Chapter 1

Introduction
Banking sector is expanding its hand in different financial events every day. At the same
time the banking process is becoming faster, easier and the banking arena is becoming
wider. As the demand for better service increases day by day, they are coming with
different innovative ideas & products. In order to survive in the competitive field of the
banking sector, all banking organizations are looking for better service opportunities to
provide their fellow clients. As a result, it has become essential for every person to have
some idea on the bank and banking procedure.

Private sector banks started functioning during the year 1983-84 with the objective of

government policy to make sure effective and meaningful participation of the private
sector in the overall national economy.
The perception of Islamic banking has been bloomed from the inspiration of building up
a society on justice in accordance with basic socio-economic principles of Islam. The
difference between Islamic bank and conventional bank is on principles. The functions of
this type of bank are completely different.

This bank is established on Islamic Shariah and all types of transactions are free from
interest. Justified profit is the basis of financial transaction of this bank. This bank is
committed to establish socio-economic justice. Islami Bank Bangladesh Limited is the
first interest free commercial bank in South-East Asia. The bank has opened 176 branches
covering important commercial areas.

Islami Bank Bangladesh is a financial institution whose status, rules and procedures
expressly state its commitment to the principle of Islamic Shariah. Consequently Islamic
banks operate on Islamic principles of profit and loss sharing, strictly avoiding interest,
which is the root of all exploitation and is responsible for large-scale inflation and
unemployment.

1.1 OBJECTIVES OF THE STUDY:

Primary objective:
As we know that 40% of our people living below poverty line and the Islami Bank
Bangladesh Limited believe in welfare banking, so my primary objective is to know what
the role of IBBL in alleviating poverty from the societies.

Secondary objective:
In order to fulfill the primary objective the secondary objectives are to identify the poverty alleviating schemes of IBBL

welfare services provided by IBBL

finding the problems and prospects of the schemes and services

on the basis of the problems giving some recommendations

1.2. METHODOLOGY OF THE STUDY:

The study is performed based on the information extracted from different sources
collected by using a specific methodology. This report is informative in nature. The
methodology is

Data collection: Sources of data of this report can be divided into two categories:
Primary Sources:
Face to Face conversation with the respective officers and staffs.
Interviewing officers and staffs.
Sharing practical knowledge of officials.
Relevant file study provided by the officers concerned.
In-depth study of selected cases.
Secondary Sources:

Annual Report of IBBL

Audit Reports

Website

Relevant books, Research papers, Newspapers and Journals.

1.3. LIMITATIONS OF THE STUDY:

This study has suffered from certain constraints noted below:

Unpublished data have not considered for the study.

The depth of the analysis has been limited to the extent of information collected
from different sources.

As the poverty alleviating schemes are new, it is difficult to find out the necessary
data.

This study has been conducted within a limited time. So, time constraint has
played a key role for the whole study.

The annual report is published in 2006, so lack of up to date data

Lack of cooperation of the respondents.

Chapter 2
Some information regarding the Islami Bank Bangladesh
Ltd.
1. What is Islamic Banking
Islamic banking has been defined in a number of ways. The definition of Islamic bank, as
approved by the General Secretariat of the OIC, is stated in the following manner. An Islamic
bank is a financial institution whose status, rules and procedures expressly state its commitment
to the principle of Islamic Shariah and to the banning of the receipt and payment of interest on
any of its operations(Ali & Sarkar 1995, pp.20-25). Shawki Ismail Shehta viewing the concept
from the perspective of an Islamic economy and the prospective role to be played by an Islamic
bank therein opines: It is, therefore, natural and, indeed, imperative for an Islamic bank to
incorporate in its functions and practices commercial investment and social activities, as an
institution designed to promote the civilized mission of an Islamic economy (Ibid). Ziauddin

Ahmed says, Islamic banking is essentially a normative concept and could be defined as conduct
of banking in consonance with the ethos of the value system of Islam (Ibid).
It appears from the above definitions that Islamic banking is a system of financial intermediation
that avoids receipt and payment of interest in its transactions and conducts its operations in a
way that it helps achieve the objectives of an Islamic economy. Alternatively, this is a banking
system whose operation is based on Islamic principles of transactions of which profit and loss
sharing (PLS) is a major feature, ensuring justice and equity in the economy. That is why Islamic
banks are often known as PLS-banks.

2.2. Some Key points about IBBL:

2.2.1. Bangladesh Bank License for IBBL operation:
The bank operates within the frame work of the existing banking laws, rules and
regulation subject to such minor adjustment that may be considered for an Islami Bank to
function. In addition to the above all requirements of Banking Companies Ordinance
1962 (as adapted in Bangladesh) as also the relevant position of Bangladesh Bank Order,
1972 (P.O. No. 127 of 1972) and instructions issued from time to time there under by
Bangladesh Bank will also apply to the bank.

2.2.2. Aims and Objectives

To conduct interest-free banking.

To establish participatory banking instead of banking on debtor-creditor

relationship.

To invest on profit and risk sharing basis.

To accept deposits on Mudaraba & Al-Wadeah basis.

To establish a welfare-oriented banking system.

To extend co-operation to the poor, the helpless and the low-income group for

their economic upliftment.

To play a vital role in human development and employment generation.

To contribute towards balanced growth and development of the country through

investment operations particularly in the less developed areas.

To contribute in achieving the ultimate goal of Islamic economic system.

2.2.3. Corporate information of IBBL:

Date of Incorporation

13 March, 1983

Inauguration of First Branch (Local Office)

30 March, 1983

Formal inauguration

12 August, 1983

Listed in Dhaka Stock Exchange

Listed in Chittagong Stock Exchange
Share Capital ( Local and Foreign)

1985
1986
42.62%, 59.38%

Authorized Capital

Tk 5,000.00 Million

Paid Up Capital

Tk 3801.60 Million

Investment

Tk 174058.00 Million

Foreign Exchange Business

Tk 287919.00 Million

Number of Branches
Number of Shareholders
Manpower

193(29.05.08)
26488
8426

2.2.4. World Ranking of IBBL amongst Top 3000 International Bank

Sl. No

Year

Rank

1998

2119

1999

2100

2000

1999

2001

1902

2002

1771

2003

1755

2004

1581

2005

4658

2006

1620

10

2007

1490

2.2.5. Ranking of IBBL amongst Top 500 Banks of Asia

Sl. No.

