/ation with highly motivated professionals working for the benefit of people based upon accountability, transparency and integrity in order to ensure stability of financial systems' Be will try to encourage saving in the form of direct investment' Be will also try to encourage investment particularly in pro-ects which are more likely to lead to higher employment'

!.< 4ole o# +hariah Council:

Formation o# +hariah Council o# Islami Bank Bangladesh -imited
In practice the Bank has already established a strong (hariah 0ouncil consisting of 19 ten! members appointed by Board of Directors and prepared its terms of reference' "ut of ten members at least 7 seven! members should be 1u<uhaK:uftiKIslamic scholars well versed in the Huran, (unnah and fully conversant with the opinion of all school of Islami thought' "ut of the remaining * three! members there must be at least one 5conomist, one Banker and one 8awyer' .he (hariah 0ouncil is appointed and they are not salaried' .he tenure of the 1st (hariah 0ouncil was *yearsb and that of subse<uent 0ouncil will be reconstituted after every three years and a retiring member is eligible for re+appointment' 1ive members including not less than three 1u<uhaK:ufti shall form the <uorum in meeting of the 0ouncil'

Functions and o%&ectives o# +hariah Board

#ccording to the Bye+laws of (hariah Board it performs the following activitiesD I' .o advise the members Banks regarding (hariah Issues' II' .o conduct (hariah inspection in the member Banks' III' .o give opinion on the (hariah matters referred to it by the management of the members bank 1,

I3' .o play intermediately role if necessary' 3' .o insure the (hariah 0ompliance in Islami Banks by sending (hariah Inspection report to the Bank :anagement' 3I' .o conduct training course on (hariah issues for 2uman ?esources Development of the memberFs bank' 3II' .o arrange (eminar and (ymposium on banking issues' 3III' .o identify the problems and making recommendation' IL' .o collect data and information regarding Islami banking the same to others' L' .o publish Books, 7ournal, :anual, Brushier and distributing the same among the members bank' LI' .o translate various Banking Books and #rticles into Bengali 8anguage (ourceD Islami bank 0entral (hariah Board 7ournalD 1st 5dition, :arch &99,!

!.10 4ole o# I/B #or Islamic Banking:

.he purpose of the Bank is to foster the economic development and social progress of member countries and :uslim communities individually as well as -ointly in accordance with the principles of (hriah i'e' Islamic law' .he functions of the Bank is to participate in e<uity capital and grand loans for productive pro-ect and enterprises besides providing financial assistances to member countries in other forms for economic and social development' .he bank is also re<uired to establish and operate special funds for special for specific purposes including a fund for assistances to :uslim communities in non+ member countries, in addition to setting up trust funds' .he Bank is authori/ed to accept deposits and to mobili/e financial resources through (hariah compatible moods' It is also charged with the responsibility of assisting in the promotion of foreign trades especially in capital goods among member countries providing technical assistance to member countries and e;tending training facilities for personnel engaged in development activities in :uslim countries to conform to the (hariah'

1E

!.11 Corporate in#ormation at a glance 51s on Fe%ruar' !:, !00<6

Date of Incorporation Inauguration of 1st Branch 8ocal office, Dhaka! 1ormal Inauguration +hare o# Capital 8ocal (hareholders 1oreign (hareholders #uthori/ed 0apital $aid+up 0apital Deposits ,&'6,J E7'*6J .k'19,999'99 million .k',,7E&'99 million .k'&9,,979'99 million 1*th :arch 19)* *9th :arch 19)* 1&th #ugust 19)*

Investments including Investment in (hares! .k'&9),,*9'99 million 1oreign 5;change Business %umber of Branches %umber of (:5 (ervice 0enters %umber of (hareholders :anpower .k'*,&,),9'99 million 196 19 *6,&77 9*7E

!.1! 2istor' and )ilestone:

1<9( 1<:0 1<:! 1<:$ Bangladesh signed the charter of Islamic Development Bank' gladesh Bank made study on the operations of Islamic Bank abroad' Islamic Development Bank came forward to participate a -oint venture Islamic Bank in Bangladesh' Islami Bank Bangladesh 8imited came into being as the first Islamic Bank in .he (outh M 5ast #sia'

16

1<:* 1<<1 1<<, 1<<9 !00( !009 !00:

I$" and 8isting in Dhaka (tock 5;change 8imited' "pening of E9th Branch' 8isting in 0hittagong (tock 5;change 8imited' "pening of 199th Branch' "pening of 1E9th Branch' "pening of 1)6th Branch' Issuance of :udaraba $erpetual Bond' 0ommencement of Brokerage 2ouse as a member of Dhaka (tock 5;change 8imited' 0elebration of silver 7ubilee' "pening of 196th Branch' "pening of 1st (':'5 (ervice 0enter'

!.1$ Conventional and Islamic %anking:

0onventional banking is essentially based on the debtor+creditor relationship between the depositors and the bank on the one hand, and between the borrowers and the bank on the other' Interest is considered to be the price of credit, reflecting the opportunity cost of money' Islam, on the other hand, considers a loan to be given or taken, free of charge, to meet any contingency' .hus in Islamic Banking, the creditor should not take advantage of the borrower' Bhen money is lent out on the basis of interest, more often it happens that it leads to some kind of in-ustice' .he first Islamic principle underlying such kinds of transactions is that =deal not un-ustly, and ye shall not be dealt with un-ustly> N&D&79O' 2ence, commercial banking in an Islamic framework is not based on the debtor+creditor relationship' .he second principle regarding financial transactions in Islam is that there should not be any reward without taking a risk' .his principle is applicable to both labor and capital' #s no payment is allowed for labor, unless it is applied to work, there is no reward for capital unless it is e;posed to business risk #usaf #hmed 199E, $'17!

17

.hus, financial intermediation in an Islamic framework has been developed on the basis of the above two principles' 0onse<uently financial relationships in Islam have been participatory in nature' (everal theorists suggest that commercial banking in an interest+ free system should be organi/ed on the principle of profit and loss sharing' .he institution of interest is thus replaced by a principle of participation in profit and loss' .hat means a fi;ed rate of interest is replaced by a variable rate of return based on real economic activities :angla A @ppal 1999' pp'179+&1E, 1)E!' .he distinct characteristics which provide Islamic banking with its main points of departure from the traditional interest+based commercial banking system areD a! the Islamic banking system is essentially a profit and loss sharing system and not merely an interest Riba! banking systemC and b! investment loans and advances in the 0onventional sense! under this system of banking must serve simultaneously both the benefit to the investor and the benefit of the local community as well' .he financial relationship as pointed out above is referred to in Islamic -urisprudence as Mudaraba. 1or the interest of the readers, the distinguishing features of the conventional banking and Islamic banking are shown in terms of a bo; diagram as shown belowD Conventional Banks Islamic Banks 1' .he functions and operating modes of 1' .he functions and operating modes of conventional banks are based on manmade Islamic banks are based on the principles of principles' &' .he investor is assured of Islamic Shariah. a &' In contrast, it promotes risk sharing between provider of capital investor! and

predetermined rate of interest'

the user of funds entrepreneur!' *' It aims at ma;imi/ing profit without any *' It also aims at ma;imi/ing profit but restriction' ,' It does not deal with Zakat. sub-ect to Shariah restrictions' ,' In the modern Islamic banking system, it has become one of the service+oriented functions of the Islamic banks to collect and distribute Zakat. E' 8ending money and getting it back with E' $articipation in partnership business is interest is the fundamental function of the the fundamental function of the Islamic conventional banks' banks' 6' Its scope of activities is narrower when 6' Its scope of activities is wider when

1)

compared with an Islamic bank' 7' It can charge additional

compared with a conventional bank' It is, in effect, a multi+purpose institution' money 7' .he Islamic banks have no provision to any e;tra money from the

compound rate of interest! in case of charge

defaulters' defaulters' )' In it very often, bankFs own interest )' It gives due importance to the public becomes prominent' It makes no effort to interest' Its ultimate aim is to ensure ensure growth with e<uity' growth with e<uity' 9' 1or interest+based commercial banks, 9' 1or the Islamic banks, it is comparatively borrowing from the money market is difficult to borrow money from the money relatively easier' market' 19' (ince income from the advances is 19' (ince it shares profit and loss, the fi;ed, it gives little importance to Islamic banks pay greater attention to pro-ect appraisal and developing e;pertise in pro-ect appraisal developing

and evaluations' evaluations' 11' .he conventional banks give greater 11' .he Islamic banks, on the other hand, emphasis on credit+worthiness of the give greater emphasis on the viability of the clients' pro-ects' 1&' .he status of a conventional bank, in 1&' .he status of Islamic bank in relation to relation to its clients, is that of creditor and its clients is that of partners, investors and debtors' trader' 1*' # conventional bank has to guarantee 1*' (trictly speaking, and Islamic bank all its deposits' cannot do that'

!.1( =usti#ication #or separate Islami Banking 1ct:

1or smooth and better functioning of Islamic Banks A 1inancial Institutions a complete separate #ct for Islamic Banks and 1inancial Institutions is essential for the following reasonsD

19

1' .he nature of deposits of Islamic Banks is different from that of conventional Banks' .he Islamic Banks mobili/e deposit on :udaraba and #l+Badiah basis under Islamic (hariah, while conventional Banks do this on prefi;ed interest basis' .he Depositors of Islamic Banks are business partners of the Banks and they share the $rofitKloss of the business' &' It is obligatory for Islamic Banks as per (hariah to pay Pakat while 0onventional Banks do not act on such obligation' In the Bank 0ompany #ct, 1991 there is no provision to pay Pakat by the Islamic Banks' *' .he Islamic Banks deploy their funds as per different modes of InvestmentK1inancing approved by Islamic (hariah' :ost of the Investments of Islamic banks are on Bai+:ode' In this mode Banks sell specified goods to the clients on cost plus agreed upon profit or at a negotiable price payable after a certain fi;ed period' If, the client fails to pay the price within the fi;ed period, the Islamic Banks cannot impose or reali/e additional amount as income of the Bank' ,' #s activities and operations of Islamic Banks particularly Investment $ort+folio is completely separate form that of 0onventional Banks, the #ct and $rocedures for initiation of legal action against the default clients should be separate under the framework of Islamic 7urisprudence' E' Inspections of Islamic Banks are made as per system adopted for 0onventional Banks and sometimes by the Inspectors without having any knowledge of Islamic system and law' .he inspection of Islamic banks should be done with a view to identifying both general and shariah lapses by the persons having good knowledge of Islamic (hariah and Banking'

!.1* Basic Functions o# IBB-:

.he functions of Islami Bank Bangladesh 8imited are as underD .o maintain all types of deposit accounts .o make investment .o conduct foreign e;change business' .o e;tend other banking services

&9

 .o conduct social welfare activities through Islami Bank 1oundation'

!.1, "rgani>ational +tructure o# IBB-:

