PART

PART11
INTRODUCTION
INTRODUCTIONOFOFREPORT
REPORT

1
1.1 Introduction:
Achievement of high economic growth is the basic principles of present economic policy. In
achieving the objectives, the banking sector plays an important role. The banking sectors
channel resources through deposit mobilization and providing credit for different business
venture. The successful running of a bank business depends upon how effectively the credit
management recovered the funds. Shahjalal Islami Bank Limited as new commercial banks
in Bangladesh responsibility bestows upon it to ensure efficient and effective banking
operation in a sound manner.

Shahjalal Islami Bank Limited is always ready to maintain the highest quality services by
upgrading Banking technology prudence in manage and applying high standard of business ethics
through its established commitment and heritage. Objectives of a private institution like SJIBL
are to maximize profit through optimum utilization of resources by providing best customers
service.

1.2 Significance of the report:

The prime reason of this study is to become familiar with the practical business world and to
attain practical knowledge about the Banking and Corporate world, which is so much essential for
each and every student to meet the extreme growing challenges in job market. It is also known to
all of us that there is no alternative of practical knowledge and the practical knowledge is much
more durable and useful than the theoretical knowledge. This study will help us to get a true
picture of the practical business world, particularly of banking business and also to attain
practical knowledge on the various spheres of banking business. So this study is of paramount
importance for each and every student regardless of his/her study area or disciplines

1.3 Origin of the Report

As a partial fulfillment of the MBA program University of Dhaka, I got placement as an
internee at the Mirpur Branch of Shahjalal Islami Bank Limited on a 3 months internship
program. This report is the outcome of my experience at the bank during the internship
period. One internship program is an attempt to provide business students an orientation
to a real life business situation in which we can observe and evaluate the use and
applicability of the theoretical concepts, which were taught in the classroom. As a student

2
of business administration, I preferred to complete my internship program in a Financial
Institution like Bank. Then I got a chance to complete the program in a leading private
commercial bank; Shahjalal Islami Bank Limited My internship topic is Investment
Management & Performance Evaluation of Shahjalal Islami Bank Ltd.

Shahjalal Islami Bank Limited is a place where I could learn the business dealings. This
organization has created a positive image to the customers mind by providing better service. This
bank has introduced some modern banking scheme that has got high market demand. As it
maintain the pace with the competitive business world, its activities, culture, philosophy and style
leads an intern student to be the best at any field of working life. As an intern student I have got
the opportunity to work with this organization for three months and acquire idea about real
business world.

1.4 Topic of the Report:

To write a report it is necessary to select a topic. A well-defined topic reflects what is going on to
be discussed throughout the report. The topic that has been assigned by organization supervisor is
Performance Evaluation & Investment Management of Shahjalal Islami Bank Ltd..

1.5 Scope of the Report

As I was working in the Shahjalal Islami Bank, Mirpur Branch, I got the opportunity to learn
different part of banking system. The supervisor divided the whole banking system in three parts;
as a result I got the opportunity to work in all the three divisions. This are-

General Banking Division.

Credit Division.
Foreign Exchange Division.

I had the opportunity to gather information about-

An overview on Shahjalal Islami Bank Limited.

Financial Performance of Shahjalal Islami Bank Limited.
Who and why people look for loans.
The customers who mainly look for this scheme, their income level, occupation, age
group, habitants etc.
What are the benefits those customers look in taking the various loans.
Habit and life style of the customer who takes the loan.

3
 From where they become acquainted about the scheme.
The reason of becoming defaulter.
A quantitative comparison with another same nature Bank (EXIM Bank).

1.6 Objective of the Report:

1.6.1General objective of the Report

The general objective of this project is to complete the Internship. As per requirement of MBA
program of University Of Dhaka, one student need to work in a business organization for three
months to acquire practical knowledge about real Business operation.

1.6.2 Specific objective of the Report

To present an overview of Shahjalal Islami Bank Limited.

A general description of the banking activities of Shahjalal Islami Bank Limited.
To submit a brief description about the Investment Department or Credit Division
and their activities.
To suggest remedial measurement for the improvement of the whole process of the
Investment Department.

1.7 Methodology of the Study:

Although there were so many limitations, it was tried to use both the primary and secondary
sources of collecting information to make the report presentable with as less abstraction as
possible.

1.7.1 Type of Research:

In this report I will describe the performance Evaluation & Investment Management of Shahjalal
Islami bank limited. So according on the base of objective this research is called exploratory
research,

1.7.2 Sources of Information:

A. Primary data
Primary data is always known as survey data. This type of data is collected from the respondent.
For this project personal Interview with the customer has been conducted. When it became

4
impossible to conduct face to face interview I collected the primary data by using the Telephone
Interview
B. Secondary data
Data that were published before for some other reason can be collected using internal and
external sources.
i) Internal Secondary data: To furnish the report properly some papers has been
collected form the officials of Shahjalal Islami Bank Limited. Information from
annual reports, journals, newspapers and other published documents have been used.
Besides other published information about the organization, depth interview of the
branch manager and second branch manager have also taken. The information mainly
about various investment schemes was taken from the authorized officer who deals
with this scheme.
ii) External Secondary Data: For better interpretation some data has been collected
from Bangladesh Bank. Internet Browsing is also one source of external Secondary
data. Others are-

Brochures of Shahjalal Islami Bank Ltd.

Annual Report (2003-07) of SJIBL
Guidelines of different Investment and loan schemes manual.
Deferent types of journals on SJIBL
Leaflets of SJIBL
Net browsing
1.8 Limitations of the Report:
Although I have obtained wholehearted co-operation from employee of SJIBL, Mirpur Branch
and Head Office, they could not manage enough time to deal with my report. On the
other hand, as it was the new branch, they were not able to give me much documents and
papers. On the way of my study, I have faced the following problems that may be terms
as the limitations/shortcomings of the study.

Budgeted times for the Study:

The first obstruct is time itself. Due to the time limit, the scope and dimension of the study has
been curtailed. Due to the short time it was not possible me to do random sampling and conduct
with the respondent by going everywhere.

5
 Data Insufficiency:
For better interpretation I had to collect some information from the Head office. But because of
some divisional and confidential problem, I could not get enough information.The Mirpur Branch
is a new Branch. So for better interpretation I could not get sufficient data.

Lack of Records:
Sufficient books, publications, facts and figures are not available.
Lack of structured data flow:
Lack of structured and current information as the Banks policy does not permit to disclose
various data related to my study and this is the major problem among all the problems, I have
encountered with.
Work on Particular topic:
This report only focuses on the investment department activities elaborately of Shahjalal Islami
Bank Ltd. It does not cover other major activities, such as
General Banking.
Foreign Exchange activities

6
 PART
PART22
ORGANIZATIONAL
ORGANIZATIONALPROFILE
PROFILEOF
OF
SHAHJALAL
SHAHJALALISLAMI
ISLAMIBANK
BANKLTD.
LTD.

7
 2.1 History & Background:
The Shahjalal Islami Bank Limited was incorporated as a public limited company as on 1 st
day of April 2001 under the Companies Act. 1994. The Bank started its commercial operation on
May 10, 2001. The Bank has made a significant progress within a very short period of its
existence and occupied an enviable position among its competitors after achieving remarkable
success in all areas of business operation. The authorized capital of the Bank is Tk. 4000 million
and Paid up capital of the Bank stood at Tk. 2740 million as on 31 December 2010. The total
equity (capital and reserves) of the Bank as on December 31, 2009 stood at Tk. 5430 million.

Name of the
Shahjalal Islami Bank Limited
Company
A public limited company incorporated in Bangladesh on 1st April 2001
Legal Form under the companies Act 1994 and listed in Dhaka Stock Exchange Limited
and Chittagong Stock Exchange Limited.
Commencement
10th May 2001
of Business
Uday Sanz, Plot No. SE (A)
Head Office 2/B Gulshan South Avenue,
Gulshan 1, Dhaka-1212.
Telephone No. 88-02-8825457,8828142,8824736,8819385,8818737
Fax No. 88-02-8824009
Website www.shahjalalbank.com.bd
SWIFT SJBL BD DH
E-mail sblho@shahjalalbank.com.bd
Chairman Alhaj Mohammed Solaiman
Managing
Muhammad Ali
Director
Auditors M/S. Syful Shamsul Alam & Co.
Chartered Accountants
Paramount Heights
65/2/1 Box Culvert Road (level-6)

8
 Purana Paltan, Dhaka-1000
Phone: 88-02-9555915, 9560332
M/S K.M Hasan & Co.
Chartered Accountants
Tax Advisor 87, New Eskaton Road
Dhaka.
Phone: 88-02-9351457, 9351564
Hasan & Associates
Legal Advisor Chamber of Commerce Building
(6th floor), 65-66 Motijheel C/A, Dhaka
No. of Branches 52
No. of ATM Booth 13
No. of SME
07
Centers
Off-Shore banking
01
Unit
No. of Employees 1404
Stock Summary:
Authorized
Tk. 4,000 million
Capital
Paid up Capital Tk. 2,740.10 million
Face Value per
Tk. 100
Share

2.2: Vision of SJIBL

To be the unique modern Islami Bank in Bangladesh and to make significant contribution to
the national economy and enhance customers trust & wealth, quality investment, employees
value and rapid growth in shareholders equity.

2.3: Mission of SJIBL

To provide quality services to customers.
To set high standard of integrity.

9
To make quality investment.
To ensure sustainable growth in business.
To ensure maximization of shareholders equity.
To extend our customers innovative services acquiring state-of-the-art technology blended
Islamic principles.
To ensure human resource development to meet the challenges of time.
2.4: Strategies of SJIBL
To strive for customers best satisfaction & earn their confidence.
To manage and operate the bank in the most effective manner.
To identify customers needs and monitor their perception towards meeting those needs.
To review and update policies, procedures and practices to enhance the ability to extend
better services to the customer.
To train and develop all employees and provide them adequate resource so that the
customer needs are reasonably addressed.
To promote organizational efficiency by communicating company plan, policies and
procedures openly to the employees in a time fashion
To cultivate a congenial working environment.
2.5 Organizational Structure
There are different wings to consist the organizational structure of SJIBL. There are
Board of Directors
Board Committees
Executive Committees
Policy Committees
Management Team
Management of SJIBL:
The Board of Directors consists of eminent personalities from commerce and industry of the
country. Mr. Sajjatuz Jumma, the founder Chairman of the Board of Directors, is a businessman
besides being an eminent personality of the country.

The Bank is manned and managed by highly qualified and efficient professionals. The Managing
Director of the Bank is Mr. Muhammad Ali who has rich experience of managing both the
nationalized and the private sector banks as Managing Director.

10
 2.6: Structural Management of SJIBL:

Organization ChartChairman
of Shahjalal Islami Bank Ltd.

Board of Directors Sponsors

Managing Director

Deputy Managing Director Deputy Managing Director

GSD, CAD, A&I, GB, D&M ID, IT, CREDIT, R&P

Executive Vice President/

Company Secretary

Senior Vice President Senior Vice President Senior Vice President

Vice President

Senior Asst. Vice

President

Asst. Vice President

First Asst Vice President

Executive Officer
Abbreviations:

Senior Officer GSD General Service Division

CAD Central Account Division
ASI Audit and Inspect
Trainee Senior Officer
CB Central Bank
D&M Developing and
Officer Marketing 11
ID International Division
R&P Research & Planning
Trainee Officer
2.7 Branch Expansion:
The Bank commenced its business on May 10, 2001 by opening its 1 st branch, i.e. Dhaka Main
Branch at 58, Dilkusha, Dhaka obtaining the licence from Bangladesh Bank, the central bank of
Bangladesh. Its corporate Head Office is situated at 10, Dilkusha Commercial Area, Jiban Bima
Bhavan, Dhaka - 1000. The Bank opened 2 (Two) branches in 2001, 6 (Six) branches in 2002, 2
(Two) branches in 2003, 2 (Two) branches in 2004, 4 (Four) branches in 2005, 5 (Five) branches
in 2006 & 2007. Upto September 31, 2009 SJIBL established 51 branches to all over the country.
to give a cordial service to their customers. Branch Network of Shahjalal Islami Bank Ltd.:

SYLHET
RAJSHAHI 4
4 Branch

DHAKA

28 Branch

KHULNA
3 Branch

CHITTAGONG
BARISHAL 1 10 Branch
br 1br11 branch

12
 Figure:
There are 6 SME service Centres, 2-9 Branch
1 Off-Shore NetworkUnit
Banking of SJIBL
and 5 Brokerage house.

2.8: Human Resources Development

SJIBLs policy on human resources management is proactive. SJBL believes that investment in
human resource development is the key to maintaining sound health of the bank. The employees
of the bank attend training program/ seminar, workshop both in home and abroad. The training
center of the bank has been arranging various courses, workshop and seminars on important
aspect of banking. This bank invites experts of banking sector for imparting training to its
employees to meet the above challenges. To keep the employees motivated, incentives,
performance award, promotion and accelerated promotion are given on a regular basis .

2.9: Information Technology

Main objective of the bank is to take care of different economic group of the society and meet
their all type of banking requirements stretching its service to the door step of the people with the
help of information technology gradually. SJBL is providing customer service through online
facilities. SJIBLs ultimate aim is to enable its respected and valued clients to shop under the
same roof. In line with that JBL VISA DEBIT CARD, SMS/push pull services have already been
introduced. Besides clients are also being facilitated by the service of REUTERS, SWIFT,
Western Union Money Transfer etc.

2.11: Corporate Governance

The Board of Directors of the bank consists of successful distinguish personalities emerging from
area of trade, commerce and industries. The bank conducts its business and operations under the
policy, directions and guidelines of the Board. The bank has also a Shariah Council consisting of
prominent Faquih, Economists, Lawyers, Bankers to advise and guide the Board and the
Management of Shariah matters relating to the business and operations.

13
Under the able guidance of the Board of Directors and the Shariah council, the professional
management team carries out the business operation of the bank, ensuring good governance
practicing sound, best corporate and risk management process. The result that was achieved by
the bank so far is due to the constant guidance, cooperation and support of the Board and Shariah
Council and devoted, dedicated and hard work of the management team and all functionaries of
the bank.

2.12: Products
Bank means mobilizing fund from surplus unit and deployment of fund for deficit unit. SJIBL
mobilize its fund from surplus unit through different types of deposit schemes and deployment
this fund for deficit unit through various investment schemes. So the main products of SJIBL are
different kinds of deposits and investment schemes.

2.12.1: Deposit Scheme

The mobilized deposits were ploughed back in economic activities through profitable and safe
investment. These types of deposit schemes of SJIBL are:
Mudaraba Monthly Income Scheme
Mudaraba Double/Triple Benefit Scheme
Mudaraba Monthly Deposit Scheme
Mudaraba Millionaire Scheme
Mudaraba Hajj Scheme
Mudaraba Housing Deposit Scheme
Mudaraba Cash Waqf Scheme

Other than these deposits schemes SJIBL also operate some traditional deposit schemes these are:
Al-Wadia Current Deposit
Mudaraba Saving Deposit
Mudaraba Short Notice Deposit
Mudaraba Term Deposit
Mudaraba Scheme Deposit

14
SL No. Nature of Deposit Taka in Million % of Total Deposit
1 Al-Wadia Current Deposit 1609.95 3.39%
2 Mudaraba Saving Deposit 3072.78 6.47%
3 Mudaraba Short Notice Deposit 1886.96 3.98%
4 Mudaraba Term Deposit 27578.74 58.11%
5 Mudaraba Scheme Deposit 10602.78 22.34%
6 Other Deposits 2708.02 5.71%
Total 47459.23 100.00%
Table 2.12.1: Deposit Mix of 2009

Exhibit 2.12.1: Deposit Mix of 2009

15
 Exhibit 2.12.1: Trend of Deposit from 2005 to 2009

2.12.2: Investment Schemes

The bank entertains good investment clients, having credit worthiness and good track record. The
bank has different profitable investment projects these are:

Mudarabaha
Bi-Muajjal
Hire Purchase and Ijara
Investment Against L/C
Bill Purchase/Discounted
Investment Against Scheme Deposit
Quard

The bank has got a few investment schemes to provide financial assistance to comparatively less
advantage group of people; which are:

Household Durable Scheme

Small Business Investment Scheme
Small entrepreneur Investment Program
Medium Entrepreneur Program
Housing Investment Scheme
Rural Investment Program
Car Investment Scheme
Woman Entrepreneur Investment Scheme

16
SL No. Mode of Investment Taka in Million % of Total Investment
1 Mudarabaha 8261.10 18.79%
2 Bi-Muajjal 19855.00 45.17%
3 Hire Purchase & Ijara 10520.72 23.93%
4 Investment Against L/C 17.32 .04%
5 Bill Purchase/Discounted 3588.62 8.16%
6 Investment Against Scheme 810.61 1.84%
Deposit
7 Quard 132.55 0.30%
8 Others 771.59 1.76%
Total 43958.26 100.00%
Table 2.12.2: Investment Portfolio of 2009

Exhibit: 2.12.2: Investment Portfolio of 2009

17
 Exhibit: 2.12.2 Trend of investment 2005 to 2009

Exhibit:2.12.2 Deposit and investment position

2.13: Services

18
Shahjalal Islami Bank Limited is an industry standard, Islami Shariah and latest technology based
modern bank. The bank is equipped with state-of-the-art technology and committed to provide
technology based modern banking to its valuable customers. Services provided by SJIBL are:

On Line Banking
SJIBL VISA Card
SMS / Pull Push Service
SWIFT

2.14: Departments of SJIBL:

All branches of Shahjalal Islami Bank Limited are divided into three departments:

General Banking Department.

