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Internship Report: Stamford University Bangladesh
Internship Report: Stamford University Bangladesh
com
Internship Report
On
General Banking, Investment and Foreign
Exchange Operation of IBBL
Submitted To
Syed Monirul Hossain
Assistant Professor
Department of Business Administration
Stamford University Bangladesh
Submitted By
S.A.M Sharif Sheikh
ID : BBA03912607
Batch: 39th
Major: Accounting
Department of Business Administration
Stamford University Bangladesh
Letter of Transmittal
Date: 23rd February 2013
To
Mr. Syed Monirul Hossain
Assistant Professor
Department of Business Administration
Stamford University Bangladesh
Dear Sir,
This is my internship report on, “General Banking, Investment and Foreign Exchange
Operation of IBBL” I have got the opportunity to work at Islami Bank Bangladesh
Limited for my internship program which is an integral part of my academic program. It
is great achievement to work under your active supervision.
The whole report based on my practical experience in Islami Bank Bangladesh Limited. I
have furnished all the things that I have learnt during the internship program in Islami
Bank Bangladesh Limited, at Mouchak Branch.
I shall be highly obliged if you are kind, enough to receive this report and provide your
valuable judgment.
Sincerely Yours
-------------------------------
S A M SHARIF SHEIKH
ID: B.B.A. 03912607
Batch: 39th
Major: Accounting
Program: BBA
Department of Business Administration
Stamford University Bangladesh
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Declaration
I do hereby solemnly declare that the work presented in this report “General Banking,
Investment and Foreign Exchange Operations, A Study of IBBL” has been carried out by
me and has not been previously submitted to any other university.
The work does not breach any existing copyright and no part of this report copied from
any work done earlier for a degree of others.
-------------------------------
S A M SHARIF SHEIKH
ID: BBA 03912607
Batch: 39th
Major: Accounting
Program: BBA
Department of Business Administration
Stamford University Bangladesh
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Certificate of Supervisor
This is certify that the Internship report on “ General Banking, Investment and Foreign
Exchange Operations, A Study of IBBL ” for the degree Bachelor of Business
Administration (BBA), Major in Accounting from Stamford University Bangladesh
carried out by S.A.M. Sharif Sheikh,Batch 39th , Bearing ID No BBA 03912607, under
my supervision . This report is free from plagiarism.
No part of the report has submitted for any degree diploma, title, or recognition before.
-------------------------------------------
Syed Monirul Hossain
Assistant Professor
Department Of Business Administration
Stamford University Bangladesh
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Acknowledgement
It is a great privilege to express gratitude to our creator Allah (SWT) for such great
opportunity to be in touch with Islami Bank Bangladesh Limited (IBBL) for the following
days. Also have to put my heartened feelings and gratitude for the kindness and assistance
that was provided to me to complete assigned report as on the topic General Banking,
Investment and foreign Exchange operations, and a study of IBBL Mouchak Branch”. In
preparing the proposed report, I have taken great assistance support and guidance from
the persons of Islami Bank Training & Research Academy (IBTRA) and from the branch
as well.
I would like to thanks to my internship supervisor Syed Monirul Hossain, Assistant
Professor (Accounting) Department of Business administration, Stamford University
Bangladesh for supervising and guiding me to prepare the report.
I express my heartfelt thanks to all the faculty members of IBTRA especially to Abu
Taher Mohammad Saleh, D.G, (Training), Md. Hedayet Ullah Deputy Director (Traning)
& FM (Course Co-coordinator). Also to Md. Dr. Mahmood Ahmed EVP & Director
(Training), And all other faculty members as well as all the employees from top to
bottom of IBTRA, Who gave us necessary information and excellence guidance to
prepare this internship report.
I am very much grateful to Mr.Sale Iqbal (SVP) Manager Mouchak Branch ,Mr. Khalifa
Al-Masud(AVP),Mr.Shahadat Hossain AVP And Investment in charge of Mouchak
Branch, for his heartily co-operation to learn about “General Banking, Investment and
Foreign Exchange Operations, A Study of IBBL Mouchak branch” as well.
I would like to thanks to GB in charge Kamruzzaman SPO, investment PO Jb. Md. Mahe
Alam and Foreign Exchange in Charge Jb. Md. Dider hossain (SPO) Mouchak Branch.
Special thanks to Mr. Al Amin sir (Senior Officer) & Mr. Shohid, Mr. Sharif, Mr. Jahirul
Islam sir who personally help me in Mouchak Branch.
I am very much grateful to my elder brother A.N.M. Mohib Ullah for his guidance and
supervision to complete the report.
At last, I would like to thanks my group members (different University), my friends and
fellows and family members.
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Executive Summary
Islami Bank Bangladesh limited is the number one Bank in Bangladesh. Since its
inception in the year 1983, it has earned tremendous popularity and credibility among
people for its better services. It is only one Bank of Bangladesh, which is staying in top-
listed one thousand Bank of the World. This Bank provides various types of Islami
Shariah based services for clients that is totally welfare oriented for the humanity.
In this report, it focuses two month working experience about General Banking,
Investment and foreign Exchange operations, a study of IBBL Mouchak Branch. At
first, discussed about Introduction, Background of the study, Origin and scope of the
Report Objectives and significance of the study Sources of Information and Limitations
of the study. Which will give a primary idea about this report.
In third, describes about the primary phenomena of the Islami Bank Bangladesh Ltd. Its
aims, Objectives, Mission Vision, Special features, Organizational functions, Products
and services, Membership of different organizations, Branches of the Bank, Corporate
information and Achievements.
In Fourth, tried to discussed about experience during the internship period. IBBL
Mouchak branch has 4650 Million deposits, Investment 9500 Million out of deposit it
has borrowed from other branches for investment. In General Banking activities mainly
learned; Accounts opening, Providing different information about Mudaraba Deposit ,
Checking of balance statement, KYC form fill up, Handling transfer transaction, Debit
and Credit voucher fill up, Issue cost memo of Telegraph Transfer. In Invest activities
observed; Clients application, Quotation, Request Letter of investment, Request for
increasing limit, Authorization Letter, Demand promissory note, Delivery Letter,
Agreement form, Cash memo.
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In Foreign Exchange, activities have learned about Import, Export Foreign Remittance
and Trading Currency. Foreign Remittance has two parts, spot cash and web based
cash, and there are some procedures for collecting web-based cash. Import Export has
some related terms; L/C, Back to Back L/C, L/CAF, MPI, IRC, SWIFT, AD, H S code,
BMRE, IBP, UCPDC, ICC.
Then evaluate the IBBL by SWOT analysis. The strengths, weakness, opportunity and
threat describe in this part.