5;ecutive $resident 5$! Deputy 5;ecutive $resident D5$! 5;ecutive 3ice $resident 53$! (enior 3ice $resident (3$! 3ice $resident 3$! #ssistant 3ice $resident #3$! (enior $rincipal "fficer ($"! $rincipal "fficer $"! (enior "fficer ("! "fficer $robationary "fficer #ssistant "fficer 6rade + I #ssistant "fficer 6rade + II #ssistant "fficer 6rade + III

&1

Chapter 0$

General Banking o# IBB-

&&

$.1 Introduction:
6eneral Banking activities are the most important part of any bank' It also play a vital role in deposit mobili/ation of the branch' 6eneral banking is the heart of all business banking activities' .his department performs the core function of the bank, operates the day+to+day transaction' It is the storage point of the all kinds of transaction of foreign e;change department, loans and advance department and itself' (o general banking section is the lifeblood in banking service' .he relationship between customer and banker begins with opening an account by the customer' "pening an account binds banker and customer into contractual relationship' #ll kinds of fraud and forgery are initiated by opening an account' .herefore, the bank should take e;treme caution in selecting customers' 3arious general banking activities are given stated below D

$.! Functions o# General Banking:

1unctions of 6eneral Banking department are as followsD #ccount opening section ?e<uirement of opening an account 0ash section Deposit section ?emittance section 0learing and collection section #ccounts section 0he<ue book issue

&*

 (aving all transaction record in computer 0losing and transfer different types of accounts' 4eeping good relation with valued customers $roviding necessary support to the customers

$.$ 3'pes o# 1ccount:

Bank receives deposit by different accounts' .here are two types of deposit accounts i' ii' #l+ wahdia :udaraba mode

1l7 ?ahdia: 0urrent account is conducted under #l+ wahdia system )udara%a mode: under the :udaraba mode client are called sahib #l :all and bank plays role as a :udarib

@nder the )udara%a )ode:

.here are many types of product under this :ode' .hese are as followsD :(# + :udaraba (avings #ccount :2(# + :udaraba 2a-- (avings #ccount :(B + :udaraba (avings Bond :(( + :udaraba (pecial (cheme :.D? + :udaraba .erm Deposit ?eceipt ::$D( + :udaraba :onthly $rofit Deposit (cheme ::( + :udaraba :ahor (avings #ccount :(%# + :udaraba (hort %otice #ccount

$.( General characteristics o# deposit accounts:

1l78a'adia Current 1AC 518C16

&,

#B0# accounts are unproductive in nature as far as banks loan able investment fund is concerned sufficient fund has to be kept in li<uid form as current deposits are demand liabilities' .hus huge portion of this fund becomes nonperforming' 1or this reason banks do not pay any of #B0# account holder' Business and companies are the main customers of this product'

)udara%a +avings 1ccount 5)+16

#s per Bangladesh Bank instruction 99J of (# deposits are treated as time liability and 19J of it as demand liability' In IB8 there is a restriction about drawing money from (B account but anytime holder may draw money of any amount with prior notice generally householder and individuals are the clients of this account'

)udara%a +hort Botice 1AC 5)+B6

:(%# accounts can be treated as semi term deposit' Deposit should be kept in these accounts for at least seven days to get interest of :(%# accounts is less then (B accounts' E'EJ generally profit, but may increase to 6J or more depending on the fund' 0he<ue book is issued them but fre<uent use of checkbook is discouraged' 6overnment organi/ation, big corporate house and banks are generally the clients of this account' .he volume of this account is generally large and notice has to be given to draw money'

)udara%a 3erm /eposit 4eceipt 5)3/46

1i;ed deposit is of two kind midterm deposit :.D! and term deposit .D! instrument whose maturity period is within one year are know as midterm deposit :.D and those above one year are considered as term deposit .D!' 0alculation of profit .D? and provisioning regarding this is <uite complicated issue' $rofit is calculation at each maturity date and provision is made on that' #lso at the month and provision of profit is mode' Incidental Charge: .aka 19 or E9 Q each for twice a year is debited from customers #B0# account for rendering service to him' .aka E9 Q each is debited from customers account for providing him solvency certificate'

&E

.ro#it: IBB8 offers a competitive price to attract depositors on the basis of market forces'

3a%le: .ro#it on /eposit

'ear
* month &999 &991 &99& &99* &99, &99E &996 &997 &99) )'*7J )',6J 7'69J 7'97J 6'&9J 7'*1J 7'6&J 6')9J 6'EEJ 6 month )'7E )'), 7'9, 7'*9 6',) 7'6E 7'97 7'19 6')E

:.D? #K0
1& month 9'1* 9'&* )'&9 7'71 6'76 7'9) 9',1 9'99 )'99 &, month 9'*& 9',& )',6 7')7 6'91 )'1E 9'E) 9'&9 )'*9 *6 month 9'E1 9'61 )'6* )'9, 7'9E )'*1 19'97 9'6E 9'99

:(#
1+19 years 7'69 7'69 6',7 6'9* E'&) 6'&* 6'79 9'19 6'99 19', 6 19'E 7 11'& & 19', E 9'16 11') 9 11'& 6 19'9 9 9')9

2a-11+ &Eyear s 19',6 19'E7 11'6E 19')E 9'E1 11'&& 11'69 19',9 19'&E E

:((
19year s 1&'*6 1&',9 11'&& 19',E 9'16 19')9 11'&6 19'99 9')9 years 19', 6 19'E 7 9'E9 )'), 7'7E 9'1, 19'* 9 9'79 9',9

:(B
Eyers )years

19', 6 19'E 7 9'E9 )'), 7'7E 9'1, 19'* 9 9'79 9',9

11')) 1&'91 19'79 19'9, )')1 19'*9 19'*9 9')9 9'69

$.(.1 General practice in account opening section

8ho can open 1ACC $ersons over 1) years e;cept some restricted persons! #ccount of club #ssociation #gent 6overnment (emi+6overnment "rgani/ation 8i<uidators

&6

 Illiterate persons etc $.(.! DEC 5Dno? 'our Customer! .his type of form is mandatory for opening #ccount' 1or opening #K0 the following things are mandatory+ 0ommissioner 0ertificate .wo copy passport si/e photo of client' "ne copy nomineeFs photo' (ign of introducer is verified $.(.$ 1ccount "pening 4egister #fter fulfilling all the re<uirements for opening account necessary entries are given in the account opening register' .here are several registers for several accounts as :(#, #B0# and :.D? etc' Date of opening, name of the account holder, nature of the business, address, initial deposit and introducerIs information are recorded in that register' %ew accounts number is given from the list of new numbers provided by the computer department' $.(.( CheFue Book 0heck book is issued to the new customer after seven days of opening account' .wo separate che<ue books are given for current and saving accounts' #B0# accounts che<ue book consists &E and E9 leafs, while :(# account checkbook has 19 leafs' .here has a che<ue book issue register in this regard where che<ue book number, leaf number, date issue etc' information are kept on the register' #ll the necessary numbers are the sent to the computer department to give entry in the program' $.(.* 1ccount Closing 1or account closing first a customer has to submit an application with his or her signature mentioning that he or she wants to close his or her account' .hen the signature will be verified by the officer' 0ustomer has to certify by different department of bank that he or she has no liabilities to the bank' #fter that the customerFs #K0 is debited and then the bank issue a pay order in the name of account holder' $.(., 1ccount 3rans#er 0ustomer has to submit an application mentioning that he or she wants to transfer his or her account to his or her desired branch and the officer will verify the signature' &7

0ustomer has to certify by different department of bank that he or she has no liabilities to this branch of the bank' .hen total particulars of the #K0 holder will prepare and sent to the customerFs desired branch' 8iability of recogni/er is secondary and account holder is primary'

$.* -ocal 4emittance

IBB8 sells and purchase $'"', D'D' and .'.' to its customers only' I. does not offer remittance service fre<uently to those other than its customer' $.*.1 .a' "rder 5."6 $ay order is an instrument that is used to remit money within a city through banking channel the instruments are generally safe as most of them are crossed' 1ccounting entries #or issuance o# pa'ment order 0ashKpartyFs #K0++++++++++++++++++++++++Dr $ayment order #K0++++++++++++++++++++++0r Income #K0 0ommission+++++++++++++0r 1ccounting entries #or issuance o# ." $ayment order #K0++++++++++++++++++++Dr 0ashKpartyFs #K0+++++++++++++++++++++++0r Charges For issuing ..": +ervice Charge: .k' 1 to .k' 19,999 .k, 19,991 to .k, 1,99,999 .k' 1,99,991 to .k' E,99,999 .k, E,99,991 to .k, 19,99,999 .k' 19,99,991 and above ;at: 1EJ of principle amount $.*.! /emand /ra#t 5//6 .k' 19K+ .k, &9K+

.k' *9K+ .k, ,9K+ .k' E9K+

&)

Demand Draft is very much popular instrument for remitting money from one corners of a country another' .he instrument is basically used for transfer and payment' Difference between pay order and demand draft is in terms of place only $'"' is used for remitting money within the city whereas D'D' is used for within the country' D'D' too constitutes current liability on the part of a bank' #t IBB8 D'D' is not sold to people other than its customer' 1ccounting entries #or issuance o# // 0ashKpartyFs #K0++++++++++++++++++++++++Dr IB6 #K0++++++++++++++++++++++++++++++++++0r Income #K0D 0ommission+++++++++++++0r Charges For Issuing // +ervice Charge: .k' 1 to .k' 19,999 #bove .k' 19,999 ;at: 1EJ of principle amount $.*.$ 3elegraphic 3rans#er 5336 .elegraphic transfer is one of the fastest means of transferring money from one branch to another or from one to another' .he .'.' issuing bank instructs its counterpart by tested tele; message regarding remittance of money' %o instrument is given for .'.' unless both parties have account as money is transferred' 1ccounting entries #or issuance o# 33 0ashK?emitterFs #K0Kche<ue++++++++++++++++++++++++Dr IB6 #K0++++++++++++++++++++++++++++++++++++++++++++++++0r Income #K0D 0ommission++++++++++++++++++++ ++++++ 0r .ele;K.elephone 0harge #K0+++++++++++++++++++++++0r Charges #or Issuing 3.3. 3elephone Charge: .k' *9KQ +ervice Charge:

.k' 197+ 1 .k' for every 1,999

&9

.k' 1 to .k' 19,999 #bove .k' 19,999 ;at: 1EJ of principle amount

.k' 197+ 1 .k' for every 1,999

$., Clearing GCollection /epartment $.,.1 Clearing

#s far safety is concerned customers get crossed che<ue for the transaction' #s we known crossed che<ue cannot be enchased for counter, rather it has through been collected through banking channel i'e' clearing' # client of IBB8 received a che<ue of another bank which is located within the clearing rageC deposit the che<ue in the account at IBB8' %ow IBB8 will he will not the money until the check is honored'

$.,.! CheFue dishonor

Bhen any branch sends the che<ue of $anthapath Branch to clearing house may be internal clearing house or Bd' Bank clearing house! for collection then clearing house will provide debit advice with che<ue! to $anthapath Branch' If $anthapath Branch response this advice, automatically local office is credited to $anthapath Branch' .hen if che<ue is honored, there is no problem' But che<ue is dishonored for any reason then $anthapath Branch will provide debit advice to local office' If local office response this advice then 4awaran Ba/ar Branch is credited to local office' (o ultimate effect is /ero'