Year

Rank

1
2
3
4

1998
1999
2000
2001

465
443
437
414

2.2.6. Conventional banks Vs IBBL:

The distinguishing features of the conventional banking and Islamic banking are shown
in terms of a box diagram as shown below:

Conventional Banks

Islamic Bank

1. The functions and operating modes of 1. The functions and operating modes of Islamic
conventional banks are based on manmade banks are based on the principles of Islamic Shariah.
principles.
2. The investor is assured of a predetermined rate 2. In contrast, it promotes risk sharing between
of interest.
provider of capital (investor) and the user of funds
(entrepreneur)
3. It aims at maximizing profit without any 3. It also aims at maximizing profit but subject to
restriction.
Shariah restrictions.
4. It does not deal with Zakat.

4. In the modern Islamic banking system, it has

become one of the service-oriented functions of the
Islamic banks to collect and distribute Zakat

5. Leading money and getting it back with 5. Participation in partnership business is the
interest is the fundamental function of the fundamental function of the Islamic banks.
conventional banks.
6. Its scope of activities is narrower when 6. Its scope of activities is wider when compared
compared with an Islamic bank.
with a conventional bank. It is, in effect, a multipurpose institution.
7. It can charge additional money (compound rate 7. The Islamic banks have no provision to charge any
of interest) in case of defaulters.
extra money from the defaulters.
8. In it very often, banks own interest becomes 8. It gives due importance to the public interest. Its
prominent. It makes no effort to ensure growth ultimate aim is to ensure growth with equity.
with equity.
9. For interest-based commercial banks, 9. For the Islamic banks, it is comparatively difficult
borrowing from the money market is relatively to borrow money from the money market.
easier.
10. Since income from the advances is fixed, it 10. Since it shares profit and loss, the Islamic banks
gives little importance to developing expertise in pay greater attention to developing project appraisal
project appraisal and evaluations.
and evaluations.

Contribution
Economy

of

IBBL

to

Bangladesh

Islami Bank Bangladesh Limited has many success stories of achievements. These are
summarized below:
IBBL is the pioneer institution of Islamic Banking in Bangladesh.

The success of IBBL has imbibed other sponsors at home and abroad to establish
Islamic Banking in Bangladesh. Four national, one international Islamic Banks have
since been established in the country. A private sector traditional bank has also
established two full-fledged Islamic Banking branches. Several other existing and
proposed traditional banks have also expressed their intention to introduce Islamic
Banking.

IBBL has successfully mobilized deposits from a section of people who hither-tobefore did not make any deposit with interest based banks.

The Islamic Banking products which are offered by IBBL through its 176 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.

IBBL market share of deposit investment and ancillary business is steadily increasing

IBBL, through still a tiny bank, handless more than 10% of country's export and
import trade.

Among the contemporary commercial Banks IBBL's position is first in respect of

mobilization of deposit, deployment of found and earning profit.

Investment in industrial sector occupies nearly 49.19% of IBBL's investment

portfolio. This is a unique example of industrial finance by a commercial Bank.

More than 1.15,000 workers are employed in the industrial projects financed by
IBBL. IBBL has thus made significant contribution to solving unemployment
problem of the country.

Dhaka-the capital of Bangladesh being a Mega city has acute transport problem.
IBBL has joined hands with an enterprising group to introduce a fleet of Premium

Bus service, which has attracted the attention of all section of the people and
mitigated transportation problem of the city to some extent.

2.2.7. Poverty alleviating schemes of IBBL

For the development of the distress people of the society and alleviating their poverty, the
IBBL has taken some special investment schemes. These are

Rural Development Schemes ,

Household Durable Schemes,

investment schemes for Doctors,

transport investment schemes,

Micro investment schemes,

Agricultural equipment investment schemes.

Islami Bank foundation is also working for the welfare of the people.

In the following chapters these schemes are described in details

In the following table various welfare oriented investment amount of IBBL is given
Sl no.
1
2

Name of schemes
Rural Development Schemes
Household Durable Schemes

2002
432.04
886.79

2003
570.88
910.91

2004
789.97
878.76

2005
1106.07
782.09

2006
2242.22
699.95

3
4
5
6
7
8

Investment schemes for Doctors

Transport investment schemes.
Car investment schemes
SME
Micro investment schemes,
Agricultural
equipment

97.21
1822.38
28.25
325.06
6.63
13.66

101.01
2311.60
33.58
395.75
10.10
12.76

85.54
2442.16
30.30
501.26
17.18
14.69

64.42
2947.38
27.75
629.81
10.21
12.53

33.38
2698.88
23.54
768.45
6.24
11.94

9
10

investment schemes
Housing investment schemes
Real state investment projects
Sub-total (Investment schemes)

597.64
2264.35
6474.01

661.56
3418.85
8427.00

672.10
4713.70
10145.6

609.78
5859.75
12050.19

506.75
6582.85
13574.2

Total investment

46280.1

59007.4

6
75858.5

93644.15

0
113575.

Percentage of total investment

1
13.99%

9
14.28%

6
13.37%

12.87%

07
11.95%

Chapter 3
Rural development schemes of IBBL
Bangladesh with its 40% people living below poverty line and 18% living in absolute
poverty is suffering from acute rural-urban economic disparity coupled with illiteracy,
lack of proper health and sanitation facilities. The country's economy is basically an
agrarian one with vast majority living in rural areas.