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List of abbreviation
ACRONYMS ELABORATIONS
BB BANGLADESH BANK
IBBL ISLAMI BANK BANGLADESH
GB GENERAL BANKING
TELECOMMUNICATION
AD AUTHORISED DEALER
A/C ACCOUNT
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DD DEMAND DRAFT (DD)
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3.7 Organizational Structural of IBBL 16
3.8 Function of IBBL 17
3.9 Distinguish between Islamic and Conventional Banking 17
3.10 The bank at a glance 18
3.11 IBBL Production & Services 18
3.12 Membership of different organization 18-19
3.13 Branches of IBBL 19
3.14 Corporate Information 19
3.15 Achievements 20
CHAPTER 4 : Internship Position and Duties 21-25
4.1 Internship Duties 22
4.2 Specific Responsibilities of the job 22-23
4.3 General Banking Activities 23
4.4 Foreign exchange activities 23-24
4.5 Investment activities 24-25
4.6 Learning points from internship work at different 25
departments
CHAPTER 5: general Banking activities of IBBL 26-39
5.1 General Banking of IBBL 27
5.1.1 Reception and customer care section 27
5.1.2 Account opening section 28
5.1.2(A) Al-Wadeeah (AWCA) 28
5.1.2(B) Al- Mudaraba (MSA) 28-33
5.2 Cash section 34
5.3 Bills & Clearing Section 35-36
5.4 Remittance section 36-37
5.5 Dispatch section 37
5.6 Accounts section 37
5.7 Reconciliation section 37
5.8 ATM, iBanking, sms banking, iTransfer, iRecharde 37-38
5.9 Custody and Maintenance 38
5.10 Vault and locker service 38
5.11 Sundry deposit account 38
5.12 Growth of Deposit 39
CHAPTER 6: Investment Procedure Of IBBL 40-54
6.1 Introduction 41
6.2 Objectives and Principles of Investment 41
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6.3 Operational Procedure of Investment mechanism of IBBL 42
6.4 Importance of Assessing of Investment Needs 43
6.5 Investment Mechanism of IBBL 44-49
6.6 Role of IBBL in Development of SMEs 49
6.7 Special Schemes under Investment Modes 50
6.8 Islami Bank Foundation 50
6.9 Special Projects 51
6.10 Sector wise investment 51-52
6.11 Mode wise investments 52-54
CHAPTER 7: An Overview of Foreign Exchange 55-72
Operation Of IBBL
7.1 Foreign Exchange & Foreign Trade 56
7.2 Importance of Foreign Exchange Business 56
7.3 Regulations for Foreign Exchange Transaction 57
7.4 International Business under Islamic perspective 58
7.5 Foreign Exchange business of IBBL at a glance 59
7.6 Foreign Exchange Activities 59
7.6.1 Import 60-67
7.6.2 Export 67-70
7.6.3 Foreign Remittance 71-72
7.6.4 Trading Currency 72
Chapter 8: SWOT Analysis Of IBBL 73-75
8.1 Strengths 74
8.2 Weaknesses 75
8.3 Opportunities 75
8.4 Threats 75
Chapter- 9: Overall Findings, Prospects, 76-81
Recommendation & Conclusion
9.1 Findings 77-78
9.2 Prospects 78
9.3 Recommendation 79-80
9.4 Conclusion 81
Bibliography 82
Appendix 83-91
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Page | 1
1.1 Introduction
Because of globalisation, today’s world enhances the opportunities of business and investment,
for economic empowerment modern world put a great effort favoring from all aspect. As a result,
in the modern society commercial banks occupy a position of economic importance. They play a
significant role to meet up the needs of the society, such as large-scale production, capital
formation, industrialisation, growth of trade and commerce. Islami bank Bangladesh Limited is an
unconditional and specialised financial institution, which is first of its kind in South East Asia,
performs most of the standard banking service and investment activities based on profit-loss
sharing system conforming to the principles of Islamic Shariah. Islami Bank does not pay interest
to the depositor. Instead of interest, depositors participate in the profitability of the bank. The Bank
participates in financing long-term projects based on profit-loss sharing instead of granting credit
facilities with interest. IBBL also performs various social welfare activities through its subsidiary
organ named Islami Bank Foundation (IBF). In this report, I undertake microscopic analysis
mainly on General Banking, Investment and Foreign Exchange Operation of IBBL and sketch
picture of the same.
As a bank, Islami Bank Bangladesh Limited receives deposits from its customers from all over the country
as well as from abroad on profit and loss sharing basis and deploys that fund to different clients as an
investment to gain profit. The bank distributes an agreed portion of the profit earned to the customers and
the shareholders. Islami Bank Bangladesh Limited also performs foreign exchange business. In this
process, the bank endeavors to contribute to the betterment of the society.
In the context of open market economy, the foreign exchange business is growing rapidly and playing a
vital role in the economic growth of a country. About 40 % of total business of our country is rolling
through foreign exchange transaction.
Islami Bank Bangladesh Limited has significantly contributed in flow of international transactions. Among
the private commercial bank of our country IBBL is being kept the first position in export, import,
Page | 2
remittance flow and as well as earnings the operating profit. Why I have chosen this topic, because to focus
on foreign exchange, general banking and investment performance of IBBL & its activities as based on
Islamic Shariah.
This study conducted to evaluate the overall activities of IBBL. Findings of the study may benefit the
organisation itself to take strategic decision on its plan to enhance the volume of foreign exchange
transaction. It may also benefit the readers as well as researchers who have particular interests in
international trade finance.
This report is based on an internship program. IBTRA (Islamic Bank Training and
Research Academy) arranges this internship program to gather practical knowledge about
banking activities. This followed by practical experiences in the branches of IBBL. Each intern
must carry out a specific project, which assigned by the IBTRA. Consequently a report based on
the projects is to be submitted to both the authority of IBTRA and the University. Our topic for
this internship report is “General Banking, Investment and Foreign Exchange Operations” of
IBBL hence I were placed in Mouchak Branch.
The scope of this paper is limited to the organisational structure, background, and
objectives, functions, and investment performance of IBBL as a whole. The scope is also limited
monitoring and documentation of IBBL, general banking aspects and foreign exchange
operations.
Page | 3
The first objective of writing the report is fulfilling the partial requirements of the BBA program.
The main purpose of this study is to have a better orientation on General banking, Investment and
Foreign Exchange business performances of the bank. In this report, I have attempted to give an
overview of on General banking, Investment and Foreign Exchange operation of Islami Bank
Bangladesh Limited. Following are the main objectives:
To show the investment mechanism and product offerings in different modes of IBBL.
Bank is the symbol of financial stability of a country. It is an institute, which is responsible for
safeguarding the financial stability of any country. In modern age, the role of banks is very wide as
well as comprehensive.
Any kinds of business small or large, inside or outside the country directly or indirectly involved
with the bank. Especially in foreign trade and foreign exchange operations are quite impossible to
imagine without the help of bank. Bank is main media of foreign business.
Now a day IBBL is one of the leading private commercial bank of Bangladesh and it plays
comprehensive role to develop business activities as well as the economic development of the
country.
1.7 Methodology
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The study performed based on the information extracted from different sources collected by using
a specific methodology. The methods of completing the report have included some steps, which
followed by one by one. First selected the topic of the report then collected information relating to
the topic by primary and secondary sources and through personal interview. As an Internee of
IBBL, it was easy for me to collect data. After gathering, the information determined the
procedure of research and sampling plans. After gathering all the information required, come up
with an expected result of the report.
Primary Sources:
Practical experience of banking.
Training, workshop & seminar.
Discussing with our supervisor and manager.
Secondary Sources:
Research papers, training materials, magazines.
Annual report, Audit reports of IBBL
Banking related text books, relevant books, research papers, newspapers, journals
and Manuals.
Class notes of IBTRA, Website of IBBL.
In-depth study of selected cases.
Related files, books study provided by the concerned officers.
The major limitation faced in preparing this report was the sensitivity of the data. As it is a
highly competitive market, if the margin information released to other competitors, it may
have a negative impact on their business. Resultantly, in some cases management were
reluctant to give some specific data.
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Confidentiality of data was another important barrier that confronted during the conduct of this
study. Every organization has their own secrecy that not revealed to others. While collecting
data on IBBL, personnel did not disclose enough information for the sake of confidentiality of
the organization
Rush hours and business was another reason that acts as an obstacle while gathering data
Time limitation is also a big factor, which hinders the data collection process. Due to time
limitation many aspect could not by discussed in the present study.
The depth of the analysis has been limited to the extent of information collected from different
sources.
In many case, up to date information not published.
Page | 6
Chapter-02
Conceptual Framework
Page | 7
Both the old French word banque and the Italian word banca used centuries ago to mean a ‘bench”
or money changer table.
Banks are among the most important financial institution in the economy. They are the principal
sources of credit for millions of individuals and families and for many units of government
(school, districts countries, etc). Moreover, for small local business ranging from grocery stores to
automobile dealers, banks are often the major source of credit.
“The institution which accepts the cheques of the persons from whom it collected money in
current accounts is called Bank” - H. L. Hert.
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Whatever financial services a banking organisation offers to the public, it must make them
available through one or more service facilities, physical locations or electronic network through
which bank personnel and equipment sell and deliver services to the public. These banking
facilities may be placed either under the control of a single banking corporation or under multiple
corporations linked to each other through a common group of stockholders.
Unit bank
When banks sell their services through one full-service office that is unit bank.
Branch bank
Banks sells their services through multiple offices that called branch bank. When regulations
permit, a bank may decide to establish a branch banking organization, particularly if it serves a
rapidly growing region and finds itself under pressure either to follow its business and household
customers as they move into new areas or lose them to more conveniently located competitors.
No country is sufficient in every aspect. In general, one country depends on other for goods &
services. Foreign exchange & foreign trade has greatly contributed to smooth exchange of goods
& services among the countries all over the world.