CheFue ma' %e dishonored 1' If the che<ue leaf is toned' &' If there is no date' *' If there is no similarity between the amount and word'

$.,.$ 3rans#er /eliver'

.ransfer Delivery is a che<ue collection procedure among internal branches within the 0learing 2ouse' Bhen a che<ue of a branch office is deposited if the che<ue is

*9

dishonored then authori/ed branch send the che<ue to the local office and local office send the che<ue to the collecting Branch on the collecting date' /e%it 1dviceD (uppose the $anthapath Branch of IBB8 has gotten the che<ue of some clearing house then $anthapath Branch will send debit advice to local office for collection' .hat means $anthapath Branch do debit the local office branch and local office branch will debit $anthapath Branch' Credit 1dviceD Bhen local office make a payment in favor of $anthapath Branch assume! then $anthapath Branch will send credit advice to local office because local office is accounts payable to $anthapath Branch' "BC+ "utward bill collection when che<ue is re<uired to collect the bill outside the clearing /one then "B0 is used' Bhen bill is collected then+ Instrument #K0 0lient #K0 0lient #K0 $ay order Income (erviceR 0ommission! (KD 3at on pay order! + + + + + + Dr' 0r' Dr' 0r' 0r' 0r'

$ay orderD Bhen client place the che<ue at branch for pay order then the treatment is M

1or .'., D'D A pay order, clients account is necessary at branch' F1/D 1inancial administration divisionD .he transaction is occurred within same clearing house that is calculated at the end of the year finally to find out the receivable and payable at 1#D in favor of branch'

$.,.( "ut?ard Bill #or Collection 5"BC6

0ustomers deposit check, drafts etc' for collection, attaching with their deposit sleep' Instrument within the range of clearing are collected through local clearing house but the other which are outside the clearing range are collected through "B0 mechanism' # customer of IBB8 principal branch 8ocal "ffice Dhaka is depositing a che<ue of (onali Bank, 0o;s Ba/ar' %ow as a collecting bank IBB8 principal branch will perform the following taskC *1

1' ?eceived seal on deposit slip' &' IBB8 8ocal "ffice $rincipal Branch crossing indicating them as collecting banks' *' 5ndorsement given G$ayees #K0 will be credited on reali/ation' ,' 5ntry on register from where a controlling number is given' 0ollecting bank can collect it either by its branch of by the drawerIs bank' .hey will forward the bill then to that particular branch' "B0 number will be given on the following letter' %ow following procedures will take place in case of the following two cases' A. ills !"oileted "hrou#h ranch): If the bill is forwarded to a branch they will collect it through IB0 procedure' 0ollecting branch will receive and I'B'0'# from that particular agent branch according treatment from the angle of collecting branch will be' #K0 concerned branch'''''''''''''''''''''''Dr' 0ustomer #K0 ''''''''''''''''''''''''''''''''''''''''''0r' Income #K0 commissionC postage''''''''''''''''''''0r In this case commission will be charged by the collecting branch, not the agent branch' . a' b' ills Collected "hrou#h $ra%er&s ank: #ccounting treatment for the collecting branch will be 0learing '''''''''''''''''''''''''''''''''''''''''''''''Dr' 0ustomer #K0''''''''''''''''''''''''''''''''''''''''0r'

$.,.* In?ard Bills #or Collection 5IBC6

In this case bank will work as an agent of the collection bank' .he branch receives a forwarding letter and the bill' %e;t steps are 1' 5ntry in the I'B'0' registers number given &' 5ndorsement given +G"ur branch endorsement confirmedG *' .he instrument is sent to clearing for collection''''''''''''''''''''''''Dr' ,' :iscellaneous 0reditor #K0 "B0''''''''''''''''''''''''''''''''''''''''0r' %ow following $rocedures will take place in case of the following two cases

*&

Credit 3ransaction: Bhen a branch re<uest another branch of the same bank! to pay a certain amount against any instrument che<ue, DD etc'! and become liable to that bank, issues a IB0# to that Branch #nd these .ransactions are recorded in the credit side of IB6 #K0 serially' $ebit transaction Bhen some che<ue or any sort of financial instrument of another branch pays those instruments on behalf of #uthori/ed Branch, issue an IBD# to that branch and these transactions are recorded in the debit side of IB6 #K0'

$.9 Cash +ection

0ash section demonstrates li<uidity strength of a bank' It also sensitive as it deals with li<uid money' :a;imum concentration is given while wording on this section' #s far as safety is concerned special precaution is also taken' .ense situation prevails if there is any imbalance in the case' .here are some functions of cash section a' 0ash receipt b' 0ash payment c' $assing, 0ancellation and payment of che<ue

$.9.1 3eller Customer 4elationship In a bank a person who delivers and receives cash from the cash counter is known as teller, a customer meets most of the time in a bank with a teller on the counter' (o teller should hold certain <uality (hould be friendly' $rovide prompt service' Be accurate in his task' In short a teller should be efficient, otherwise he has to pay' $.9.! ;ault #2 cash, instruments $'"', D'D' and 0heck! and other valuables are kept in the vault is insured up to .k' , crore with local insurance company' If cash stock goes beyond its limit of .k' , crore, the e;cess money is transferred to Bangladesh Bank if there is shortage of cash during transaction period money is transferred to drawn from the central **

bank' .here are three keys of the vault which are given to three seniors most officers' Daily as estimated amount of cash brought out from the vault for transaction purpose' %o more than .k' , crore brought at once from the vault on a single day' $.9.$ Cash .acking and 2andling 0ash packing and handling needs a lot of care as any mistake may lead to disaster' $acking after banking hour when the counter is closed, cash are packed according to denomination' %otes are counted several times and packed in bundle, stetted and stumped with initial' $.9.( Evening Banking #fter the banking hour the cash counter is closed' But sometimes customers come to draw or deposit money after the service hour' 2owever, their money is received or aid recorded in the ne;t daybook' .his is known as evening banking'

$.: /ispatch +ection $.:.1 In?ard dispatch

1' Inward mail, other than those which are registered, marked confidential and addressed personally to same official, may be opened by an authori/ed member of staff who should enter in the inward mail register and mention the serial number of the mail register on the letterK paper received, affi; =received> date stamp on it and delivery the same to the concerned officials against acknowledgement' &' 8etters addressed personally to any official shall be opened by the address only' *' ?egistered mails and mails marked confidential will be opened by an officer or management in small Branches' #ll these letters shall however enter in the inward mails registers' ,' (top payment instructions and court orders shall be received authori/ed officials who will immediately note date A time on it and take necessary steps' $.:.! "ut?ard dispatch 1' "utward letters must be serial number and entry in the register with name and address'

*,

&' 5ach typist will maintain a typist master file and dispatch 0lark also maintain a separate master file for future record' *' 8ocal letters may be delivered through peon book' If the area is large and letters are many then service are given through post office' ,' 8etter dispatched must be entered in the outward mail register and bear proper postal stamps if sent through post office' E' If the letters are sent by registered post or courier service, postal or courier receipt must be maintained by the dispatch department in a file' (imilarly acknowledgements received back should be maintained in the file

Chapter 0(

*E

Investment o# IBB-

(.1 Introduction:
Investment operation of a Bank is vital important as the greatest portion of total revenue is generated from it ma;imum risk is centered in it and a Bank e;istence mostly depends on prudent management of its Investment $ort+folio' .o survive in world economy, a bank should have to contribute in the proper resources mobili/ation through its efficient investment policy so that it is profitable, safe and li<uid investments' # sound, well+ defined, well+planned and appropriate Investment $olicy framework is necessary for achieving the ultimate goal of the Bank'

*6

.he special feature of the investment policy of the Bank is to invest on the basis of profit+ loss sharing system in accordance with the tenets and principles of Islami (hariah 5arning profit is not only motive and ob-ective of the BankFs investment policy but also emphasis is given in attaining social welfare and in creating employment opportunities'

(.! /eposit mo%ili>ation:

In recent years Islami Bank Bangladesh 8imited had succeeded in attracting increased deposit' Investment of the Bank increased to .k' 166)1&'7) million as on in &997 from .k' 1*&)1&'99 million in &996' .he percentage of deposit growth in &997 was &E'69J' .otal number of depositors of IBB8 increased to *)9&799'99 8ac in &997 from *&971*1'99 8ac of the preceding year, registering an increase of 19J' Basically Islami Bank has its own product line such as :udaraba (avings #ccount :(#!, :udaraba (pecial (cheme :((!, :udaraba .erm Deposit :.D?!, :udaraba (hort %otice #ccount :(%#!, :udaraba :onthly $rofit Distribution (cheme ::$D(! etc' this 5ntire $roduct makes a tremendous response over the client' :ore over the client are becoming very much interested to accept the new methodology introduced by IBB8 instead of conventional banking where there is no use of .erms call interest. .hen most recently IBBl has introduced a new product call :udaraba (aving' Bond already augment resources matching with its structure, it has received tremendous response' In 199), 19 year and five yearFs .erm :udaraba (pecial (aving pension! (cheme has been introduced to meet the e;pectation of the e;istingKpotential depositors of the Bank that has also received tremendous response'

(.$ Investment:
Investment of the bank increased to .k' 1,,,,9&1 :illion as on *1'1&'&997 where the investment of preceding year is .k' 1,1*,E7E million and the growth rate in &997 is &7'69J rather than the growth rate of the preceding yearD 17'&,J'this increased

*7

investment growth of the bank in &997 is due to promote investment for effective utili/ation of depositorsF fund'

3a%le7(.1 +ector78ise Investment

(ector+wise distribution of investment as on *1st December &997 vis+S+vis the corresponding period of last year is given belowD .aka in :illion +ector7?ise Investment +ector Industrial 0ommercial ?eal 5state .ransport #griculture "thers .otal 1mount !009 H to 3otal Investment E,'*7J *9'&)J E'9*J ,',7J 1')*J *'1&J 199J !000, H to 3otal Investment EE'1EJ &E'E&J 7'*6J E'19J &',9J ,'*)J 199'99J

1mount

7),7)) ,*,)77 ),E)) 6,,)E &,6E6 ,,E&7 1,,9&1

6&,6,& &),9), ),*E) E,)99 &,7&& ,,979 11*E7E

Chart7(.1 Comparison o# +ector78ise Investment as on $1.1!.!007

*)

3.12% 1.83% 4.47% 5.93% 54.37% Industrial commercial Real Estate 30.28% Agriculture Trans ort !t"ers

3a%le7(.$ )ode ?ise Investment:

5)illion in 3aka6 )ode7?ise Investment )ode Bai+:urabha 2ire $urchase (hirkatul :elk Bai+:ua--al $urchase A %egotation Huard Bai+(alam :udaraba :usharaka .otal 6,E,6 11,9,9 1,9EE 1,1E* E9 1,* 1,,,9&1 ,'E&J 7'6&J 1'*EJ 9')9J 9'9*J 9'19J 199J 6,9&1 ,,),7 1,97, 996 E9 1* 11*,E7E 6'99J ,'&7J 1'7,J 9')9J 9'9,J 9'1J 199J !009 1mount 7*,)** @nder E9,&91 H to 3otal Investment E9'9EJ *,'6,J !00, 1mount E9,,6E *9,*99 H to 3otal Investment E&'*6J *,'69J

*9

Chart7(.$ Comparison o# )ode ?ise Investment as on $1.1!.!009

$udara%a &a'ings 0.40% 0.93% 1.35% 2.87% 8.58% 10.47% 10.#1% 22.01% 0.0#% 0.01% 42.71% $udara%a $ont"l* -ro.it (e osit &c"eme $udara%a &/( ,ills -a*%le $udara%a 0a11 $udara%a 2oreign )urrenc* (e osits $udara%a $u"or &a'ing $udara%a & ecial &a'ings $udara%a &a'ings ,ond $udara%a Term (e osit )urrenc* + )ontingenc*

$ursuant to the Investment $olicy adopted by the Bank a 7+year $erspective Investment $lanF has been drawn+up for the year &99* to &997 and put into implementation' .he plan aims at diversification of the investment port+folio by si/e, sector geographical area, economic purpose and securities to bring in phases all sectors of the economy and all types of economic groups of the society within the fold of BankFs investment operations'

(.( "%&ectives and principles o# Investment:

,9

.he ob-ectives and principles of investment operations of the Bank areD .o invest fund strictly in accordance with the principles of Islami (hariah' .o diversity its investment portfolio by si/e of investment, by sectors public and private! by economic purpose, by securities and by geographical area including industrial, commercial A agricultural' .o ensure mutual benefit both for the Bank and the investment client by professional appraisal of investment proposals, -udicious sanction of investment close and constant supervision and monitoring thereof' .o make investment keeping the socio economic re<uirement of the country in view' .o increase the number of potential investors by making participatory and productive investment' .o finance various development schemes for poverty alleviation, income and employment generation with a view to accelerate sustainable socio+economic growth and development of the society' .o invest in the form of goods and commodities rather than give out cash money to the investment clients' .o encourage social enlistment enterprises' .o shun even highly profitable investment in fields forbidden under Islamic (hariah and are harmful for the society'

,1

 .he Bank e;tends investments under the principles of Bai+:urabaha, Bai+ :ua//al, 2ire $urchase under (hirkatul :eelk and :udaraba' .he Bank is making sincere efforts to go for investment under :udaraba principle in near future'

(.* 3he salient #eatures o# investment o# IBB-:

.he salient features of the investment policy are outlined belowD "bservance of the legal investment limited of the Bank' "bservance of legal investment limited per client' "ptimum utili/ation of inevitable fund' $rofitability of the investments' (afety and security of the investments' Investment at minimum possible risk e'g' default risk and li<uidity risk etc' 8i<uidity of investments' 0onform to 0entral BankFs investment restrictionsK priority' $reference to the investments for small amountK si/e' (atisfactory return on investments' .o take in view inter+aria, the following points are considered while considering an investment proposal

(., General investment procedures:

.here are three types of investment :echanism' 5very mechanism of investment is strictly followed investment procedures' .hese are as followsD Induction of client #pplication

,&

 0ategori/ation , categories! $rocessing and appraisal (anction Documentation $urchase of goods by the Bank .aking delivery of goods by the Bank (ales and delivery of goods to the client

(.9 /i##erent )odes o# Investment:

.here are three types of investment :echanism which are as followsD 1. Bai7)echanism 53rading )ode6: a' Bai+:urabaha b' Bai+:ua--al c' Bai+(alam d' Bai+IstinhnaFa &' I&ara )echanism a' 2ire $urchase b' 2ire $urchase under (hirkatul :elk $. +hare )echanisms a' :udaraba b' :usharakah

(.9.1 Bai7)echanism 53rading )ode6:

,*

a6 Bai7)ura%aha
.he terms =Bai+:urabaha> have been derived from #rabic words and Bai and ?ibhun!' .he word means purchase and sale and the word means an agreed upon profit =Bai+ :urabaha> means sale on agreed upon profit' Bai+:udarabaha may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods permissible under Islamic (hariah and the 8aw of the land!, to the buyer at a cost plus agreed profit payable in cash or on any fi;ed future date in lump+sum or by go downs' .he profit marked+up may be fi;ed in lump+sum or in percentage of the cost price of the goods' Important #eature: 1' It is permissible for the 0lient to offer an order to purchase by the Bank agriculture goods deciding its specification and committing him to buy the same from the Bank on :urabaha, i'e' cost plus agreed upon profit' &' It is permissible to make the promise binding upon the 0lient to purchase from the Bank, that is, he is to either satisfy the promise or to indemnify the damages a caused by breaking the promise without e;cuse' *' It is permissible to take cashKcollateral security to guarantee the implementation of the promise or to indemnify the damages' ,' It is also permissible to document the debt resulting from Bai+:urabaha by a 6uarantor, or a mortgage, or both lay any other debt' :ortgage K6uarantee K0ash (ecurity may be obtained prior to the signing of the #greement or at the time of signing the #greement'

,,

E' (tock and availability of goods is a basic condition for signing a Bai+:urabaha #greement' .herefore, the bank must purchase the goods as per specification of the 0lient to ac<uire ownership of the same before signing the Bai+:urabaha agreement with the 0lient' 6' #fter purchase of goods the Bank must bear the risk of goods until those are actually sold and delivered to the 0lient buyer, the Bank shall bear the conse<uences of any damages or defects, unless there is an agreement with the 0lient releasing the Bank of the defects, that means, if the goods are damaged, Bank is liable, if the goods are defective, a defect that is not included in the release! the Bank bears the responsibility' 7' .he bank must deliver the specified to the 0lient on specified date and at specified place of delivery as per 0ontract' )' .he Bank shall sell the goods at a higher price 0ost R $rofit! to earn profit' .he cost of goods sold and profit mark+up therewith shall separately and clearly be mentioned in the Bai+:urabaha #greement' .he profit mark+up may be mentioned in lump sum or in percentage of the purchaseKcost price of the goods' But, under no circumstances, the percentage of the profit shall have any relation with time or e;pressed in relation with time, such as month, per annum etc' 9' .he price once fi;ed as per agreement and deferred cannot be further increased' 19' It is permissible for the Bank to authori/e any third party to buy and receive the goods on BankFs behalf' .he authori/ed must be in a separate contract'

Categori>ation o# Bai7)ura%aha

,E

Categori>e the proposal as under: Bai7)ura%aha Commercial: Investment for $urchase and sale goods to individual K1irmK0ompany for 0ommercial purpose shall be termed as Bai+:urabaha 0ommercial'

Bai7)ura%aha Industrial Investment to industrial undertakings in the 1orm of 8and, Buildings, :achineries, 5<uipments, ?aw :aterials, etc' shall be termed as Bai+:urabaha Industrial Bai7)ura%aha 1griculture Investment to agriculture sector for supply of seeds, fertili/er etc' shall be termed as Bai+ :urabaha #griculture' Bai7)ura%aha Import Investment for Import of goods from abroad shall be termed as Bai+:urabaha Import'

%6 Bai7)ua&&al
=Bai+:ua--al> means sale for which payment is made at a future fi;ed date or within fi;ed period' In short, it is a sale on 0redit' Bai+:ua--al may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods permissible under Islamic (hariah and the 8aw of the 0ountry!, to the buyer at a cost plus agreed profit payable in cash or on any fi;ed future date in lump+sum or by go downs' .he seller may also sell the goods purchased by him as per order and specification of the Buyer' Important Features: i' Bank is not bound to declare cost of goods and profit mark+up separately to the client' ii' (port delivery of the item and payment is deferred'

,6

iii'

"wnership and possession of the goods is transferred by the Bank to the client before receipt of sale price'

iv'

0lient may offer an order to purchase by the Bank any specified goods and committing himself to buy the same from the Bank on Bai+:ua--al :ode'

v'

It is permissible to make the promise binding upon the client to purchase from the Bank' .hat is he is to either satisfy the promise or to indemnify the damage caused by breaking the promise'

vi'

0ashK0ollateral (ecurity should be obtained to guarantee the implementation of the promise or to indemnify the damages'

vii'

:ortgageeK6uaranteeK0ash (ecurity may be obtained before Kat the time of signing the agreement'

viii'

(tock and availability of goods is a pre+condition for Bai+:ua--al agreement' .he responsibility of the bank is to purchase the desired goods at the disposal of the client to ac<uire ownership of the same before signing the Bai+:ua--al #greement with the client'

i;'

.he Bank after purchase of goods must bear the risk of goods until those are actually delivered place of delivery as per contract'

;'

.he bank must deliver the specified goods to the client on specified date and at specified place of delivery as per contract'

;i'

.he Bank may sell the goods at one agreed price which will include both the cost price and the profit'

;ii'

.he price once fi;ed as per agreement and deferred can not be further increased'

,7

Categori>ation: Categori>e the proposal as under IBai7)ua&&alJ Commercial: Investment for $urchase and sale goods to individual K1irmK0ompany for 0ommercial purpose shall be termed as Bai+:urabaha 0ommercial' Bai7)ua&&al Industrial: Investment to industrial undertakings in the 1orm of 8and, Buildings, :achineries, 5<uipments, ?aw :aterials, etc' shall be termed as Bai+:urabaha Industrial' Bai7)ura%aha 1griculture: Investment to agriculture sector for supply of seeds, fertili/er etc' shall be termed as Bai+ :ua--al #griculture' Bai7)ua&&al Import Investment for Import of goods from abroad shall be termed as Bai+:ua--al Import'

C6 Bai7+alam
@nder this mode Bank will e;ecutive purchase contract with the client and make payment against purchase of product, which is under process of production' Bai+(alam contract will be e;ecuted after making any investment showing price, <uality, <uantity, time, place and mode of delivery' .he profit to be negotiated' It this mode the payment as the price of the goods is made at the time of #greement and the delivery of the goods is deferred' Important #eatures: ,)

 Bai+(alam is a mode of investment allowed by Islamic (haria in which commodity ies!Kproduct (! can be sod without having the said commodity ies! Kproduct s! either in e;istence or physical Kconstructive possession of the seller' If the commodity ies!Kproduct (! are ready for sale, Bai+ (alam is not allowed in (hariah' .hen the sale may be done either in Bai+:urabaha or Bai+:ua--all mode of investment' 6enerally, industrial and agricultural products are purchasedKsold in advance under Bai+(alam mode of investment to infuse finance so that product is not hankered due to shortage fundKcash' It is permissible to obtain collateral security from the seller client to secure the investment from any ha/ards via non+supplyKpartial supply of commodity ies!Kproduct (!, supply of low <uality commodity ies! Kproduct (!' It is also permissible to obtain :ortgage and Kor $ersonal 6uarantee from a third party as security before the signing of the #greement or at the time to signing the #greement Bai+(alam on a particular commodity ies!Kproduct (! or on a product of a particular field or firm cannot be affected for #gricultural $roduct s! only!' .he seller manufacturer! client may be made agent of the Bank to sell the goods delivered to the Bank by her provided a separate agency agreement is e;ecuted between the Bank and the 0lient #gent!' 08#(( %".5(, 2ussain, #bul!' ' Categori>ation: .he proposal may be categori/ed as underD