The agriculture sector is unable to provide any further scope for employment resulting in
influx of rural population towards urban areas. Rural areas are characterized by stagnant
agriculture and scanty industries. Underemployment and unemployment is a regular
phenomenon particularly in rural areas.
The vast human resources have remained unutilized due to lack of education, proper
training and concerted efforts to help grow the rural economy. These results in uneven
distribution of income which causes serious set back in balanced geographical growth as
well as growth of GDP.
Islami Bank Bangladesh Limited was founded with the major objective of establishing
Islamic economy for balanced economic growth by ensuring reduction of rural-urban
disparity and equitable distribution of income.
In view of the above, Branches of the Bank have been encouraged to invest their deposits
in their respective areas and in particular for the economic enlistment of the rural people.
Accordingly, a Scheme in the name and style of 'Rural Development Scheme' has been
introduced to cater to the investment needs of the agriculture and rural sector to create
opportunity for generation of employment and raising income of the rural people with a
view to alleviate poverty.

Objectiv
esfollowings are the important objectives of IBBLs Rural Development Scheme:
The
1)

To bring the poorer population within an organizational framework by setting up

certain rules and regulations with a view to free them from the curse of poverty and make
them self-reliant, thereby converting RDS into a self-reliant sustainable program;

2)

To extend bank investment to agricultural and non-agricultural sectors in the rural

areas;
3)

To invest on employment and income generation activities of the rural population;

4)

To provide self-employment for distressed people;

5)

Socio-economic development of the poor and distressed by group/center

formation;
6)

To bring both male and female to provide employment under income generation

activities and help them to attain self-reliance step by step;

7)

To continue to support the self-reliance drive of the poor in their search of capital

formation from savings they make out of their increased income;

8)

To help reduce and eventually stop, through enhancement of their income, the

lending on high and exorbitant rates of interest by the village money-lenders, the advance
sale of crops, land and mortgage of land by the poor at the time when they are most in
need.
9)

To follow an approach of comprehensive development side by side with

economic development; and

10.

To provide financing to develop housing in the area

Target Group
Farmers having land holding of maximum 0.50 acres.
Sharecroppers with consent from the landowners.
Persons engaged in off-farm activities having no land or land up-to-maximum 0.50
acres.
Persons/farmers permanently residing in the selected villages.
Persons having derelict pond will be eligible for investment for re-excavation and fish
cultivation.

Destitute women and distressed people will be provided investment for mulch
cows/poultry birds/ducks/goats etc. and other suitable off-farm activities for raising
their supplementary income.
Avenues of investment: other than agricultural activities, seven categories of non
agricultural activities in the rural areas are financed under the RDS program of Islami
Bank Bangladesh Limited. The categories and the types of activities financed under each
category are presented in following table
Investment Avenues, Higher limits and Duration:
Investment
Higher limit
Duration
Avenues
Crop production
Tk.10000
Highest 1(one)year
Fish cultivation in
ponds
Irrigation
Agriculture and
irrigation
Implements
All nonagricultural sector

Tk.25000

Tk.10000

Highest 1(one)year

Rickshaw ,van and

rural transport
Hand Tube well

Tk.5000

House-building
materials

Tk.15000

Highest 2(two)
years
Highest 3(three)
years
Highest 3(three)
years

Tk.5000
Tk.25000

Tk.3000

Highest
3(three)years
Highest 1(One)year
Highest
3(three)years

Remarks
Crop of twelve
varieties
According to need
10%borrower
equity
For 343
non-agricultural
items payable in
weekly installment
Payable in weekly
installment

Documentation
To secure Bank's investment, the following documents have to be executed:
Group guarantee form.
Deed of Agreement.
Usual charge documents.

Sanction and Disbursement

On the basis of the list submitted by the Field Officers, the Investment Committee of the
Branch carefully scrutinizes the applications and sanction the investment at the Branch
level. The Investment Committee consists of Manager, Project Officer and the Field
Officer.
After sanction of the investment the Branch complete documentation formalities and then
disburse the amount with the help of the Investment Officer and Field Officer. In all the
cases Branch must ensure strict adherence to the banking and Shariah norms.

Appointment of Field Officer

Field Officers are appointed by the Head Office of the Bank. After recruitment, the Field
Officers have to undergo compulsory Foundation Training for a period of two weeks so
that they can perform satisfactory.
They are appointed well ahead of starting operation of the Scheme in a Branch. The
concerned Branch starts operation of the Scheme after satisfactory completion of the
base- line survey, formation of the Groups, motivation of the Group members and
compliance of the Group disciplines etc.

The eligible criteria for the Field Officers

are the followings:
a. Young man with initiative and drive.
b. Minimum qualification: graduate or equivalent.
c. Willingness to work in the rural areas.
d. They are recruited as per Recruitment Policy of the Bank under a separate Service
Rules for the RDS Employees.
e. Their services are confirmed after one year on satisfactory performance. The
performance are considered satisfactory if rate of recovery is 95% or above.

Statistics of Rural Development Scheme

(1998 to 2007)
Year

Bra
nch.

Dis:

UP

Vill

Men:

Women
members
(%)

Amount of
Accumulated
investment

Investment
Installment

Recovery
Rate.