As per Foreign Exchange Regulation Act, 1947 (Article 2nd) Foreign Exchange means Foreign
Currency i.e. Currencies other than Local Currency. It includes any instrument drawn, accepted,
made or issued under clause (13) of article 16 of the Bangladesh bank order, 1972, all deposits,
credits and balances payable in any foreign currency and any draft, travelers cheque, letter of
credit and bill of exchange expressed or drawn in the Bangladesh currency but payable in any
foreign currency.
Cross border transactions or exchange of goods & services between two parties of separate
territory (country) called foreign trade. It is part of foreign exchange.
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Foreign trade includes:
Import &
Export.
Today’s world called global village. To survive in this competitive global market, the importance
of foreign exchange business badly needed. The necessity of foreign trade is a border area.
Chapter-03
An Overview of Islami Bank
Bangladesh LTD.
Page | 11
3.1
Page | 12
According to the Organisation of the Islamic Conference (OIC), “Islamic bank is a financial
institution whose statutes, rules and procedures expressly state its commitment to the principles of
Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations.”
According to Dr. Ziauddin Ahmed “Islamic Bank is essentially a normative concept
and could be defined as conduct of banking in consonance with the ethos of the value
system of Islam.”
Although Islamic Bank is a financial institution, its operations and activities shows that Islamic
Bank as a business firm with Halal transaction within the boundary of Islami Shariah. The main
objective is not only to earn profit but also to make welfare orient interest free and exploitation
free economy of a country.
Islami bank operates on Islamic principles including profit and loss sharing, strictly avoiding
interest, which is the root of all exploitation and is responsible for large-scale inflation and
unemployment.
Islami bank is committed to try its best to do away with disparity and establish justice in the
economy, trade, commerce and industry, build socio-economic infrastructure and employment
opportunities.
The vision of IBBL is to always strive superior financial performance, be considered a leading
Islamic Bank by reputation & performance.
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To work for the benefit of people& encourage savings in the form of direct
investment
To ensuring stability in financial system with accountability, transparency &
integrity. (Reference : ibbl website)
Ensures Shariah compliance through regular and effective guidance of powerful and highly
esteemed Shariah council consisting of 13 members representing Shariah scholars.
3.7 Organizational Structure of IBBL
Pioneer in Islamic Banking running its entire operation based on Islamic Shariah. This
Council comprising of leading Ulama, renowned economists, lawyers and bankers of the
country for constant supervision and guidance of the banking operation. Never participate in
the interest based money market operations. Never borrowed from any source either inside or
outside the country. A transparent and corruption free operation for the last 23 years in a row.
Regular and timely holding of AGM declaring good dividend since 1989 without break till
2002, except in the year 1992. Largest contributor of tax to the Government exchequer from
the private sector banks receiving CIP status from the Government almost every year. Received
the best bank award in Bangladesh from Global Finance, the UK in 1999, 2000 & 2004. It is
Page | 17
connected to 830 offices of 230 foreign banks in 74 countries. IBBL received A+ rating in CRISL
( Credit Rating Information & Services).
IBBL has the scope to explore the market niche through various types of IBBL instruments. IBBL
offers wide range of IBBL products and services. It provides Mudaraba Savings Deposit,
Mudaraba Term Deposit, Mudaraba Special Savings (pension), Al –Waadeeah current account,
Mudaraba Savings Bond, Mudarba Monthly Profit Deposits, Mudaraba Special Deposits,
Mudaraba Hajj Savings, Mudaraba Muhor Savings, Mudaraba Foreign Currency Deposits, and
Mudarba waqf cash Deposits.
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professionally competent work force. The division number of branches & location map of Islami
Bank Bangladesh Limited (IBBL) such as:
3.15 Achievements
As per Bankers' Almanac (January 2001 edition) published by the Reed Business Information,
Windsor Court, England, IBBL's world Rank is 1771 among 3000 banks selected by them. This
position was 1902 among 4500 selected banks as on January 1999 edition. IBBL's country Rank is
5 among 39 banks as per ratings made by the above Almanac on the basis of IBBL's Financial
Statements of the year 2001.
And in 2012 IBBL take place in 1000 number bank among the world.
Chapter-04
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4.1
Internship Duties
We had started our internship program in IBBL on 31st October 2012. There were two types of
training method. First step was theoretical training at Islami Bank Training and Research Academy
Page | 21
(IBTRA) and second steps was practical session at Islamic Bank Bangladesh Limited (IBBL),
Mouchak branch from 11th November 2012 to 27th December 2012. We got chance two months for
gathering practical knowledge from this branch. Our office hour was from 10am to 6 pm, when we
entered into the office at first we signed in the register book. Our practical working area and
responsibilities schedule given by the bank manager, which summarized as follows:
Job Rotation
Training Investment General Banking Foreign Exchange
10
8
14
8
In the Investment section we had to deal with the necessary papers and documents as
required.
Fill up the necessary documents to apply and sanction of an investment procedure of
different companies.
Mainly we had to deal with the web based cash collection in the foreign exchange section.
4.3 General Banking Activities
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Account opening.
Had to provide different information about MSA , AWCA , MSSA , MSND,MTDRA and so on
Clients account balance and statement checking.
KYC from fill up.
Handling transfer transaction.
Debit and credit voucher fill up.
Issue cost memo of Telegraphic Transfer (T.T).
Issue cheque book.
Transfer local remittance
Provide information to the customer
Changing customer address, phone number, photo, signature and close existing account,
transfer account as per customer requirement.
Providing accounts statement
Provide online, SMS banking to the customer
Collection of all cheque from other bank and within the bank.
Provide account balance to the customer
There is a section called foreign remittance section where customers collect foreign remittance.
We had to deal with two types of remittance: Spot cash and web based cash.
Web Based Cash: Mainly we had to deal with the Web Based Cash collection. The
activities we had to do are as follows:
When customer comes to collect a Web Based Money, at that time we had to
collect a PIN number and his/her name to download the money from internet.
It is compulsory to bring national ID card or passport main copy and photocopy to collect
the money and the beneficiary has to come by him/herself, otherwise we were not bound
to pay the money.
Then we had to provide an application form to the customer to write the remitter’s name,
the country name, PIN number, his/her name, address, cell phone number, and signature.
After that, our onsite senior officer downloads the money information from website and
printout three copies of that to maintain other formalities.
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Then he gives those three copies to me to make credit voucher where we had to write the
beneficiary’s name, T. T No, date, amount of the money very carefully and we had to take
signature of the beneficiary beside of the credit voucher.
After that, we had to input all the information of the beneficiary in the Web Based
Remittance register, 1st had to credit the amount in the beneficiary’s account then again
had to debit the money in the same account as the beneficiary is taking the cash instantly.
The client had to give a signature in his/her account column.
Finally, we had to check the application form, which filled up by the beneficiary and staple
that with a copy of the web money and his/her photocopy of national ID card or passport.
The credit voucher also had to staple with a copy of the web money.
In this section, we had to mainly deal with the papers and documents needed to fill up to apply and
sanction of an investment procedure of different companies. The Bank should have these
documents against each investment of any company for future dealings. The papers and
documents, which we had to fill up for each company, are as follows:
Clients application.
Quotation.
Request letter for an investment.
Authorisation letter.
Demand promissory note.
Demand promissory note delivery letter.
Agreement form.
Cash memo.
We have learned about the Islamic Bank. Islami Bank does not provide any loan rather
they provide investment on sharing profit & loss mode.
Chapter-05
GENERAL BANKING
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ACTIVITIES OF IBBL
General Banking is the heart of banking. Here money collection procedure occurs. Other services,
like
chequ
e
encas
hment
,
accou
nt
transf
er; account closing, bills and remittance related works are conducted here. So, general banking is
the most important area in banking service. Following activities are conducted under this section:
Young, energetic, diligent and cooperative officials are receiving the customer cordially and lead
them to right place / official for their purpose serve.
The mudarabah account of Islami Banks is different from the account of an interest-based bank.
Mudarabah is a form of business contract where one party supplies money and the other manages
the business by investing labor and time as per agreement. Under this arrangement, profit
distribution under agreed ratio and loss (if any) will be borne by “Saheb al mal” (Islami bank
term). The Bank distributes minimum 65% of its investment-income, earned through deployment
of Mudaraba deposits, among the Mudaraba depositors.
Islami Bank Bangladesh Limited care special importance on savings. The objectives and principles
of the saving policy of the bank are as follows:
To encourage people to save for self and for the country as a whole
To develop a sustained saving habit among the people.