,9

 Industrial Including small and cottage! #gricultural "thers, if any'

c6 IsteshnaKa
IsteshnaIa is a contract between a manufacturerKseller and a buyer under which the manufacturerKseller sells specific product s! after having manufactured, permissible under Islamic (hariah and 8aw of the 0ountry after haying manufactured at an agreed price payable in advance or by go downs within a fi;ed period or onKwithin a fi;ed future date on the basis of the order placed by the buyer'

Important #eature: IstisnaFa is an e;ceptional mode of investment allowed by Islamic (hariah in which product s! can be sold without having the same in e;istence' In the product s! are ready for sale' IstisnaIa is not allowed is (hariaf' .hen the sale may be done either in Bai+:urabaha or Bai+:aa--al mode of investment' in this mode, deliveries of goods are deferred and payment of price may also be deferred'

It facilitates the manufacturer sometimes to get the price of the goods in advance, which he may use as capital for producing the goods' It gives the buyer opportunity to pay the price in some future dales or by go downs'

E9

 It is a binding contract and no party or is allowed to cancel the IstisnaIa contract after the piece is paid and received in full or in part or the manufacturer starts the work' IstinaIa is specially practiced in manufacturing and industrial sectorsC however, it can be practiced in agricultural and constructions sectors also 0lass %ote, #bul 2ussain!'

(.9.! I&ara )echanism 5-easing )ode6 a6 2ire .urchase AI&arah

.he term I-arah has been derived from the #rabic works #-r and @-rat which means consideration, return, wages or rent' .his is really the e;change value or consideration, return, wages, rent of service of an #sset' I-arah has been defined as a contract between two parties, the 2iree and 2irer where the 2irer en-oys or reaps a specific service on benefit aginst a specified consideration or rent from the asset owned by the 2iree' It is a hire agreement under which a certain asset is hired out by the 2iree to a 2irer against fi;ed rent or rentals for a specified period'

%6 2ire .urchase under +hirkatul )elk

2ire purchase under shirkatul :elk is a special type of contract which has been developed through practice' #ctually, it is a synthesis of three contractsD (hirkat, I/ara and sale' (hirkat means partnership' (harikatul :elk means share an ownership' Bhen two or more persons supply e<uity, purchase an asset, own the same -ointly, and share the

E1

benefit as per agreement and bear the loss in proportion to their respective e<uity, the contract is called (hirkatul contract' Important Feature: I' In case of 2ire $urchase under (hirkatul :elk transaction the asset K property involved is -ointly purchased by the 2ire Bank! and the 2irer 0lient! with specified e<uity participation under a (hirkatul :elk 0ontract in which the amount of e<uity and share in ownership of the asset of each partner 2ire Bank A 2irer 0lient! are clearly mentioned' @nder this agreement, the 2ire and the 2irer becomes co+owner of the asset under transaction in proportion to their respective e<uity participation' II' In 2ire $urchase under (hirkatul :elk #greement, the e;act ownership of both the 2ire Bank! and 2irer 0lient! must be recogni/ed+ 2owever, if the partners agree and wish that the asset purchased may be registered in the name of anyone of them or in the name of any third party, clearly mentioning the same in the 2ire $urchase (hirkatul :elk #greement' 2owever, in IBB8, no third party registration shall be allowed' III' .he share K part of purchased asset owned by the 2ire Bank! is put at disposal Kpossession of the 2irer 0lient! keeping the ownership with him Bank! for a fi;ed period under a hire agreement in which the amount of rent per unit of trine and the benefit for which rent to be paid along with all other agreed upon stipulations are also to be clearly stated' @nder this agreement, the 2irer 0lient! becomes the owner of the benefit of the asset but not of the asset itself, in accordance with the specific provisions of the contract which entitles the 2ire Bank! is entitled for the rentals'

E&

I3' #s the ownership of hired portion of the asset lies with the 2ire Bank! and rent is paid by the 2irer 0lient! against the specific benefit, the rent is not considered as price or part of price of the asset' 3' In the 2ire $urchase under (hirkatul :elk #greement the 2ire Bank! does not sell or the 2irer 0lient! does not purchase the asset but the 2ire Bank! promise to sell asset to the 2irer 0lient! part by part only, if the 2irer 0lient! pays the cost price K e<uity K agreed price as fi;ed for the asset as per stipulations within agreed upon period on which the 2irer also gives undertakings' 3I' .he promise to transfer legal by the 2ire undertakings given by the 2irer to purchase ownership of the hired asset upon payment part by part as per stipulations are effected only when it is actually done by a separate sale contract' 3II' #s soon as any part of 2ireIs BankIs! ownership of the asset is transferred to the 2irer 0lient! that becomes the property of the 2irer and hire contract for that share K part and entitlement for rent thereof lapses' 3III' In 2ire $urchase under (hirkatul :elk #greement, the (hirkatul :elk contract is affected from the day the e<uity of both parties deposited and the asset is purchased and continues up to the day on which the full title of 2ire Bank! is transferred to the 2irer 0lient!' IL' .he hire contract becomes effective from the day on which the 2ire transfers the possession of the hired asset in good order and usable condition to the 2irer, so that the 2irer may make the agreement'

E*

L' 5ffectiveness of the sale contract depends on the actual sale and transfer of ownership of the asset by the 2ire to the 2irer' It is sold and transferred part by partC it will become effective part by part and with the sale and transfer of ownership of every share K part' .he hire contract for that share K part will lapse and the rent will be reduced proportionately' #t the end of the hire period when the full title of the asset will be sold out and transferred to the 2irer 0lient!, the 2irer will become the owner of both the benefit and the asset conse<uently the hire contract will fully end' Categorisation: Categori>e the proposal as under: 2ire .urchase under +hirkatul )elk Commercial Investment on 2ire $urchase under (hirkatul :elk mode to individual K1irm K0ompany K(ociety for 0ommercial purposes shall be termed as 2ire $urchase under (hirkatul :elk 0ommercial' 2ire .urchase under +hirkatul )elk Industrial 2ire $urchase under (hirkatul :elk investment to industrial undertakings in the 1orm of 8and, Buildings, :achineries, 5<uipments, .ransport, etc' shall be termed as 2ire $urchase under (hirkatul :elk Industrial' 2ire .urchase under +hirkatul )elk 1griculture 2ire purchase under (hirkatul :elk Investment to agriculture sector in the form of #gricultural 5<uipment, :achineries (hallow .ube+Bell, Deep .ube+Bell, .ractor, .railers, and .ransport etc' shall be termed as 2ire $urchase under (hirkatul :elk #griculture'

E,

2ire .urchase under +hirkatul )elk 3ransport 2ire $urchase under (hirkatul :elk investment in the form of .ransport +Bus, .ruckm 0ar, .a;i, 8aunch, (teamer, 0argo 3essel, #ir .ransport etc, shall be termed as 2ire $urchase under (htrkatuT :elk .ransport' 2ire .urchase under +hirkatul )elk 4eal Estate 2ire $urchase under (hirkatul :elk investment in the form of 8and, Building, :arket, #partments, for useKrental shall be termed as 2ire $urchase under (hirkatul :elk ?eal 5state' 2ire .urchase under +hirkatul )elk 4eal Estate 2ire $urchase under (hirkatul :elk investment in the form of asset for useKrental under any scheme all is termed as 2ire $urchase under (hirkatul :elk (cheme'

(.9.$ +hare )echanism a6 )udara%ah

It is a form of partnership where one party provides the funds while the other provides the e;pertise and management' .he first party is called the (ahib+#l+:aal and the latter is referred to as the :udarib' #ny profits accrued are shared between the two parties on a pre+agreed basis, while capital loss is e;clusively borne by the partner providing the capital' Important #eatures: Bank supplies capital as (ahib+#l+:all and the client invest if in the business with his e;perience'

EE

 #dministration and management is maintained by the client' $rofit is divided as per management' Bank bears the actual loss alone' 0lient can not take another investment for that specific business without the permission of the Bank 0lass, %otes, 2ussain, and #bul!'

%6 )usharaka
#n Islamic financial techni<ue that adopts =e<uity sharing> as a means of financing pro-ects' .hus, it embraces different types of profit and loss sharing partnership' .he partners entrepreneurs, bankers! etc'! (hare both capital and management of a pro-ect so that profits will be distributed among them as per rations, where loss is shared according to ratios of their e<uity participation' Important #eature: Bank and client both supply capital une<uallyKe<ually' $rofit is divided as per agreement and actual loss is divided as per e<uity' 0lient will maintain all accounts properly bank or its agent may verify or audit it' Banks can advice the client in such a business in respect of the businesse Categorization: 0ategori/e the proposal as underD Bai+:usharaka 0ommercial Bai+:usharaka Industrial

E6

(.9.( "ther )odes o# Investment

3here are t?o other modes o# investment ?hich have limited impact in our countr':

a6 Luard
.he word GHuardG is an #rabic wordG which means loan or credit on advance' .he literal meaning of Huard is giving G1ungible goodsG for use without any e;tra value returning those goods' It must follow the principle of e<ual for e<ual return with homogeneous goods' 1ungible goods may be rice, oil, salt, money etc' In banking sector, money is used as <uard' Huard is 2alal by Islam for not to pay any e;tra or interest in return' 3here characteristics o# Fungi%le goods 6oods which are vanished Kconverted for one time use' %o flow of service' (ervice canIt be separated from the actual goods'

Characteristics o# Luard: .here should have fungible goods' Goods must be returned equally. .here is no e;tra payment' (pecific period for returning goods'

%6 Luard7e72asana

E7

Huard means loan without interest and 2asana means beautiful' Huard+e+2asana implies beautiful loan on good faith or beneficial loan' Islami Bank IBB8! does not recover any charge,even service, from Huard+e+2asana account' 8oanee has to repay the principal amount' .his loan facility in e;tended only to deserving cases on compassionate grounds and special welfare consideration' .he principal amount is refundable within a reasonable time' Islami Bank IBB8! grants this loan not only for consumption purpose but also for owning factor s! of production' .he ultimate ob-ects of both the consumption and

production Huard+e+2asana are to enable the loanees to support economic problems' In Islami Bank IBB8! an investment is created against pledge of :udaraba .erm Deposit ?eceipt :.D?!' 6enerally )9J of the :.D? is allowed to the holder for 2alal activities without any profit' "nly .4'&99K+is reali/ed as service charge per deal' It is called Huard against .erm Deposit ?eceipt H.D?!'

