Abstract of A Doctoral Thesis On

The Role of Marketing on Financial Performance in showing differences between the Traditional and Islamic Banking in the context of Bangladesh

Marketing is the performance of business activities that boosts up the overall flow of a company's products and services to its clients with a view to achieving the desired goal based on profit. The goal of banking business deals with a profit in market penetration by pricing, promoting and distributing of products for which there is a significant achievement of an organization. People at the helm consider MA !"T#$% is every thing to e&ploit the untapped potentials of an organization. The broad ob'ective in perusing research is to uphold and evaluate the implication of marketing on the financial performance in showing salient differences between The Traditional and #slamic banking in the conte&t of (angladesh. To some e&tent, the study mainly focuses on #slami (ank (angladesh )td *#(()+, Al,Arafa #slami (ank, "-#M (ank )td, .haha'alal #slami (ank )td and their marketing devices on financial performances have been compared with that of four other commercial banks in (angladesh, such as $ational (ank )td. *$()+, Prime (ank )td. *P()+, .tandard /hartered (ank *./(+ and /iti (ank $. A. */$A+.

AIMS AND OBJECTIVES

o o o o o o To conduct interest free banking. To establish participatory banking instead of banking on debtor , creditor relationship. To invest through different modes permitted under #slamic .hariah. To accept deposits on Mudaraba 0 A#,1adeeah basis To establish a welfare,oriented banking system. To e&tend co,operation to the poor, the helpless and the low,income group for their economic uplift. o o To play a vital role in human development and employment generation. To contribute towards balanced growth and development of the country through investment operations, particularly in the less developed areas. o To contribute in achieving the ultimate goal of #slamic "conomic .ystem.

FUNCTIONS
o o o o o To maintain all types of deposit accounts. To make investment . To conduct foreign e&change business. To e&tend other banking services. To conduct social welfare activities.

EXECUTIVE SUMMARY
Marketing is the performance of business activities that directs the flow of a company's products and services to clients with a view to achieving the desired goal based on profit. (anking business goal deals with a profit by pricing, promoting and distributing of products for which there is a market. The broad ob'ective of the study is to evaluate the implication of Marketing on the financial performance of commercial banks. The study mainly focuses on #slami (ank (angladesh )td. *#(()+, "&port #mport (ank of (angladesh )td. *"-#M+, Al,Arafah #slami (ank )td. *AA#(+, .hah'alal #slami (ank )td. *.4()+, Prime (ank )td. *P()+, $ational (ank )td. *$()+, .tandard /hartered (ank *./(+, and /iti (ank $.A. */$A+. Performances of sample banks have been compared from different angles.

Islami Bank Bangladesh Ltd.

#slami (ank (angladesh )imited *#(()+ was incorporated on 25 th March,2675 as a public company with limited liability under the companies Act, 2625 *Amendment, 2668+. The (ank started functioning from 59th March, 2675. #(() is the first interest,free (ank in .outh,"ast Asia. The establishment of this bank ushered in a new era in (angladesh, the 5 rd largest Muslim /ountry of the world. The (ank is commited to run all its activities as per #slamic .hariah. #(() through its steady progress and continued success has, by now, earned the reputation of being one of the leading private sector banks of the country.

Aims and Obje ti!es

To conduct interest free banking. To establish participatory banking instead of banking on debtor , creditor relationship. To invest through different modes permitted under #slamic .hariah. To accept deposits on Mudaraba 0 Al,1adeeah basis To establish a welfare,oriented banking system. To e&tend co,operation to the poor, the helpless and the low,income group for their economic uplift. To play a vital role in human development and employment generation. To contribute towards balanced growth and development of the country through investment operations particularly in the less developed areas.

To contribute in achieving the ultimate goal of #slamic "conomic .ystem.

C"#$"#ate In%"#mati"n
Authorised /apital: Tk. ;99.99 Million Paid,up /apital: Tk. 52<.67 Million .hare in /apital: )ocal .hare holders: 57= >oreign .hare holders: ?3= $umber of (ranches: 29; $umber of "mployees: 32<2 Total @eposit: Tk.26<;9.66 Million Total #nvestment: Tk. 258;8.<8 Million

Management "% IBBL

#slami (ank (angladesh )imited is managed by (oard of the @irectors consisting of 38 Members out of whom 7 are foreigners and 2? are local. A 6,member "&ecutive committee is formed by the (oard of @irectors for efficient operation of the (ank. (esides, a Management /ommittee looks after the daily affairs of the (ank.