Savings

1998
1999
2000
2001
2002
2003
2004
2005

25
27
32
45
52
69
69
89

21
24
27
33
38
45
45
48

175
180
190
198
102
111
125
140

520

19403
33351
38190
75135
141115
174315
200470
307225

52%
55%
62%
75%
87%
91%
93%
93%

1.90
18.48
60.35
131.86
326.74
714.93
1323.87
2029.67

9.94
27.01
49.44
140.30
272.60
371.09
432.06

100%
100%
99%
99%
100%
99%
98%
98%

0.19
0.91
3.50
7.99
22.97
56.05
99.07
166.83

620
763
1258
2062
3365
5214
6875

2007
2007

120
129

50
61

190
220

7700
10023

430465
516725

94%
89%

2923.59
2884.66

557.97
789.97

98%
99%

PERFORMANCE OF RURAL DEVELOPMENT SCHEME: UP

TO March 2008

Sl. Areas of performance

Number/Amount

01 Total number of Branch of IBBL

190

02 No. of Branch handling the Scheme

119

03 No. of Village

7,788

04 No. of District

60

05 No. of Centre

14,256

06 No. of Group

73,712

07 No. of Male member

339,115

08 No. of Female member

29,445

09 Total number of Members

368,560

10 No. of Client (Who availed investment)

259,064

11 Cumulative disbursement

8,589.74

12 Average size of investment

0.011

13 Present outstanding

1,944.47

14 Amount of overdue

6.68

15 Percentage of Recovery

99%

16 No. of account adjusted (Since inception)

707,401

17 Adjusted amount (Since inception)

5,833.90

18 Balance of personal savings

653.18

19 Total waiver from inception

4.46

228.74
323.10

20 Number of client under MEIS

1,808

21 Cumulative disbursed under MEIS

88.18

22 Present outstanding under MEIS

77.23

23 No. of Field Officer

1,391

24 No. of Tube-well provided (Since inception)

5,372

25 Amount disbursed against Tube-well

9.98

26 No. of Sanitary Latrine provided (Since inception)

3,042

27 Amount disbursed against Sanitary Latrine

2.79

Islami Bank Bangladesh limited (IBBL) envisages an economic system based on equity and
justice. Taking into consideration that majority of the population below poverty line lives in rual
Bangladesh, the Bank has devised a Rural Development Scheme (RDS) with a view to creating
employment opportunity for them and alleviates their poverty through income generation
activities.
The IBBL through its RDS project has been implementing integrated programs for the landless
poor, eager laborers and marginal farmers aimed at meeting their basic needs and promoting their
comprehensive development. Consciousness among the poor needs should be enhanced so that
they can lift their position in the socio-economic structure of the country. In order to consolidate
their economic base, invested money should be used in income generating activities so the poorer
section of the population can become self-reliant. RDS works for the realization of that objective.

Some Recent Field Experiences of RDS

Hamid and Rahman (2001) have recently evaluated the Rural Development
Scheme of the IBBL under the sponsorship the Islamic Bank Training and Research
Academy. Some results are given as under.
1. In Islami Bank, among the total funds disbursed in 2000, the maximum amount
(24.9%) has gone to processing and manufacturing. In order of importance, the other
heads are trading (20.5%), agriculture and forestry (17.9%), services (12.1%), and others.
In the GB the picture is not very different. Here, maximum amount of loan (36.9%) has
gone to processing and manufacturing sector, followed by services (23.3%), trading

(13.8%), livestock and fisheries (7.8%) and others. The data as published by Credit and
Development Forum (CDF) shows that about 42 per cent of total funds of 369 NGOs
including ASA, BRAC and Proshika was distributed in the small business sector and
another 18 per cent to the livestock sector up to June 1988.
2. Characteristics of Entrepreneurship
As many as six major characteristics have been identified for the entrepreneurs. These
are: He/She:
(a)

produces wholly new product

(b)

undertakes new line of business

(c)

adopts new process of production (in the case of old products)

(d)

goes for expansion of the existing business

(e)

adopts new marketing techniques

(f)

generates new employment opportunities.

It can be seen from the Report that expansion of business is the most dominating feature
of entrepreneurship development of the clients under discussion. In the IB as many as 60
per cent of the clients possessed this feature. In order of importance other features include
new line o business (16%) and wholly new product (12%). In the GB, expansion of
business accounts for about 52 per cent of the total activities. Interestingly next dominant
feature of GB clients is that 40 per cent of them have gone for new line of business. Other
features are not worth mentioning. For others category, only 17 per cent fall within the
category expansion of business. This is followed by generation of new employment.
The most dominating characteristic of this others category is that as many as 65 cent do
not possess any quality of entrepreneurship development constitute only 7 per cent and 5
per cent in the IB and GB, respectively.
From the discussion of these necessary characteristics, it may be concluded that both the
IB and the GB have contributions towards the development of small entrepreneurs.
3. Practical work experiences
The RDS members were asked to give their experiences briefly in working with the IB.
Interestingly enough, about half of the members agreed that the Bank Supervisors spoke
about the Quran and the Hadiths. Many of them categorically stated that they had learned
many things about Islam. It was good that they need not go to the Bank to collect their
loans or mix with unknown male persons in unknown places. About one-fifth of the
members said that the IB was quite flexible: it did not put undue pressure for weekly
instalment when the members were in genuine difficulty. They also said that sometimes
the Bank Supervisors had gone to their residences to deliver the goods (investments).
This answer constitutes about 15 per cent of the total responses. Some mentioned about
the help and assistance given by the IB at the time of their daughters marriages.
Although in terms of percentage it is very negligible, a few argued that the IB did in fact
take extra charge in terms of profit, where is then the interest-free bank? they argued
(!!!)
4. Expectations from the IB