(.: /i##erence %et?een Islamic Banking G Conventional Banking in case o# Investment )odes:
Islamic Banking 01. @nder 3rading modes Conventional Banking

Buying and selling should be confirmed in In conventional banking, due to basic Islamic banking' .hree components should difference in principle, no type of loans be ensured+ e;istence of goods, having the and advances can be compared with possessionK ownershipK title and transfer of trading modes' 2owever, there is an ownership' #s per clients order bank will apparent similarity at operational level of procure the goods and then sell to the client the trading mechanism with the 0ash with adding profit' Huotation cash memo 0redit hypothecation and pledge! of and other papers if any! should be in favor conventional banks' But the concept of

E)

of bank of ensure procurement of goods' buying and selling between Bank and 6oods once sold can not be resold i'e' in client is absolutely absent' 0ompound case of payment failure bank can not charge interest is charged and accounted for in on the goods al ready sold' In practice, bank case of failureKdelay of payment' charge compensation to control willful default which is not reali/ed as income in bankFs trading books modes of accounts' are Bai 0ustomary Bai :ua--al,

:urabaha and Bai (alam' 0!. @nder +hirkat modes: (hirkat as modes are in :udaraba case of and 0onventional banks do not practice these :usharaka' :udaraba principle is the same types of mechanism' mentioned deposit mobili/ation' :usharaka is the e<uity participation of both the parties involved' @nder :usharaka profit is shared as per agreement and loss is shared as per e<uity' :usharaka business can be formed with or without participation in management' 0$. @nder 2ire purchase mode: Islamic banks are operating a special type of In conventional banks, 2$ is practiced' mechanism called 2$(:+ a mechanism .wo contracts $urchase and sale! are derived through the combination of 2$ and preformed between bank and client' "n musharaka' performed .here under are the three 2$(: contracts payment of the last installment, $urchase, (ale and rent contract! to be ownership is transferred to the client' mode' Interest is accounted for at gestation "wnership is gradually transferred to the period' client after payment of each installment' ?ent is not charged and accounted for in gestation period' E9

Chapter 0*

69

Foreign E change o# IBB-

*.1 )eaning o# Foreign E change:

1oreign 5;change means currency A trade e;change say conversion of one to another' .his is a part of economic A (cience' .his is a big deal divided into different currencies instrument such as Draft, .raveler 0he<ue, Bill of 5;change business including sell, purchasing of currency notes A .0 etc' 0urrency 5;change means the conversion of one 0urrency into another'

*.! Foreign E change )arket:

1oreign 5;change market means the places where foreign currency is bought A sold' In this more that supply, currency value' #lternately following are the features of foreign e;change marketD

61

1' &' *' ,' e;changeD

Bank A client' Different Banks in the same foreign e;change market' Different Bank A (chedule Bank of the same country' Different 0ontrol Bank'

Islami a Bank follows the following the two craters in respect A payment of foreign 1' 8ocal currency market value A &' 1oreign currency market value' 5;change is being controlledD 1' .o stabili/e the rate of e;change' &' .o protect domestic industries' *' 1or proper implementation of plans' ,' .o increase the bargaining strength E' .o check over invoicing A @nder invoicing 6' .o check the Blank marketing and smuggling 7' 1or regulating the international movements of goods

*.$ 1uthori>ed /ealer Branch:

Bangladesh bank in e;ercise of the power under section * of 1oreign 5;change regulation #ct' 19,7 issues a license to schedule Bank where they have ade<uate trained "fficerK(taff to deal in 1oreign 5;change' .he banks that are authori/ed to deal in foreign e;change are called authori/ed dealers'

*.( 1r%itrage o# Foreign E change:

#rbitrage can be defined as simultaneous buying and selling of foreign currencies for the purposes of making profit #rbitrage is carried out mostly by banks, they keep constant watch over the latest development in the financial market of the world'

*.* Foreign E change 4egulation Items:

1' Bangladesh Bank :anual'

6&

&' 1oreign 5;change 0ircular' *' $ublic %otice ,' Import A 5;port $olicy 6a/ette E' :inistry of 0ommerce 0ircular 6' B0D circular' 7' 6uide lines for foreign e;change regulation' )' "ther authori/ation i'e' %B0 Dept!

*., )ethods o# e##ecting pa'ment o# IBB-:

Islami Bank follows the following methods to make payments between countries' 1' 3elegraphic 3rans#er 5336: .his is an instruction for transfer of money by .elegram, 0able or tele; from a bank in one country to another Bank in different center' .his is an instruction form the Importers Bank to the e;porters Bank' .he .. charge is reali/ed by us from the partly as per Bank circular' &' )ail 3rans#er 5).36: .his transfer is the order to pay cash to a *rd party' .his .ransfer is sent by mail A the charge must be reali/ed as per Bank circular' *' /ra#ts G CheFue: # draft is pay order issued by one Bank to another Bank or its branch'

+ome common terms used in Foreign E change:

"ver Bought: .his position known as long position' "ver +old: .his position known as short position' -IB"4: 8ondon Inter Bank "ffer ?ate' +8IF3: (ociety for Borld Bide Inter Bank 1inancial .elecommunication' C2I.+: 0learing 2ouse Inter Bank $ayment (ystem' B"+34" 1AC: "ur #K0 with you i'e' out #K0 with #merican 5;press' ;"+34" 1AC: .heir #K0 with us, #l+ ?a-i #K0 with IBB8' -"4" 1AC: .his #K0 i'e' third Bank ?elationship' 1C@: #sian 0learing @nion'

6*

*.9 @ni#orm Customs and .ractices #or /ocumentar' Credits 5@C./C6:

.he I00 @niform 0ustoms and $ractice for Documentary 0redits @0$!, first published in 19**, are the universally recogni/ed set of rules governing the use of the Documentary 0redit in international commerce' Banking associations and individual Banks in more than 199 countries and territories adopted the previous revision of 19)*' .his revision of the @0$, the first for ten years, takes into account a range of important consideration+ including international -udicial decisions, technical innovations in banking and other industries, case studies and day to day practice to offer a thoroughly revised and up to date series of rules' .hree years in preparation, the ,9 #rticles of the new @0$ has come into effect on 7anuary 1, 199, that indispensable guide to Documentary 0redit usage' .hey provide a comprehensive and practical working aid to bankers, lawyers, importers, e;porters, transport e;ecutives and everyone involved in international trade'

*.: 1ctivities o# Foreign E change:

.here are three kinds of foreign e;change transaction 1' Import &' 5;port A *' ?emittance' In the following these are discussed in brief'

*.:.1 I)."43
)eaning o# Import Import means lawfully carrying out of anything from one country to county for Buying' It will be occurred according to the 6overnment law' Important .olic' "rder Based on the needs of commodity and availability of finance, 6overnment declares policy' 1or import of goods for a particular period having approval from the %ational #ssembly is defined as Import policy order' Import policy is a guideline of a set of rules

6,

envisaged by 6overnment #uthority i'e' the :inistry of .rade and commerce for the registered importer for import of goods inside the country' /uration 5arlier import policy has been formulated for two years' But present import policy order has been formulated for E five! years, 5ffect from the 1, th 7une 1999 to *9th 7une &99* and valid till announce of new import policy order' If re<uire 6overnment can revise the policy in each every years' Import related #ees Four categories o# importer registration rene?al #ees are as under 0ategories # B 0 D Uearly heights ?egistration 1ees .aka! E99K+ 1E99K+ *999K+ E999K+ ?enewal E99K+ 1E99K+ *999K+ E999K+ import E'99 1E'99 E9'99 #bove E9'99

!. +urcharges #or di##erent 'ears are as under: 1 year late .4 E9K+ & year late .4 199K+ * year late .4 &99K+ 4egulations o# Import Import o# goods under this polic' shall %e regulated as under: 1' 0ontrol listD @nless otherwise specified items which have been indicated as banned in this list shall no be permissible for import' #n items included in this list with specific conditions for import shall be importable only on fulfillment of the conditions specified' &' 1reely Importable ItemsD @nless otherwise specified an items the name of which does not appear in the control list shall be freely importable'

6E

*' %otwithstanding anything mentioned else where, all imports into Bangladesh shall be sub-ect to such general or specific conditions as many have been prescribed in this order' ,' In addition to the conditions mentioned in the control list the conditions' ?estrictions and procedures for import of various items mentioned in the test portion of this order, shall as usual, apply in case of import of those items' E' If, while determining the import status of an items mentioned in the control list the description of goods does not conform to the 2'('0 0ode mentioned against item, or any discrepancy arises between the 2'( 0ode and the description of goods, in that case the description of goods shall prevail, In other words, if the import of a particular item is shown as banned in the control list, or is shown as importable as sub-ect to fulfillment of conditions in the list, the said ban or restriction as the case may be, shall e<ually apply to the import of that item , even if such ban or restriction is mentioned else where and not against the appropriate 2'( 0ode, if any importer, taking , advantage of such discrepancy, import any banned items or restricted items or restricted item without fulfilling the respective conditions, such import shall be treated to have been made as in contravention of the provisions of this order' 4egulations o# Import: : 8K0D may be open under deferred payment basis' Direct $ayment in #broadD "nly for Bangladeshi %ational who live in abroad for service' .hose who are entitled to purchases the importable goods for direct payment to the beneficiary from his own service without opening any 8K0, .he goods must be sent to the Bangladesh' %ationals who lived in Bangladesh' In that case no approval is re<uired from 00I A 5' .ime 8imit "pening of 8K0D 8etter of 0redit shall be opened by all importers within 1&9 days from the date of registration of 80#1 with the Bangladesh Bank unless otherwise notified' 3alidity of 80# for (hipmentD @nless otherwise specified, shipment of goods shall take place within 17 month in the case of machinery and spare parts and 11 months in the case of all other items form the

66

date of issuance of 80# from by Bank or registration of 80# form within Bangladesh Bank registration unit as the case may be' /ocument reFuired to %e su%mitted along ?ith -C1 Form: Importers in both public sector and private sector shall submit to their nominated banks the following documents along with the 8K0 authori/ation 1orm for opening letter of credit' a! 8K0 application form duly signed by the importer' b! Indent for goods issued by indenture or pro+forma invoice obtained from the foreign supplier, as the case may be and c! Insurance cover note' Import -AC 5-etter o# Credit6: # letter of credit is a conditional Bank undertaking of payment' In other words letters of credit is a letter form the importer Bankers to the e;porter that the bills if drawn as per terms A conditions complied with will be honored on presentation' Definition of 8K0D # letter of 0redit is a conditional bank undertaking of payment' In other words letters of credit is a letter form the importer bankers to the e;porter that the bills if drawn as per terms and conditions are compiled with will be honored on presentation #s per @0$D0 E99 a credit may be eitherD i! ii! ?evocable' Irrevocable'

.he 0redit, therefore, should clearly indicate whether it is revocable or irrevocable' In the absence or such indication the credit shall be deemed to be irrevocable'

Classi#ication o# -AC:
'?evocable 8K0, Irrevocable 8K0, 0onfirmed 8K0, .ransferable 8K0, Divisible 8K0, ?evolving 8K0, ?estricted 8K0, ?ed 0lause 8K0, 6reen 0lause 8K0, Back+to+Back 8K0