Foreign Exchange Department.
Investment Department.
2.14.1 General Banking Department
General banking department is one of the most important departments of Shahjalal Islami Bank
Limited. Basically bank provides the main services to the customer through this department. In
general this section of the Shahjalal Islami Bank Limited is divided into five sections.

Accounts opening section

Cash section
Remittance section
Bills and clearing section
Accounts section

2.14.2 Foreign Exchange Department

Banks play a very important role in effecting foreign exchange transaction of a country. Mainly
transactions with overseas countries are in respect of imports; exports and foreign remittance
come under the purview of foreign exchange department. Banks are the vital sectors by which
such transactions are effected /settled. Central Bank records all sorts of foreign exchange
transactions. The other banks dealing with foreign exchange are to report to Bangladesh Bank

19
regularly (viz. daily, monthly, quarterly, yearly etc.). The foreign exchange department consists of
three sections. They are:

Import section
Export section
Foreign remittance section

2.14.3 Investment Department

Banking business consists of borrowing and lending. Bank act as an intermediary between
surplus and deficit economic units. Thus a banker is a dealer in money and credit. Banks accept
deposit from large number of customers and then lend a major portion of the accumulated money
to those who wish to borrow. In this process banks secure reasonable return to the savers, make
funds available to the borrowers at a cost and earn a profit after covering the cost of funds. Banks,
besides their role of intermediation between savers and borrowers and providing an effective
payment mechanism, have been allowed to diversify into many new areas of better paying
business activities.

2.15 SJIBL Activities:

2.15.1 Membership of Different Organization / Chamber

1. Bangladesh Institute of Bank Management (BIBM)

2. The Institute of Bankers Bangladesh (IBB)
3. Bangladesh Association of Banks (BAB)
4. Bangladesh Foreign Exchange Dealers' Association (BAFEDA)
5. Central Shariah Board for Islamic Banks of Bangladesh
6. Islamic Banks Consultative Forum (IBCF)
7. International Chamber of Commerce- Bangladesh
8. Society for Worldwide Inter-bank Financial Telecommunication (SWIFT)

2.15.2 Corporate Banking

We provide personalized solutions to all our customers. The Bank distinguishes and identifies
corporate customers' need and designs appropriate solutions accordingly.

20
Shahjalal Islami Bank Limited offers a complete range of financing and operational services to its
corporate client groups combining trade, treasury, investment and transactional banking activities.
We offer accurate solution whether it is project finance, term Investment, import or export deal,
working capital requirement. We are pledged bound to render efficient services to satisfy
customer needs.

Our experience in handling Corporate Banking business covers a wide span of businesses and
industries. We hold leverage on our expertise in the following sectors particularly:

Textile Spinning, Dyeing / Printing

Ready Made Garments
Agro processing industry
Edible Oil, Consumer and Diversified Industries
Industry (Import Substitute / Export oriented)
Food & Allied products
Paper & Paper Products
Engineering, Steel Mills
Chemical and chemical products etc.
Telecommunications.
Information Technology
Real Estate & Housing
Wholesale trade
Project Finance
Lease Finance, Hire Purchase, International Banking
Transport
Pharmaceuticals
Export Finance
Import Finance

21
 2.16 An Overview Of Mirpur Branch:
My study has completed at Mirpur branch, which is started on July 12, 2010 with the 14 efficient
& responsible employees. Although this Branch has past only one, it has created positive image
not only to the SJIBL but also to the customers. There are some efficient and effective bankers
workers in this Branch. The management of the Branch always tries to provide better service to
its customer and behave well with them. As a result they have got a huge number of accounts in
this branch. Last year this Branch also has stood fifth place among all Branches of SJIBL. As a
new Branch it is a tremendous victory for the management.

There are mainly three divisions in this Branch. The General Banking Division deals the day to
day transactions. This is highest busy department among all the three departments. The
Investment Division/Credit Division gives loan to the customer and monitor whether he repays
regularly or not. As the Branch did not become AD Branch yet, the foreign Exchange Division
deals their activities with the help of Foreign Exchange Branch of SJIBL.

2.16.1 Organ gram of MIRPUR branch:

SVP & MANAGER Assistant

Officer

FAVP & Deputy

Manager

Executive Officer Executive Officer

First Officer
Junior Junior
Officer Officer
(Cash)
Assistant Assistant Assistant
Officer Officer Officer
(Foreign (Comput
ex.) er)
Assistant Officer Assistant Officer

22
Mirpur Branch Started with initial deposit of Tk.12,23,04,014.84 as a new Branch of Shahjalal
Islami Bank Ltd.. As on end of the September 30, 2008 it stood Tk. 23,62,45,411.38.
2.17: WORKING EXPERIENCE AT SJIBL:

2. 17.1 INTRODUCTION:
Internship has provided me the opportunity to coordinate the theoretical knowledge that I have
gathered in BUBT with the Practical field. Although three months is not a very long period to
learn the whole thing that usually occurs in an organization, I tried my best to learn as much as I
could.

The supervisor divided my job into three parts. 1) The general Banking department 2) The
Credit /Investment division and 3) The Foreign Exchange department. At first I was placed to the
General Banking department. I worked there for 20 days. Then I moved to the Credit department.
I also worked there for 20 days and finally I moved to the Credit department to work there for 20
days. The supervisor kept the rest 30 days for me to collect information for the project and for
writing the project. As my main concern was to collect information from the Credit department, I
spent most of the time in the Credit department

2. 17.2 THE GENERAL BANKING DIVISION

At first I was placed to this Division. The officers gave all the briefings about this Division.

GENERAL BAKING DIVISION:

The main business of this Division is dealing with Deposit. There are two types of Deposit in this
Branch.

Demand deposits: These deposits are withdrawal of money without notice. There are two types
of Demand deposit in this Branch.

Al-Wadia Current Deposit.

MudarabaSavings Deposit

Time deposits: A deposit which is payable at a fixed date or after a period of notice is a time
deposit. I fond two types of Time deposit in the Branch.

23
 Mudaraba Term Deposit Receipt (MTDR)
Mudaraba Short term deposit (MSTD)

Task I handled in this Division is:

Issuing Cheque Book.

Opening Account.
Opening MTDR, MSD, MDS, Special savings Scheme, Azibon Pension scheme etc.
Demand Draft (D.D)
Telegraphic Transfer (T.T).
Mail Transfer (M.T)
Payment Order (P/O)
Travelers Cheque (T.C)

Cheque Book issue is a very sensitive issue because most of the fraud occur through this cheque
book. To open an individual savings account one need to have an introducer in this Bank. But to
open a current account one needs to submit the trade license. And if it is Partnership Company,
the customers need to submit the partnership deed. I also dealt with opening other deposit scheme
like Millenure Scheme, Digun Bridhy Prakalpa, special savings Scheme etc. I also dealt with
receiving documents/ letters. In clearing section, I learned about Outward Bill Collection (OBC),
Inward Bill Collection (IBC), and Inter bank Bill Transaction. Account (IBTA), and Endorsement
etc. The bank has to keep record of the collecting cheque & return cheque in the registered book
and some other record keeping books and requires preparing particular schedule paper for
sending to the head office within 3 p.m. everyday. In the Transfer Register the Debit and the
Credit balance should be matched. Otherwise they need to recalculate the whole transaction
again. The total amounts of every record have to exactly same. I had to work in the deposit
section where I have gathered high knowledge about banking deposit. My supervisor told about
different types of deposit scheme of the Bank and how they operate all of them. I become myself
acquainted with different kinds of deposit of this Branch. This Branch mainly deals with ACD,
MDS, MSD, and MTDR I also learned about the local remittance system of the branch. I had to
write voucher of pay order, DD & TT and also transferred it into the register book. I saw that, it
was very essential for every DD, TT & PO to match the test number. If the test number didnt

24
match, then the authority cancelled that. There is one responsible officer who deals with the daily
voucher. He needs to check all the voucher used previous day and make a Muri of those
vouchers. End of the day the officer needs to receive all the vouchers from every section to keep
all the vouchers together. I got the opportunity to become acquainted with these facts. The cash
in charge and the man who posts the transaction in the computer need to match end of the day.

2. 17 .3 INVESTMENT DIVISION:
This is the place where I have spent most of my intern time duration. My intern supervisor is the
head of this Division. So I have the opportunity to learn about the different functions of this
division. The main business of a bank is to provide Credits to the customers. But if the
management does not understand the customers intention the bank might loose huge amount
money from that project. This department exercises the lending function; therefore, distribute its
funds among various assets in a manner as to drive sufficient income. The different tasks I found
in this division are as follows:
Except the proposal of different loan from the customer.
Verifying the customers.
Investigate the customers work place.
Lending Risk Analysis (LRA)
Send report to the CIB for bigger loans
Issuing loan for the customer.
Collecting Charge documents from the customers
Issuing CCS, SOD, small loan, Doctors credit scheme etc.
Monitoring the recovery
Report to the head office about recovery rate of different
Sending letters to the defaulter.
Contact with defaulters etc.

My supervisor told me about all the factions of this department and how they deal with theses
factors. Secured overdraft is one the important task of this Division. The bank gets 16% interest
from this loan. A person can take loan from his or her fixed deposit. Consumer Credit scheme is
another important task of this division. When a loan is issued to the customers the bank needs to
take charge documents from the party. If the party becomes defaulter and the bank requires
submitting sue against that party charge document help the bank a lot. This division needs to
monitor the recovery rate of each month. The responsible officer sends the report about the

25
condition of the loan each and every month. So the officer collect information from the cash
department whether all the customers repaid the loan not. After getting the information he needs
to send letters to the defaulters for repaying the loan immediately. Otherwise he needs to contact
personally with the customers physically or through telephone. In lending, the most important
step is the selection of the borrower. Due to the asymmetric information and moral hazard, banks
have to suffer a lot due to the classified loans and Credits, which weakens the financial soundness
of the bank. If the selection of the borrower is correct, i.e. the borrower is of good character,
capital and capacity or of reliability, resourceful and responsible; the bank can easily get the
return from the lending. For this the division needs to prepare lending risk Analysis for the
persons who want to take bigger loans. And send it to the head office so that that they can verify
all the things and issue it for the customers.

In this division I had to observe all the things and had to help the officer to learn about this
division. Some times I had to go with my supervisor to investigate the customer physically.

2. 17.4 FOREIGN EXCHANGE DIVISION:

This is one of the busy departments, I have found in the Mirpur Branch. There are three people
working from morning to till evening. The big customers that means the customers who have
taken higher amount of loan from this Branch needs to have busy with their business. The Export
and Importers need to for opening L/C or go for Back to Back L/C.
Task of this Division:

Issue L/C.
L/C Advising & Conforming.
L/C Collection & Negotiating.
FDBP.

This Branch not an AD branch. So the branch needs to do their foreign dealings with the help of
Foreign Exchange branch. On the first day of this division, the officer told me about all the term
and conditions of this division. He made me understand about how to open letter of Credit and
Back to Back L/C what are the requirements of opening L/C, advising and conforming of L/C.
This was a great opportunity for me to gather knowledge about impact of foreign trade as well as
the policy and regulation of Bangladesh bank.

26
In this division I just discussed with different terms and read some files and documents. Because,
in this department the job were more-or-less based on document verification by getting true and
perfect information. There are formats of making documents in the computer. The authorized
person just changes the numbers & other required things from the format and prepares documents
for the customers.

PART
PART33
THEORETICAL
THEORETICALBACKGROUND
BACKGROUND

27
PART - 3.0 THEORETICAL BACKGROUNDS:

28
3.1 Introduction:
Islami 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 operation. For millions of Muslims, banks were institution to be avoided.
Islam is a religion, which keeps Believers from the tellers window. Their Islamic beliefs prevent
them from dealings that involve usury or interest (Riba). Yet Muslim needs banking services as
much as anyone and for many purposes: to finance new business ventures, to buy a house, to
facilitate capital Investment to undertake trading activities and to offer safe place for saving.
Muslims are not averse to legitimate profit as Islam encourages people to use money in Islamic
ally legitimate ventures not just to keep their funds idle.

However in this fast moving world more than 1400 years after the Prophet (S.A.W) can Muslims
find room for the principles of their religion? The answer comes with the fact that a global
network of Islamic banks investment house and other financial institution have started to take
shape based on the principals of Islamic finance laid down in the Quran and the Prophets
traditions some 14 centuries ago. Islamic banking based on the Quranic prohibition of changing
interest has moved from a theoretical concept to embrace more than 100 banks operating in 40
countries with multibillion-dollar deposits worldwide. Islamic banking is widely regarded as the
fastest growing sector in the Middle Eastern financial services market. Exploding onto the
financial scene barely thirty years ago an estimated $US100 billion worth of funds are now
managed according to Shariah.

The best-known feature of Islamic Banking is the prohibition on interest. The Holy Quran forbids
the charging of Riba on money lent. It is important to understand certain principles of Islam that
underpin Islamic finance. Muslim scholars accepted the word Riba to mean any fixed or
guaranteed interest payment on cash advances or on deposits.

3.2 Evolution of Islamic Banking:

Islamic Banking comes into reality through a long theoretical exercise of several renowned
Islamic scholars and economists. The first attempt to establish an Islamic financial institution
took place in Pakistan in 1950. In the modern world, the pioneering role in establishing the first
Islamic Bank in 1963 named Mit- Ghamar Saving Bank in Egypt at rural area of Nile Delta.
As on today, there are many Islamic financial institutions operating through out the world

29
covering both Muslim and non-Muslim countries of various socio-economic environment.

3.3 Common Practices of Islamic Banks in Mobilization of Funds:

The common practices of Islamic banks in the sources of funds may be described as follows:

3.3.1. Current Accounts:

All Islamic banks operate current account on behalf of their client individuals and
business firms. These accounts are operated for the safe custody of deposits and for the
convenience of customers.

3.3.2. Saving Account:

1. Savings accounts are opened with the condition that deposits provide the bank with an
authorization to invest and
2. Depositors have the right to deposit and withdraw funds.
3. The profits in savings accounts are calculated on the minimum balance maintained during
the month
4. A minimum balance has to be maintained in order to qualify for a share in profit.

3.3.3. Investment Deposit:

Investment deposits are Islamic banks counterparts of term deposits or time deposits in the
conventional system. They are also called profit and Loss-Sharing (PLS) Accounts or
Participatory Account. However they can be distinguished from traditional fixed term deposits in
the following manner:

3.4 Islamic Financial Vehicles:

Islamic banks around the world have devised many creative financial products based on the risk
sharing and profit sharing principles of Islamic banking. For day to day banking activities a
number of financial instruments have been developed that satisfy the Islamic doctrine and provide
acceptable financial returns for investors.

3.4.1. Al-Mudaraba (Profit sharing):

Important features of Mudaraba are as follows:

30
 1. The division of profits between the two parties must necessarily be on a proportional
basis and cannot be a lump sum or guaranteed return.
2. The investor is not liable for losses beyond the capital he has contributed.
3. The mudarib does not share in the losses except for the loss of his time and efforts.

3.4.2. Murabaha:

This is the sale of a commodity at a price, which includes a stated profit, which includes a stated
profit known to both the vendor and the purchaser. This can be called a cost plus profit contract.
The buyer in deferred payments usually pays the price back.

3.4.3. Musharaka (Profit and loss sharing)

This is a partnership normally of limited duration formed to carry out a specific project. It is
therefore similar to a western- style joint venture, and is regarded by some as the purest from of
Islamic financial instrument, since it conforms to the underlying partnership principles of sharing
in and benefiting from risk.
3.4.4. Ijarah (Lease financing)

Another popular instrument is leasing which is designed for financing an asset or equipment. It is
a manfaah (benefit) or the right to use the asset or equipment. The lessor leases out an asset or
equipment to the client at an agreed rental fee for a pre-determined period pursuant to the
contract.

3.4.5. Ijara Wa Iktina (Hire Purchase)

Equivalent to the leasing and installment loan, hire- purchase, practices that put millions of
drivers on the road each year.
3.4.6. Muqarada

This technique allows a bank to flat what are effectively Islamic bonds to finance a specific
project. Investors who buy muqaradah bonds take a share of the profits of the project being
financed, but also share the risk of unexpectedly low profits or even losses.

3.4.7. Bai-Salam

31
A buyer pays in advance for a specified quality of a commodity, deliverable on a specific date at
an agreed price. This financing technique, similar to a futures or forward- purchase contract is
particularly applicable to seasonal purchase but it can also be used to buy other goods in cases
where the seller needs working capital before he can deliver.