&'n ti"ns(

To maintain all types of deposit accounts. To make investment. To conduct foreign e&change business. To e&tend other banking services. To conduct social welfare activities through #slami (ank >oundation.

E)$"#t Im$"#t Bank "% Bangladesh Ltd.

A"&port #mport (ank of (angladesh )td.A is widely named as A"-#M (ankA which is a completely shariah based #slamic bank. All of its activities are being operated under the norms of #slamic shariah. The bank was established as a traditional bank on the 5rd of August in the year of 2666. Though it started its operation as a traditional bank, it was converted to an #slamic bank on the 2 st of 4uly in the year of 3998. The bank has got a dramatic change through this conversion.

Visi"n(
The main of vision of "&port #mport (ank of (angladesh )td. is BTogether Towards TomorrowC. The bank believes in togetherness with its customers in the growth and progress with services. To achieve the desired goal, there will be pursuit of e&cellence at all stages with a climate of continuous

improvement, because, in "&port #mport (ank of (angladesh )td., everybody believes the line of e&cellence is never ending. (ankDs strategic plans and networking will strengthen its competitive edge over others in rapidly changing competitive environments. #ts personalized Euality services to the customers with the trend of constant improvement will be cornerstone to achieve bankDs operational success.

Missi"n(
2. To be the most caring and customer friendly and service oriented bank. 3. To create a technology based most efficient banking environment for its customers. 5. To ensure ethics and transparency in all levels. 8. To ensure sustainable growth and establish full value of the honorable shareholders and ;. Above all, to add effective contribution to the national economy.

C"#$"#ate In%"#mati"n
@ate of incorporation #nauguration of first (ranch Authorised /apital Paid,up /apital $umber of (ranches /redit ating : : : : : : 4une 93, 2666 August 95, 2666 Tk.5;9.99 /rore 2<2.5<; /rore 5;*Thirty >ive+ )ong Term F A, *AdeEuate .afety+ .hort Term F .T,5 *%ood %rade+

Al*A#a%ah Islami Bank Limited

Al,Arafah #slami (ank incorporated in (angladesh as a banking company in 266; with limited liability by shares. #t started business on 3< .eptember of that year with an authorised capital of Tk 2,999 million. At inception, its paid up capital was Tk 292.39 million divided into 292,399 ordinary shares of Tk 2,999 each. 35 sponsors of the bank subscribed the total issued capital. Al,Arafah (ank is an interest,free shariah bank and its modus operandi is substantially different from those of regular commercial banks. The bank however, renders all types of commercial banking services under the regulation of the (ank /ompanies Act 2662. #t conducts its business on the principles of musharaka, (ai,murabaha, (ai,mua''al and Gire Purchase transactions. A .hariah /ouncil of the bank maintains constant vigilance to ensure that the activities of the bank are being conducted according to the precepts of #slam. The management of the bank is vested in a 35,member board of directors, who oversee the affairs of the bank through a managing director, the chief e&ecutive officer of the bank.

S$e ial &eat'#es "% the Bank

2. 3. 5. 8. ;. ?. <. All activities of the (ank are conducted under an interest,free system according to #slamic .hariah. #t's investment policies under different modes are fully .hariah compliant. @uring the year 3995, <9= of the investment income has been distributed among the Mudaraba depositors. #t believes in providing dedicated services to the clients imbued with #slamic spirit of brotherhood, peace and fraternity. The bank is committed towards establishing a welfare,oriented banking system to meet the needs of low income and underprivelage class of people. The (ank upholds the #slamic values of establishment of a 'ust economic system through social emancipation and eEuitable distribution of wealth. >ollowing the #slamic traditions, it is assisting in the economic progress of the socially disadvantage peopleH in the creation of employment opportunities and in upliftment of rural areas to ensure a balance development of the country. The (ank believes in social and philanthropic activities and has established A#() "nglish Medium Madrasha and A#() library. More endeavours will inshallah follow in future.

7.