To mobilise deposits through the operation of following accounts:
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1. Mudarabah Savings Account.
2. Mudarabah Term Deposit Account: 3 months / 6 months / 12 months / 24 months / 36-
month term.
3. Mudarabah Special notice account.
4. Mudarabah Hajj Savings Account (a special account to facilitate performance of Hajj by
fixed income group: 1year to 25 years term.
5. Mudarabah Special Savings (Pension) account 5 years & 10 years term.
6. Mudarabah Saving Bond Scheme: 5 years & 8 years term.
7. Mudarabah foreign Currency Deposit (Savings) Account.
8. Mudarabah Monthly Profit Deposit Account.
9. Mudarabah Muhor saving Account.
10. Mudarabah Waqf cash Deposit Accounts (MWCDA).
Who can open bank accounts?
The account holder sign of his/ her own self in front or the specific bank principle officer
in the account opening form.
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Trade license up to date.
KYC form for Firm.
Introduction of any current account holder.
Two copies attested Photocopies of proprietor (A/C operator)
Tax Identification Number (TIN)
VAT certificate.
Nationality Certificate from word commissioner/ Up Chairman or Passport
Photocopy.
All documents must submit by attested the photocopies of the original documents.
Partnership Deed.
Trade License Up to date.
KYC form for Firm.
Introduction of any Current Account holder.
Two copies attested photographs of A/C holders.
TIN Certificate.
VAT Certificate (if necessary).
Nationality Certificate from Word Commissioner/ UP Chairman or Passport photocopy of
every signatories of the Account.
All documents must submit by attested the photocopies of the original documents.
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Introduction to any current account holder.
Two copies attested photographs of A/C operators.
Nationality Certificate from Word Commissioner/ UP Chairman or Passport Photocopy of
every signatories of the A/C.
For Association/Trust/Society
Request letter.
Copy of Resolution of governing body to open the account and authorization for
operation.
Certificate of registration.
List of authorized signatories and members of the governing bodies along with address.
Issuing
Book’s
Relation
Requisitio
Account Transfer
Customer has to submit an application mentioning that he/she wants to transfer his/her A/C to his
desired branch and the officer will verify the signature, Customer has to be certified by different
department of Bank that he/she has no liabilities to the bank. Then total particulars of A/C holder
will prepare and sent to the customer's desired branch. Liability of recogniser is secondary and
account holder is primary.
Account Closing
First, a customer has to submit an application with his/her signature mentioning that he/she wants to
close the A/C. Then the officer will verify the signature. Customer has to certify by different
department (Advance, Foreign Exchange department) of Bank that he/she has no liabilities to the
Bank. After that, the customer's A/C debited and then Bank issues a Pay Order in the name of A/C
holder or pay as per their instruction.
Then the officer checks the cheque from the computer for further verification. Here
is the following information that is checked.
The cash section deals with all type of negotiable instruments. It also includes the
vault which is used as the store of the cash instruments. Any client who wants to deposit money
will fill up the deposit slip and give the form along with the money to the cash officer over the
counter. The cash officer counts the cash and compares with the figure written in the deposit
slip. Then he puts his signature on the slip along with the ‘cash received’ seal and records
in the cash receive register and also in the computer against the account holder.
A cheque may be an open cheque (which can be presented for payment by the
holder) or a crossed cheque (which can be paid only through a collecting banker.)
Cheques of its customers are received for collection from other banks. In case of
receiving cheques, following points should be checked very carefully:
The cheques should not carry a date older than the receiving date for
more than 6 months. In that case it will be a stale cheque and it will not
be allowed for collection.
Page | 34
The amount in figure and words in both sides of the pay-in-slip should
be same.
The name mentioned in the cheque should be same in both side of the
pay-in-slip and it should be the same with the name mentioned in the
cheque.
The cheque must be crossed.
The place where banks meet and settle their dues is the clearing house.
Types of cheque
Inward clearing cheques: Inward cheques are those ones drawn on the respective
branch which have been presented on other banks and will be cleared/honored
through the clearing house. For example, the cheque drawn on IBBL, Head Office.
Outward Cheques: These cheques are received on the counter from other banks.
1. Drawn on another branch of IBBL. These are called Outward Bills for Collection (OBC).
2. Drawn on another bank, which is situated in the clearing house area. This
cheques are called clearing cheque.
3. Drawn on another bank, which is situated outside the clearing area. This
cheques are also called as OBC.
OBC are those cheques drawn on other banks which are not within the same clearing
house. An officer gives OBC seal on this type of cheques and later sends a letter to
the manager of the branch of the same bank located in the branch on which cheque
has been drawn. After collection of that bill, branch advice the concerned branch in
which cheque has been presented to credit the customer account through IBCA. In
absence of the branch, officer sends a letter to the manager of the bank on which the
cheque is drawn. That bank will send pay order in the name of the branch. This is
the procedure of OBC mechanism.
According to section 85 (A) of the Negotiable Instruments Act, a demand draft is “An order to
pay money drawn by one office of the bank upon other office of the same bank for a sum of
money payable to order on demand.”
Telegraphic transfer is so far the quickest method of transferring funds from one place to another.
Sometimes, the remitter of the funds requires the money to be available to the payee immediately.
In that case, bankers requested by the remitter to remit the fund telegraphically.
Pay Order mean for making payment of the banker’s own or of the customer’s dues locally and not
for affecting any remittance to an out station. In a sense, the payment order used for making a
remittance to the local creditors for which application to be made through F -19 and amount may
be deposited through cheque / cash.
Book keeping, maintenance of vouchers preparation of general ledger and clean cashbook,
maintenance of sundry, suspense etc.
Page | 36
Reconciliation of IBG A/C’s
IBDA Inter Branch Debit Advice.
IBCA Inter Branch Credit Advice.
Income-expenditure register maintaining
Islami Bank Bangladesh Limited now has its own ATM network with 48 booths. IBBL also has
85-shared ATM booths with ETN covering major cities and districts of the country. IBBL is on its
way to expand their ATM network countrywide. IBBL
cardholder can withdraw cash; pay BTTB, Grameen Phone, City Cell and Aktel bill and monthly
installments of MSS, Hajj, Muhor and HDS schemes through ATM.
IBBL has developed its own integrated banking system namely as eIBS (electronic Integrated
Banking System) with the following objectives:
Custody and maintenance of AOF SS Cards, Cheque Books, Ledgers, Statement of A/Cs voucher
and secrecy of Accounts.
Sundry Creditors
Security Money Payable
Locker Key Security Deposit
Staff Security Deposit
Outstanding Expenses
Marginal Deposit
Bank Guarantee (BG)
Total deposit of the Bank now stands at Taka 341,853.67 million on 31.12.2012 as against
registering a growth rate of 20.45% against the same period of the previous year. The Bank has a
sound deposit-base as it mainly comprises of small and medium size deposits.
400000
350000 341,853
335578
300000 291935
250000
211292
200000 202115
166325
150000
132419
100000
69655
50000
0
z 2005 2006 2007 2008 2009 2010 2011 2012
Page | 38
Chapter-06
INVESTMENT
PROCEDURE OF IBBL
Page | 39
6.1 Introduction
Investment is the action of deploying funds with the intention and expectation that they will earn a
positive return for the owner. Funds may invest in either real
assets or financial assets. When resources used for,
purchasing fixed
and current
assets in a
production
process or for a
trading
purpose, that it
can be termed as
real investment. Specific examples of financial investments are deposits of money in a bank
account, the purchase of Mudaraba savings bonds or stock in a company. Since Islam condemns
hoarding
savings and
a 2.5
percent
annual tax
(Zakat)
Page | 40
imposed on Savings, the owner of excess savings, if he is unable to invest in real assets has no
option but to invest his savings in financial assets.
Page | 41
6.4 Importance of Assessing of Investment Needs
Assessment of Investment needs necessary for the following reasons.
To detect actual Investment limit of Bank.
To detect actual Investment against obsolete /out dated/non trading items.
To assess the quality, quantity, price and marketability of the commodities
To ensure proper follow-up supervision and monitoring of the Investment.
Page | 42
To ensure capacity of the client in handling Investment activities.
to overcome the situation of Division of found by the clients
To ensure trading instead of lending of money.
To ensure payment against delivery of goods.
To ensure actual buying and selling of goods.
To select proper & genuine Investment client.
To ensure viability/profitability of the project.