A question was asked about their expectations from the IB. It is shown that of the 15
answers noted, the most important one relates to the amount of loan/investment given.
They expected more loans and more than one type of loans (like GB) simultaneously.
This constitutes 27.3 per cent of the total answers. Next important one (17.3%) was the
loans for housing, sanitary latrine, and tube well for drinking water. Eleven per cent of
the members very forcefully argued that the IB must provided training facilities in
tailoring, hand-works, fish-culture and pisciculture works particularly for the women.
They alleged that because of lack of training they were unable to make economic use of
the sewing machine given to them. The same number of respondents expected financial
assistance for their daughters marriages. Contrary to normal expectation, about 6 per
cent opined that IB should give financial assistance in kind, and not in cash, and that they
should not be allowed to speak lie on this issue! There were people who wanted to learn
about the Quran and the Sunnah. Although not significant, there are other interesting
expectations as given in the Report.
5. Suggestions
The members of the RDS have given many interesting and important suggestions for the
increasing the number of clients. Perhaps very consistently, the members have suggested
that the IB should increase the volume of credit. Through experience they were of the
opinion that peoples demand for money was very high. The lending institutions gave fell
short of their demands. Even the amount of loan/investment given by the IB fell short of
their demands. Even the amount of loan/investment given by the IB fell short of the
amounts given by the other institutions, particularly, GB, ASA and BRAC. Given the
opportunities for proper utilisation, the bank should also provide more than one type of
loans (general loans, housing loans etc.) simultaneously. This is treated as the most
appropriate weapon for increasing the number of clients under the present clients under
the present circumstances.
Another very important suggestion given by the members was to preach more
about the teachings of the Quran and the Sunnah. The added that the Supervisors should
say that the bank or the RDS was not for any particular category of people but for every
one who wanted to improve her/his living standard by avoiding (interest). In order to
compete with other conventional lending institutions, the members suggested that the rate
of profit (many say interest) should be comparatively lower and that should made clear
to the members by way of simple examples. Introduction of housing loans and the loans
for such things as latrine, education, tube wells and others would definitely attract the
general people to come within the umbrella of the RDS. Many members have praised the
behavior of the RDS Supervisors: Some suggested that they should improve their
activities with more modern and appropriate tolls. Their numbers should be increased.
The members have also very consistently insisted introduction of training program events
for the women on various important issues. Another no-negligible suggestion given by

the members was that they should be given outright grants in terms of cash or food during
the period of natural calamities such as floods, earthquake and other catastrophic.

Chapter 4
Some other special investment schemes of IBBL for alleviating
poverty
4.1. House - hold durables investment schemes:
Under this investment scheme in 31st December 2007 27010 people have been given
investment. The amount of total investment was 1371.31 million taka. On the other hand,
in 2006, 27349 people were given investment and the amount of investment and the
amount of investment was 699.95 million taka.

4.2. Investment in Small and Medium Enterprise:

The Small and Medium Enterprise creates enough employment opportunity and play a
vital role in socio economic development of the country .The IBBL launched Small
Enterprise and Consumer investment Division in 1st January 2006.The objective of this
scheme is to provide investment facilities to the small entrepreneur. Besides this, the

other two division of IBBL ,Project Investment Division(PID) and General Investment
Division(GID),these two provides investment to the medium scale entrepreneur
In 31st December 2006, the investment in SME sector of the bank was 18902 million
which was 16.64% of the total investment of the bank .Investment in this sector proves
that IBBL is trying to create employment opportunity for the people and wants to
increase their per capita income.

Chapter 4
Some other special investment schemes of IBBL for alleviating poverty
4.1. House - hold durables investment schemes:
Under this investment scheme in 31st December 2007 27010 people have been given
investment. The amount of total investment was 1371.31 million taka. On the other hand,
in 2006, 27349 people were given investment and the amount of investment and the
amount of investment was 699.95 million taka.

4.2. Investment in Small and Medium Enterprise:

The Small and Medium Enterprise creates enough employment opportunity and play a
vital role in socio economic development of the country .The IBBL launched Small
Enterprise and Consumer investment Division in 1st January 2006.The objective of this
scheme is to provide investment facilities to the small entrepreneur. Besides this, the

other two division of IBBL ,Project Investment Division(PID) and General Investment
Division(GID),these two provides investment to the medium scale entrepreneur
In 31st December 2006, the investment in SME sector of the bank was 18902 million
which was 16.64% of the total investment of the bank .Investment in this sector proves
that IBBL is trying to create employment opportunity for the people and wants to
increase their per capita income.

4.3 Small Business Investment Scheme

Bangladesh, a third-world developing country, is rich in natural and human resources.
Inspite of vast possibilities, the majority people of the country live in hardship-below
poverty line as these resources are not being properly tapped, explored and exploited.
Physical labor is their only means of earning. A large segment of this populace is active
youth force. Many of them are efficient, intelligent and energetic with initiative & drive
and have courage to take risks. But they can not uplift their socio-economic condition due
to poverty, lack of financial support and other required facilities. Lack of capital
compelled many small traders to leave their profession. As a result the unemployment
problem has been increasing day by day, and the unemployment youths, finding no
avenues of employment, are getting themselves involved in anti-social activities creating
threat to the social life. Islami Bank, as welfare oriented financial institution, is
committed to generate employment and bring about an overall improvement in the socioeconomic condition of the people and the quality of their life. The Bank, to make
effective contribution in this respect, has taken-up a special program and introduced
'Small Business Investment Scheme' to make the small traders, entrepreneurs and
neglected unemployed youths of urban and rural areas self-reliant by providing them
required financial support. The following benefits will be achieved through
implementation of this Scheme.
Gradually it will help to alleviate poverty and minimize unemployment.

It will help small traders and entrepreneurs to become self-reliant and to improve
their quality of life through capital formation.

It will create opportunity for the unemployed youths to engage themselves in income generating activities.

It will help to expand the market for locally produced goods by increasing
productivity of small traders and entrepreneurs.

Aims and objects

To expand investment facilities for the small traders and entrepreneurs in urban
and rural areas with a view to raise their level of income and to improve their
quality of life.

To inspire and encourage unemployed youths to establish small business

enterprises and thereby to create opportunities for self-employment for ensuring
social justice and welfare of the people in large scale

4.4. Agriculture Implements Investment Scheme

Bangladesh is predominantly an agricultural country with vast majority of people living
in rural areas. Most of our people, for their living, are dependent on agriculture.
Agriculture still contributes the lion share of the gross domestic product. But we could
not as yet become self-sufficient in food production. We still import a bulk quantity of
food grains from abroad to meet the deficit. This reliance on import has made us
dependent on others. We must modernize our agriculture and establish more and more
industries
in
order
to
minimize
imports.
We can bring about revolutionary changes in the agricultural sector by adopting modern
agricultural technology replacing the age-old traditional way of cultivation and increasing
the use of fertilizer. This can only be done by collective efforts of both public and private
sectors.
Islami Bank Bangladesh Limited is a welfare oriented Bank. It can play positive and
important role in the economic development, progress and uplift of the country by
investing in the agricultural sector. The Bank has, therefore, introduced "Agriculture
Implements Investment Scheme" to provide power tillers, power pumps, shallow tube
wells, thrasher machine etc. on easy terms to the unemployed youths for self-employment
and to the farmers to help augment production in agricultural sector.