<

C"#$"#ate In%"#mati"n
@ate of egistration #nauguration of first (ranch Authorised /apital Paid,up /apital "Euity $umber of (ranches @eposit #nvestment $umber of Manpower $umber of .hareholder : : : : : : : : : : 4une 27, 266; .eptember 3<, 266; Tk.3;9.99 /rore 7;.83 /rore 2?6.92 /rore 8? *>orty .i&+ 2?<<.;5 /rore 2<83.52 /rore 623 887<

Shahjalal Islami Bank Limited +S,BL.hah'alal #slami (ank )imited *.4()+, a .harial (ased commercial (ank in (angladesh was incorporated as a Public )imited /ompany on 2st April, 3992 under /ompanies Act 2668. The (ank commenced commercial operation on 29th May 3992 by opening its 2st branch, i.e., @haka Main (ranch at ;7, @ilkusha, @haka obtaining the license from (angladesh (ank, the central (ank of (angladesh.

Obje ti!es
To establish interest,free and welfare oriented banking system.

To help in poverty alleviation and employment generations. To contribute in sustainable economic growth.

Visi"n
To provide Euality services to our customers, To set high standards of integrity, To e&tend our customers innovative services acEuiring state,of,the,art technology blended with #slamic principles, and brings total satisfaction to our clients, sponsors and employees.

Missi"n
To e&pand #slamic banking through welfare oriented banking system, ensure eEuity and 'ustice in economic activities, e&tend financial assistance to poorer section of the people and achieve balanced growth and eEuitable development.

C"#$"#ate In%"#mati"n(
/ommencement of (usiness $umber of (ranches $umber of "mployees Authorized /apital Paid,up /apital >ace Ialue per .hare : : : : : : 29th May 3992 32 5<< Tk.399 /rore 27<.2? /rore Tk.299.99

.#ime Bank Limited

The bank was incorporated as a public limited company in (angladesh under /ompanies Act 2668. #t commenced its banking business with one branch from April 2<,266; under the license issued by (angladesh (ank. Presently the bank has 83 branches all over (angladesh and a booth located at @haka club, @haka. Jut of above 83 branches, 9; branches are designated as #slamic (ranches complying with the rules of #slamic .hariah, the modus operandi of which is substantially differently from other branches run on commercial conventional basis. The bank is listed with @haka .tock "&change )imited and /hittagong .tock "&change )imited as a publicly Euoted company for its general class of share. The principal activities of the bank are to provide all kinds of commercial banking services to its customers through its branches in (angladesh. The bank also carries out merchant banking activities under the license issued by the .ecurities and "&change /ommission *."/+, @haka, (angladesh.

Visi"n
The vision is to be the best Private /ommercial (ank in (angladesh in terms of efficiency, capital adeEuacy, asset Euality, sound management and profitability having strong liEuidity.

Missi"n
2. 3. To build Prime (ank )imited in to an efficient, market driven, customer focused institution with good corporate governance structure. /ontinuous improvement in our business policies, procedure and efficiency through integration of technology at all levels.

Obje ti!es(
The ob'ectives for which the bank is established are as follows: 2. 3. To carry on, transact, undertake and conduct the business of banking in all branches. To receive, borrow or to raise money on deposit, loan or otherwise upon such terms as the company may approve.

5. 8. ;.

To carry on the business of discounting and dealing in e&change of shares and securities and all kinds of mercantile banking. To provide for safe,deposit vaults and the safe custody of valuables of all kinds. To carry on business as financiers, promoters, capitalists, concessionaires and brokers.

?. To act as agents for sale and purchase of any stock, shares or securities or for any other momentary or mercantile transaction. <. To establish and open offices and branches to carry on all or any of the business abroad and within the country provided prior permission is obtained from (angladesh bank.

C"#$"#ate In%"#mati"n
#ncorporation of the /ompany : /ommencement of (usiness $umber of (ranches $umber of "mployees Authorized /apital Paid,up /apital Total Assets Total "Euity : : : : : : : 23 >ebruary 266; 2< April 266; ;9 22<3 Tk.899.99 /rore Tk.2<;.99 /rore Tk.;239.37 /rore 555.56

/ati"nal Bank Limited

$ational (ank )imited has its prosperous past, glorious present, prospective future and under processing pro'ects and activities. "stablished as the first private sector (ank fully owned by (angladeshi entrepreneurs, $() has been flourishing as the largest private sector (ank with the passage of time after facing many stress and strain. The member of the board of directors is creative businessman and leading industrialist of the country. To keep pace with time and in harmony with national and international economic activities and for rendering all modern services, $(), as a financial institution automated all its branches with computer network in accordance with the competitive commercial demand of time. Moreover, considering its forth,coming future the infrastructure of the (ank has been rearranging. The e&pectation of all class businessman, entrepreneurs and general public is much more to $(). !eeping the target in mind $() has taken preparation to open new branches by the year 399<.