To ensure compliance of Shariah Principles.
To maintain discipline in the Investment port-folio of the Branch.
To secure the Investment.
To allow Investment for appropriate period.
To handle the Investment proposal efficiently.
To ensure investment for productive purpose.
To identify the tenure of investment to be made i.e. for short term /midterm /long term.
To know the objective of Investment.
To ensure profitability of all concerned.
To ensure welfare of the society.
To ensure Business ethics.
To minimize the risk of investment.
To ensure national interest.
To ensure recovery of investment in time.
To comply the Bank’s target regarding diversification of Investment.
Investment is the action of deploying funds with the intention and expectation that they will earn a
return for their owners of a fund can deploy it through real investment or financial investment.
When resources spent to purchase fixed and current assets for use in a production process for
trading purpose, then it can be termed as real investment. For example, deposit of money with a
bank, purchase of Mudarabah Savings Bond or share of a company. Financial investments
ultimately takes form of real investment as it is meant for so. Since hoarding is condemned by
Page | 43
islam and a 2.5 percent annual tax (Zakat) is imposed on savings, the owner of a fund, if he is
unable to make real investment, has no option but to invest his savings as a financial investment.
Investment Mechanism
Bai-MURABAHA MUDARABAH
Hire Purchase
Bai-MUAJJAL MUSHARAKA
(Deferred sale) (Partnership) Hire purchase
ISTISNA'A SALE
Bai –Mechanism:
Under Bai Mechanism Islami Bank Bangladesh Limited practiced different kinds of investment
modes. Those are given below:
1. BAI-MURABAHA
Meaning:
The terms 'Bai- Murabaha' have derived from Arabic words Bai and Ribhun. The word Bai means
Page | 44
purchase & sale and the words Ribhun means an agreed upon profit. Bai-Murabaha means sale on
agreed upon profit.
Definition:
Bai-Murabaha may be defined as a contract between a buyer and a seller under which the seller
sells certain specific goods permissible under Islamic Shariah and the law of the land to the buyer
at a cost plus agreed profit payable on cash or on any fixed future date in lump- sum or by
installments. The profit marked-up may fixed up on lump sum or in percentage of the cost price of
the goods.
Meaning:
The terms "Bai" and "Muajja" have been derived from Arabic words 'Bai' and 'Ajal'. The word Bai
means purchase and sale and the word 'Ajal' means a fixed time or a fixed period. "Bai-Muajjal"
means sale for which payment made at a future fixed date or within a fixed period. In short, it is a
sale on Credit.
Definition:
The Bai-Muajjal may be defined as a contract between a buyer and a seller under which the seller
sells certain specific goods (permissible under Shariah and law of the country), to the buyer at an
agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by
fixed installments. The seller may also sell the goods purchased by him as per order and
specification of the buyer.
Meaning:
The terms “Bai” and “Salam” have derived from Arabic words. The words “Bai” means “sale and
purchase” and the word “Salam” means “Advance”. “Bai-Salam” means advance sale and
purchase.
Page | 45
Definition:
It is a sale, which the buyer makes an advance payment, but the delivery delayed to an agreed date.
whose delivery will be in a future date. It means deferred the commodity sold (debt in kind) and
4. ISTISNA'A SALE
Definition:
Instisna'a sale is a contracting which the price is paid in advance at the time of contract and the
object of sales manufactured and delivered later a manufacturer, artist or craftsman may take
orders, with or without advance payment, to make articles himself or hire labor to do so.
The purchasers called Mustasnia contractor and the seller is called "sania" maker manufacturer
and the thing is called 'masnooa' manufactured, built, made.
Share Mechanism
1. MUDARABA
Definition:
It refers to a contact between two parties in which one party supplies capital to the other party for
the carrying on of some trade on the condition that the resulting profits distributed in a mutually
agreed proportion while all loss is borne by the provider of the capital. Mudarabah also known as
Qirad and Muqaradah
Mudaraba is a contract of those who have capital with those who have expertise where the first
party provides capital and the other party provides the expertise with the purpose of earring "halal"
(Lawful) profit, which will devised between them in ration agreed. This mode serves the business
interest of the capital owner and the mudharib (agent).
2. MUSHARAKA (Partnership)
One / two or more entrepreneurs approach an Islamic Bank for the finance required for a
project. The bank along with other partners provides complete finance. All partners, including the
bank have the right to participate in the project. They can also waive this right.
Ijara Mechanism
Hire purchase Under Shirkatul Melk
Hire purchase Under Shirkatul Melk is a special type of contract, which has developed through
practice. Actually, it is a synthesis of three contracts:
1. Shirkat
2. Ijarah and
3. Sale
Shirkatul Melk:
Shirkatul means partnership Shirkatul Melk means share in ownership. When two or more persons
supply equity, purchase an asset, own the same jointly, and share the benefit as per agreement and
bear the loss in proportion to their respective equity, the contract called Shirkatul Melk contract.
Ijarah:
The term Ijarah has derived from the Arabic words ‘Air’ and ‘Uirat’, which means consideration,
return, wages, or rent. This is really the exchange value or consideration, return, wages, rent of
Page | 47
service of an asset. Ijarah has defined as a contract between two parties, the Hiree and Hirer where
the Hirer enjoys or reaps a specific service or benefit against a specified consideration or rent from
the asset owned by the Hiree, it is a hire agreement under which a certain assert is hired out by the
Hiree to a Hirer against fixed rent or rentals for a specified period.
Element of Ijarah:
A. According to the majority of Fuqaha, there are three general and six detailed elements of Ijarah.
B. The Hiree: the individual or organization hires/rents out the property of service called the Hiree.
C. The Hirer: the individual of organization hires / takes the hire of the property or service against
the consideration, rent/ wages/ remuneration called the Hirer.
D. The benefit / asset: the benefit, which is hired/, rented out is called the benefit.
E. The rent: the consideration either in monetary terms or in kinds fixing quantity of goods/money
to paid against the benefit of the asset or service of the asset called the rent.
Sale:
This is a sale contract between a buyer and a seller under which the ownership of certain goods or
asset transferred by seller to the buyer against agreed upon price paid / to pay by the buyer.Thus,
in Hire Purchase under Shirkatul Melk made both the bank and the client supply equity in equal or
unequal proportion for purchase of an asset like land, building, machinery, transport etc. Purchase
the asset with that equity money, own the same jointly; share the benefit as per agreement and bear
the loss in proportion to their respective equity. The share part or portion of the asset owned by the
bank hired out to the client partner for a fixed rent per unit of time for a fixed period. Lastly, the
bank sells and transfers the ownership of its share / part / portion to the client against payment of
Page | 48
price fixed for that part gradually part either by part or in lump sum within the hire period or after
the expiring of the hire agreement.
Thus, Hire Purchase under Shirkatul Melk agreement has three stages:
Page | 50
6.10 Sector wise investment
To suit the needs of client of different strata in the society islami bank sanction & disburse data in
different sector. The mentioning sector of investment of IBBL are:
Industry
Commerce
Real Estate
Agriculture
Travel
SME
Others
Page | 51
Interpretation
From the above graph ,it can be said that IBBL distribute its investment facilities according to
different sectors. In 2010 bank invested in industrial sector the most.
Others 0 0
Page | 52
Interpretation
From the above graph ,it can be said that IBBL distribute its investment facilities according to
differentmodes. In 2011 & 2010 bank invested in murabaha & hair purchase.
Page | 53
Mudaraba 0.57 0
Interpretation
From the above graph ,it can be said that IBBL distribute its investment facilities according to
different modes. In 2011 & 2010 bank invested in murabaha & hair purchase.
CHAPTER-07
Page | 54
AN OVERVIEW OF FOREIGN
EXCHANGE
OPERATION OF IBBL.
7.1 Foreign
Exchange &
Foreign
Trade
According to the theory of comparative advantages, some countries have some advantages where
others have another. For example, we have cheap labor; readymade garments on the other hand,
U.S. have strong currency. We need foreign currency & they need cheap labor & readymade
garments. Therefore, international transaction, Foreign exchange businesses are started.
Page | 55
No country is fully sufficient in every aspect. In general, one country depends on other for goods
& services. Foreign exchange & foreign trade has greatly contributed to smooth exchange of
goods & services among the countries all over the world.