3.4.8. Istisna (Purchase order)

This is a sale and purchase agreement whereby the seller undertakes to manufacture or construct
according to the specification given in the agreement. It is similar to bai salam the main
distinction being the nature of the asset and method of payment. Istisna generally covers those
things which are customarily made to order and advance payment of money is not necessary as
required in bai salam.

3.4.9. Bai-Muajjal

In short, it is a sale on credit. Bai-Muajjal may be defined as a contract between a buyer and
seller under which the seller sells specific goods to the buyerat an agreed fixed price payable at a
certain fixed future date in lump sum or within a fixed period by fixed installments.

3.4.10. Hire Purchase under Shirkatul Melk

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

3.4.11. Quard-Al-Hasan

It is a virtuous loan. Through this mode, Bank provides loan to its customer for a certain period,
which bears no profit/loss/compensation.

3.4.12. Direct Investment

32
Islamic Bank without the help/assistance of any client may directly invest its fund/capital in
share, securities, business and industry. Profit and loss in this business is exclusively, the internal
matter of the Bank.

3.5 Tools for Appraisal Credit:

The Cs of Good and Bad Loan

In addition to the formal credit appraisal, the credit officers of SJIBL try to judge the possible
client based on some other criteria. These criteria are called the Cs of good and bad loans. The
Cs are described below.

Make sure that the individual or company you are lending to have
Character
Outstanding integrity.
Make sure that the individual or company you are lending to have the
Capacity
capability of repaying your loan.
Understanding the business and economic conditions can and will change
Conditions
after the loan is made.
Make sure that the individual or company you are lending to have an
Capital

Collateral
PART
PART44
appropriate level of investment in the company.
Make sure that there is a second way out of a credit but do not allow
that to drive the credit decision.
Complacency TYPES
TYPESOF
OFINVESTMENT
Do not rely on past history to continue. Stay alert to what can go wrong in
any loan. INVESTMENT
Remember that documentation, follow-up and consistent monitoring is
Carelessness
essential to high quality loan portfolios.
Share credit objectives and credit decision-making both vertically and
Communication
laterally within the bank.
Make sure that you understand the risks; particularly the downside
Contingencies possibilities and that you structure and price the loan consistently with
that understanding.
Competition Do not get swept away by what others are doing.

33
PART - 4.0 TYPES OF INVESTMENT:

34
The word comes from the Latin word credo meaning I believe. It is a lenders trust in a
persons/firms/companys ability or potential ability to command goods or services of another in
return for promise to pay such goods or services at some specified time in the future. The making
of loans and advances has always been prominent profitable function of the Bank. The investment
facilities extended by Shahjalal Islami Bank Limited, Mirpur Branch can be classified by
following ways:

1. Bai-Muajjal (F.O.) Investment Scheme.

2. Small Business Investment Scheme.
3. Housing Investment Scheme.
4. Car Purchase Investment Scheme.
5. Household Durable Investment Scheme.
6. Bank Guarantee (Non funded).

4.1 Bai-Muajjal (F.O.) Investment Scheme

Depositors may even be in need of money to purchase required products/goods for their
personal/family use or to meet urgent family requirements. In such a situation, they require
investment facility against their deposit with the Band. Shahjalal Islami Band Limited (SJIBL) is
also providing such investment facility to its depository customers as part of financial obligation
(FO). To address this investment facility it is necessary to have a policy guideline for investment
against deposits considering the same as cash equivalent security.

4.1.1. SJIBL depository schemes:

SJIBL has introduced the following depository schemes for its customers:

1. Monthly Deposit Scheme (MDS).

2. Millionaire Scheme (MS).
3. Multiple Benefit Deposit Scheme (MBDS).
4. Monthly Profit Scheme (MPS/ Monthly Income Scheme (MIS).
5. Mudaraba Term Deposit Scheme (MTDR).
6. Double Benefit Scheme (DBS)
4.1.2. Features of the scheme:

35
The features of the scheme will be as mentioned below:

1. Revolving/Term.
2. Repayable at a time or by installments
3. In case of term facility maximum repayment period will be one year with renewal option.
4. In case of term facility maximum repayment period will be three years.
5. Profit will be charged at such a rate so that the spread of profit (spread between the rate
of profit on deposit and rate of profit on investment) will be minimum 3.00%.
6. The deposit A/C or the deposit instrument will be kept under lien/ pledge with our Bank
as security.

4.1.3. Procedure for forwarding Investment Proposal to HO:

1. The investment proposal for new investment / renewal / enhancement to be forwarded.

2. The investment proposal to be forwarded with the following supporting papers /
documents:

Client(s) application for the investment / renewal / enhancement.

The signature of the client(s) in the application to be verified clearly by the branch
official.
In case of renewal / enhancement, the statement of the existing facility duly signed by the
branch official to be provided.
In case of facility against Monthly Deposit Scheme (MDS) and Millionaire Scheme
(MS), the statement of the deposit account duly signed by the branch official to be
provided.

4.1.4. Security against the investment facility:

Incase of Monthly Deposit Scheme (MDS) and Millionaire Scheme (MS), the deposit
account will be marked lien till full and final adjustment of the liability.
Incase of facility against MBDS/MIS/MPS/MTDR, the deposit account will be pledged
till full and final adjustment of the liability.
Bai-Muajjal Agreement and other charged documents to be executed as per the nature of
the investment are as follows:

4.2 Small Business Investment Scheme

36
Keeping this dire issue in view, Shahjalal Islami Bank Limited has introduced an investment
scheme titled as Small Business Investment Scheme for the small businessmen and self-
employed persons. The scheme will facilitate committed small industries & business enterprises
and self employed persons who want to promote & propagate their business further with
magnitude & direction.
4.2.1. Mode of Investment:

1. Hire Purchase under Shirkatul Meelk (HPSM)

2. Lease
3. Bai-Muajjal-Commercial-TR
4. Bai-Muajjal (Term)

4.2.2. Ceiling of Investment:

1. Investment to the tune of maximum TK 5,00,000/- (Taka five lac) only shall be given
preference against single client exposure under the scheme. At the first step, investment
to the tune of maximum TK 5,00,000/-(Taka five lac) only be allowed.
2. Maximum ceiling of the investment will be TK 3,00,000/- (Taka three lac) only for any
region other than Dhaka & Chittagong Metropolitan Area.
3. Bank investment-Client equity ratio where applicable shall be 60:40.

4.2.3. Tenure of Investment:

1. In case of HPSM, Lease: Maximum tenure will be 3 years i.e. 36 months, but
and Bai-Muajjal (Term) Initially investment maximum tenure will be 2 years
allowed as grace period to the deserving client)

2. In case of Bai-Mujjal : Maximum tenure will be 1 year i.e. 12 months and

commercial-TR renewable on satisfactory performance
.

4.2.4. Rate of Profit/Rent and Fees:

Rate of profit/Rent is 15.00% p.a.

37
Fees are as follows:

Application Fee of TK 100/- (non refundable);

Processing Fee of TK 500/- (non refundable);
4.2.5. Supervision Charge:

Supervision charge will be @ 2.00% per annum. The same will be debited at a time on Banks
principal investment at the time of disbursement.
4.2.6. Risk Fund:

Risk fund will be @ 1.00% per annum. The same will be debited at a time on Banks principal
investment at the time of disbursement.

4.2.7. Security:

General Security for each case:

1. Hypothecation of Stock/Equipments.
2. The stock/equipments should be duly and properly insured to cover the risks of probable
hazards.
3. 01 (one) post dated master cheque in favor of SJIBL covering the investment.
4. Post dated cheque against each installment/deal.
5. Trust Receipt(s) duly executed by the Client along with delivery order(s) for each deal (in
case BMTR).
6. Personal guarantee of the client, spouse and adult son(s) & daughter(s), if any of the
client

Specific Security for the investment not exceeding TK 2, 00,000/-

1.3 Housing Investment Scheme:

Shahjalal Islami Bank Limited has designed the scheme titled, Housing Investment Scheme for
different income groups to provide them with a peaceful abode. The salient features of the
scheme are as follows:

38
4.3.1. Location of the facility

Initially the scheme shall be implemented in Dhaka, Chittagong, Sylhet and Narayangonj cities of
the country.

4.3.2. Ceiling of Investment

Maximum investment limit will be Tk. 75.00 Lac depending on the clients repayment capability
and actual cost of the construction/apartment under following norms:

Purchase of readymade New Apartment/House/Flat: 70% of Total Cost.

Purchase of readymade Old Apartment/House/Flat: 50% of Total Cost.
Construction of new house: 60% of Total Cost.

However investment to the extent of 30% of the cost of the apartment or cost of construction
(excluding the value of land) or cost price of readymade house (land & building) shall be given
preference.
4.3.3. Tenure of Investment

Repayment period will be from 1 year to maximum 20 years on case to case basis, under
prudential judgment of approving authority. Investment proposals with repayment period of 5
years shall get first preference and that up to 10 years shall get 2 nd preference.

Moratorium
For Investment Period
Period
New Apartment/House ready 3 months Up to 20 years
Old Apartment/House- not over 15 years Nil Up to 10-12 years
Construction 3 months Up to 20 years
Renovation/Extension Nil Up to 5 years
Remaining investment period
Taking over House Building Investment Nil with existing financer or 15
years which ever is lower.

4.3.4. Rate of Profit:

The rate of return (mid rate) will be 16.5% p.a. repayable & recoverable on a monthly basis and
the rate to be determined by the bank judging the money market situation from time to time.
Rebate @ 1% for regular & timely payment will be allowed at the discretion of the Bank.

39
4.3.5. Fees:

Application Fee of Tk. 500/- (non refundable).

Processing Fee of Tk. 5,000/- (non refundable)
Documentation Fee (non refundable) @ 1% of the investment amount payable after
sanction but before disbursement (one time).
Risk fund @ 1% of the investment amount payable after sanction but before
disbursement (one time)

4.3.6. Security:

Registered Mortgage of the related property along with Registered Irrevocable Power of Attorney
authorizing the Bank to dispose of the property including land where construction will be the
made flat or apartment to be purchased without intervention of the court.

4.3.7. Recovery of Banks Investment:

Repayment will be allowed only on monthly installment basis.

4.4 Car Purchase Investment Scheme:

Car Purchase Investment Scheme was previously known as Car purchase on Installment
Scheme. The revised policy, terms & conditions etc are as under:

4.4.1. List of Purchasable cars under the scheme:

The following brand new and reconditioned cars (without registered) will only be purchased
under the scheme:

1. Private Car.
2. Microbus.
3. Jeep.

4.4.2. Eligibility of the investment client:

The permanent employees working in the following organizations aged between 20 to 55 years
are eligible to avail investment facility under the scheme:

1. Government Organizations.

40
 2. Semi-Government & Autonomous Organizations.
3. Banks and Financial Institutions.
4. Senior teachers of University & Government College.
5. Executives/Officers working in any Multi-national Companies or in ant renowned Non-
governmental Organizations.
6. Except above the following persons will also be entitled for the facility under the scheme:

a. The genuine businessmen having valid trade license, vat certificate and TIN.

b. Acceptable persons to the Banks Management having strong Net Worth.

c. Different professionals like Doctors and Engineers.

4.4.3. Ceiling of Investment:

The highest ceiling of the scheme will be as under:

1. In case of New Car the maximum selling will be Tk. 40.00 lac (Taka forty lac)
2. In case of Reconditioned Car the maximum selling will be tk.30.00 lac.

4.4.4. Period of Investment:

1. In case of New Car the maximum investment period will be 05 (five) years.
2. In case of Reconditioned Car the maximum investment period will be 04 (four) years.

4.4.5. Mode of Investment:

1. Hire Purchase/Hire Purchase under Shirkatul Meelk.

2. Lease/Ijara.

4.4.6. Clients Equity:

1. In case of New, Minimum margin will be 10 %.

2. In case of Reconditioned, Minimum margin will be 20%.

4.4.7. Disbursement Procedure:

In respect to availability of required documents & information for approved of the Investment
facility and subsequent realization of the clients equity in full, the car by issuing Purchase
Order/Pay Order/Draft favoring the Branch will purchase the car by issuing Purchase Order/Pay

41
Order/Draft favoring the supplier and handover the same to the client within 03 (three) working
days.

4.4.8. Repayment Procedure:

The repayment of monthly installment shall be deposited latest by 10 th day of every month. The
repayment to be started from the next month of disbursement made on behalf of the client.

4.4.9. Pre-Payment of the Investment:

The client may adjust his/her outstanding investment partially or fully before the expiry.

4.4.10. Securities:

1. The owner ship of the car will be in the name of the Bank. After full and final adjustment
of the facility, the car will be transferred in the name of the client.
2. 1st class comprehensive insurance of the car is to be done for full investment period.
3. In addition to completion of all charge documents, the client will provide a undertaking
that (s) he will pay monthly installments regularly.
4. Each client will have to provide personal guarantee of two persons. The following
persons will be able to provide personal guarantee:

a. First Class Govt. Gazette Officer.

b. Bank Officers not below Principal Office.
c. Senior teachers of University/Government of College having high net worth.
d. Professionals like Doctors, Engineer having high net worth and minimum five
years experience.
e. Businessmen having high net worth and acceptable to the Bank.

4.4.11. Profit, Charges & Risk Fund:

Description

Rate of Profit @ 16.50% p.a. (Mid Rate).

@ 1.00% (to be realized one time before disbursement).

Service Charge

42
 @ 1.00% (to be realized one time before disbursement).
Risk Fund

It may be mentioned here that the client will get rebate@ 1.00% equivalent to the Risk
Fund deposited by the client before taking disbursement of the investment facility, if the
client pays all installment regularly as per schedule.
It is also to be noted that there will be no Margin, no Service Charge and no Risk Fund
in case of the Employee of Shahjalal Islami Bank Limited and Profit Rate to be
determined by the Bank from time to time.

4.4.12. Sanctioning Authority:

Managing Director shall approve all proposals under the scheme.

4.5 Household Durable Investment Scheme

Household Durable Investment Scheme (HDIS) was previously known as Household Durable
Purchase Scheme

4.5.1. Household Items:

Household Items means the following items:

Air-Conditioner/Air IPS/UPS/Stabilizer/FAX/Cell-
Electrical/Electronic goods
Cooler Phone.
Crockerys Computer Washing Machine

Knitting Machine (Home

Furniture and Fixtures Non-Commercial Generator.
Useable)
Oven Refrigerator
Photo Copier
Deep Fridge Two-in-One Three-in-One
Room Heater
CD/VCD/DVD Player Water Purifier

Water Cooler Water Pump Typewriter

Camera Different Kitchen Kits Ornaments for marriage

Any other different household items.

4.5.2. Eligibility of the client:

43
 In case of service holder minimum service length requirement is 3 years which may be
relaxed for the client having banking service;
In case of businessmen minimum business experience requirement is 5 years that may
be relaxed on special consideration.
The age of the client will be in between 20 to 55 years. Highest limit of the age may be
relaxed on special consideration.

4.5.3. Ceiling of Investment

Maximum celling of the investment will be Tk. 5.00 lac per client.
Size of the investment will be fixed as such the monthly installment against the
investment would not exceed 25% of clients monthly salary/income. However, the
condition may be relaxed by the Management of the Bank depending on the capability
to repay the installment of the client.

4.5.4. Basic feature of the Scheme

Type of Investment: Bai-Muajjal TR/Hire Purchase under Shirkatul Meelk.

Period of Investment: Maximum 03 (three) years.
Clients Equity: Minimum 25%. Preference will be given in case of highest equity .
Profit & Charges:

@ 16.00% p.a. or the rate to be determined by the

Rate of Profit
Bank from time to time.
@1.00% p.a. on approved limit to be realized
Service Charge
upfront.

Risk Fund @1.00% to be realized at the time of disbursement.

4.5.5. Repayment Procedure

Monthly Installment basis, the repayment to be started from the next month after disbursement
and shall be deposited latest by 10th day of the respective month.

4.5.6. Disbursement Procedure

44
Payment to be settled by issuing Pay Order favoring the vendor on realization of the clients
equity in full, well ahead of disbursement.

4.5.7. Pre-Payment of the Investment

The client may adjust his/her outstanding investment partially or fully before the expiry.

4.5.8. Guarantors for the facility

Personal guarantee from two persons having good financial means & standing and acceptable to
the Bank are needed. The Branch shall verify the guanines of the guarantors. At the time of
selection of guarantor, the following information to be followed:

4.5.9. Securities

In case of HPSM, the ownership of the item(s) shall be in the name of the Bank.
In case of Bai-Muajjal TR, Trust Receipt and Bai-Muajjal agreement is must.
Necessary charge document duly singed by the client.
One post dated master Cheque, Covering the facility amount (with profit).
Post-dated cheques against each monthly installment.
A declaration to be obtained from the client to the effect that he/she will adjust the
monthly installment on time as per schedule of the facility.

4.5.10. Sanctioning Authority:

Head Office shall approve all proposals under the scheme.

4.5.11. Supervision & Recovery

All the investment facilities under the scheme will be supervised investment in nature.
Supervision of end-use, constant follow-up and timely recovery of investment under the Scheme
should be given utmost importance. Branch must ensure proper supervision & follow-up of
investment in all respects by its official(s) including the Branch Incumbent initially, so that
recovery percentage under the Scheme remains at a desired level.