Objectives
To create opportunities for self-employment of un-employed rural youths.
To help farmers to augment agricultural production.
To assist in the introduction and use of modern technology in the agricultural
sector.
To play auxiliary role in achieving self-sufficiency in food production.
Types of Agriculture Implements
Power tillers
thrasher Machine
Any other agricultural implements proposed by the branch and which has local
demand.

4.4. Transport Investment Scheme

The role of modern communication is most vital for the socio-economic growth and
uplift of a developing country like Bangladesh. A sound and efficient communication
network is the pre-requisite for sustained development through the expansion of trade,
commerce and industry. In this backdrop the demand for road and water transports has
increased manifold throughout the country. Moreover, the use of modern transports has
increased keeping pace with the rise of the standard of living of the professionals.
Considering all these facts, Islami Bank Bangladesh Limited has introduced 'Transport
Investment Scheme'. Under this scheme investment on easy terms is being extended to
the existing successful businessmen in road and water transports and potential
entrepreneurs in this sector for different types of road and water transports. Besides,
Multinational companies, established business houses and well to do officials and
professionals can become owner of various kinds of transports through Hire Purchase
under this scheme.
Aims and Objectives

To assist in the development of communication system of the country.

To help overcome the existing transportation problem.

To assist solvent service-holders and professionals having fixed income for

acquisition of private cars and thus to help them to improve their professional efficiency
and the standard of living.

4.5. Micro Industries Investment Schemes

Bangladesh as a developing country has been trying for its overall economic growth. One
of the major problems confronting its growth is lack of development of enterprises and
potential entrepreneurs who can create more job opportunities by establishing new
enterprises in the industrial sector. There are a number of educated unemployed youths
and also skilled & semi skilled unemployed persons in the country. Besides, every year
quite a good number of youths are coming out of the general/technical educational
institutions to add to this already crisis ridden employment market. Development
programs and efforts will bring no meaningful result unless and until income- generating
employment opportunities can be created for the growing number of unemployed people
including the educated unemployed youths. Establishment and expansion of micro
industries can play a vital role in creating more employment opportunities as well as in
the

overall

socio-economic

development

of

the

country.

Islami Bank Bangladesh Ltd. has been appreciably participating in this direction by
financing industrial sector. With a view to creating wider base for industries, the Bank has
decided to launch Micro Industries Investment Scheme through its Branches. This
scheme has been devised to cater to the investment needs of those persons who intend to
set-up new micro industrial ventures or to restructure their old units by way of BMRE
involving

total

cost

of

Tk.5.00

lac.

This is intended mainly to create new jobs for the educated, skilled & semi skilled
unemployed and also to encourage those who remain outside the purview of investment
due to shortage of funds and insufficient collaterals. The scheme has been prepared with
easy terms and conditions to encourage the small entrepreneurs, educated unemployed

youths and skilled /semi skilled persons to come forward for establishment of micro
industries commensurate with the local demand.
Sectors of Investment:
Different sectors including food and agriculture based industries, plastic & rubber industries,
forestry and furniture industries, engineering industries, leather industries, chemical industries,
textile industries, recycling industries, service industries, electrical accessories industries,
computer technology industries, paper products industries, handicrafts industries, fishery & live
stock farming, hollow bricks, roof tiles and any other viable micro-industries have been identified
for financing under the Scheme

4.6. Investment in Industrial sector

In the investment policy of IBBL industrial sector of the country has given priority. The
industrial investment of the bank is increasing rapidly .IBBLs investment in industrial
sector is higher than other bank .The total investment of the bank in industrial sector as
on 31st December 2005 was 46063.51 million taka and on 31st December 2006 it was
62642.10 million taka which is 36% higher than the previous year. In the following table
investment in industrial sector by IBBL is given:

Sl
no.

Description

No. of
projects

Percentage Amount of Percentage

of total
investment of total
number
investment

Textile, spinning weaving

&dyeing
Steel, Re-rolling& Engineering
Agriculture based industry
RMG& Parts of RMG
Food & Beverage
Cement industry
Pharmacy industry
Poultry, poultry feed &
Hatchery
Sanitary Equipment

145

15.85%

24337.82

38.85%

42
145
260
22
8
8
15

4.59%
15.85%
28.42%
2.40%
.87%
.87%
1.64%

7679.58
7336.64
5019.50
3787.74
1489.44
1171.19
767.44

12.26%
11.71%
8.01%
6.05%
2.38%
1.87%
1.23%

.11%

431.78

.69%

2
3
4
5
6
7
8
9

10
11
12
13
14
15
16
17
18
19
Total

Chemical, cosmetics&
petroleum
Printing & binding
Power
Ceramic & brick
Health care(hospital &others)
Plastic industry
Petrol pump & CNG filling
station
Information technology
Hotel & restaurant
Others industry

