Welcome to my presentation Presented by MD.Hasibur Rahman major in Finance ID:B081718 Depertment of Business Administration IIUC-Dhaka campus

Presentation topic “Modes of Investment of IBBL:an exploratory study on Islami Bank Bangladesh Limited ”

1.1 Introduction: Because of globalization 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, industrialization, growth of trade and commerce etc. Islami Bank does not pay interest . to depositor. Instead depositors participate in the profitability of the bank. The Bank participates in financing long-term projects on the basis of 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 Different Investment Modes of IBBL and sketch picture of the same.

Objectives and Philosophy of the study: The objective of the study is to fulfill the requirement of BBA program as well as to gain practical exposures about investment of IBBL. In line with the broad objective, the detailed objectives of the study may be spelled out as follows:  To familiar the history and operations of Islami Banking in Bangladesh.  To fined out the overall pictures of investments of IBBL.  To identify strength and weakness of investments of IBBL.  To identify the problems related to investments faced by IBBL.  To recommend actions that may be necessary to redesign the investments of IBBL.

Methodology of the study: The study is performed based on the information extracted from different sources collected by using a specific methodology. This report is analytical in nature. The methodology is: Data collection: Source of data of this report can be divided into two categories

Methodology continued…….. Primary Sources: Face to face conversation with the respective officers and staffs. Interviewing officers and staffs. Relevant file study on provided by the officers concerned. In depth study of selected cases. Secondary sources:  Website of IBBL. Annual Report of IBBL. Audit Reports. Relevant books, Newspapers and Journals. Internet and various study report.

Modes of investment an exploratory study on Islami Bank Bangladesh Limited

Modes of Investment of IBBL When money is deposited in the IBBL, the bank, in turn, makes investments in different forms approved by the Islamic Shariah with the intention to earn a profit. Not only a bank, but also an individual or organization can use Islamic modes of investment to earn profits for wealth maximization. Some popular modes of IBBL’s Investment are discussed below. Bai Modes Share Modes  Ijara Modes

Bai Modes Continued……….. Bai-Murabaha Bai-Muazzal Bai-Salam Quarde-e-Hasana

Bai Modes continued….. Bai-Muazzal (Deferred Sale) Bai-Murabaha (Contract Sale on Profit) “Bai-Murabaha" means sale on agreed upon profit. Bai-Murabaha may be defined as a contract between a Buyer and a Seller under which the Seller sells certain specific goods permisIBBLe under Islamic Shariah and the Law of the land to the Buyer at a cost plus agreed profit payable in cash or on any fixed future date in lump sum or by installments. The profit marked-up may be fixed in lump sum or in percentage of the cost price of the goods. Bai-Muazzal (Deferred Sale) “Bai-Muazzal” means sale for which payment is made at a future fixed date or within a fixed period. In short, it is a sale on Credit. The Bai- Muazzal may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods, permisIBBLe 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 in fixed installments.  

Continued…….. Bai-Salam (Advance payment) “Bai-Salam” means advance sale and purchase. Bai-Salam may be defined as a contract between a buyer and seller under which the seller sells in advance in the certain commodities and products IBBL under Islamic Shariah and the law of the land to the buyer at a agreed price payable on execution of the said contract and the commodities and products to the buyer at a future time in exchange of an advanced price fully paid on the spot. Here the buyer makes an advance payment, but the delivery is delayed until sometime in the future. Usually the seller is an individual or business and the buyer is the bank. Quarde-e-Hasana Term Deposit Recite The word “Quarde” is an “Arabic word” which means loan or credit on advance. The literal meaning of Quarde is giving “Fungible goods” for use without any extra value returing those goods. It must follow the principal of equal foe equal return with homogeneous goods. Fungible goods may be rice, oil, salt, money etc. In banking sector money is used as quarde. Quarde is Halal by Islam for not to pay any extra or interest in return.

Share Modes Mudaraba Musharaka

Share Modes continued……. Mudaraba (Investment made by the entrepreneur) The word “Mudaraba” means “travel” for undertaking business The term Mudaraba refers to a contract between two parties in which one party supplies capital to the other party for the purpose of engaging in a business activity with the understanding that any profits will be shared in a mutually agreed upon. Losses, on the other hand, are the sole responsibility of the provider of the capital. Mudaraba is also known a Qirad and Muqaradah Musharaka (Partnership based Investment) The word “Musharaka” is derived from the Arabic word “Sharikah” meaning partnership. Thus the word “Musharaka” means a partnership established between two or more partners for purpose of a commercial venture participated both in the capital and management. Thus, it involves different types of profit and loss sharing partnership.