Induction of clients, verification and investigation of the clients and guarantors, supervision,
monitoring, follow-up and investment will be made by the different agency will be published
later on. But, initially, branches will start the scheme by the existing manpower.

45
4.6 Bank guarantee:

A bank guarantee has special significance in the business of banking as a means to ensure safety
of funds lent to the customers. In case, the borrower is unable to provide the security of tangible
assets, or the value of asset falls below the amount of the loans, and the borrowers personal
security is not considered sufficient, an additional security is sought by the banker in the form of
a guarantee given by a third party.

4.6.1. Nature of the Scheme

It is a non-funded investment. The bank does not pay money to the party. The bank only issues a
letter of guarantee to the party.
4.6.2. Terms and Condition

1. The banks legal advisor must verify all security documents.

2. When the principal debtor defaults in fulfilling this obligation or promise the liability
bestow on guarantor.
3. Bank reserves the right to cancel the terms and conditions partly or wholly at its direction
PART
PART55
without assigning any reason whatsoever.
4.6.3. Profit:
DOCUMENTATION
DOCUMENTATION&&SECURITY
SECURITY
The bank can earn profit by issuing the letter of guarantee by following two ways:

1. The bank get service charge for the letter of guarantee.

2. The bank can invest the security money to earn more profit.

46
PART 5: DOCUMENTATION:

An Islamic Bank is a financial institution that operates with the objective to implement and
materialize the economic and financial principles of Islam in the banking region. The main
function of an Islamic Bank is to extend investment facilities to its valued clients through
compliance of Islami Shariah and banning of the receipt & payment of any interest in any of its
operations. The investment facilities are given against mainly two types of securities. These are:

1. Movable: MTDR/MIS/DBS, Goods, commodities, etc.

2. Immovable: Land, Building, etc.

47
5.1 Document & Security

Before rendering investment facilities to its clients, bank has to create charges over the securities
through a number of agreements, papers that are called documents. Security is a cover against an
investment facility, which may be encashed at the time of default by a client. It is also meant to be
an insurance against an emergency. The customer should own it.

Primary Security: Goods/commodities for which a bank allows investment is called

primary security. These may be the stocks, machinery, etc.
Collateral Security: Any security other than primary security to be obtained to secure
the investment is deemed as collateral security. These may be land, land with building,
MTDR/MIS/DBS, Shares, etc.
Personal Security: It is the guarantee of a respective third party.

5.2 Modes of charging security:

1. Pledge
2. Hypothecation
3. Mortgage
4. Assignment
5. Lien &
6. Set-off

5.2.1. Pledge:

Pledge is the Bailment of goods as security for payment of a debt or performance of a promise.
Bailment is the delivery of goods by one person to another for some purpose, under a contract
that the goods shall be returned or otherwise disposed of according to the direction of the persons
delivering them, when the purpose is accomplished. The features of pledge are as follows:

Goods bailed/pledged must be movable property.

Ownership remains with pledge or (borrower)
Possession retains with pledge (Bank)

5.2.2. Hypothecation:

48
Hypothecation is a charge against property for an amount of debt where neither ownership nor
possession is passed to the creditor. Features of Hypothecation are:

Charge against a property for an amount of debit.

Goods remain in the possession of the borrower.
Equitable charge to the bank under document Letter of Credit.
Borrower binds himself to give possession of the hypothecated goods to the Bank when
called upon to do so.
It is a floating charge.
It is rather precarious.

5.2.3. Mortgage:

A Mortgage is a transfer of an interest in specific immovable property for the purpose of

securing the payment of money advanced or to be advanced, an existing or feature debt and the
performance of an engagement, which may give rise to a pecuniary liability. The transferor is
called Mortgageor and the transferee is called Mortgagee. The principle money and the
interest of which payment is secured for the time being are called Mortgage money and the
instrument by which the transfer is effect called Mortgage deed.

5.2.4. Assignment:

An Assignment means a transfer by one person of a right, property or debt to another person. The
person who assigns is Assignor and to whom is called Assignee. The features of pledge are as
follows:

It must be writing.
It must be signed by the assignor.
It must be absolute.
Not by way of charge only.
Notice is mandatory.

49
5.2.5. Lien:

Right of the creditor in possession of goods or securities belonging to a debtor to retain them until
a debt due from the letter is paid. Before lien the following conditions must be fulfilled:

Goods must be in the possession of the creditor in the ordinary course of the business.
Lawful debt.
Must not be any contract to the contrary.

Features of general lien are as follows:

Right for a general balance.

Does not have the right to sell the property.
Simply the right to retain.

5.2.6. Set-off:

It means the total or partial merging of a claim of one person against another by counter claim by
the later against the former. It is combining of accounts between a debtor and creditor so as to
arrive at the net balance payable to one or the other. Ingredients of set-off are as follows:

Mutual debt is for sums certain.

Debts to be due immediately.
Debts in same right.
No agreement to the contrary.
Letter of set-off or notice is required.

5.3 Different types of investment and documents there against:

Type of Investment Documents

Bai-Muajjal- Commercial TR Demand Promissory Note
Letter of Revival
(Revolving)
Letter of Disbursement
Letter of Continuity
Letter of Arrangement
Letter of Undertaking
Letter of Authority
Trust Receipt (Criminal case)
Purchase Schedule
Letter of Hypothecation

50

Hire purchase (Real
estate/Machinery/Car/Household)
Bank Guarantee (Revolving)
Murabaha Letter of Credit (Revolving)
Letter of Disclaimer (if applicable)
Bai-Muajjal Agreement
Balance Confirmation
Memorandum of Deposit of Title Deed
(Security of landed property)
Letter of Guarantee (Security belonging to 3 rd
party or personal guarantee)
Any other Documents Deemed Necessary to
Protect the Interest of the Bank
Demand Promissory Note
Letter of Revival
Letter of Disbursement
Letter of Arrangement
Letter of Undertaking
Letter of Authority
Hire Purchase Agreement
Balance Confirmation
Memorandum of Deposit of Title Deed
(Security of landed property)
Letter of Guarantee (Security belonging to 3rd
party or personal guarantee)
Any other Documents Deemed Necessary to
Protect the Interest of the Bank
Demand Promissory Note
Letter of Revival
Counter Guarantee
Letter of Authority
Balance Confirmation
Memorandum of Deposit of Title Deed
(Security of landed property)
Letter of Guarantee (Security belonging to 3rd
party or personal guarantee)
Any other Documents Deemed Necessary to
Protect the Interest of the Bank
Demand Promissory Note
Letter of Revival
Letter of Disbursement
Letter of Arrangement
Letter of Undertaking
Letter of Authority
Murabaha Agreement
L/C Application and Arrangement
Balance Confirmation
51

Murabaha Post Import TR (Revolving)
Murabaha Post Import Pledge
(Revolving)
Back to back Letter of Credit
(Revolving)
Memorandum of Deposit of Title Deed
(Security of landed property)
Letter of Guarantee (Security belonging to 3rd
party or personal guarantee)
Any other Documents Deemed Necessary to
Protect the Interest of the Bank
Demand Promissory Note
Letter of Revival
Letter of Disbursement
Letter of Arrangement
Letter of Undertaking
Letter of Authority
Trust Receipt (Criminal case)
Murabaha Agreement
Balance Confirmation
Memorandum of Deposit of Title Deed
(Security of landed property)
Letter of Guarantee (Security belonging to 3rd
party or personal guarantee)
Any other Documents Deemed Necessary to
Protect the Interest of the Bank
Demand Promissory Note
Letter of Revival
Letter of Disbursement
Letter of Arrangement
Letter of Undertaking
Letter of Authority
Letter of Disclaimer (if applicable)
Murabaha Agreement
Balance Confirmation
Memorandum of Deposit of Title Deed
(Security of landed property)
Letter of Guarantee (Security belonging to 3rd
party or personal guarantee)
Any other Documents Deemed Necessary to
Protect the Interest of the Bank
Demand Promissory Note
Letter of Revival
Letter of Disbursement
Letter of Arrangement
Letter of Undertaking
Letter of Authority
Murabaha Agreement
52
 L/C Application and Arrangement
Letter of Lien
Balance Confirmation
Memorandum of Deposit of Title Deed
(Security of landed property)
Letter of Guarantee (Security belonging to 3rd
party or personal guarantee)
Any other Documents Deemed Necessary to
Protect the Interest of the Bank

5.4 Different types of securities and formalities there against:

Name of Securities Formalities

a. Letter of Hypothecation of stocks duly insured, covering all
possible risks under banks mortgage to be obtained.
Stocks b. 1st charge on assets and book debts of the company to be
created with the Registrar of Joint Stock Company within 21
days from the date of disbursement.
a. Letter of Hypothecation of machinery duly insured, covering
all possible risks under banks mortgage to be obtained.
Machinery b. 1st charge on assets and book debts of the company to be
created with the Registrar of Joint Stock Company within 21
days from the date of disbursement.
a. The Car/Vehicle will be registered in the name of the bank at
clients cost.
b. The car shall be covered under comprehensive insurance
Vehicle
policy with reputed insurance company.
c. The Registration/Blue Book, Fitness Certificate etc. for the
vehicle shall always be kept up to date at clients cost.
a. Pledge of MTDR/MIS/DBS.
b. Marking of Lien on MTDR/MIS/DBS and issuing register
MTDR/MIS/DBS
c. Letter of Lien
d. Letter of Authority for encashment as and when required
Shares a. Pledge of Share Certificate.
b. Proper Lien to be marked with the issuing authority of the
share and to be duly acknowledged by Securities Exchange

53
 Commission (SEC).
a. To be obtained all original documents.
b. To be vetted by the Panel Lawyer of the Bank.
c. Deed of Mortgage and Irrevocable Power of Attorney to be
drafted by the Panel Lawyer of the Bank.
Landed Property c. Deed of Mortgage and Irrevocable Power of Attorney to be
registered in the Office of the Sub Registrar.
e. Deed of Agreement for further charge on the mortgaged
property to be executed by the mortgagor in consultation with
Banks Panel Lawyer.

5.6 Custody of documents:

The document should be entered in Document Execution Register.

A separate packet/file should be prepared for each investment facility.
All documents should be kept in fire proof safe in strong room.

5.7 Classification of the Investment on the Basis of Security:

For internal use, SJIBL classify the Investment and Advances on the basis of how much the bank
is secured in respective of the security offered by the clients-

Security # 1
Debts considered good in respect of which that is fully secured
Security # 2
Debts considered good for which banks holds no other security than the debtors personal
security
Security # 3
Debts considered good and secured by the personal security of one or more parties in addition to
the personal security of the debtor.

54
 Security 2005 2006 2007 2008 2009
01 3,885(91%) 6,577 (92%) 9,955 (94%) 14,895 (96%) 19,998 (97%)
02 384 (9%) 572(8%) 635 (6%) 621 (4%) 619 (3%)
03 - - - - -
Total Investment 4,269 7,149 10,590 15,516 20,617

Figure in Million Tk.

Investment on the Basis of Security

100%
80%
60%
40%
20%
0%
2005 2006 2007 2008 2009
PART
PART66 Year
Security 1 Security 2 Security 3
LOAN
LOANFOLLOW
FOLLOWUP
UPPROCEDURE
PROCEDURE
Exhibit:5.7: Investment position on basis of security

From the above it can be said that, so far year 2005 to2009 no clean investments are
accomplished by the Shahjalal Islami Bank ltd.

55
PART 6 Loan Follow-up Procedure of Shahjalal Islami Bank Ltd.:
6.1 Investment Guidelines

SHAHJALAL ISLAMI BANK LIMITED has formulated a detailed INVESTMENT

GUIDELINES, which clearly identifies the business/industry sectors that should constitute the
majority of the banks Investment portfolio, indicates the type of Investments that are permitted;
such as Working Capital, Trade Finance, Term Investment etc. details the banks Single
Customer/Group Limit as per Bangladesh Bank guidelines, specifies industry sector exposure cap

56
to avoid over concentration in any one industry sector, outlines Industries or Investment activities
that are discouraged, states the facility parameters (e.g., maximum size, maximum tenor, and
covenant and security requirements) & policies regarding management of Cross Boarder Risk.

6.2 Investment Assessment & Risk Grading

6.2.1. Investment Assessment

Prior to sending any proposal to Head Office (Investment Approval/Risk Management Unit,
Investment Division, Head Office) a thorough Investment Risk assessment should be conducted
and the results of this assessment should be presented in a Investment Memorandum that
originates from the BRANCH RETAIL/CORPORATE MARKETING UNIT (Relationship
Manager/Account Officer (RM), and is approved by Investment Approval/Risk Management
(IRM) unit at Head Office. The RM is the owner of the customer relationship, and to be held
responsible to ensure the accuracy of the entire Investment Memorandum submitted for approval.
Relationship Managers to be familiar with the banks Investment Guidelines and should conduct
due diligence on new Customers, principals, and guarantors.

Investment Guidelines contains the detail Investment Memorandum designed for use at
SHAHJALAL ISLAMI BANK LIMITED covering the following Risk area:

Customer Analysis.
Industry Analysis.

Supplier/Buyer Analysis.
Historical Financial Analysis.
.

Projected Financial Performance.

Investment Structure.

Security
Name Investment

Account Conduct.
For existing Customers, the historic performance in meeting repayment obligations (trade
payments, cheques, Profit and principal payments, etc) should be assessed.

57
 Adherence to Investment Guidelines.
Investment Memorandums should clearly state whether or not the proposed Memorandum is in
compliance with the banks Investment Guidelines. The Banks Head of Investment or Managing
Director should approve Investment Memorandums that do not adhere to the banks Investment
Guidelines.
Mitigating Factors.
Mitigating factors for risks identified in the Investment assessment should be identified. Possible
risks include, but are not limited to: margin sustainability and/or volatility, high debt load
(leverage/gearing), overstocking or debtor issues; rapid growth, acquisition or expansion; new
business line/product expansion; management changes or succession issues; customer or supplier
concentrations; and lack of transparency or industry issues.

6.2.2 Risk Grading

Risk grading is a key measurement of a Banks asset quality, and as such, it is essential
that grading is a robust process. All facilities to be proposed for sanction at
SHAHJALAL ISLAMI BANK LIMITED should be assigned a risk grade. . As per
recommendations of the Focus Group Risk Grade Matrix is provided in the Investment
Guidelines for adoption at SHAHJALAL ISLAMI BANK LIMITED.

6.3 Approval Authority

The authority to sanction/approve investment facility is clearly delicate :

1. Investment approval authority must be delegated in writing from the MD & Board (as
appropriate), acknowledged by recipients, and records of all delegation retained in IRM.
2. MD/EC/Board must review delegated approval authorities annually.
3. The Investment approval function should be separate from the marketing/relationship
management (RM) function.
4. The role of Investment Committee is restricted to only review of proposals i.e.
recommendations or review of banks Investment portfolios.

58
 5. Executives within the authority limit delegated to them by the MD must authorize all
Investment risks. The pooling or combining of authority limits should not be
permitted.
6. Investment approval is centralized within the IRM function. All large Investments must
be approved by the Head of Investment and Risk Management or Managing
Director/EC/Board or delegated Head Office Investment executive.
7. MD/Head of Investment Risk Management must approve and monitor any cross-border
exposure risk.
8. Any breaches of Investment authority should be reported to MD, Head of Internal
Control, and Head of Investment Division.
9. It is essential that executives charged with approving Investments have relevant training
and experience to carry out their responsibilities effectively. As a minimum, approving
executives should have:

At least 5 years experience working in corporate/commercial banking as a relationship

manager or account executive.
Training and experience in financial statement, cash flow and risk analysis.
Successfully completed an assessment test demonstrating adequate knowledge of the
following areas:
o Introduction of accrual accounting.
o Industry / Business Risk Analysis
o Causes for availing Investment Facilities
o Financial reporting and full disclosure
o Financial Statement Analysis
o The Asset Conversion/Trade Cycle
o Cash Flow Analysis
o Projections
o Investment Structure and Documentation
o Investment Management.

10. A monthly summary of all new facilities approved, renewed, enhanced, and a list of
proposals declined stating reasons thereof should be reported by IRM to the MD .

6.4 Segregation of Duties:

59
 Banks entire Investment Functions have been segregated in the following manner as
per Focus Group recommendations:

- Investment Approval/Risk Management

- Relationship Management/Marketing
- Investment Administration and Monitoring

Branch Investment Division is segregated as below:

Retail/Corporate Marketing Unit
Investment Administration and Monitoring Unit

Head Office Investment Division is segregated as follows:

Investment Approval/Risk Management
Investment Administration and Monitoring Unit

The detail responsibilities of the executives/officers under the above units have been mentioned
in the Investment Guidelines.

6.5 Internal Audit:

SHAHJALAL ISLAMI BANK LIMITED has a segregated internal audit/control department

charged with conducting audits of all departments. An audit is usually carried out annually, and
ensures compliance with regulatory guidelines, internal procedures, and Investment Guidelines
and Bangladesh Bank requirements.