Foreign Exchange:
As per Foreign Exchange Regulation Act, 1947 (Article 2nd) Foreign Exchange means Foreign
Currency i.e. Currencies other than Local Currency. It includes any instrument drawn, accepted,
made or issued under clause (13) of Article 16 of the Bangladesh Bank Order, 1972, all deposits,
credits and balances payable in any foreign currency and any draft, travelers cheque, letter of
credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign
currency.
Foreign Trade
Cross border transactions or exchange of goods & services between two parties of separate
territory (country) are called foreign trade. It is part of foreign exchange. Foreign trade includes:
Import
&
Export.
7.2 Importance of Foreign Exchange Business
Today’s world is called global village. To survive in this competitive global market, the
importance of foreign exchange business is badly needed. The necessity of foreign trade is a
border area.
Page | 56
many circulars regarding foreign exchange transactions & they are the monitoring authority by
issuing up-to-date instruction circulars for smooth functioning. Ministry of commerce issued
IMPO (Import Policy Order & Export Policy Order) & EXPO.
Foreign Exchange transactions are regulated by the following Act / Guidelines / Circular etc:
Page | 57
Legal relation is based on assignment and Mandate
Title of goods remains in the name of client
Deals with documents rather than goods
Does not take risk as rate of return is fixed at the time of negotiation
Abstract responsibility in case of fraud or defective goods
Charges interest based on the amount disbursed
No necessity to comply with Shari’ah
IBBL offer different trade products and services complying Shari’ah and law of the land.
Page | 58
2 Export 148,421 193,000 137,644 95% 31%
Import
Export
Remittance
Trading of currency
7.6.1 IMPORT
The general principle in financing import business is elimination and avoiding of interest in all
operation. The different modes of IBBL are as under:
Page | 59
In all types of import usually the importer take bank finance. In IBBL, finance can also be made
for the first two types under Bai-Murabaha & Bai-Muajjal mode and for the 3rd type under Hire-
Purchase under Shirkatul Melk (HPSM) mode. Import finance can also made under Bai-Salam or
Musharaka or Mudaraba modes. Islami Banks have to perform its all transactions related to import
& export by abiding the National and International rules/regulations in addition to its own
rules/regulations/guidelines and Islamic Shariah.
Bai-Murabaha is a contract between a Buyer and a Seller under which the seller sells certain
specific goods permissible under Islamic Shariah and the Law of the land to the Buyer at a cost
plus agreed profit payable in cash or any future date in lump sum or by installment. The profit
mark-up may be fixed in lump sum or in percentage of the cost price of the goods.
Bai-Murabaha means "Sale on agreed upon profit" and in case of import we can do the same
practice. As per the procedure Bank purchase goods from foreign supplier and sale to the
importer/client. As per international banking practice and as per UCPDC goods consigned to the
opening bank i.e. the owner of goods is bank till transfer the ownership by endorsement on the
back of Bill of Lading (B/L) or other transport document. Also as per UCPDC payment claim by
the supplier of the goods to the L/C opening bank through drawing bill of exchange on Bank.
As per Islamic Banking practice import finance under Bai-Murabaha is made under single deal
covering the investment at L/C stage, Bills stage, and post import stage as under:
If the importer/client like to take the financial facility for paying custom duty, VAT and other cost
along with import payment bank may provide the facility under Islamic mode under Murabaha
mode, which is called single deal Murabaha or MPI. The agreement is made at the time of import
Page | 60
and the whole process of (i) Murabaha L/C, (ii) Murabaha Bills and (iii) Murabaha Post Import is
covered under one agreement as a single deal.
It is a Contract between a Buyer and a Seller under which the seller sells certain specific goods
(permissible under Shariah and law of the land) to the buyer at an agreed fixed price payable at a
certain fixed future date in lump sum or within a fixed period by installment.
For import of machinery and other durable and reusable item import is made under HPSM mode.
HPSM is a mechanism as combination of three systems namely- Izarah, Shirkat and Bai-(Purchase
and Sale)
i. Bank and client import the item jointly sharing money as per agreement i.e. Shirkat
ii. Bank gives lease of their portion at an agreed rent.
iii. Bank Sale their portion of the property gradually by receiving periodical payment from the
client.
Zone Wise Import Position (In Terms of Contribution): Up to September’11)
Zone wise Contribution in import (% )
Rajshahi Sylhet
Comilla
4% 0%
0%
Barishal
Bogra Zone 0%
2%
Chittagong (South)
21%
Mymensingh
Dhaka South
0%
9% Page | 61
Letter Of Credit (L/C)
Letter of Credit (L/C) is a payment guarantee to the seller by the buyer’s bank. It is in fact, a
Credit Contract whereby the buyer’s bank is committed (on behalf of the buyer) to place an agreed
amount of money at the seller’s disposal under some agreed conditions. Buyers and sellers enter
into contracts for buying and selling goods/ services and the buyer instructs his bank to issue L/C
in favor of the seller. Here bank assumes fiduciary function between the buyer and seller.
Types of L/C
Islami Bank Bangladesh Ltd. Deals with two types of L/C. These are -
1. Sight L/C
2. Deferred L/C.
Negotiating Bank
Confirming Bank
Paying/ Reimbursing bank
Applicant
The person or body (customer of the bank) who requests the bank (opening bank) to issue letter of
credit.
Page | 62
The bank through which the L/C IS advised to the beneficiary (exporter).
Beneficiary of the L/C is the party in whose favor the letter of credit is issued. Usually they are the
seller or exporter.
Confirming Bank
The bank, which under instruction in the letter of credit, adds their irrevocable undertaking to that
of the issuing bank. It is done at the request of the issuing bank having arrangement with them.
The confirmation constitutes a definite undertaking on the part of confirming bank in addition to
that of issuing bank.
Negotiating Bank
The bank that negotiates document and pays the amount to the beneficiary when presented
complying credit terms. If the negotiation of the documents is not restricted to a particular bank in
the L/C, normally negotiating bank is the banker of the beneficiary.
The bank nominated in the credit by the issuing bank to make payment against stipulated
documents, complying with the credit terms. Normally issuing bank maintains account with the
reimbursing bank.
Import Procedure
An importer is required to have the following formalities to import the goods through Islami Bank
Bangladesh Ltd. -
Import Mechanism
To import, a person should be competent to be an ‘Importer’. According to Import and Export
Control Act, 1950 the Office of Chief Controller of Import and Export provides the registration
(IRC) to the importer. After obtaining this, the person has to secure a letter of credit authorization
(LCA) from Bangladesh Bank. And then a person becomes a qualified importer. He is the person
who requests or instructs the opening bank to open an L/C. He is also called opener or applicant of
the credit.
The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange
Control & Import Trade Regulation;
Eligibility of the goods to import;
The L/C must not be opened in favor of the importer or his agent;
L/C must be signed by the importer agreeing all terms and conditions mentioned in the
application;
IMP form duly filled in and signed;
Validity of IRC;
HS code of the goods;
Insurance cover note with date of shipment;
Radioactivity report in case of food items;
Survey reports or certificate in case of old machinery (ies).;
Page | 64
Carrying vessel is not from Israel;
Certificate declaring that the item is in operation not more than 5 years
L/C Advising Mechanism
The seller being satisfied with the terms and the conditions of the credit proceeds to dispatch the
required goods to the buyer. Then he has to present the documents evidencing dispatching of
goods to the negotiating bank on or before the stipulated expiry date of the credit. The usual
documents are-
Invoice
Bill of lading
Certificate of origin
Packing list
Shipping advice
Non-negotiable copy of bill of lading
Bill of exchange
Pre-shipment inspection report
Shipment certificate.
Scrutiny of Documents
First of all it must be ensured that full set of documents as mentioned in the L/C has been received.
Following documents are included, namely-
1. Letter of Credit
2. Commercial Invoice
3. Bill of Exchange
4. Bill of lading
5. Insurance cover note
6. Certificate of origin
This is the most sensitive task of the Import Department. The officials have to be very much
careful while making payment. This task constitutes the following-
Date of Payment: Usually payment is made within seven days after the documents have
been received. If the payment is become deferred, the negotiating bank may claim Profit
for making delay.
Preparing Sale Memo: A sale memo is made at B.C rate to the customer. As the T.T &
O.D rate is paid to the ID, the difference between these two rates is exchange trading.
Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID.