3'pes o# -AC:

67

1' ?evocable 0reditD #s per #rticle no' ) a! # revocable credit is a credit which can be amended or canceled by the issuing bank at any time without prior notification to the seller since to offers little security to the seller'

&' Irrevocable 0reditD

#s per #rticle no 9 an irrevocable credit constitutes a definite undertaking of the issuing Bank' # credit cannot be amended or cancelled without the agreement of all parties' It gives the seller grater assurance of payment' #n irrevocable credit can be either confirms or unconfirmed dependant on the desire of the seller' Classi#ication o# importer: Importers are those who ate authori/ed by the import .rade authority i'e' A 00I A 5 for import of goods essential for consumption or for production purposes' .here are mainly three types of importers' 1' &' *' 0ommercial Importer Industrial Importer Importers under Bage 5arner (cheme

1' 0ommercial ImporterD It means an importer registered under the importers, e;porters and indention registration order 19)1 who import goods from sale, when issued to commercial importers, given the category held by him with I.0 classification and public notice against which they are admitted into import trade' &' Industrial importersD Bhen issued to an industrial consumer, gives the items of import as raw materials and packing materials and spare parts, the value of entitlement and I.0 classification' *' Importers under B5(D It means registration importers who import only under the B5(' In this scheme, the foreign e;change re<uired for import of goods is met out of the remittance made' By Bangladesh national earning wage abroad' B5( importers can be importing all permissible items a declared by the importer also can import under B5('

6)

-AC 1..-IC13I"B G .4"CE/@4E F"4 ".EBIBG -ACD 1or opening 8K0 the client is to submit to the bank an application in the printed format of the designated bank' .his is called 8K0 application form which is also an agreement between the importer and the bank' .he form is to be stamped under stamp #ct' In force in Bangladesh' .he importer must submit the 80# A I:$ and indent or contract' $urchase orderKpro+forma invoice duly accepted by the importer! along with 8K0 application' .he 8K0 application must be completedK filled in and signed by the authori/e person of the importer giving the following particularsD a' 1ull name and address of the supplier of beneficiary and importer' b' Brief description of the goods' c' 8K0 value for @(V, etc' 01? value! which must not e;ceed the 80# value' d' .he unit price, <uantity <uality of the goods' e' "rigin of the goods, port of loading and port of destination must be mentioned' f' :odel of shipment (ea, #ir, .ruck or ?ail etc'! g' 8ist date of shipment and negotiation time must not be beyond *9 days from the shipment date!' h' Insurance cover note number and name or the company' i' .enor of draft 1'e, sightK issuanceK deferred etc' -' :ode of advising 8K0 i'e' airmailK full tele; short cable etc'! k' "pening of 8K0 under @0$D0 publication %o' E99K+ I00 revision 199*' l' Bhether shipmentK transshipment is allowed' m' Instruction to add confirmation if re<uired' n' 80# %umber' o' #ny other relevant information and instruction if any must be mentioned in the 8K0 application form' # written application from opener is verified a relevant licenseK 80#K permit of the loanK Barter must remain valid up to that period the e;tension is sought' Increase of 8K0 amount may be done provided the 80# covers the increase in amount'

69

8K0 amount can be decreased provided the relevant Indent is amending accordingly and with the consent of beneficiary' 5ach of clauses of the 8K0 can be amended provided the parties involve the 8K0 consent to it' $rocedure or preparation and dispatchD #mendment is to be typed in the Banks printed format' .he copies of the amendment must be dispatched to all concerned as done in dispatching the 8K0' #mendment be kept in the 8K0 file chronologically date wise'

Bank charge: #mendment commission is to be reali/ed form the party as per instruction of Bangladesh Bank 1' 5' 0irculars' #ccounting procedure' Dr' $artyFs #K0' 0r' 0ommission #K0' 0r' $ostage A .elegraph #K0' -ia%ilit': If the amount of 8K0 increased the liability voucher is to be passed as underD Dr' 8iability as per contra B5( 8K0!' 0r' #sset as per contra B5( 8K0!' Dr' #sset as per contra B5( 8K0!' 0r' 8iability as per contra B5( 8K0!' # fresh 8iability is to be passed including amount of increase on the date of amendment'

B1CD 3" B1CD -AC: :eaning of Back to Back 8K0

79

Back to Back 8K0 is a type of import 8K0 either in inland or in abroad, which open against lien on valid e;pert 8K0' In our country in e;port garment this method of finance is widely used and very well known to the manufacturers of garments' Bangladesh e;porter received an irrevocable 8K0' for supply readymade shirts from an #merican Bank' 1or manufacture of the ordered shirts the e;porter' Dose not has re<uired raw materials and cloths' .o e;ecute the order he is to import materials and cloths from 4orea' .hen the Bangladesh e;porter does not have the re<uired raw materials and clothes' .o e;cite the order he is to import materials and cloths from 4orea' .hen the Bangladeshi e;porter will have to open an import 8K0 favoring 4orean suppler for import of cloths and accessories' .he 8K0 is opened by the Bangladeshi bank keeping the #merican Bank 8K0 in the WbackF i'e' to fulfill the re<uirement! of the e;port 8K0 is called back to back 8K0' Bhile opening such import 8K0 the Bangladeshi e;porter is to pledge to manufacture the shirt by the 4orean in imported cloths under boded ware house system' .ro%lems o# Back to %ack -AC 1' (hipment time gapD (ometime time is shorted for e;porting against import 8K0, kit may be caused' &' .erms and rules violationsD IBB8 cannot violate the rules A term of (hariah council' *' ,' (elling violationD "ut of agreement IBB8 cannot receive e;cess wanted' $ayment of back to back 8K0 billD %o stock bills are supported against (hariah' E' 6aps of International rules A regulations'

.rospects o# %ack to %ack -AC 1' It is 6arment oriented readily'

71

&' *' ,' E'

Backward lender must have! .o continuous <uality improvement' .o e;change customer facilities' .o be continuous of our authori/ed'

-AC ".EBIBG F@BC3I"B+: .he following functions are maintained for opening 8K0' 1' &' *' "pening the 8K0' 8K0 8odgment' 8K0 ?etirement'

-odgment o# -AC Bhen the documents received from the foreign correspondent and checked with 8K0 file by two persons to ascertain the correctness it is found in order at that time make entry in the bill register and pass the necessary voucher reverse the liability entry!' .he process is known as lodgment' Document must be lodged within * three! days' In three ways the documents may be transferred to the parties'

4etirement o# -AC Bhen the parties retire the documents by cash payment or by :$IK8I: arrangement is known as retirement' 4inds of BillD a' #t sight b' 0ollection *9 cashK 8oanX Barter

7&

Check up the document: Before lodgment, documents must be checked with 8K0 file' 0heck up as underD 1' Invoice &' Bill of 8ading *' Draft ,' Bank forwarding date' 1' I%3"I05D a! .he invoiced amount tallied with draft amount' b! .he invoice is shown by the beneficiary ad s signed by him' c! Description of goods in the invoice and bill of 8ading are identical' &' Bill of 8adingD re also to be referred to the draw for their acceptance' .he reply of importer is to reach to the Bank within 7& hours in case of non+acceptance' .he dishonor is to be communicated to the negotiating bank within reasonable time' @nusual delay in communication of dishonor is not acceptable to the negotiating Bank and the issuing Bank forfeits its right to claim refund' ?etirement $rocedure for Deferred $ayment of issuance BillsK BB Bills D 8hen the dra#t is returned %' the dra? 5importer6 a#ter dul' accepted %' him the #ollo?ing procedure to %e maintained. 1' .he maturity date is to be worked out and noted in the bill ?egister and also in due date diary' .he due date diary may be maintained by the dealing officer ad the :anager in+charge of foreign 5;change Determent' &' .he 1oreign 0orrespondent should be advised the due date maturity and be authori/ed to debit the %"(.?" account or to claim reimbursement on due date as per 8K0 terms'

7*

*'

#ll the documents delivered to the importer e;cept accepted bill of e;changeK draft'

*.:.! EM."43
)eaning o# E port: 5;port means lawful carrying out of anything from one country to another country for sale /e#inition o# E porter .he importers and e;ports trade of the country is regulated by the Imports 5;ports 0ontrol #ct 19E9' %o person Kfirm is allowed to e;port any thing from Bangladesh unless he is registered with 00I and 5 under the registration order Importer and 5;porter! 19E&' .o become an e;porter an 5?0 e;port ?egistration 0ertificate! must be obtained from the office of 00I A 5' E port under -AC 5;porters are allowed to e;port the commodity under irrevocable letter of credit' @nder this type of e;port, e;porter will ship the goods as pr terms of the credit and will get payment as per arrangement of the credit' General 4ules #or E port .here are some rules, which are mandatory for e;port of any goods form Bangladesh' .he rules are as underD 1! %o $erson can e;port any goods from Bangladesh, unless he is duly registered as an e;porter with the 00I A 5' &! #ll e;port must be declared on the 5L$ form, which is consisting of , copies' *! 5;port mush is against any of the followingD a! 5;port 8K0' b! 1irm 0ontract' c! #dvance $ayment' ,! .ransport documents related to land route or sea and any other #uthor)i/ed Dealer' .he #irway Bill and any other documents of title to car,go may be drawn to the order of a Bank in the country of import' 2owever in case of advance payment, transport

7,

document may be drawn to the order of 1oreign Importer Bank endorsement of transport documents is prohibited' Directions under (l' %o' shall not apply in the following casesD +tages G )echanism o# E port 1! 5;porter will make the goods ready for shipment' &! #rrangements have to be taken for inspection of the goods by the authority as per credit terms' *! 5;porter will declare on 5L$ form against e;port 8K0K1irm 0ontractK #dvance payment' ,! 5;porter have to arrange approval for e;port from custom authority on 5L$ from by submitting 5;port 8K0, 5;port permission from 00I A 5, Huota clearance from 5$B, @'D' in case of garments, invoice, packing list along with shipping bill prepared by 0A1 agent' E! #fter completion of custom formalities, shipping company will receive the goods and will issue B'8' 6! 5;porter will collect visaK license and certificate of origin for final documentation' 7! 5;porter will submit the full set of documents to the negotiating bank for negotiation' )! %egotiation bank will dispatch the documents to the issuing bank for clearance of the goods from destination against payment as per credit terms' competent

*.:.$ 4E)I331BCE
)eaning o# 4emittance .he word =?emittance> originates from the word =remit> which means to transmit moneyK fund' In banking terminology, the work =remittance means transfer of fund one place to another' Bhen money transferred from one country to another is called =1oreign ?emittance>