6.6 Preferred Organizational Structure and Responsibilities

Investment approval at SHAHJALAL ISLAMI BANK LIMITED is centralized within

the IRM function. All Memorandums are approved by the Head of Investment Approval/
Risk Management /Managing Director/CEO/EC/Board or delegated Head Office/Branch
executive.

6.6 Approval Process:

60
The approval process must reinforce the segregation of Relationship Management/Marketing
from the approving authority. The responsibility for preparing the Investment Memorandum
should rest with the RM within the RETAIL/CORPORATE UNIT at BRANCH. Investment
Memorandums should be recommended for approval by the RM team based on branches and
forwarded to the INVESTMENT APPROVAL/RISK MANAGEMENT UNIT at Head Office and
approved by individual executives.

The recommending or approving executives should take responsibility for and be held
accountable for their recommendations or approval. There is limited delegation of approval limits
in favor of the Managing Director and some executives of the bank:

The following diagram illustrates the approval process at SHAHJALAL ISLAMI BANK
LIMITED

Investment Memorandum
Recommended By RM / Marketing
(BRANCH)

Investment Approval/ Risk Management

Unit

Head of Investment (HOI)

Managing Director

61
Executive Committee/Board
 Memorandum forwarded to HEAD OFFICE for approval/decline
HOI advises the decision as per delegated authority to BRANCHES
Managing Director advises the decision as per delegated authority to HOI

1. Managing Director presents the proposal to EC/Board.

2. EC/Board advises the decision to HOI.

6.8 Appeal Process:

Any declined Investment may be re-presented to the next higher authority for
reassessment/approval. However, there should be no appeal process beyond the Managing
Director.

6.8.1. Investment Administration:

The Investment Administration and Monitoring function is critical in ensuring that proper
documentation and approvals are in place prior to the disbursement of Investment facilities. For
this reason, it is essential that the functions of Investment Administration and Monitoring is

62
strictly segregated from Relationship Management/Marketing in order to avoid the possibility of
controls being compromised or issues not being highlighted at the appropriate level. Investment
Administration procedures is in place to ensure the following:

Disbursement:

Security documents are prepared in accordance with approval terms and are legally
enforceable. Standard Investment facility documentation that has been reviewed by legal
counsel should be used in all cases. Exceptions should be referred to legal counsel for
advice based on authorization from an appropriate executive in IRM.
Disbursements under Investment facilities are only be made when all security
documentation is in place. CIB report should reflect/include the name of all the lenders
with facility, limit & outstanding. All formalities regarding large Investments &
Investments to Directors should be guided by Bangladesh Bank circulars & related section
of Banking Companies Act. All Investment Approval terms have been met.

6.8.2. Investment Monitoring:

To minimize Investment losses, monitoring procedures and systems should be in place that
provides an early indication of the deteriorating financial health of a Customer. At a minimum
the following are looked into:

Past due principal or Profit payments, past due trade bills, account excesses, and breach
of Investment covenants.
Investment terms and conditions are monitored, financial statements are received on a
regular basis, and any covenant breaches or exceptions are referred to IRM and the RM
team for timely follow-up.
Timely corrective action is taken to address findings of any internal, external or
regulator inspection/audit.
All Customer relationships/Investment facilities are reviewed and approved through the
submission of an Investment Memorandum at least annually.

6.8.3. Investment Recovery

63
The Recovery Unit (RU) of Investment Administration and Monitoring Unit should directly
manage accounts with sustained deterioration (a Risk Rating of Sub Standard (6) or worse). The
RUs functions are as follows:

Determine Account Action Plan/Recovery Strategy

Pursue all options to maximize recovery, including placing customers into receivership
or liquidation as appropriate.
Ensure adequate and timely Investment loss provisions are made based on actual and
expected losses.
Regular review of grade 6 or worse accounts.

The management of problem Investments must be a dynamic process and the associated strategy
together with the adequacy of provisions must be regularly reviewed. A process should be
established to share the lessons learned from the experience of Investment losses in order to
update the Investment guidelines.

6.9 Tools for Appraisal Credit:

In addition to formal credit appraisal, the credit officers of Shahjalal Islami Bank Limited try to
judge the possible client based on some other criteria. These criteria are called the Cs of good
and bad loans. These Cs are described below:

1. Character: Make sure that the clients have outstanding integrity.

2. Capacity: Make sure that the clients have capability to repay the loan.
3. Conditions: Understand the business and economic conditions.
4. Capital: Make sure that the clients have appropriate level of investment.
5. Collateral: Make sure that there is a second way out of a credit but do not allow that to
drive the credit decision.
6. Complacency: Do not rely on past history to continue.
7. Carelessness: Remember that documentation, follow-up and consistent monitoring are
essential to high quality loan portfolios.
8. Communication: Share credit objectives and credit decision-making both vertically and
laterally within the bank.
9. Contingencies: Understand the risk, particularly the downside possibilities and
structure and price.
10. Competition: Dont get swept away by what others are doing.

64
6.10 CIB Report from Bangladesh Bank:

It stands for Credit Information Bureau report. CIB is a department run by Bangladesh Bank to
help the all banking and financial institution by providing the latest report on the customers, who
enjoy credit facilities more than 10 Lac Taka. According to Bangladesh Bank order no bank can
provide only credit facilities more than Tk. 10 Lac, without having CIB report from Bangladesh
Bank.

CIB Inquiry Forms

i CIB-1A (For Individual / Institution)
ii CIB-2A (For owner information if borrower is institution)
iii CIB-3A (Information of group/related business concern)

CIB Reporting Forms

i CIB-1 (Borrowers Information- Borrowers only)
ii CIB-2 (Borrowers Information- Owners only)
iii CIB-3 (Borrowers Information- Group only)
iv CIB-4 (Credit Exposure Matrix)
v CIB-5 (Guarantor Information)

AT A GLANCE INVESTMENT PROCEDURE OF SHAHJALAL ISLAMI BANK LIMITED

65
 Step 1: Application for Investment

Step2: Getting Investment Information (Including CIB Report)

Step3: Investigation of Submitted Documents

Step 4: Investment Risk and Worthiness Analysis

Step 5: Project Verification

Step 6: Completion of Risk Grading

Step 7: Preparing Investment Proposal

Step 8: Send to Head office for Consideration

Step 9: Review Information by Head Office Investment Division

Step 10: Preparing Executive Committee (EC) Memo

Step 11: Sanction Advice

Step 12: Collection for Charge Documents

Step 13: Disbursement of Funds

Step 14: Investment Monitoring and Supervision

66
 PART
PART7(A)
7(A)
CLASSIFICATION,
CLASSIFICATION,MONITORING
MONITORING
&&RECOVERY
RECOVERYPROCEDURE
PROCEDURE

67
PART 7 (A): Investment classification, monitoring, and Recovery System:

7.A.1: Classification of Investment:

Central bank of Bangladesh gives a guide line to follow the investment procedure. There are four
classes of investment in the investment review practiced in Shahjalal Islami Bank Ltd. They are
as follows-
7.A1.1: Unclassified Investment: The investment account is performing satisfactorily in the
terms of its installments and no overdue is occurred. This type of investment is fall into this
classification.
7.A.1.2: Substandard Investment: This classification contains investment where
irregularities have been occurred but such irregularities are temporarily in nature.
7.A.1.3: Doubtful Investment: The investment contains where doubt exists on the full
recovery of the investment and loan along with loss in anticipated but can not be quantifiable at
this stage.
7.A.1.4: Bad and loss Investment: A particular investment and loan fall in this class when it
seems that this investment and loan is not collectable or worthless even after all the security has
been exhausted.

7.A.2: Classification Procedure:

Objective Basis:
7.A.2.1: Unclassified Investment: A particular investment account will be treated as an
Unclassified Investment, when it fulfills the following criteria-
Installments are made on timely basis and no overdue has occurred.

7.A.2.2: Substandard Investment: A particular investment account will be treated as a

Substandard Investment, when it fulfills the following criteria-
Investment Category Time Overdue
Micro Investment 3 months and above but less than 6 months.
Continuous Investment
Fixes Term Investment If the repayable time within 5 years then
overdue installment equals or exceeds the
amount repayable within 6 months.

If the repayable time more than 5 years

then overdue installment equals or exceeds

68
 the amount repayable within 12 months.

Un recovered for 3 months & above but less

Demand Investment than 6 months from date of the investment is
claimed.

7.A.2.3: Doubtful Investment: A particular investment account will be treated as a

Doubtful Investment, when the states of the investment accounts fall under the
following criteria-
Investment Category Time Overdue
Micro Investment 6 months and above but less than 12 months.
Continuous Investment
If the repayable time within 5 years then
overdue installment equals or exceeds the
amount repayable within 12 months.
Fixes Term Investment
If the repayable time more than 5 years
then overdue installment equals or exceeds
the amount repayable within 18 months.

Un recovered for 6 months & above but less

Demand Investment than 12 months from date of the investment is
claimed.

7.A.2.4: Bad and Loss Investment: In the following table the criteria to be fulfilled to fall
in these criteria-
Investment Category Time Overdue
Micro Investment Not recovered within more than 12 months.
Continuous Investment
If the repayable time within 5 years then
overdue installment equals or exceeds the
amount repayable within 18 months.
Fixes Term Investment
If the repayable time more than 5 years
then overdue installment equals or exceeds
the amount repayable within 24 months.

Demand Investment Un recovered for 6 months & above but less

69
 than 12 months from date of the investment is
claimed.

Qualitative Judgment Basis:

This procedure totally depends on the Branch Manager or head office investment division. The
factors considered in Shahjalal Islami Bank Ltd. areas follows-
1) Significant decrease in the value of the security.

2) Incorrect information supplied by the borrower and bankruptcy of the borrower.

3) Investment rescheduled frequently or the rules of rescheduling are violated or a suit is

filed for the recovery of the investment.

4) Borrower sustains a loss of capital.

Last two year the classification of the investment of Shahjalal Islami Bank Ltd. Is given below-

Status As at 31 December 2008 As at 31 December 2009

Compositio
Amount Amount Composition
n
Unclassified 32770910668 99.55% 43361530260 98.64%
Special
Mention 4620000 .01% 183496231 .42%
Account
Substandard 8878000 0.03% 73210220 0.17%
Doubtful - 0.00% 445000 0.001%
Bad or Loss 134365000 .41% 339579000 .77%
Total 32918773668 100% 43958260711 100%
Table:7.A.2.4: classification of investment

7.A.3: Investment Monitoring:

To minimize Investment losses, monitoring procedures and systems should be in place that
provides an early indications towards the deteriorating financial health of a borrower and in
SJIBL, there is no separate monitoring division and the investment officials along with the branch
manager monitors the overall profiles and the risk aspect of the investment portfolio in
accordance with the criteria set down in the Banks Investment policy. Monthly monitoring
report prepared by the branch investment division along with the comment of branch manager

70
and kept in the investment file with a copy to the to the Head office. The investment officer
monitors the following things-
1. Investment terms and conditions are monitored, financial statements are received on a
regular basis, and any covenant exceptions are referred to the branch manager for timely
follow up.

2. The account is not having excess over limit.

3. The terms and conditions of the sanctioned letter are strictly followed.

4. The value of the collateral security is adequate.

5. The analysis of the borrowers business performance and companies of the projected and
actual to find out any deviations.

6. A timely corrective action is taken to address findings of any internal, external, or

regulator audit.

This whole procedure formally performed at intervals prescribed by the Head Office but it is the
most responsible work for the branch investment division to monitor the investment accounts in a
timely basis to ensure that the investment work set by the bank.

7.A.3.1.: Review frequency of Investment Account:

Risk Grade Monitoring Period
>6 Quarterly
4-5 Semi Annually
1-3 Annually

SJIBL uses PC Bank Software developed by Leeds Corporation and the software able to
procedure the whole information for Head office as well as local review where a manual process
is in place, which is give accurate exception result. This exceptions give corrective actions are
taken in a timely manner before the account deteriorates. Various bank like Mercantile, EXIM,
Social Investment, United Commercial Bank Ltd. Also use this software for easy operating
system.

7.A.4: Investment Recovery:

71
The recovery unit of Head Office directly manages amount with sustained deterioration. These
functions are given below-
Determine account recovery strategy.

Pursue all options to maximize recovery, including placing clients into receivership as
appropriate.

Ensure adequate and timely investment loss provisions are made based on actual and
expected loss.

Regular review of weak accounts.

The management must be in dynamic process and the associated strategy together with the
adequacy of provisions is regularly reviewed.

7.A.4.1: Non Performing Investment Account management:

All the NPIs are assigned to an account manager within the RU, who is responsible for
coordinating and administering the recovery of the account, and serves as the primary customer
contact after the account is downgraded to substandard.

7.A.4.2: Account Transfer:

Within seven (7) days of an account being downgraded to substandard, request for action and a
downgrade checklist is completed by the executives of investment division of the branch and
forwarded to the investment division for acknowledgement. Then the account is assigned to an
account officer within the RU, and prepares a classified Investment Review report (CIR) within
in 20 days of transfer.

7.A.4.3: NPI monitoring:

A CIR is prepared by the recovery unit account officer to update the status of the recovery action
plan, review and assess the adequacy of provisions, and modify the banks strategy as appropriate.
Head of investment approves the CIR report for NPIs up to 15% of the bank capital.

If the NPIs excess of 15% then MD/CEO approval needed.

The CIRs for NPIs above 25% of capital should be approved by the MD/CEO, with a
copy received by the board.

72
7.A.4.3.1: Rate of Provisioning:
Shahjalal Islami bank Ltd in the time of investment provisioning to get the real picture of
the income mainly follows under the guideline of Bangladesh bank. The rate of provision
for SJIBL is given below
Micro Investment All other investment
Loan Classifications Provisions Rate
Unclassified 5% 1%
Substandard 5% 20%
Doubtful 5% 50%
Bad or Loss 100% 100%
Table:7.A.4.3.1 Rate of Provisioning

Taka in Million

Classified loan Unclassified loan

Year provisions provisions
2003 23 43
2004 21 72
2005 14 106
2006 13 157
2007 1 215
2008 28 355
2009 118 480

73
 Figure: 7.A.4.3.1 Amount of provision against investment
Above figure, it can be said that total amount of provisions held by SJIBL against its investment
is increasing year to tear both classified and unclassified investment. Thats way SJIBL become
more confident about their investment.

7.A.5: Gross Classified Investment Coverage ratio:

This ratio reflects the firms measurement taken to face the loan loss problem by measuring the
level of provision made by the bank for investment as a percent of the total loan. The calculation
is in follows-
Gross Classified Investment Coverage Ratio = Provision for Investment/ Total Investment

PARTICULARS YEARS

2003 2004 2005 2006 2007 2008 2009

Provision for
Investment

44 85 120 178 238 383 598

Total Investment

4269 7149 10590 15516 20617 32918 43958

Ratio 0.0103 0.01188 0.01133 0.01147 0.01154 0.01163497 0.01360389

74
 Figure : 7.A.5: Gross Classified Investment Coverage ratio

Interpretation:
From the above table, it can be said that during the time period 2003 to 2004 the bank
provisioning to classified investment is increasing, it indicates worsening in the asset quality of
the bank. But in the year 2005 the bank has made the lowest amount of provisions, which
indicates improvement of asset quality. But again from the year 2006 SJIBL has increased its
provisioning rate against its total investment; because of loan default has increased during the
year 2006.

7.A.6 Incentive Program:

Shahjalal Islami Bank has also arrangement to offers incentive programs to encourage the
recovery unit accounts executives to bring down the Non Performing investments (NPI). The
table below shows an indicative incentive plan for RU executives-

Incentive Program of Shahjalal Islami Bank Ltd.

Recovery as a % of
Recommended Incentive as % of net recovery amount
principal plus profit
If CG 7-8 If written off
79% to 100% 1.00% 2.00%

75
 51% to 75% 0.50% 1.00%
20% to 50% 0.25% 0.50%

PART 7 (B): LENDING RISK ANALYSIS (LRA): MODERN TECHNIQUE OF CREDIT

APPRAISAL:
The Financial Reform Project (FSRP) has designed the LRA package, which provides systematic
procedure for analyzing and quantifying the potential investment risk. Bangladesh bank has
directed all commercial bank to use LRA technique for evaluating investment proposal
amounting to Tk 10 million and above. The objective of LRA is to assess the investment risk in
quantifiable manner and then find out ways & means to cover the risk.
Broadly LRA package divides the Investment risk into five categories-

Financial Risk 50%

Business risk 18%
Management risk 12%
Security Risk 10%
Relationship Risk 10%
A detail description of these risks and the procedure for evaluating the credit as follows:

7. B.1 Financial Risk (50%):

It refers to the possibility that the borrower will be unable to covered fixed financial obligations,
such as interest, lease and dividends to the preferred stock holder. In order to judge the financial
risk associated with an investment SJIBL analyze the following factors-

Leverage (15%): Here SJIBL examines the degree of borrowers indebtedness by

examining the level of assets financed by the borrower by using the fixed financial
obligations, which is generally known as debt. The bank employs Debt Ratio to judge the
borrowers degree of indebtedness and use the following parameters-

Parameter (Debt ratio) Score

Less than0.25 15
0.26 to 0.35 14
0.36 to 0.50 13
0.51 to 0.75 12
0.76 to 1.25 11
1.26 to 2.00 10
2.01 to 2.50 08

76
2.51 to 2.75 07
More than 2.75 00

Liquidity (15%): Here SJIBL examines the borrowers ability to repay the loan on
demand or on due date. The bank uses the current ratio as a parameter to measurers the
borrowers liquidity. So to measure the liquidity of the borrower bank uses the following
parameter-

Parameter (Current ratio) Score

Greater than 2.74 15
2.50 to 2.74 14
2.00 to 2.49 13
1.50 to 1.99 12
1.10 to 1.49 11
0.90 to 1.09 10
0.80 to 0.89 08
1.70 to 0.79 07
Less than0.70 00
Coverage (5%): Here SJIBL examines the borrowers ability to meet the contractual
interest payment obligation. In order to do that bank uses the Time Interest Earned ratio
as a measure of the borrowers ability to cover the contractual interest payment
obligations,
Profitability (15%): Here SJIBL examines the borrowers ability to generating earnings
by using the available resources. Bank uses the operating profit margin as a measure of
the borrowers profitability. The following parameters are used-

Parameter (Operating Profit Margin) Score

Greater than 25% 15
20% to 24% 14
15% to 19% 13
10% to 14% 12
7% to 9% 10
4% to 6% 09
1% to 3% 07
Less than 1% 00

7. B.2 Business risk (18%):

77
It refers to the risk that the borrowers business falls to generate sufficient cash flow to repay the
investment due internal and external reasons. And following factors are analyzed based on
following parameters to identify the business risk.