11

1.20%

242.62

.39%

25
3
14
14
10
18

2.73%
.33%
1.53%
1.53%
1.09%
1.97%

497.62
358.93
552.27
294.34
598.16
126.99

.79%
.57%
.88%
.47%
.95%
.20%

2
6
166
915

.22%
.66%
18.14%
100%

10.11
8.66
7930.93
62642.10

.02%
.01%
12.66%
100%

Chapter 5
Activities of Islami Bank Foundation
One of the distinguishing features of Islami Bank is that its overall activities are directed
towards the welfare of the society. The Bank, since its inception, has dedicated itself for
the uplift and emancipation of the helpless and downtrodden people of the society. With
this end in view, the Bank has created a separate fund, which was earlier known as
Sadaqua Tahbil. In 1991, the Sadaqua Tahbil was reorganized and enlarged under the new
name of 'Islami Bank Foundation' with a fund of Taka 38.00 million in order to conduct
social-welfare activities on a wider scale. As one of the leading non-government
voluntary organizations of the country, the Foundation has been working with unique and
special Programs for the welfare of distressed humanity and to make poor, down-trodden,
landless and asset-less people self-reliant.
The aims and objectives of the Foundation are to serve distressed humanity, promote

people oriented mass education, extend health and Medicare facilities to the povertystricken people in urban and rural areas, create facilities for productive self-employment
and develop human resources for improving economic condition and quality of life, assist
healthy growth of art, culture and literature, science and technology, sports, research and
propagation of Islamic teachings. The Foundation has taken up a number of schemes
covering the whole of Bangladesh.

Educational Programs
Education is the backbone of a nation. Awareness building, skill training, and access to
information-all depend on education. But it is regrettable that the rate of literacy is still
very low in Bangladesh. Most of the children are deprived of the light of education due to
poverty, lack of sufficient educational institutions, non-availability of text books and
equipments etc. In a ward, the unfavorable socio-economic conditions are responsible for
this chaotic situation.
The Foundation has, therefore, taken up the following Programs to improve the country's
educational scenario:

Support to model Forqania Maktab

Scholarship /lump grant for poor and meritorious students

Financial support to educational institution

Income Generating Programs

Access to required finance and other related inputs may help many to become self
employed. In absence of such opportunity the unemployed youths entangle themselves in
various anti-social activities. Islami Bank Foundation has, therefore, taken up the
following Self-employment projects:

Rickshaw

Sewing

Poultry keeping

Rural health work

Goat rearing

Small trade

Health and Medicare Programs

Health and Medicare facilities are the basic and fundamental rights of each individual but
most of the people of our country are still deprived of it. The Foundation has, therefore,
taken up the following Programs to extend health, Medicare and sanitation facilities to
the urban and rural areas:
Establishment of Medical Centers
Supporting Charitable dispensaries
Lump-sum help for medical treatment
Tube well Installation
Sanitary Latrine construction etc.
Such Assistance is also extended to the members of Rural Development Scheme (RDS)
of IBBL. Under Health and Medicare Programs preventive measures have also been
taken. Special steps have been taken for construction of sanitary latrines and installation
of tube wells in the villages covered under to whom Islami Bank Bangladesh Ltd. is
providing finance for income generation activities.

Humanitarian Help Programs

These program aims at providing help to distressed people who are unable to meet their
basic needs like food, clothing, shelter and medicine. The old widow and children
without guardians get preference. Besides, the program extends assistance to orphanages,
provide fund for the marriage of poor girls, assist indebted people, help distressed
wayfarers etc.

Relief and Rehabilitation Programs

Participation in relief and rehabilitation activities in natural disasters and in emergency
forms an important program of Islami Bank Foundation. During calamities like flood,
tornado, tidal surge etc. the Foundation mobilizes its own people as well as donates to the
relief fund opened at the government level. The Foundation also tries its best to extend
hands of assistance and co-operation to the Muslim brethren elsewhere in the world.
Dawah Programs
One important objective of Islami Bank Foundation is to disseminate the true knowledge
and teachings of Islam. The Foundation has, therefore, taken up various schemes to
enlighten the common people as well as the elite and make them familiar with the
concept of Islam. Islamic research magazines and other Islamic Literatures are being
distributed among the Academicians, Journalists, Justices, Lawyers, High Officials,
Bankers, Literatures and important Libraries and Institutions of the country. The
Foundation is also working among the prisoners for their moral reforms.

Islami Bank Hospital

With the objective of providing low-cost curative services to the less affluent segment of
the society, the Foundation has so far set up Hospitals at three Divisional Headquarters in
Dhaka, Rajshahi and Khulna. Services of eminent general practitioners and specialists in
various fields of treatment like Medicine, Surgery, Gynae, Pediatric, E.N.T. Urology,
Neuro-surgery, Skin, Orthopedic etc. are harnessed in these hospitals. Standard
diagnostic, medical and surgical equipments are in used in these hospitals. The
Foundation plans to establish Hospitals at each Divisional Headquarters of the country.
Islami Bank Medical College, Rajshahi

The number of Doctors in Bangladesh is not sufficient compared to the total population.
The Govt. Medical Colleges are also a very few and a good number of meritorious
students can not get admitted into the Govt. Medical Colleges due to insufficient number
of seat capacities.
Though some private medical colleges have been established mostly in and around the
capital but the tuition fees and other charges are so high that the students of poor and
middle class families can not afford it.
Keeping in view the objective to enable the students of poor and middle class families to
be a doctor, Islami Bank Foundation has established a medical college in Rajshahi, a
metropolitan city of northern part of the country. In the meantime, the classes of the
students of 1st 2nd and 3rd batch are going in full swing. The construction work of the
hospital building at Naodapra, the own site of the college, is also going on.
Community Hospital
Besides establishing Hospitals at the Divisional Headquarters, IBF has a plan to assist
local initiatives in setting up Hospitals at District level. Establishment of Four such
Hospitals is planned during 1999.
Monoram: Islami Bank Crafts & Fashion
The project has been taken up as a sales outlet of home-made garments, handicrafts and
other items produced by the distressed women. The main objective of the project is to
create conducive and healthy atmosphere in which women can contribute to the family
income by working within the limits of Shariah.
The other objective of this project is to develop designs of women-wear, which will
conform, to the principles of decency and modesty as laid down by Islam and at same
time compare well with the modern-day-fashions.