Page | 66
Chart Title
200000
150000
100000
50000
0
1 2 3 4 5 6 7 8 9 10
Series1 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Series2 4% 30% 34% 24% 41% 30% 41% 13% 39% 20%
Series3 16673 21738 29151 36169 51133 66690 93920 1E+05 1E+05 2E+05
7.6.2 Export
Export means flow of goods and services produced within Bangladesh but purchased by economic
agent (individuals, firms & government) of other countries. In other words in case of exports
products sold outside the country. So getting payment against such sale usually require different
time span depending on the terms of sale contract or relative payment terms of export L/C.
In view of above exporter require immediate fund and other financial facilities to execute their
export order. It is the bank who extends such facilities as needed by the exporter.
In addition, facilitating export by financing exporter at different stages are now important part of
bank’s activities.
Export section deals with two types of L/C that are as follows-
Export Section
Page | 67
Pre-shipment stage &
Post–shipment stage
So, export finance is classified into two categories
A) Pre-Shipment finance
B) Post-Shipment finance
Back-to-back L/C
To purchase/procure goods for export processing bank may provide facility in the way of Back-to-
Back L/C opened under Bai-Muajjal mode. If the back-to-back L/Cs are opened deferred payment
basis no finance by the bank is required except if they fail to make shipment in time.
Bai-MurabahaTR
For purchase of goods for export shipment bank can finance under Bai-Murabaha TR mode. That
means the exportable goods or raw materials are purchased under Bai-Murabaha mode and
delivered to the exporter client for export or export processing against Trust Receipt duly signed
by the client.
The mechanism of Bai-Salam is- goods purchase in advance against payment now but
delivery of goods will be made after a specified time.
For meeting the expenses other than procurement of goods bank make finance
Page | 68
Under Bai-Salam mode to the exporter. Through Bai-Salam bank purchase a portion of exportable
goods in advance and make payment. After production exporter makes shipment of the goods, this
is already sold to the bank.
Musharaka
Post-shipment finance is made by the bank after shipment by negotiated and purchased of shipping
documents by the bank. Bank made payment on submission of documents if these are free from
any discrepancies and bank found suitable for purchase in all respect. Bank adjust their liability
when get foreign payment. Bank earns exchange income from such finance, which is permissible
under Islamic Shariah.
2) Arrangements have to be taken for inspection of the goods by the competent authority as per
credit terms.
3) Exporter will declare on EXP form against export L/C/Firm Contract/ Advance payment.
4) Exporter have to arrange approval for export from custom authority on EXP from by submitting
Export L/C, Export permission from CCI & E, Quota clearance from EPB, U.D. in case of
garments, invoice, packing list along with shipping bill prepared by C&F agent.
5) After completion of custom formalities, shipping company will receive the goods and will issue
B.L.
6) Exporter will collect visa/ license and certificate of origin for final documentation.
Page | 69
7) Exporter will submit the full set of documents to the negotiating bank for negotiation.
8) Negotiation bank will dispatch the documents to the issuing bank for clearance of the goods
from destination against payment as per credit terms.
Dhaka Central,
6.16%
Barishal, 6.79%
Dhaka North, 7.27%
Sylhet, 11.62%
Dhaka South,
9.15%
Mymensingh, 8.6%
Chittagong (North),
4.15%
Comilla, 28.59%
Chittagong (South),
4.51% Page | 70
Khulna Zone, 5.25%
Remittance of foreign currency being received in the country from abroad is called inward foreign
remittance.
Foreign currency being made out abroad may be termed as foreign outward remittance. Purpose of
foreign Outward remittance:
The Dealing Room of IBBL established at IBW (International Banking Wing) in July 2005 and is
functioning with two officials who have taken Foreign Exchange Bourse Training in Mumbai
under the auspices of Reserve Bank of India.
The Dealing Room of IBBL earned BDT 210.00 million from July 2005 to December 2005. From
January to August 2006, Dealing Room has earned BDT 255.00 million.
Page | 72
CHAPTER-08
SWOT Analysis
Page | 73
SWOT Analysis is an important tool for evaluating the company’s Strengths, Weaknesses,
Opportunities and Threats. It helps the organisation to identify how to evaluate its performance
and scan the macro environment, which in turn would help the organisation to navigate in the
turbulent ocean of competition. The SOWT analyses of IBBL presented below:
8.1 Strengths:
Adequate finance: Islami Bank Bangladesh Ltd. has adequate finance. That’s why they need not
to borrow money from Bangladesh Bank or any other financial institution.
More funds for investment: For adequate financial ability, they can provide more investment to
the clients.
Honest and Reliable Employees: All of the employees of Islami Bank are honest and reliable.
They are always devoted themselves to the works for better customer service. They have no
corruption report.
It has vast years of experience since its establishment.
IBBL is only the Bank, which is the pioneer of welfare banking system among all other financial
and banking organisation.
At IBBL, the top management is the driving force and the think tank of the organisation where
policies designed and often cascaded down.
IBBL provides its customer excellent and consistent quality in every service.
IBBL is a financially sound company.
IBBL utilizes state-of-the art technology to ensure consistent quality and operation.
IBBL provides its works force an excellent place to work.
IBBL has already achieved a good will among the clients.
IBBL has a research division.
8.2 Weaknesses:
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IBBL have lacks well-trained human resource in some area.
IBBL have lacks aggressive advertising
The procedure of credit facility is to long comparing to other banks.
Employees are not motivated in some areas.
Absence of structured marketing and credit policy
Lack of co-ordination with the branches and Head Office.
Lack of IT assistance
8.3 Opportunities:
Emergence of i banking will open more scope for IBBL.
IBBL can introduce more innovative and modern customer service.
Many branches can be open in remote location.
IBBL can recruit experienced, efficient and knowledgeable work force as it offers good
working environment.
The successful launching and needs to an Islamic Money Market in the country.
8.4 Threats:
The worldwide trend of mergers and acquisition in financial institutions is causing
problem.
Frequent taka devaluation and foreign exchange rate fluctuation is problem.
Many new banks are coming in the scenario with new service.
Local competitors can capture huge market share by offering similar products.
The rules and regulations of Bangladesh are not favorable for Islami Bank. Therefore, they
have to face various problems to operate their activities according to Islami Shariah.
Lack of skill personnel, because of poor salary structure rather than other private banks.
Unknown attitudes of the people about the Islamic Banking.
CHAPTER-09
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OVERALL FINDINGS, PROSPECTS,
RECOMMENDATION, &
CONCLUSION.
9.1 Findings:
Bangladesh is not a full Islamised country, all activities are not operating according to the
Shariah of Islam. Nevertheless, the IBBL is trying to operate their activities as much as
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possible. Yet some limitations and problems are arising and that’s why to encapsulate the
overall study we need to detect some findings which are present below:
Islamic Banking is a new phenomenon in our country during last two decades. Therefore,
majority of our people have no proper knowledge about the activities of Islamic Banking as
well as its investment mechanism hamper large scope of investment of IBBL.
No Islami money market is available. Easily money transaction is not possible for the
interest free banking system. Call rate money is not responded according to Islami Shariah
Most of the people in our country have a bad impression of IBBL’s operations regarding
indirect generation of interest which meaning no difference between investment of IBBL
loan / Credit / advance of conventional banks, for this reason, they are not too much
interested to make investment with IBBL. Because of improper, insufficient application of
Islamic Banking rule in our country. The investment operations of IBBL cannot run
smoothly.
IBBL, which is committed to avoid interest, cannot invest the permissible part of its
statutory liquidity reserve and short Term liquidity surplus in those securities.
This bank cannot invest in all economic sectors, which prohibited by the law of Islam.
Profitable investment portfolio of IBBL requires clear investment knowledge according to
Islamic Shariah. However, sometimes IBBL cannot invest its assets in proper portfolio due
to insufficient and unskilled work force in these regards. As a result, there is a large
amount of money being idle and thus potential profit is not increasing.
This Bank revalues its investment operations within limited number of investment modes
and does not initiate investment modes according to changing diverse needs of people
Sometimes investment operations of IBBL hampered due to increase, dishonest, indiscreet,
hypocritical nature of people.
IBBL has no strong promotional activities to increase motivate its present and potential
investment client. IBBL does not grant investment portfolio for new entrepreneurs, new
businesspersons, and new companies etc., which ultimately create “Class Banking
There are limited scopes to deal women entrepreneurs and professionals for making
investment by women interpreters.