Age of Business (3%): SJIBL examines the number of years the borrower has been
engaged in the primary line of business.
Parameter (Experience) Score
More than 10 years 03
More than 5 but less than 10 years 02
2-5 years 01
Less than 2 years 00
Size of Business (3%): SJIBL examines the size of the borrowers business measured by
most recent years total sales and bank uses the following parameters, carry scores based
on its status in reflecting the variable under considerations:

Parameter (Sales in BDT Crore) Score

More than 60 05
30-59.99 04
10-29.99 03
5-9.99 02
2.50-4.99 01
Less than 2.5 00
Business Outlook (3%): SJIBL examines the medium term prospects of the borrowers
business, taking into account the industry market share and economic sector.

Parameter Score
Favorable 03
Stable 02
Slightly Uncertain 01
Cause for Concern 00
Market Competition (3%): SJIBL examines the competition in the market in which the
borrower is engaged in business.

Parameter Score
Dominant Player 02
Moderately Competitive 01
Highly Competitive 00
Entry/Exit Barrier Here SJIBL examines the level of entry and exit barriers within the
industry in which the borrower operates business.

78
 Industry Growth (3%): SJIBL examines the growth rate of the industry in which the
borrower conducts his business.

Parameter Score
Strong (10% & more) 03
Good (> 5%-10%) 02
Moderate (1%-5%) 01
No Growth (<1%) 00

7. B.3 Management risk (12%):

The management risk refers to the risk that the company fails to repay the investment due to
managements inefficiency in conducting business effectively and efficiently towards the
achievement of the organizational goals and due to management not exploiting effectively the
companys position. To examine the management risk associated with an investment, the officials
of the Shahjalal Islami Bank Ltd. Analyze the following factors based on following parameters:

Experience (5%): Here SJIBL examine the quality of the management team based on the
aggregate number of years that the senior management team has been in the industry. The
bank uses the following parameters:

Parameter (Years of Experience) Score

> 10 years in the related line of business 05
5-10 years in the related line of business 03
1-5 years in the related line of business 02
No Experience 00
Succession (4%): SJIBL examines the quality of the management team based on the
availability of the successions of management officials for the future management of the
institution.

Parameter Score
Ready Succession 04
Succession 1-2 years 03
Succession within 2-3 years 02
Succession in question 00
Team Work (3%): Here SJIBL examines the quality of the management team based on
management officials willingness to work together and here the bank decide whether the
management officials are cooperative or not and degree of their cooperativeness. The
bank uses the following parameters and each parameters and each of the parameter

79
 carries score based on their status in reflecting the quality of the variable under
examination.

Parameter Score
Very good 03
Moderate 02
Poor 01
Regular Conflict 00

7. B.4 Security Risk (10%):

The sort of risk is associated with the realized value of the security, which may not cover the
exposure of loan. The security risk is subdivided into major two heads, such as security control
risk and another is security cover risk.

Collateral security (4%): SJIBL examines the quality of the additional security offered
by the borrower and the bank usually emphasize on the location of the assets offered as
collateral.
Primary Coverage (4%): Here SJIBL examines the quality of the primary security by
examining the modes of charging security
Guarantee (2%): SJIBL also examines the quality of the guarantee given by the
borrower.

7. B.5 Relationship Risk (10%):

SJIBL examines the past track record of the borrower.

Account Conduct (5%): SJIBL examines how satisfactorily the borrower has
maintaining account with the bank.
Limit Utilization (2%): SJIBL judges the extent to which the borrower has utilized his
each credit limit.
Personal Deposit (1%): Here SJIBL examines the extent to which the bank maintain a
personal banking relationship with key principals.
Compliance of the Covenants (2%): SJIBL examines the extent to which the borrower
maintains all the terms and conditions of the investment contracts.

Risk Grading of SJIBL:

80
Risk grading means rating a particular investment proposal based on the associated with it and
based on the score obtained from the scoring matrix. Shahjalal Islami Bank adopts credit risk
grading system. The system defines the risk profile of the borrowers to ensure that account
management, structure and pricing are commensurate with the risk involved. Borrower risk
grades are clearly started on credit applications. Generally a risk grading score card provides the
following grade-

Risk Rating Grade Definitions

Superior - Low risk
Good - Satisfactory Risk
Acceptable Fair Risk
Marginal Watch List
Special Mention
Substandard
Doubtful and Bad
(Non-Performing)
Loss (Non-Performing)
The borrowers all security documentation should
1
in place and everything is secured.
The repayment capacity of the borrower is
2 strong. The borrower should have excellent
liquidity and low leverage.
These borrowers are not as strong as grade 2
borrowers, but should still demonstrate
3
consistent earnings, cash flow and have good
track record.
Assets warrant greater attention due to
4 conditions affecting the borrower, the industry or
the economic environment.
Assets have potential weakness that deserves
5
managements close attention.
Financial condition is weak and capacity or
6
inclination to repay is in doubt.
Full repayment of principal and interest is
7
unlikely and the possibility of loss is extremely.
Assets outstanding with no progress in obtaining
8
repayment or in the late stage of liquidation.

81
 PART
PART88
SWOT
SWOTANALYSIS
ANALYSISOF
OFSHAHJALAL
SHAHJALAL
ISLAMI
ISLAMIBANK
BANKLTD.
LTD.

82
PART 8: SWOT ANALYSIS OF SHAHJALAL ISLAMI BANK LTD.

A particular SWOT analysis discloses the following issues for an organization that an
organization achieved over the time of its operation by analyzing its both internal and external
environment:

S- STRENGTHS
W-WEAKNESS
O-OPPORTUNITIES
T-THREATS

The SWOT analysis of Shahjalal Islami Bank Ltd. is shown below:

8.1 STRENGTHS:
Provides of good quality services: Having the reputation of being the provider of
good quality services among its potential customers.
Differentiated Islamic Banking Products: SJIBL has several types of differentiated
Islamic Banking Products (both deposit and investment) with unique features and
facilities, which are so much helpful for enhancing the economic growth.

83
 Wide range of financial products/services: Having wide range of financial
products/services. Particularly the GB department has obtained most of the clients
reliability in providing services by offering various financial schemes.
Good investment portfolio: SJIBL never invest all types of business area for that case
their portfolio is very good.
Low Balance Requirement: Relatively low minimum balance/deposit requirement to
maintain an account with the Bank.
Satisfactory business growth: From the star of the business in 2001 SJIBL run their
business successfully and their business growth is very much satisfactory.
Experienced Top management: Management of SJIBL is very efficient and they
always take correct decision for give better service to the customer.
Strong correspondent relationship: SJIBL maintains strong relationships with other
commercial banks & a member of SWIFT service.
Strong Capital: SJIBL has strong capital base and maintain all the statutory
requirements to be a good Bank.
Comfortable liquidity position: Shahjalal Islami Bank Limited always maintains a
comfortable liquidity position in the market.
Achieve goodwill from the clients: SJIBL has already achieved a strong goodwill
among the clients.
Strong concentration on Investment: Investment Division is the heart of SJIBL and
main business area of the bank. Bank gives loans to the client by judging their business
and concern how the clients repay the loan
Strong monitoring Process: Investment terms and conditions are monitored, financial
statements are received on a regular basis, and any covenant exceptions are referred to
the branch manager for timely follow up.

Strictly follow rules and regulations: The terms and conditions strictly followed by
the authority of the bank thats why SJIBL has low risk in loan defaultation.

Co-operative & skilled personnel: SJIBL has skilled personnel who are very much
specialized in interacting with clients, (particularly in Investment department).

8.2 WEAKNESSES:
Complexity in account opening: Various complex requirements demanded by the

84
 Bank to open a new account.
Low geographic coverage: SJIBLs branch expansions growth is not in satisfactory
level. Outside the Dhaka division they have only 8 branches.
Limited delegation of power: For the sanction the loan branch has no power. All
power in handed in the head office.
Lengthy Process for sanction the loan: All power in the head office for that case for
sanctioning loans it takes more time.
No bank guarantee power: No branch has any bank guarantee power.
Conservative mind setting in working: SJIBL working structure is very much
conservative and for that case its growth is slow than other bank.
Lack of strong and attractive promotional activities: It is an Islami perspective bank,
so it spends money for promotional activities in a low rate.

8.3 OPPORTUNITIES:
Perception of Islami bank: Strong appetite for Islamic financial services among the
people of Bangladesh.
Give higher interest rate: Possibility to generate very high rate of return as compared
to fixed rate of interest from other bank
Demand Endless: Banking industry is an industry with an endless demand in the
future.
Concentration in Other business area: It has an opportunity in SME and Agro based
business.
Credit card Facility: If in future SJIBL provide to the client credit card in dual
currency then it can be differentiated from other commercial bank.
Merge with Same nature bank: Expansion of existing Banking networks through
merge with other Islamic Banks will facilitate the bank to enjoy the competitive
advantage.
Be Prepare in competitive advantage: A large number of private Banks coming into
the market in the recent time. In this competitive environment Shahjalal Islami Bank
must expand its product line to enhance its sustainable competitive advantage.
Wide Banking networks: The bank should establish a wide range of banking network
in the country and outside the country.

8.4 THREATS:

85
Lack of awareness: Lack of awareness regarding the Islamic Banking system among
the people of Bangladesh.
Products name difficulty: Name of the products is so much difficult to understand and
very much confusing, such as Mudaraba, Murabaha.
Increase financial institutions merging: The worldwide trend of mergers and
acquisition in financial institutions causing problem.
Money rate devaluation: Frequent taka devaluation and other rate fluctuation is
causing problem for the bank.
Guideline: Lack of adequate guideline by the Central Bank on the basis of Islamic
Shariah.
Competition increase: Increased competition from fellow Islamic Banks and Other
Commercial Private Banks (PCBs).
Lacking in fund collection procedure: Limitation (as an Islamic Bank) to borrow
from the money market (short term funds), which may produce a threat to the liquidity
of the Bank.
Market pressure: Market pressure for dollar ($) crisis is increasing day by day.
Government rules and regulations: Unfavorable Government rules and regulation
created regarding Banking business that hampers their business procedure.
Economic and political situation: Unfavorable economic and political climate, such as
high inflation rate & continuous devaluation of money.

86
 PART
PART99
FINANCIAL
FINANCIALPERFORMANCE
PERFORMANCE
ANALYSIS
ANALYSISOF
OFSJIBL
SJIBL

87
PART 9: FINANCIAL ANALYSIS OF SHAHJALAL ISLAMI BANK LTD.:

Financial analysis is so much essential for each and every business institution as well as for the
Banking institutions to assess their past financial performance and to identify the sources, where
the necessary improvement is needed to perform better in the future and to meet the future
challenges by taking effective business strategy. Financial analysis typically is associated with
ratio analysis. Ratio analysis involves the methods of calculating and interpreting the financial
ratios to analyze the firms relative financial performance. The main purpose of this analysis is to
analyze and monitor the firms financial performance, so, that the interested parties (both the
external and internal) can realize the firms actual performance easily and conveniently, which is
so much essential for the parties. There are several ratios that help a particular analyst to analyze
the past performance of a particular firm and to diagnose the various relevant variables, which are
important for improving the future operation of that firm. The financial ratios, that are useful for
analyzing the past financial performance of a financial institution, such as Bank, can be
divided into five broad categories for convenience and they are enumerated below --------
Liquidity Ratio.
Operating Efficiency Ratio.
Profitability ratio.
Capital Ratio.
Market Ratio

These five groups of financial ratios are used to analyze a particular firms past financial
performance and to identify the sectors where the necessary improvement is needed to make the
future performance of the firm far better than the past. It is also mentionable that there are three
types of ratio comparison and they are

Cross-Sectional Analysis: involves comparison of different firms ratios at the same

point of time.
Time Series Analysis: involves evaluates performance over time by observing the trend
of a particular ratio.

88
 Combined Analysis: combines both the Cross-Sectional and Combined
Analysis.

And in this section of the report I am going to evaluate the financial performance of the
SHAHJALAL ISLAMI BANK LTD. over time by calculating and interpreting some common
ratios. All the important ratios to analyze and evaluate the financial performance of the
SHAHJALAL ISLAMI BANK LTD. are calculated and interpreted in the following next pages:
9.1.0. Liquidity Ratio: It measures a firms ability to meet up or satisfy its short tem
obligations, as they become due. The commonly used liquidity ratios are ----

9.1.1. Current Ratio: A measure of liquidity, calculated by dividing the current assets by current
liabilities. It shows the level of current assets that a particular firm has against per Taka of current
liabilities of that firm. So the equation becomes

Current ratio = Current Assets / Current Liabilities

Particulars years
2003 2004 2005 2006 2007 2008 2009
Current
Ratio 1.1 1.04 1.33 1.38 1.48 1.12 1.11

Figure:9.1.1.: current Ratio

89
Interpretation: We know that, the current ratio measures a firms liquidity by measuring the
portion of its current asset relative to its current liabilities and the higher the ratio, the higher the
liquidity of the firm. So, after observing the graph shown above, it can be said that the
companys current ratio is fluctuating year to year and Banks current ratios are always below the
standard level (2), which is not good and risky for the firm Shahjalal Islami Bank Ltd. In 2008
and 2009 it was decreasing from the following years. But In past year 2003 to 2006 Banks
current ratio as well as the liquidity is increasing at slow rate, which was n
good for the Bank and the reason is that the Bank has maintained a steady level of current
liabilities during that period of time.

9.2.0. Operating Efficiency Ratio: The ratio measures a particular Banks operating
efficiency, which is the Banks ability to serve its customers in the most effective way by using
least amount of resources (such as time, cost etc.). The following ratios are widely used to
measure a particular Banks operating efficiency:
9.2.1. Operating Cost to Income Ratio: It measures a particular Banks operating efficiency by
measuring the percent of the total operating income that the Bank spends to operate its daily
activities. It is calculated as follows:

Operating Cost to Income Ratio = Total Operating Cost/Total Operating Income

Particulars years
2003 2004 2005 2006 2007 2008 2009
Operating
Cost 158 140 174 227 313 513 875
Total
operating
Income 182 215 676 1072 1628 2322 2916

Operating
Cost to
Income
Ratio 86.74% 65.31% 25.77% 21.19% 19.23% 22.09% 30.01%

90
 Figure:9.2.1: Operating Cost to Income Ratio of SJIBL
Interpretation: We know that this ratio measures the operating efficiency of a particular Bank
my measuring the portion of the total operating costs relative to the total operating income of that
Bank and the higher the ratio, the lower the operating efficiency and vice-versa. So, after
observing the figure drawn above, It can be said that the efficiency of the Bank has been able to
minimize its operating costs during the time period between years of 2003 to 2007 was
decreasing, which is a very good sign for the bank. But in 2009 it is increasing.

9..2.2. Total Asset Turnover: Total Asset Turnover indicates the efficiency with which the firm
uses its assets to produce operating income. It is calculated by using the following formula

Total Asset Turnover = Total Operating Income /Total Asset

PARTICULARS YEARS
2003 2004 2005 2006 2007 2008 2009
Total operating
Income
182 215 676 1072 1628 2322 2916
Total Asset 6423 9742 1448 21343 28347 44109 58920

91
Total Asset
Turnover

0.028 0.022 0.047 0.05 0.057 0.053 0.049

Figure:9.2.2 Total Asset Turnover Ratio Of SJIBL

Interpretation: We know that this ratio measures the return from per unit of total assets and the
efficiency of the Bank in using its total assets to generate operating income and the higher the
ratio, the higher the efficiency of the Bank in using its assets. So, after observing the given graph,
It can said that the return from per unit of total asset, as well as the Banks efficiency in
generating income is fluctuating year to year and the Bank generated the maximum level of
turnover in year 2007 and lowest level of turnover in the following year 2004 but from the year
2005 the return from per unit of asset is increasing, as the operating income of the Bank has
increased a lot during the year 2007 as the Bank has expanded its geographic coverage by
establishing some new branches and its efficiency continue following year.

