Principles of distribution of Profit to Mudaraba Depositors Presented by Md. Fariduddin Ahmed Advisor Export Import Bank of Bangladesh Limited Former Managing Director & Chief Executive Officer Islami Bank Bangladesh Limited

Principles of distribution of Profit to Mudaraba Depositors The principles of calculation and distribution of profit to Mudaraba Depositors generally followed by different Islami Banks are as under: Mudaraba Depositors share income derived from investment activities i.e. from the use of fund. Mudaraba Depositors do not share any income derived from miscellaneous banking services where the use of fund is not involved, such as commission, exchange, service charges and other fees realised by the Bank in connection with sale and purchase of Demand Drafts, Telegraphic Transfers and Mail Transfers etc. Profit and loss resulting from the use of funds are separately maintained in the accounts from other income and expenditure relating to other activities and services offered by the Bank. Prepared by Forkan Uddin Mahmood

Principles of distribution of Profit to Mudaraba Depositors Mudaraba Deposits get priority in the matters of investment over Bank's equity and other cost free funds. Mudaraba Depositors do not share any income derived from investing Bank's equity and other cost free fund. The amount of the statutory cash reserve and the liquidity reserve which are required to be maintained with Bangladesh Bank is deducted from the aggregate balance of Mudaraba Deposits to arrive at the net balance of profit sharing deposit. The gross income derived from investments during the accounting year is, at first, allocated to Mudaraba Deposits and cost-free-funds according to their proportion in the total investment. Prepared by Forkan Uddin Mahmood

Principles of distribution of Profit to Mudaraba Depositors The share of gross investment income of Mudaraba Deposits as worked out in terms of principle shown against serial No 7 above is distributed as under: Minimum sixty-five (65) percent is distributed to Mudaraba Depositors applying the rates of weightage shown below. Mudaraba Depositors' share of sixty-five (65) percent of gross investment income might further be raised by the Bank's Management at its discretion to rationalise the Rates of profit to Mudaraba Depositors but it would not be reduced during any accounting year without giving prior declaration. The rest amount of gross investment income is retained by the Bank as management fee for managing the investment & for making reserve for Bad & doubtful investments. Prepared by Forkan Uddin Mahmood

Particulars of Deposits Principles of distribution of Profit to Mudaraba Depositors Islami Bank Bangladesh Ltd, at present, applies the following weightages to Mudaraba Deposits. Sl. Particulars of Deposits Weightage a) Mudaraba Hajj Savings i) From 11 years to 25 years Term 135% ii) From 1 year to 10 years Term 130% b) Mudaraba Waqf Cash Deposit c) Mudaraba Special Savings (Pension) 10 Years 5 Years 110% d) Mudaraba Muhor Savings Account Ii) e) Mudaraba Savings Bond (MSB) 8 Years 125% f) Mudaraba Monthly Profit Deposit Scheme (MMPDS) 120% g) Mudaraba Term Deposits 36 Months 100% 24 Months 98% iii) 12 Months 96% iv) 06 Months 92% v) 03 Months 88% h) Mudaraba Savings Deposit 75% Mudaraba Foreign Currency Deposit j) Mudaraba Special Notice Deposit 55% Prepared by Forkan Uddin Mahmood

Principles of distribution of Profit to Mudaraba Depositors Differential rates of weightages have been assigned to Mudaraba Depositors on account of the following factors: Banking Facilities The Term Depositors do not enjoy any banking facility such as, operating accounts by cheques, transfer of account from one branch to another, collection of cheques and other instruments, executing standing instructions through their accounts and so on and so forth. On the other hand, the PLS Savings Depositors have freedom to get the above services through their accounts. PLS Short Notice Depositors enjoy still greater facilities in regard to making deposits in and withdrawal from their accounts. Prepared by Forkan Uddin Mahmood

Principles of distribution of Profit to Mudaraba Depositors Period of Deposits The longer the period of deposit, the greater the risk they bear with regard to fluctuation of the rates of profit and erosion of the value of deposit due to inflation. The Term Depositors have also to forgo profit in case of premature encashment. The pattern of Rates of Return on various types of cost bearing deposits of the traditional Banks in our Money Market have also an important bearing on allocation of weightage at different rates. In consideration of the above factors, full weightage has been assigned to our Mudaraba Deposits of 36 months and relatively lower Weightages have been given to Mudaraba Deposits of lower periods, Mudaraba Savings and Mudaraba Short Notice Deposits. Prepared by Forkan Uddin Mahmood

Principles of distribution of Profit to Mudaraba Depositors On the basis of the above principles, let us work out the rates of profit using the information and figures given below: a) Total Investment Tk. 2000 b) Total Investment Income (Net of provision for bad & doubtful investment) Tk. 300 c) Total fund employed i) Banks equity and Al-Wadeeah Deposits ii) Mudaraba Deposits Tk. 1700 Tk. 2000 Therefore the share of investment income of Mudaraba Deposit will be (300 2000 1700) Tk. 255.00 Less Management fee 35% Tk. 89.25 Distributable Income Tk. 165.75 Prepared by Forkan Uddin Mahmood

Type of Mudaraba Deposit Share of Distributable Profit Principles of distribution of Profit to Mudaraba Depositors Sl. No Type of Mudaraba Deposit Yearly Prod. Weigh-tage % Weigh. Prod. Share of Distributable Profit Rate of Profit (%) 1 2 3 4 5 6 7 a) Mudaraba Hajj Savings i) From to 25 years Term 150 135 202.50 18.01 12.01% ii) From 1 year to 10 years Term 50 130 65.00 5.78 11.56% b) Mudaraba Waqf Cash Deposit 75 101.25 9.01 c) Mudaraba Special Savings (Pension) 10 Years 125 162.50 14.45 5 Years 100 110 110.00 9.78 9.78% d) Mudaraba Muhor Savings Account 90 117.00 10.41 121.00 10.76 e) Mudaraba Savings Bond (MSB) 8 Years 112 140.00 12.45 11.12% 88 96.80 8.61 Prepared by Forkan Uddin Mahmood

Type of Mudaraba Deposit Share of Distributable Profit Principles of distribution of Profit to Mudaraba Depositors Sl. No Type of Mudaraba Deposit Yearly Prod. Weigh-tage % Weigh. Prod. Share of Distributable Profit Rate of Profit (%) 1 2 3 4 5 6 7 f) Mudaraba Monthly Profit Deposit Scheme (MMPDS) 100 120 120.00 10.67 10.67% g) Mudaraba Term Deposits i) 36 Months 200 200.00 17.79 8.89% ii) 24 Months 50 98 49.00 4.36 8.72% iii) 12 Months 96 96.00 8.54 8.54% iv) 06 Months 92 92.00 8.18 8.18% v) 03 Months 88 88.00 7.83 7.83% h) Mudaraba Savings Deposit 75 37.50 3.34 6.67% Mudaraba Foreign Currency Deposit J) Mudaraba Special Notice Deposit 55 27.50 2.45 4.89% TOTAL 1700 1863.55 165.75 Rate of Profit: Fig. in Col 6 X 100 Fig in Col No 3 Prepared by Forkan Uddin Mahmood

Allah Hafez