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In rural areas for low-income community, this bank grants investment and group not
individual. As a result, the mission, using invested money in income generating activities
so the poor needy population can become self-reliant failed. Moreover, it enhances group
dependence.
IBBL has lack of modern technologies and equipment's like online facilities, fax, cash card
and credit card system.
Numbers of employees are fewer than the volume of works, which creates problem for
prompt service.
Absence of efficient personnel and infrastructure fit for Islamic trade financing on
International Business.
IBBL has no special share market. It is another limitation.
There is no Shariah Board in Bangladesh for foreign exchange business, which can guide
them in their activities.
9.2 Prospects
In spite of the present limitations Islamic Banking system has tremendous
Potentiality and prospects in Bangladesh.
The successfully launching and operation of Islami Banks in Bangladesh has established
the fact that banking without interest is feasible.
Islami banks have brought together money deposits and entrepreneurs under their fold and
coverage. These depositors and entrepreneurs so long avoided interest based banking on
grounds of religious injunctions.
9.3 Recommendation
To ensure better customer services coping with the growth of overall business of the
branch additional space kindly allocated immediately for the branch.
Business discretionary power may revise.
Expenditure ceiling may revise considering the grade of the branch.
Evening banking allowance may be increased.
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Automation of Foreign Exchange portfolio.
Revision of foreign exchange related charges.
Arrangement of monthly /quarterly training courses /workshops for the clients selected by
the branches in order to promote investment clients of the desired level.
Effective human resources should place at every department of IBBL for more speedy and
smooth banking operation. Women employee should be increase more in order to deal
women entrepreneurs for create demand for investment.
To fulfill the vision of "mass banking" this Bank should grants investment portfolio to new
entrepreneurs /new businessperson’s new companies etc.
The bank should disburse total invested money at once to the clients to achieve full
benefits of invested money.
The amount of investment of RDS & operating range should increase. So more people will
get the facility under the scheme & they will able to increase their standard of livings.
To gain success in the programs like "Poverty Alleviation and "Self Reliant" especially in
rural areas, this bank should provide investment facilities on the basis of individual.
To create syndicate banking system for foreign exchange business
Decision making process should be free of ambiguity and be time conscious
Ensure reasonable spread and return on assets.
Build good value for sponsors and shareholders.
Formulation of recruitment / remuneration policy should be outstanding.
Enhancement of remuneration package should be competitive and attractive.
Eventually, it should mentioned that IBBL is still very successful and competitive in their
customer service, banking operation, management process, record keeping and overall
activities of banking.
The Bank should go aggressive advertising and promotional activities to get a broad
geographic coverage.
IBBL should utilize "Internship Program" as one kind of promotion policy to
encourage its present and potential investment clients. To do so this bank should
provide facilities to the internees through proper placement and practical operations as
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well as job certainty to those who bring
introduce themselves the best performers in
doing their particulars.
IBBL should appoint a sufficient number of
women employees to deal women
entrepreneurs and professionals, understand
their needs, and thus create demand for
investment.
To fulfill the vision of "mass banking" this bank should grants investment portfolio to
new entrepreneurs /new businessmen new companies etc.
To remove image problem, IBBL should take various advertisement programs.
Literature on Islamic capital market may preserve at IBTRA library.
Inclusion of more subjects based on the Quran and Sunnah in the training courses of
the Islami Bank Training & Research Academy in order to develop human resources
having morally.
IBBL should initiates different investment modes according to changing /diverse needs
of clients by conducting huge Research and study.
9.4 Conclusion
IBBL is trying to develop banking sector through welfare and servicing to the people. Islami
economy and banking bound together. IBBL has emerged facing the many obstacles yet. This
bank is trying to operate their activities according to Islam.
Most of the people in our country have a bad impression about IBBL’s operations regarding
indirect generation of interest, which means no difference between investments of IBBL
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loan/credit/advance of conventional banks for this reason. They are not much interested to
investment with
IBBL because of majority of our people have no proper knowledge about the activities of Islami
banking as well as its investment mechanisms. IBBL through its steady progress and continuous
success has, by how, earned the reputation of being one of the leading private sector banks of the
country. The bank has shown steady progress in this important sector. IBBL’s capital adequacy,
deposits, reserves, earning per share, export, import and remittances are increasing day by day.
Therefore, no doubt IBBL is a growing profitable financial institution.
Interest free banking system is no more a concept. It is now a reality, a dynamic system, embodying a
set of superior banking mechanism. More than 300 Islamic bank and financial institutions are
operating in different countries throughout the world with a marked success from this inception in
our country in 1983. IBBL has been operating with real and confidence in corporation with other
conventional banks.
The significant growing of IBBL has encouraged the traditional banks to open Islamic banking
window, like –HSBC, Dhaka Bank Ltd., Prime Bank Ltd., The city Bank Ltd. Though IBBL has
reached the top position among the PCBs in our country, it has more concentrate its customers’
service to survive in the end by facing the competitors’ strong strategies in banking era.
To conclude we must say that, Islami bank Bangladesh Limited (IBBL) has immense potential in
Bangladesh. It can play vital role in bringing revolutionary changes in our life with both material
and moral world and in individual and collective level.
Bibliography
Text Book
1. Text Book on Islamic Banking Publishes by Islamic Economics research Bureau.
2. Principle & Practice of Islamic Banking” Written by Abdur Rakib (EVP), IBBL.
3. Islami Banking written by A.A.M. Habibur Rahman.
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4. Book, Journals related to Islami Banking.
5. An Overview of Investment Portfolio of IBBL.
6. Booklet namely “Introduction of Islami Bank Bangladesh Ltd.”
7. Foreign Exchange operations by Jb. Md. Belayet Hossain.
8. Economic Trends published by Bangladesh Bank.
Publication
1. Annual Report of 2010 & 2011
2. Materials Supplied by IBTRA. (sheet)
Internet
1. http://www.bangladesh-bank.org
2. http://www.islamibankbd.com
3. http://www.ibtra.bd.com
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IBBL Milestone
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Shariah Supervisory Committee : 1983
IPO : 1985
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IBBL Mudaraba Perpetual Bond (MPB) Issue : 25th November 2007
1st Position of IBBL in Inward Remittance : 2007, 2008, 2009 & 2010
Branches of ibbl
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Five year
performance of IBBL
( Amount In Million Taka )
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Part Particulars 2007 2008 2009 2010 2011
Total Deposits
(Including bills 166,812.78 202,115.00 244,292.14 291,934.60 341,853
payable) Gross
Total Investments
(Including Inv in 102,145 123,959.00 174,365.55 198,763.00 255,272.41
Share) Gross
Total Foreign
287,919.00 402,695.00 462,370.00 609,331.00 716,058.00
Exchange Business
Payment to
Government 2,385.08 3,245.08 3,253.23 4,108.98 5,515.56
(Income Tax)
Total Assets
(including 150,959.66 188,115.27 250,012.79 288,017.19 340,638.49
Contra)
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Total Assets
(Excluding 122,880.35 150,252.82 191,362.35 230,879.14 278,302.84
Contra)
No. of deposit
2,705,180 3,207,131 3,802,709 4,361,896 42,72,123
account holder
No. of investment
297,943 421,751 508,758 498,362 1,62,736
account holder
Cumulative
amount of
6,033.36 9,303.12 13,969.01 18,768 24,239.00
disbursement
from RDS
Outstanding
Investment of 1,106.00 2,242.00 2,885.00 3,012 3,752.00
RDS
RDS no. of A / C
164,116 295,012 350,278 321,484 492,475.00
holder
Number of
Foreign 860 870 884 906 919
Correspondents
Number of
17,201 20,960 26,488 33,686 52,164.00
Shareholders
Number of
6,202 7,459 8,426 9,397 9,588
Employees
Number of
169 176 186 196 231
Branches
Earnings per
487.57 368.42 375.46 56.29 55.10
Share (Taka)
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Capital Adequacy
9.44% 9.43% 10.61% 10.72% 11.65%
Ratio
450000
400000
350000
300000
Deposits
250000
Investment
200000
Remittance
150000 Foreign Exchange
100000
50000
0
2006 2007 2008 2009 2010
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Figure: Deposits
Investments
Figure: Investment
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Remittance Trends (Country vs. IBBL)
1 2 3 4
1 2 3 4 5 6 7
0%
17% 16%
17% 16%
17% 17%
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