Missi"n
To provide highest benefits to our customers and good returns to our shareholders. To Provide services at the doorsteps of the clients through diversification and further e&pansion of the financial sector.

To ensure highest utilization of human resources through increasing efficiency and creativity. To encourage people to grow habits of savings. To increase investment for keeping the pace of market economy.

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To simplify international transaction and foreign trade to earn the trust of all concerned. To identify the needs of the clients based on practical necessity and ensure short and long,term finance. To utilize bank asset through proper investment and participation of different welfare programmes of the country. To help keep the share market active through meaningful presence of the bank in the capital market. To utilize information technology for modern banking operation. To strengthen the discipline in the bank management and provide best services to the clients through creating long lasting relation with them. To achieve economic growth through business and different social programmes. To enhance the bankDs image within and outside the country.

C"#$"#ate In%"#mati"n
/ommencement of (usiness $umber of (ranches $umber of "mployees Authorized /apital Paid,up /apital Total Assets : : : : : : March 35, 2675 62 33<9 Tk.38;9.99 /rore Tk.79;.8< /rore Tk.8?<6?.98 /rore

Standa#d Cha#te#ed
.tandard /hartered (ank started its business in (angladesh in 2687, opening its first branch in the port city of /hittagong. The bank increasingly invested in people, technology and premises as its business grew in relation to the country's thriving economy. At present the bank has ? offices in @haka /hittagong and .ylhet, including the country's only offshore banking unit inside the @haka "&port Processing Kone at .avar. "&tensive knowledge of the market and essential e&pertise in a wide range of financial services underline our strength to build business opportunities for corporate and institutional clients at home and abroad. /ontinuous upgrading of technology and control systems has enabled the bank of offer new services, which include uniEue ATMs and Phone banking. .tandard /hartered's services in (angladesh, ranges from Personal 0 /orporate (anking to #nstitutional (anking, Treasury and /ustodial services.

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B#"ad st#ategi "bje ti!es

/reating a congenial work environment Modernization of the management information system to achieve full automation by drastically cutting down the paper works in long term. >ocusing on service Euality and consume needs ecruiting and maintaining top grade, efficient employees To invest in those technological systems which will upgrade and enhance financial services

Citibank / A
/itibank $ A is a foreign private bank in (angladesh. The (angladesh branch commenced its banking operations on 38 4une 266; after obtaining license from (angladesh (ank in 4anuary 266;. (efore starting full,fledged banking activity through the branch at @haka, it established a foreign representative office here in 267<. The present branch of the bank is the upgraded and transformed shape of the representative office. /iti %roup #nc., a merger of /iticorp #nc. and Travelers %roup #nc. formed on 7 Jctober 2667, is a bank holding company under the laws of Lnited .tates of America. #t is the sole shareholder of /itibank $ A and its head office in $ew Mork governs the businesses of its (angladesh branch. The bank commenced business in (angladesh with a paid up capital of Tk.398 million and total assets of Tk.796 million.

.#in i$le A ti!ities

The principal activities of the @haka branch of /itibank $A are to provide all kinds of commercial and merchant banking services to its customers. #n addition to traditional lending activities, the bank is e&tensively involved in long,term financing in (angladesh through eEuity participation and in other forms of term investments. #t has eEuity participation in .hinepukur /eramic )td and the country's first private television channel "kushey *"TI+. /itibank $ A provided support to large, medium and small scale industries in the form of working capital financing, medium and long,term financing, e&port servicing and import financing, and loans and advances to trade and commerce. )ending rates on these financing schemes varied between 7= and 2?.;9= during its operations in (angladesh.