7E

3'pes o# 4emittance: 1oreign remittance may be classified into' Inward 1oreign ?emittance' "utward 1oreign ?emittance' )echanism o# 4emittance 10#D+ 1oreign currency #K0 Dollar' 10#$+ 1oreign currency #K0 Dollar' :10D+ :udaraba foreign currency deposits' $10+ $rivate foreign currency' 10#D+ 5;p'+ 1oreign currency #K0 dollar e;port' %?"+ %on residence dollar' %?.+ %o residence .aka' $D#$+ properly development #K0 dollar' $D#$+ properly development #K0 pound' Instruments o# Foreign 4emittances: 0ash for .'0' 1'D'D .'. :'. I':'" 0he<ue $'" D Dollar, $ound, 1rance 1r' ?iyal or any other currency' D .ravelers 0he<ue' D 1oreign Demand Draft' D .elegraphic .ransfer, 0able transfer or swift transfer' D :ail .ransfer' D International :oney "rder' D By any person A institution'' D $ayment "rder'

76

Chapter 0,

+8"3 1nal'sis o# IBB-

+8"3 1B1-E+I+ "F IBB-:

5very organi/ation has some internal (trengths and Beaknesses as well as they have also some e;ternal opportunities and threats' .o survive in world competitive market, every

77

organi/ation should emphasi/e on (B". analysis that help to take proper decision and to achieve the ultimate goal of the organi/ation' #s a internee of IBB8 %ew :arket Branch, I have tried to find out what are their (trengths and Beakness as well as opportunities and threats are stated belowD

,.1 +34EBG32+

,.! 8E1DBE++E+
1' Centrali2ed $ecision +akin#

S' Ade(uate )inance 1* Lack of up3to3date e(uipments S* +ore funds for Investment 1, $eficiency of e4pertise S, -onest and .eliable /mployees 10 Lack of Advertisin# S0 .eli#ious )eelin#s of the people 15 Lack of ade(uate employees

,.$ ".."43@BI3IE+

,.( 324E13+
"' .ules and re#ulations

O' Innovative and modern customer "* Islamic ankin# Operation introduced service by conventional ankin#. O* .etainin# vast customers ", Call money system O, Special ima#e "0 Lo%er salary structure O0 Poverty alleviation

,.1 +34EBG32+

7)

S' Ade(uate )inance Islami Bank Bangladesh 8td' has ade<uate finance' .hat is whyC they need not to borrow money from Bangladesh Bank or any other financial sources' S* +ore funds for Investment 1or ade<uate financial ability, they can provide more investment facility to their clients compared to other Banks' S, -onest and .eliable /mployees #ll of the employees of Islami Bank are honest and reliable' .hey are always devoted to their clients for better services' S0 .eli#ious )eelin#s of the people :ost of the people of Bangladesh are :uslim and they are trusted in superior performance of IBB8 as a (ariah based+Islamic Banking'

,.! 8E1DBE++E+
1' Lack of ade(uate employees Islami Bank Bangladesh 8td' has very limited human resources compared to its vast financial activities' 1* Lack of up3to3date e(uipments IBB8 has lack of modern technologies and e<uipments' :ost of the Branches are not well decorated' %umber of #.: Booth is not sufficient compared to their vast banking operation ' 1, $eficiency of e4pertise :any of the employees are unskilled and from them, superior performance is une;pected to survive in the national economy as well as in the world economy' 10 Lack of Advertisin# IBBl has lack of advertising like other banks' .hey donFt telecast any attractive advertisement in the media' 15 Centrali2ed $ecision +akin# .he decision making of the bank is too much centrali/ed' %o decision is made without the authori/ation of the head office'

,.$ ".."43@BI3IE+
79

O' Innovative and modern customer service .his bank can introduce more Innovative and modern customer services to its customers to survive better in the competition market O* .etainin# vast customers IBB8 has a vast opportunity to hold most of the customers by e;tending its banking operation all over the country as most of the people of Bangladesh are religious minded' O, Poverty alleviation IBB8 has a great opportunity to save the countyFs poor people from being taking loan from different %6"s or few banks with higher interest rate' O0 Special ima#e IBB8 has created special image to the people as a more reliable bank' $eople believe that if they keep their money in Islami bank it will be more secured than other banks'

,.( 324E13+

)9

"' .ules and re#ulations ?ules and regulations of Bangladesh Bank defers with Islamic Banking (ystem' (o they have to face various problems to operate their activities according to the Islamic (hariah' "* Lo%er salary structure %ow many of the Banks are hiring young talent and e;pertise employees with higher remuneration where IBB8 could not hire skilled manpower because of lower salary structure compared to other banks' ", Call money system In the money market of Bangladesh, there is no call money system of Islami (hariah' "0 Islamic ankin# operation introduced by conventional ankin# 1ew other conventional banks have started to open their Islamic Banking operation shortly'

)1

Chapter7 09

Conclusion G 4ecommendations

)&

Conclusion:
Islamic bank Bangladesh limited is a bank which operates it s activities according to Huaran and (unnah' Its banking activities are based on profit Y loss sharing' It does not create any illegal pressure on client' .he strength of islami bank Bangladesh limited is + employees of Islamic Bank Bangladesh 8td' are honest because they strongly believe in Islamic rules and regulations' .hey do not take any types of bribe form clients' (o believes of people are increasing on the activities of Islamic Bank Bangladesh limited' :any people of Bangladesh are involving with IBB8 for doing their daily financial activities' It has a bright future because it has got huge customers than other conventional banks in Bangladesh that are based on interest' .he weaknesses of Islamic bank Bangladesh limited are + although it is getting bright future but it does not operate its activities 199J based on Islamic shariah' Because still there is not e;isted an Islamic environment in the economic activities of Bangladesh' It is performing its daily financial transaction with other financial institution that are not based on Islam' In this case, it is involving with some %on+Islamic activities unintentionally' "n the other hand every client is not 199J honest' (o they are taking investment form IBB8 and after maturity, they are showing loss on that pro-ect intentionally' (o IBB8 is losing some profit form their investment' .hreats of Islami Bank Bangladesh 8imited are + at this time, many financial institutions have commenced their financial activities according to Islamic shariah' .his type of organi/ation will create more competition in the financial market' (o it is a threat for Islamic bank Bangladesh limited' #fter all, although it is facing some problem, it has a bright future and day+by+day it is enhancing its financial activities over the country' :any organi/ations are following to IBB8 and they are starting their business based on Islamic (hariah in our economy'

)*

4ecommendations:
It is not une;pected to have many problems in any organi/ation' I have found some of the problems of IBB8' .o solve these problems, I can suggest following recommendationsD 1' .his Bank should arrange a wide varieties of regular programs like GIslamic 7alsaG G"aa/ :ahfilG IBB8' &' $ractice a lot so that the amount of doubtful income declines substantially during the year as compared to the past few years, indicating more carefulness of the :anagement in complying with (hariah' #s a result, idle money will be invested to increase potential profit of this Bank *' .o promote the investment clients at desired level, every branch should be arrangement of monthly K<uarterly training courses Kworkshops' ,' IBB8 should appoint a sufficient number of women employees to deal women entrepreneurs and professionals to understand and create their investment needs' E' .o gain success in the programs like G$overty #lleviation and G(elf ?eliantG especially in rural areas, this bank should provide investment facilities on the basis of individual position as well as IBB8 needs to finance the needy entrepreneurs who have no money at all and they are newcomer in the business' 6' IBB8 could not hire skilled manpower because of lower salary structure compared to other banks' (o IBB8 should increase their salary structure G(eminarG G:os<ue+Based DiscussionG etc' about Islamic Banking activities over the country to remove the negative impression about

),

appoint skilled manpower so that they can provide more innovative and modern customer services'

Bi%liograph':
Books: #hmed, Piauddin 19)*, Evaluation of Islamic Banking, Institute of $olicy (tudies, 8ahore, $akistan' ?a<uib, #bdur A :ohammed, (haikh &99,, Islami Banking !heory "ractice "rocedure# 1st edn, #8+#min $rokashan, Bangla Ba/ar, Dhaka' 1rticles: #lam, :' %' &999, WIslamic Banking in BangladeshD # case study of IBB8F, International $ournal of %inancial Services# vol' 1, no' ,, pp' 6&+71' 4han, :' (' %', 2assan, :' 4', A (hahid, #' I' &997, WBanking Behavior of Islamic Bank 0ustomers in BangladeshF, $ournal of Islamic Economics Banking and %inance# vol' *, no' &, pp' 1E9+1)1' Internet: Islami Bank Bangladesh 8imitedD &or'orate Information.. ?etrieved 9& #pril &999 .ime )am+11'*9 pm! from www'islamibankbd'com Islami BankingD (ome 0onceptual Issues ch+*!' $ournal of &once'ts and Ideology. ?etrieved 9* #pril &999 .ime 9am+1pm! from www'islamibankbd'comKideology'php 1nnual 4eports: #nnual ?eport &996 published by Islami Bank Bangladesh 8imited' 2ead "fficeD Islami Bank .ower ,9, DiIkusha 0K#, Dhaka+1999 , Bangladesh' #nnual ?eport &997 published by Islami Bank Bangladesh 8imited' 2ead "fficeD Islami Bank .ower ,9, DiIkusha 0K#, Dhaka+1999 , Bangladesh'

)E

Balance Sheet Islami Bank Bangladesh Limited

)6

)7

PROPERTY & ASSETS )as" )as" in "and3 including .oreign currenc*4 ,alance 5it" ,( ,an6 + its agent %an6 ,alance 5it" ot"er ,an6 + 2inancial Institutions In ,anglades" !utside ,anglades" $one* at call + s"ort notice In'estment in s"are + securities 7o'ernment !t"er In'estments 7eneral In'estment etc ,ills urc"ased + (iscounted 2i8ed Assets including -remises9 2urniture + 2i8tures 10000136044547217745"ther assets Total Assets%on Banking #ssets 1663252862921324194035248ibilities8I#BI8I.U A

31.12.2007 Tk.
17076455162 2907141037 141#9314125 4012328480 2353854350 1#58474130 203#5710399 20341950000 23760399 144920#09595 133881027350 11039582245 3987232#75 : 1913#2349717 : 191#5151#75 #2403504533 : 3000000000 1795210134#3 3801#00000 302#498149 34411470#2 1572091043 81-704-745-989

31.12.2006 Tk.
23518949591 14101498#3 22108799728 1329127634 759317303 5#9810331 35577#0399 3534000000 23760399 113575071129 10#7040#7251 #871003878 3724#94303 : 150252820801 : 1401#12590# 52118549##9 :

#((5.( 17#7587001890283048)urrent + ot"er accountDeposits A "ther account 3103#9282#25872279475$udara%a &a'ing (e ositsBills payable 518853512573952213542#Bearer 0ertificate of Deposits:udaraba .erm Deposits 101957271717826184480$udara%a -er etual ,ond"ther :udaraba Deposits 1184133625410007232797Total Libilities"ther 8ibilities -aid u )a ital0apitalK(hare+Zholder 5<uity
&tatutor* Reser'e !t"er Reser'e R E i!"l#$i!% &'o&ose$ $i(i$e!$ Total Liabilit) & S*a'e*ol$e'+s E,#it)

140245588004 345#000000 2270333255 341#599542 864000000 65-080-700-199

Year Wise Performance of IBBL (2006-2007)

( Amount In Million Taka )

))