9.2.3. Investment to Deposit Ratio: It shows the operating efficiency of a particular Bank in
promoting its investment product by measuring the percentage of the total deposit disbursed by
the Bank as loan & advance or as investment. The ratio is calculated as follows:

Investment to Deposit Ratio = Total General Investment/Total Deposit

92
 PARTICULARS YEARS
2003 2004 2005 2006 2007 2008 2009

Total Investment 4269 7149 10590 15516 20617 32918 43958

Total Deposit 6039 9092 12205 18091 22,618 34279 47,459

Investment to
Deposit Ratio 70.69% 78.63% 86.77% 85.76% 91.15% 96.03% 92.62%

Exhibit:9.2.3: Investment to Deposit Ratio of SJBIl

Interpretation: From the figure drawn above, I am able to say that, the Banks investment to
deposit ratio is fluctuating year to year and in the year 2008 the Bank has disbursed the highest
amount of loan & advances, which is the highest of the total amount of deposit collected by the
Bank in the same year and the year 2003-2006 the Bank has disbursed on an average of above of
the total deposit collected by the Bank in each year, which is good for the Bank.

93
9.3.0. Profitability Ratios: These ratios help us to evaluate the firms profits with respect to
operating income, assets, or equity. Ratios are ----
9.3.1. Net Profit Margin: It measures the percentage total operating income, that remains after
all the costs and expenses have been paid. It is calculated as follows ---

Net Profit Margin = Net Profit after Tax/Total operating Income

PARTICULARS YEARS

2003 2004 2005 2006 2007 2008 2009

Net Profit after
Tax

0 -473 256 463 647 817 1070

Total operating
Income

182 215 676 1072 1628 2322 2916

Net Profit 0.00% - 37.81% 43.20% 39.72% 35.19% 36.69%
Margin 219.04%

Exhibit:9.3.1: . Net Profit Margin

94
Interpretation: we know that this ratio shows us the portion of total operating income that
remains after deducting all the costs and expenditure for particular period of time. From the
above graph, it can be said that the companys net profit margin is fluctuating year to year or over
the time and the Bank has generated maximum amount of net profit margin in the year 2006,
which is 43.20% and lowest amount of margin in 2003 which is 0.00% and in the year of 2004
the banks profit turn into negative position which is -219.04% because in that particular year
some directors go another bank and they withdraw their investment amount. So I can conclude
that the Bank generates net profit from year 2005 on an average rate of above 41% of the total
operating income. From 2007 the net profit margin of the Bank has decreased as the Banks
operating expense has increased during the year as the Bank has established new branches, which
has increased the Banks fixed and non-interest expense.

9.3.2. Return on Total Assets (ROA): It is also called Return on Investment (ROI) and it
measures the overall effectiveness of management in generating profit with its available assets. It
is calculated as follows ----

ROA = Net Profit after Tax / Total Asset

Particulars YEARS

2003 2004 2005 2006 2007 2008 2009

Net Profit
0 -473 256 463 647 817 1070
Total Asset 6423 9742 1448 21343 28347 44109 58920

ROA 0.00% -4.85% 1.77% 2.17% 2.28% 2.08% 2.22%

95
 Exhibit:9.3.2: Return on Asset of SJIBL

Interpretation: After having a careful view on the graph I am able to say that the Banks
effectiveness to generate return by using its available assets is fluctuating year to year and the
Bank has generated maximum amount of ROA from the year of 2007 and due to lack of
efficiency in utilization of assets the Banks ROA falls in the minimum level in the year of 2004
that turn into a negative figure because in that particular year some directors go another bank and
they withdraw their investment amount.

9..3.3. Return on Equity (ROE): It measures the return earned by the funds invested by the
common stockholders. It is calculated as follows -----

ROE = Net Profit after Tax/Shareholders Equity

PARTICULARS YEARS
2003 2004 2005 2006 2007 2006 2007

Net Profit 0 -473 256 463 647 817 1070

Equity Capital 253 268 741 1205 2788 3605 4926

0.00% - 34.46% 38.44% 23.21% 22.66% 21.72%
ROE 176.07%

96
 Exhibit:9.3.3: Return on Equity of SJIBL

Interpretation: The Companys return on equity is decreasing in the starting time, which is not
good for the Bank. The Bank has generated maximum amount of ROE in the year 2006, which is
38.44% but after that, the Banks ROE is worst position in the year of 2003 which is 0.00% and
in the year of 2004 it turn into a negative figure that is -176.07%. The ROE is decreasing falls as
the amount of proposed dividend and paid up capital of the Bank has increased lot during this
period of time but compare to that the amount of net profit is not increasing that much as the
operating income of the Bank is increasing as the Bank as established some new branches during
this period of time.

9.4.0. Capital Ratio: This type of ratio analyze a particular Banks capital structure and help us
to determine the level of assets financed by the Banks creditors and the level of assets financed
by the firms shareholders funds. The common types of ratios are as follows:

9.4.1. Debt Ratios: The ratio analyzes a firms debt position, which indicates the amount of other
people money being used in the firm to generate profits by measuring the portion of total asset
financed by the firms creditor. This ratio is calculated as follows ---

Debt Ratio = Total Liabilities/Total Asset

PARTICULARS YEARS

97
 2003 2004 2005 2006 2007 2008 2009
Total Liabilities 616 947 1370 20137 25559 40504 53994

Total Asset
642 974 1448 21343 28347 44109 58920
Debt Ratio 95.95% 97.22% 94.61% 94.35% 90.17% 91.83% 91.64%

Exhibit:9.4.1: Debt Ratio Of SJIBL

Interpretation: After having a careful view on the graph, we can see that the company, SJIBL
has financed on an average of above 94% of its total assets with debt in every year but from the
year 2004 the Banks debt position is started to fall, as the Bank is now emphasizing on equity
capital financing and the Bank has lowest level of debt ratio in the year 2007 as the Bank has
increased its paid up capital of Tk. 1872 (In Million Taka). In 2008 and 2009 position is
satisfactory.

9..4.2. Equity Capital Ratio: The ratio shows the position of the Banks owners equity by
measuring the portion of total assets financed by the share holders invested funds and it is
calculated as follows:

Equity Capital Ratio = Total Shareholders Equity/Total Asset

Particulars years

98
 2003 2004 2005 2006 2007 2008 2009
Equity
Capital 253 268 741 1205 2788 3605 4926
Total Asset
642 974 1448 21343 28347 44109 58920
Equity
Capital
ratio 3.95 2.76 5.13 5.65 9.83 8.17 8.36

Exhibit:9.4.2: Equity Capital Ratio Of SJIBL

Interpretation: From the figure, shown above it can be said that, from the year 2003 the Banks
equity capital ratio is fluctuating year to year, which indicates that the Bank is emphasizing on
shareholders funds to finance its total assets and the Bank has financed on an average of above
5% of its total assets by using the shareholders invested capital and the Bank has maximum level
of equity capital ratio in the year 2007, which is 9.83% as the Bank has increased its equity
capital by increasing the paid up capital of Tk. 1872 crore. But in 2008 and 2009 it has been
decreased drastically.

99
 PART
PART10
10
COMPARATIVE
COMPARATIVEANALYSIS
ANALYSISWITH
WITH
EXIM
EXIMBANK
BANK

100
PART 10: COMPARATIVE ANALYSIS WITH SAME NATURE ORGANIZATION:

I have mentioned in the earlier part of the report that, financial analysis typically is associated
with ratio analysis. Ratio analysis involves the methods of calculating and interpreting the
financial ratios to analyze the firms relative financial performance. And there are three types of
ratio comparison viz.

Cross-Sectional Analysis,
Time Series Analysis and

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 Combined Analysis.

And in this part of the report, I am going to make a comparative study on the financial
performance of Shahjalal Islami Bank Limited (SJIBL) by using the Cross-Sectional Ratio
Analysis method and I have chosen the EXIM BANK LIMITED as a peer Bank of EXIM for my
Cross-sectional Analysis to evaluate the actual financial performance of the EXIM Bank. Before
moving towards the analysis, I would like to give a brief on EXIM Bank Limited for our better
understanding and to have a clear idea about the compared organization:

10.1. Overview of EXIM Bank Limited

10.1.1 An Overview of EXIM Bank Limited:

The EXIM Bank of Bangladesh Limited is an Islamic Shariah based commercial Bank,
which is committed to provide high quality financial services to contribute to the growth of
G.D.P. (Gross Domestic Product) of the country through stimulating trade & commerce,
accelerating the pace of industrialization, boosting up export, creating employment opportunity
for the educated youth, Poverty alleviation, raising standard of living of the limited income group
and over all socio-economic development of the country.

The Bank offers full range of Personal, Corporate, International Trade, Foreign Exchange, Lease
Finance and Capital Market Services. EXIM Bank Limited is the preferred choice in banking for
its friendly and personalized services, cutting edge technology, tailored solutions for business
needs, global reach in trade and commerce and high yield on investments, assuring Excellence in
Banking Services.

10.1.2 Financial highlights of EXIM Bank:

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The performance of the Bank, during the period under review (2003 2009), is more significant
simultaneously in development and achievements of continuous growth rate in all the areas of
banking operations. The Bank has successfully been marching ahead with its prime business
objective by earning a pre- tax profit of Tk. 1,618,797,086 million registering an annual growth
than that of the previous year, which is 2006 with a profit of 1,199,490,935. The amount of total
assets of the Bank as on 31 December, 2007 stood at Tk. 5 1,503,027,985million, more than that
of the previous year 2006. In the year 2007, the Banks after tax Return on Assets (ROA) is
2.00%which is well above the industry average and it was 1.73%in the previous year. In the year
2007, the total amount of statutory liquidity requirement (SLR) reserve held by the Bank with
Bangladesh Bank was Tk. 1, 134,639,838 million. In 2008 the bank recorded its operating profit

EXIM BANK AT A GLANCE (as on 31 December, 2009)

Name of the Institution : Export Import Bank of Bangladesh Limited

Date of incorporation : June 02, 1999

Commencement of operation : August 03. 1999
Authorized Capital : Tk. 1000.00 million (initial)
Tk. 3500 million (as on 31 December, 2009)
Paid up Capital : Tk. 225 million (initial)
Tk. 3373 million (as on 31 December, 2009)
Converted to Islamic bank : July 01, 2004
Legal form : A Shariah based Islamic Bank
Slogan : Together Towards Tomorrow
Industry : Banking industry of Bangladesh

Nature of business : Shariah based Islamic banking with different

financial services/products
Target customers : Individuals and Corporate customers
Deposits, accumulated : Tk 73835461825
General Investments : Tk 68609907470
Operating profit : Tk 4443746741
Net profit : TK 1682990615
Number of branch (2007) : 56
Total manpower : 1312
Chairman : Md. Nazrul Islam Mazumder
Managing director : Kazi Masihur Rahman
Web address : www.eximbankbd.com
of tk 2518.39 which is 31.98 % higher than that of 2007.

10.2 SWOT analysis of EXIM BANK LIMITED:

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A particular SWOT analysis discloses the following issues for an organization that an
organization achieved over the time of its operation by analyzing its both internal and external
environment:
S- STRENGTHS
W-WEAKNESS
O-OPPORTUNITIES
T-THREATS

The SWOT analysis of EXIM Bank Bangladesh Limited is shown below:

10.2.1. STRENGTHS:
Superior Financial Services: Reputation of being a provider of superior quality
financial services among its customers, particularly the Investment department has
obtained most of the clients reliability in providing services and on the other hand
SJIBL also provide the same satisfactory work to their customer.
Differentiated Islamic Banking Products: Because SJIBL and EXIM several types of
differentiated Islamic Banking Products (both deposit and investment) with unique
features and facilities, which are so much helpful for enhancing the economic growth.
Products for lower income people: SJIBL and EXIM have strong concentration on
lower income groups to improve their living standards by creating more awareness and
motive of savings among them.
Concentration for students: Special concentration on the students to develop savings
habit among them and SJIBL has an education savings scheme for the students.
Maintain account in low amount: Relatively low minimum balance/deposit
requirement to maintain an account with the Bank. On the other hand SJIBL has
various amount of depository scheme for different type of people.
Skilled personnel: Co-operative & skilled personnel, who are very much specialized in
interacting with clients both EXIM and SJIBL
Correspondent with other financial institutions: SJIBL and EXIM have strong
correspondent relationship with other commercial banks & a member of SWIFT
service.
Training Institutions: EXIM has own training institution which arrange useful and
distinctive training program time to time. On the other hand SJIBL also arrange
training program to their officials.

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 Capital: Strong capital base and maintain all the statutory requirements to be a good
Bank.
Strong concentration on Investment: EXIM bank is an Islamic perspective bank, it
also maintain strong concentration on investment. On the other hand Investment
Division is the heart of SJIBL and main business area of the bank. Bank gives loans to
the client by judging their business and concern how the clients repay the loan
Strong monitoring Process: EXIM banks officials strongly monitor every area of
investment. In the other hand in SJIBL investment terms and conditions are monitored,
financial statements are received on a regular basis, and any covenant exceptions are
referred to the branch manager for timely follow up.

10.2.2. WEAKNESSES:
Long account opening procedure: Various requirements demanded by the Bank to
open a new account both EXIM and SJIBL.
Narrow portfolio: Narrow product/service portfolio (particularly the deposit portfolio)
on the other hand SJIBL has their strong product portfolio..
Geographic coverage: Both EXIM & SJIBL Low geographic coverage (only nine
branches are operating in rural areas).
Credit card facility: EXIM unable to provide credit card facility for all customer
groups. It provides credit card facility only for the selected customer groups but SJIBL
provide credit card all class of people.
Unavailable online facility: Unavailability of online Banking facility, on the other
hand SJIBL has an online facility in every branch.
Promotional Activities: Both EXIM and SJIBL Lack of strong and attractive
promotional activities.

10.2.3. OPPORTUNITIES:
Perception of Islami Bank: Strong appetite for Islamic financial services among the
people of Bangladesh.

High rate of return: Possibility to generate very high rate of return as compared to
fixed rate of interest both EXIM and SJIBL.

Use latest technology: The use of latest technology in all spheres of banking, which
will increase the banks efficiency and service quality more.

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 Online facility: Introduction of online banking facility will enable the bank to offer its
banking service beyond its national border for EXIM; on the other hand SJIBL has a
strong online facility.

Expand banking network: Expansion of existing Banking networks through merge

with other Islamic Banks will facilitate the bank to enjoy the competitive advantage.

10.2.4. THREATS:
Lack of awareness regarding Islamic network: Lack of awareness regarding the
Islamic Banking system among the people of Bangladesh.
Complexion in product name: Name of the products are so much difficult to
understand and very much confusing, such as Mudaraba, Murabaha.
Increased competition: Increased competition from fellow Islamic Banks and Other
Private Commercial Banks (PCBs).
Lack of guide line by the central bank: Lack of adequate guideline by the Central
Bank on the basis of Islamic Shariah.
Fund collection from the market: Limitation (as an Islamic Bank) to borrow from the
money market (short term funds), which may produce a threat to the liquidity of the
Bank.
Government rules and regulations: Unfavorable Government rules and regulation
regarding Banking business.
Unfavorable climate for the banking sector: Unfavorable economic and
political climate, such as high inflation rate & continuous devaluation of money.

10.3.0: Competitive financial analysis:

10.3.1. Liquidity Ratio: It measures a firms ability to meet up or satisfy its short tem
obligations, as they become due. The commonly used liquidity ratios are ----

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10.3.1.1. Current Ratio: The equation is Current ratio = Current Assets / Current
Liabilities

Year Current Ratio

SJIBL EXIMBL

31.12.2003 1.1 1.78

31.12.2004 1.04 1.13

31.12.2005 1.33 1.17

31.12.2006 1.38 1.25

31.12.2007 1.48 1.39

31.12.2008 1.12 1.12

31.12.2009 1.11 1.10

Figure:10.3.1.1: Liquidity position of SJIBL with Exim

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Interpretation: We know that, the current ratio measures a firms liquidity by measuring the
portion of its current asset relative to its current liabilities and the higher the ratio, the higher the
liquidity of the firm. So, after observing the graph shown above, it can be said that - EXIM
Banks current ratio has started to rise from the year 2004 but it is always below the standard
level (2), which is not good and risky for the EXIM Bank. On the other hand, the current ratio of
Shahjalal Islami Bank Limited (SJIBL) is increasing year to year at an increasing rate but the
ratio is also below the standard level. So it can be said that both the Bank is suffering from
liquidity problem but both are improving year by year.