C"n e$ts 0 R"le "% Se#!i e Ma#keting

A bankDs performance in terms of achieving its goal of profit ma&imization mostly depends on how its deposit and investment schemes are successfully marketed. The banks collect the saved funds of the people by offering various deposit schemes against which they pay interest to the depositors. #n against to that, the banks lend those deposits to the another set of people who carry out the investment

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function in the economy. A bank offers several deposit schemes for the depositors to mobilize funds such as: /urrent Account, .avings Account, >i&edNTerm @eposit Account, >oreign /urrency @eposit Account, .avings (ond Account, Ga'' .aving Account, @eposit Pension .cheme Account and .pecial $otice @eposit Account. A bank, on the other hand, offers several investment schemes for the investors to invest its accumulated fund such as: @ifferent Pro'ect #nvestment schemes, Transport #nvestment .chemes, Gire,Purchase #nvestment, Gouse Gold @urable %oods .chemes, "ducation .chemes, eal,estate #nvestment .chemes, /redit /ard .cheme, @octors .chemes and Agricultural #nvestment .chemes etc. (anking .ervices are characterized with intangibility, lack of identity, in,built inertia, wide range of needs, geographic dispersion, wide indirect competition and growth balanced with risk. .ervice marketing mi& includes product, price, place, promotion, people, physical evidence and process. )ogical steps that make marketing effective are market intelligence, setting business as well as market ob'ectives and strategies, marketing plans, action and control. .uccessful marketing efforts e&hibit three basic features, such as, customer,focused, customersD satisfaction and involvement in the entire organization. #n fact, (ankDs service marketing reEuires not only " )te#nal Ma#keting but also #nte#nal Ma#keting and #nte#a ti!e Ma#keting.

The .#"je t( &indings 0 Re "mmendati"n

Analyzing the different aspects of marketing functions of the eight selected banks, the study reveals the fact that the banks that practice #slamic banking are performing better. Among the eight banks, in respect of deposit growth rate, .4() has been retaining the first position in 3993, 3995 and 3998 and / $A took that position in 399; and P() in 399?. .4() also stood first in investment growth rate up to 399; and was replaced as second by AA#( that held the first position in 399? which also reflected in investment per branch growth rate. Jn the basis of net profit, .4() was in the first position up to 399; e&cept ./( in 3995. AA#( went ahead of .4() and placed .4() in the second position in 399?. #n growth rate of branch e&pansion, deposit per employee along with investment per employee and net profit per employee .4() showed consistency and held first position over the period. The elevation of .4() and AA#( is nothing but obviously a result of their recent development of market oriented operations. .4() has redesigned its Marketing @epartment to enhance the scopes of its marketing functions. #t has also increased number of employees. To meet customersD demands, .4() has introduced some attractive service packages. #t is successfully marketing its products during this time. P() has also a Marketing @epartment through which it has been able to bring a great achievement in some areas. #n deposit growth rate P() held the fist position in 399? and in income e&penditure ratio

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it always showed the lowest ratio over the whole period e&cept / $A in 399;. #t proved its efficiency over its competitors. (esides, it has introduced innovative services like /redit /ard, Micro /redit etc. P() is e&panding and strengthening its Marketing @epartment day by day. Though /$A is operating through only three branches in (angladesh, by dint of practicing market, oriented operations, it is earning more market share eventually. #n deposit per branch growth rate it held first position in 399?. #n manpower e&pansion growth rate it had highest ratio in 399? which also reflected in its employee per branch in 399? and employee per branch growth rate in 3998, 399; and 399?. #n deposit position #(() had an all time unbeaten position where it held first position in import and remittance in 399?. (ut it was failed to show the reEuired results in other sectors. #t happened due to #(() is yet to develop an organized Marketing @epartment. #t has many deposit 0 investment schemes but it canDt market most of them successfully because of not having market oriented operational drive. #n consideration of total deposit and investment amount, #(() stands first in deposit and second in investment. (ut as far as growth rate of deposit 0 investment are concerned, #(() never stood first among eight selected banks. Most of the deposit amounts are cost bearing which is responsible for earning less profit. Jn the other hand, ./(, $() 0 P() have huge amount of cost free funds. They have been able to attract depositors of cost free funds by dint of their well, furnished working environment, automation in all operations and above all with planning and implementing marketing techniEues. $() paid the highest dividend in 399?. #n order to achieve sustainable growth and development, $() needs to be market,oriented. A self,sufficient Marketing @epartment should be established. This @epartment will analyze market situations, current changes in customersD demand and recommend strategies to design and launch innovative services. #n addition to this, working environment needs to be developed and motivation level of employees needs to be improved. /omputerization and the latest communicational method should be applied in all areas of operations. $() needs to increase e&penditure for promotional purposes. #t can use Publicity, Personal .elling 0 Mail Marketing as media to promote its services as these have been found most effective.

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