Service Centre
To save the people of coastal and river belt from natural disaster, erosion etc. a special
project has been taken in the name and style of "Service Centre". Under this program
pucca structure constructed in coastal areas, river belts and off-shore islands would be
used for integrated social development of the people as well as provide safe shelters
during natural calamities. Two such Service centers (in Noakhali and Manikgonj) have
already been established.
Islami Bank Physiotherapy and Disabled Rehabilitation Centre
In Bangladesh there are a great number of unfortunate disabled persons who have no
other means to maintain themselves without resorting to beggary. The burden of the
society might be lessened and these people can be helped to become self-reliant through
imparting special skills. Keeping this in view, Islami Bank Foundation has decided to
rehabilitate these unfortunate disabled persons through establishing a centre named
"Islami Bank Physiotherapy and Disabled Rehabilitation Centre" This Centre while
making temporary arrangement for food and shelter for the disabled, will arrange for
health check up, physiotherapy and occupational therapy and look for job placement
through internship in various factories and trading houses.
Islami Bank Institute of Technology
The large number of unemployed youth of the country may be turned as assets through
taking up Human Resource Development (HRD) Program.
The youths with skills in various sectors of technology may become self-employed in the
land and can also get employment opportunities abroad. Islami Bank Foundation has,
therefore, established 3 Technical Institutes, two in Dhaka and another in Bogra, which
are rendering training facilities in Computer, Secretarial Science, Driving, Electrical,
Refrigeration and Air Conditioning, Radio & TV, Tailoring and Garments etc.

Centre for Development Dialogue

Alongside with the governmental efforts at National level and multilateral and bi-lateral
institutions at the international level, Non Govt. Organizations (NGOs) in different parts
of the world especially in the developing countries are playing increasing role in
experimentation

with

Development

models.

Most of the organizations unfortunately, try with development techniques from a

standpoint, which often turn antagonistic to the belief and social norms of the people. The
renowned foreign and national NGOs have their established training centre(s) where they
train their own people and also rent out the facilities to others. Islami Bank Foundation
has decided to establish a training centre of its own named "Center for Development
Dialogue" which will create opportunity for imparting training facilities for its own staff
members as well as the staff members of other development organizations

Chapter 6

Findings of study
After discussing some schemes and social welfare activities of Islami Bank Bangladesh
Limited which are contributing to poverty alleviation, I have found some problems of
those schemes and activities. These are:

1. In case of rural development schemes of IBBL the target group are farmers
owning land up to 0.50 acres of land. So there are no investment facilities for the
landless people. But the number of landless people is large in rural areas.
2. The people who are not the permanent resident of the project area will not get
invest under RDS .Determining the permanent resident is a troublesome work.
3. Most of the poverty alleviating schemes and welfare activities of IBBL are not
known by the people. So there is a lack of advertising and awareness among
people.
4. As IBBL has less branches in rural areas, The Rural Development Schemes of
IBBL is not as popular as like Grameen Bank or other NGOs program.
5. The poverty alleviating activities specially the RDS is new schemes. On the other
hand, many NGOs are working in that field to reduce the rural poverty .So the
RDS face a tough competion.
6. The investment schemes of IBBL needs lots of papers and documents which are
hazardous for the rural people as most of them are illiterate.
7. The modes of investment of IBBL are different from the conventional banks. But
most of the people of our country are familiar with the conventional banking
system. As a result, the modes of investment are not clear to rural as well as urban
people.
8. Lack of proper step in observation that the poor people who are taking the loan
from IBBL are using it for productive purposes and their real income are really
increases as a result of taking the loan.
9. Lack of Research and Development work for the Rural Development Schemes.

Chapter 7: Concluding Part

Recommendation

Some special investment schemes need to be launched for the landless rural
people.

In order to make people aware about the investment schemes and modes of
investment various kinds of seminars, workshops, road shows in rural and urban
areas need to be arranged.

More branches should be opened in rural areas.

The field officers of the Rural Development Schemes must make the rural people
understand about the documentation process of taking investment .They must be
cordial about it.

More research work needs to be done in the Islami Bank Training &Research
Academy in order to improve the Rural Development Schemes.

The access of the target groups to productive resources, services and markets
needs to be ensured. The target group must be organized, mobilized and planning
mechanism must be oriented toward those groups.

More work needs o be done to clarify the factors that undermined the success of
particular projects , with a view to providing practical operational models that
can be used to project design and implementation.

Moreover proper management of schemes needs to be ensured.

Conclusion:

Islamic bank Bangladesh limited is a bank which operates its activities according to
Quaran and Sunnah. Its banking activities based on profit \ loss sharing. It does not
create any illegal pressure on client. The strength of islami bank Bangladesh limited are employees of Islamic Bank Bangladesh Ltd. are honest because they strongly believes in
Islamic rules and Allah and they do not take any types of bribe form clients. So believes
of people are increasing on the activities of Islamic bank Bangladesh limited. Many
people of Bangladesh are involving with IBBL for doing their daily financial activities. It
has a bright future because it has got huge customer then other conventional bank in
Bangladesh that are based on interest.
The weaknesses of Islamic bank Bangladesh limited are - although it is getting bright
future but it does not operate its activities 100% based on Islamic shariah. Because still
there is not existed 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 unislamic activities unintentionally.
On the other hand every client is not 100% honest. So they are taking investment form
IBBL and after maturity, they are showing loss on that project intentionally. So IBBL is
losing some profit form their investment .For this reason, Islami bank Bangladesh limited
has closed its bai - mechanism. Now it is not providing investment under this
mechanism.
Threats of Islamic bank Bangladesh limited are - at this time, many financial institutions
have commenced their financial activities according to Islamic shariah. This type of
organization will create more competition in the financial market. So it is a threat for
Islamic bank Bangladesh limited.
As the poverty alleviating activities of IBBL is new Islami bank needs to popularize it
After 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. Many organizations are following to
IBBL and they are starting their business based on Islamic shariah in the economy in
Bangladesh.