10.3.2. Operating Efficiency Ratio: The ratio measures a particular Banks operating
efficiency, which is the Banks ability to serve its customers in the most effective way by using
least amount of resources (such as time, cost etc.). The following ratios are widely used to
measure a particular Banks operating efficiency:

10.3.2.1. Operating Cost to Income Ratio: It measures a particular Banks operating

efficiency by measuring the percent of the total operating income that the Bank spends to operate
its daily activities. It is calculated as follows:
Operating Cost to Income Ratio = Total Operating Cost/Total Operating Income

Operating cost to incomeRatio

Year SJIBL EXIM

31.12.2003 86.74% 33.06%

31.12.2004 65.31% 31.00%

31.12.2005 25.77% 27.04%

31.12.2006 21.19% 31.54%

31.12.2007 19.23% 32.34%

31.12.2008 22.09% 28.64%

31.12.2009 30.01% 29.04%

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 Exhibit:10.3.2.1: Cost Comparison Of SJIBL with Exim
Interpretation: We know that this ratio measures the operating efficiency of a particular Bank
my measuring the portion of the total operating costs relative to the total operating income of that
Bank and the higher the ratio, the lower the operating efficiency and vice-versa. So, after
observing the figure drawn above, I am able to say that, during the time period between the years
2003 to 2005, the operating efficiency of the EXIM Bank was increasing, which was a good sign
for the Bank but from the year 2006, the ratio started to increase, which indicates that the Bank
is incurring more costs than that of previous years and this is not a good sign for the Bank. On the
other hand, Shahjalal Islami Bank Limited (SJIBL) has been able to minimize its operating costs
during the time period between years of 2005 to 2009 which is a very good sign for the bank. So
in comparison with EXIM Bank, SJIBL is more efficient in controlling & minimizing its
operating costs year to year.

10.3.2.2. Total Asset Turnover: Total Asset Turnover indicates the efficiency with which the firm
uses its assets to produce operating income. It is calculated by using the following formula

Total Asset Turnover = Total Operating Income /Total Asset

Year Total Asset Turnover

SJIBL EXIMBL
31.12.2003 0.028 0.047
31.12.2004 0.022 0.05
31.12.2005 0.047 0.048
31.12.2006 0.05 0.048
31.12.2007 0.057 0.055

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 31.12.2008 0.053 0.052
31.12.2009 0.049 0.053

Exhibit: 10.3.2.2: Comparison of total asset turnover of SJIBL with Exim

Interpretation: After observing the given graph, I am able to say that the return from per unit
of total asset, as well as the Banks efficiency in generating income is fluctuating year to year
and the Bank generated the maximum level of turnover in year 2007 and lowest level of turnover
in year 2003. On the other hand, Shahjalal Islami Bank Limited (SJIBL) has generated maximum
level of turnover in year 2007 and lowest level of turnover in the year 2004. But in case of
comparison, SJIBL is more efficient in using their assets to generate income than the EXIM
Bank Limited consistencely.

10.3.3.0. Profitability Ratios: the ratios are as follows ----

10.3.3.1. Net Profit Margin: It is calculated as follows
Net Profit Margin = Net Profit after Tax/Total operating Income

Net Profit Margin

Year SJIBL EXIM

31.12.2003 0.00% 30.31%

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 31.12.2004 -219.04% 31.52%

31.12.2005 37.81% 34.46%

31.12.2006 43.20% 32.29%

31.12.2007 39.72% 33.00%

31.12.2008 35.19% 30.89%

31.12.2009 36.69% 37.87%

Exhibit:10.3.3.1: Comparison of Net profit margin of SJIBL with EXIM

Interpretation: From the above graph, it can be said that the EXIM Banks profit margin is
fluctuating year to year or over the time and the Bank has generated maximum amount of net
profit margin in the year 2009, which is 37.87% and lowest amount of margin in 2003 which is
30.31%. So I can conclude that the Bank generates net profit in each year on an average rate of
above 31% of the total operating income. On the other hand, SJIBL profit margin in 2003 starts
from 0 and in 2004 it has negative profit but by the years between 2007 it generates profit more

111
than EXIM. So it can be easily said that SJIBL performance and profitability is much better
than EXIM bank recently.

10. 3.3.2. Return on Total Assets (ROA):

Year Return on Asset

SJIBL EXIMBL

31.12.2003 0.00% 1.42%

31.12.2004 -4.85% 1.57%

31.12.2005 1.77% 1.65%

31.12.2006 2.17% 1.56%

31.12.2007 2.28% 1.81%

31.12.2008 2.08% 1.83%

31.12.2009 2.22% 2.19%

Exhibit: 10.3.3.2: Comparison of ROA of SJIBL with EXIM

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Interpretation: After having a careful view on the graph I am able to say that the both the
Banks effectiveness to generate return by using its available assets is fluctuating year to year and
both the Banks have generated maximum amount of ROA in the year of 2007 but in case of
comparison, recently SJIBL and EXIM both are efficient to generate ROA .

10.3.3.3. Return on Equity (ROE): It measures the return earned by the funds invested by
the common stockholders. It is calculated as follows ----

ROE = Net Profit after Tax/Shareholders Equity

Year Return on Equity

SJIBL EXIMBL

31.12.2003 0.00% 34.05%

31.12.2004 -176.07% 27.27%

31.12.2005 34.46% 29.04%

31.12.2006 38.44% 20.90%

31.12.2007 23.21% 23.03%

31.12.2008 23.00% 21.98%

31.12.2009 22.00% 25.10%

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Exhibit:10.3.3: Comparison study on ROE position of SJIBL with EXIM

Interpretation: The EXIM Bank has generated maximum amount of ROE in the year 2003, but
after that, the Banks ROE is decreasing year to year, which is not favourable for the EXIM Bank.
The ROE is decreasing from the year 2004 to year 2006. In the other hand SJIBL performance is
lower in 2004 but they are able to improve their ROE in the following years. They reached
highest ROE in 2006. Having a negative ROE in year 2004 they are able to improve more
than EXIM. But two banks ROE is stable and same in 2009.

10.3.4.0. Capital Ratio: The common types of ratios are as follows:

10. 3.4.1. Debt Ratios: This ratio is calculated as follows ----

Debt Ratio = Total Liabilities/Total Asset

Debt Ratio
Year

SJIBL EXIM

31.12.2003 95.95% 95.82%

31.12.2004 97.22% 94.25%

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 31.12.2005 94.61% 94.33%

31.12.2006 94.34% 92.55%

31.12.2007 90.16% 92.15%

31.12.2008 91.83% 92.71%

31.12.2009 91.64% 92.22%

Exhibit: 10.3.4.0: Comparison of Debt position of SJIBL with Exim

Interpretation: After having a careful view on the graph, we can see that the EXIM Bank has
financed on an average of above 94% of its total assets with debt in every year and from the
year 2005 the Banks debt position is started to fall, as the Bank is now emphasizing on equity
capital financing and the Bank has lowest level of debt ratio in the year 2007. On the other hand,
SJIBL has more debt in the year 2004 but at the end of 2009 SJIBL has used less debt than the
EXIM Bank has done in its capital structure. So it can be said that the SJIBL is much more
efficient to use its debt position than the EXIM Bank.

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10. 3.4.2. Equity Capital Ratio: The ratio shows the position of the Banks owners equity by
measuring the portion of total assets financed by the share holders invested funds and it is
calculated as follows:
Equity Capital Ratio = Total Shareholders Equity/Total Asset

Equity Capital ratio

Year SJIBL EXIM

31.12.2003 3.95% 4.18%

31.12.2004 2.76% 5.75%

31.12.2005 5.13% 5.67%

31.12.2006 5.65% 7.45%

31.12.2007 9.83% 7.85%

31.12.2008 8.17% 7.29%

31.12.2009 8.36% 7.77%

Exhibit: 10.3.4.2:Comparison on Equity capital of SJIBL with EXIM

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Interpretation: From the graph, shown over it can be said that, from the year 2005 the EXIM
Banks equity capital ratio is increasing year to year, which indicates that the Bank is
emphasizing on shareholders funds to finance its total assets and the Bank has financed on an
average of above 5% of its total assets by using the shareholders invested capital and the Bank
has maximum level of equity capital ratio in the year 2007, as the Bank has increased its equity
capital. On the other hand, equity capital ratio of Shahjalal Islami Bank Limited (SJIBL) is
increasing year to year and the Bank (SJIBL) has financed maximum amount of its total assets by
using the shareholders invested capital in year 2007. So it can be said that both the Bank is
putting emphasis on equity capital financing.

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PART 11: FINDINGS:

11.1. ON SELECTED ORGANIZATION: All of the findings that are originated from the analysis
are enumerated below:

11.1.1. Findings from Financial Performance Analysis of Shahjalal Islami Bank Ltd.: After
analyzing the financial performance of the SJIBL, I have identified the following crucial issues of
the financial performance of the Shahjalal Islami Bank Ltd.:

SJIBL is newly 4th generation bank of our country. The liquidity level of the Bank is
fluctuating year to year and always below the standard limit. But recently the Banks
liquidity level has started to rise, which is a good sign for the Bank.
The Banks operating cost to income ratio started to go down from the year 2003 and it
maintain a standard level of low operating cost. That is a good sign for the bank.
The Banks total asset turnover is in bad position in the year 2004 but from the year
2005 it has started to rise.
The Banks net profit margin is going in worst position in the year 2004 & thats turn
into negative figure (219.04%) and from the next year 2005 it has started to rise, and
still now it turn into a profitable way, which is a good sign for the Bank.

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 The Banks ROA and ROE position is very good except in the year 2004.
The Bank has financed on an average of above 94% of its total assets with debt in
every year but from the year 2004 the Banks debt position is started to fall, as the Bank
is now emphasizing on equity capital financing.
The Bank has financed on an average of above 6% of its total assets by using the
shareholders invested capital and the Bank has maximum level of equity capital ratio
in the year 2007, which is 9.83% and continue the following year.
The Banks market value (value of the Bank to the investors) is increasing year to year
thats a good indication for the bank.
11.1.2 Findings from the analysis-

While working on Shahjalal Islami Bank Limited, Mirpur Branch, I have attained a newer kind of
experience. After collecting and analyzing data I have some findings. These findings are
completely my personal view to research work.

SJIBL mainly includes several types of loan facilities and generally the bank prefers
term investment facilities.
The level of short term investment in the general investment portfolio is decreasing,
while the level of long term investment is increasing.
At Shahjalal Islami Bank, the average investment processing time is relatively long.
This statement is particularly true for project loan processing, which usually takes over
one month.
SJIBL risk grading analysis on the based o security of the proposed investment facility
and market reputation of the borrower.
According to Bangladesh banks guideline the approval authority should be delegated to
the individual executives and not to committees to ensure accountability in approval
process. But in SJIBL all loan approval authority centralized in Head office.
Shahajalal Islami Bank limited has a written investment policy manual, which act as
guideline for the branch officials and which is available in every branch.
In Shahjalal Islami Bank investment monitoring is done by investment in charge under
supervision of Branch managers.
In SJIBL the portion of classified investment is very low and the bank has a very strong
and well organizes division for recovery of loans.

119
 Shahjalal Islami Bank Limited has lack of strong supervision for which loans are
defaulted.
In terms of repayment large loan has performed better than small sized loan.
This bank started on-line service. As a result customers are getting the full service by
the on-line service. But sometimes they have to face problem with on-line account.
Branches are very much enthusiastic to provide more service to the clients. Investment
Division is an efficient department. They are very much prompt to give decision to their
valued client. Head Office Credit committee sits regularly on weekly basis. They never
keep any things pending.
Good cooperation is identified among the work procedures and among the employees of
the bank, which results in effective service. The employees of the bank can provide
effective and efficient services to the customers because of computer facility.
The number of human resources in the Computer section is really insufficient to give
services to huge number of customers.
The investment of the branch is too low in comparison to the total deposits of the
branch.
The Bank has given less emphasis on long-term financing.
The bank has its training institution which arrange useful and distinctive training
program time to time for the employees.
The Bank has strong correspondent relationship with other commercial banks & the
Bank is a member of SWIFT service community.
In case of clearing, postings are made through computer database program and
currently the Bank (SJIBL) uses PC Bank 2000 database program, which is encountered
by several problems and limitations.
Shahjalal Islami Bank Limited has also shortage of efficient management information
system.
Lack of promotional activities.
Lack of rural development program.

11.2. Comparative findings on selected organization (SJIBL) and compared

organization (EXIM):

The liquidity level of both the Banks (SJIBL & EXIM Bank Limited) is always below
the standard limit, though the Banks liquidity level is increasing year to year, which is
a good sign for the Banks.

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 Both the Banks are currently operating with moderate operating efficiency and the
EXIM Bank has maintained all the issues, reflecting operating efficiency at a tolerable
level except its operating costs and the operating cost position of the EXIM Bank is
rising year to year. On the other hand, the Shahjalal Islami Bank Limited has
successfully maintained all the issues, reflecting operating efficiency at a tolerable level
and the Bank (SJIBL) is much more efficient than the EXIM Bank.

Both the Banks (SJIBL & EXIM Bank Limited) are currently operating with moderate
profitability and the profitability of the Shahjalal Islami Bank Limited (SJIBL) is higher
than the profitability of the EXIM Bank.

Both the Banks capital structure includes both the debt and equity capital and Both the
Banks have financed most of its total assets (above 95%) with debt and a little portion
with shareholders invested capital. But now it SJIBL turn their investment in equity
basis.

The EXIM Banks market value (value of the Bank to the investors) is fluctuating year
to year but from the year 2006 it is increasing, while the market value of the Shahjalal
Islami Bank Limited (SJIBL) is increasing day by day.

PART 11.3: CONCLUSION:

A banker cant sleep well with bad debts in his business. Shahjalal Islami Bank limited is a
leading Private Islami bank in Bangladesh with superior customer bases that are loyal, faithful,
worthy towards the bank. The service provided by the young energetic officials of the Shahjalal
Islami Bank Limited is very satisfactory. As an Islamil bank SJIBL has to follow the rules of
Bangladesh bank despite the fact that these rules sometime restrict the foreign business to some
extent. During my internship in this branch I have found its Investment department to be very
efficient; therefore this department plays a major role in the overall profitability of the branch and
to the Bank as a whole.
Shahjalal Islami Bank Ltd is one of the most potential Islami banks in the Islami banking sector.
It has a large portfolio with huge assets to meet up its liabilities and the management of this bank
is equipped with the expert bankers and managers in all level of management. So it is not an easy
job to find out the drawbacks of this branch as a new branch. But the branch needs more

121
employees for its substantial growth. I would rather feel like producing my personal opinion
about the ongoing practices in Mirpur Branch.

The Bank's drive towards market leadership as well as quality in choosing business will continue
in the coming years although competition is intensified with the opening of more financial
institutions. The Bank is optimistic that the volume of business will increase in future through
pragmatic and market friendly policies; The Bank shall continue to explore new fields of
investment and take steps to open new Branches for Banking. We shall endeavor to adopt
customer-oriented policies and introduce new techniques that will help to earn profit and increase
greater confidence of the existing/ prospective customers.
In future, this internship experiences & the report will help me in investment analysis & to choose
the right investment portfolio. Actually both the professional & educational life will be beneficial
with the experience.

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SL
Terms Elaborations
No.
1 SJIBL Shahjalal Islami Bank Limited
2 FI Financial Institution
3 BB Bangladesh Bank
4 IBCF Islamic Banks Consultative Forum
5 IBBL Islami Bank Bangladesh Limited
6 BIBM Bangladesh Institute of Bank Management
7 IBB Institute of Bankers Bangladesh
8 BAB Bangladesh Association of Banks
9 BAFEDA Bangladesh Foreign Exchange Dealers' Association
10 SWIFT Society for Worldwide Inter-bank Financial Telecommunication
11 AWCD Al-Wadiah Current Deposit
12 MSD Mudaraba Savings Deposit
13 MSND Mudaraba Short Notice Deposit
14 MDS Monthly Deposit Scheme
15 DBS Double Benefit Scheme
16 MS Millionaire Scheme
17 MTDR Mudaraba Term Deposit Scheme
18 NPI Non Performing Investment
19 MBDS Multiple Benefit Deposit Scheme
20 FO Financial Obligation
21 TR Trust Receipt
22 HPSM Hire Purchase under Shirkatul Meel
23 HDIS Household Durable Investment Scheme
24 MIS Monthly Income Scheme
25 L/C Letter of Credit
26 CIB Credit Information Bureau
27 RM Relationship Manager
28 IRM Investment Risk Management

123
29 RU Recovery Unit
30 IDBP Inland Documentary Bill Purchased
31 HIS Housing Investment Scheme

Annual reports (2003-2007) of Shahjalal Islami Bank Ltd.

Credit Manual of Shahjalal Islami bank Ltd.

124
Management guideline of Bangladesh Bank

http://www.shahjalal Islami Bank.com.bd/

http://banglapedia.search.com.bd/HT/E_0080.htm

http://www.google.com.bd/

http://www.exim.com.bd/

http://www.exim.com.bd/Financial_Highlights/Annual_Report.htm

www.yahoo.com

www.report.com

BOOK Reference 1: A HANDBOOK OF BANKS ADVANCES

BY L.R. Chowdhury
Edition: 1983
BOOK Reference 2: PRINCIPALS OF MANAGERIAL FINANCE
BY Lawrence J. Gitman
Edition: 2001
BOOK Reference 3: DISCOVERY OF FINANCE

125
126