Ijarah Modes Hire purchase Under Sirkatul Meelk Hire Purchase under Shirkatul Melk is a Special type of contract which has been developed through practice. Actually, it is a synthesis of three contracts:  Shirkat  ijara  Sale

Learning Points It was a great experience to have learnt some important banking, finance, marketing functions that will help me in future. I could learn how to file the official documents accordingly and to keep track of those files. This helped me understand the importance of file management system of Islami Bank Bangladesh Ltd.

Continued….. I have gathered a very good skill in handling Electronic Integrated Banking Software (EIBS), Web Based Remittance and Investment which will help me in my future job carrier. I have learned about how to import,openning an L/C. Remittance handling Investment proceure Account openning

Analysis:  All activities are conducted on interest free system according to Islami shariah  Investment is made though different modes as per Islami shariah.  Extend socio economics and financial services to individuals of all economics backgrounds with strong commitment in rural uplift.  Lack of strong initially to explore investment opportunities through research and markets.  All employees are not expert of online banking system.  Some of the employers try to violate Islami shariah when they deal with investment.  Most of the employers and employees are not Business graduate/ Master.  Security in bank is not standard.  Some Investment deal is very much slow.  Islami bank lacks efficient manpower.

(SWOT) Analysis Strengths  Countrywide branch network.    Countrywide branch network.  Expatriates faith & inclination towards Islamic Banking.  Strong base of well-wishers.  General support of beneficiaries towards IBBL.  Wider network of arrangement.  SWIFT arrangements with major Banks.  Motivated and experienced human resources. Weaknesses  Lack of proper automation.  Shortage of manpower.  Insufficient logistic support.  Concentration of remittance operation though a single location.  Non-offering special deposit & investment schemes for the expatriates.

(SWOT) Analysis continued……. Opportunities    New arrangement with some Exchange Houses.  Increase in skilled/ semi-skilled expatriates in various countries.  On-line banking facilities.  Opening branches at the major remittance receiving localities.  Enforcement of Anti Money Laundering Act.  Floating and attractive Exchange Rate. Threats  Entering third generation banks to remittance business  Unusual exchange rate offered by competitor.  Aggressive marketing by some banks.  Operation of New Islamic Banks/ Branch

. ISLAMI Bank Bangladesh Limited. Trends of investment:2007 to 2011 This Figure shows the upward trends for IBBL, 28

Mode wise investment (31.12.2010)

Sector wise investment (2011)ISLAMI BANK BANGLADESH LTD.

INVESTMENT OF SOME WELFARE SCHEMES

Recommendations Any kind of bank Shariah based or interest based has to operate under regulatory environment prepared and approved by the government. There are conflicts between Islami Shariah and general Government rules and banking law. That’s why Islami bank does not get the opportunity and help from the running law of government. • Insurance company pools large amount of money, which is mainly invested by bank. Islami bank does not get benefit from insurance companies directly. Because insurance companies are not guided by Islami Shariah. So Islami Bank is not interested to get insurance from that companies that’s why it is necessary to establish Islami insurance policy. • Islami bank cannot accept securities & bonds from Bangladesh Bank because these securities & bonds are not well instructed by Islami Shariah. Besides the conventional banks get these benefits from Bangladesh Bank that helps them to increase their wealth. • Islami bank lacks efficient manpower. In our country Islami bank spreading very rapidly but still skilled manpower is not sufficient. Islami banking and Islami economy must be included in the syllabus of schools and universities so that Islami educated people can have opportunity to get employed in Islami bank and the service of Islami bank can be better with the help of these skilled personnel.

Conclusion: Islami banking system the collection of invested money is easier that the conventional banking because Islami bank concerns with the purpose of investment not with only the invested money. I also think that there is bright future waiting for the Islami banking in Bangladesh. And IBBL is in a position to go as a catalyst for this development in the banking sector in Bangladesh. Another thing I have to mention here that the IBBL is going through the path in which they need to go and as like today it will bring more new and welfare oriented activities in the banking sector in the years to come.

Thank you all for joining my presenation ALLAH HAFEZ