HISTORIES
AND GROWTH OF ISLAMIC BABKING AROUND THE WORLD
In the 20th century ,the financial
and Banking world come to acquainted with a new member in the money market
known as Islamic Bank with some special features.Islami banking gradually
evolded during the last thirty years in some parts of the Muslim world.During
1960’s it was observed that Muslims of Malayasia used to save miney primarully
for performing Hazz.Such savings mostly kept idle in pillows,under mattresses
and floor for avoiding interest,which was unproductive and damaging for the
growth and development of ecnomy.For utilizing such saving the Government of Malayasia in 1962 established
an interest free financial institution known as “Pilgrims Saving Corporation”.In
1963 Ahmed El Nujjar established a bank
at MITGAMAR inegypt by his personal endeavor with a view to bring some
development in socio-economic field in the process of Islam.this Mitgrambank is
considered as the Father of Modern Islamic Banking and A.E Niffar is considered
as the Father jof Islamic Banking System.The tremendous development that the
world economy has experienced in the last few decades was contributed by
several factors among which, growing institutional supply of loan able funds
must have in the human body. Both commercial banks and other development
financial institutions provide short,
medium, and long-term credits to businesspersons and entrepreneurs who usually
take the lead in ventures of economic development.
Institutional
supply of credit has been made possible by a system of financial
inter-mediation organized in a way where conventional banks collect small savings from the public
by offering them a fixed rate of interest and advancing the loan able funds out
of the deposited money to enterprising clients charging relatively higher rates
of interest. The margin between these two rates is the banks income. In
addition, banks also provide many other services to the public for which it
receive service charges. Despite the outstanding contribution of the conventional
banking system(interest-based) several ancient and modern economists are
critical about its efficiency level . Some economists consider the role of
interest in the conventional banking mechanism as a major negative factor that
contributes to cyclical fluctuations in the economy (Minsky 1982). More recent
concern over the potential instability of the world monetary and financial
system was expressed by Maurice Allais, a Noble Laureate in the called for an
urgent reform of the World Economic order (Allais 1993, pp13-16) . Others
vehemently opposes the argument for using rate of interest as a stabilizing
tool in the economy (Saud 1980, p. 88) . This called for the emergence of a new system of banking
capable of tacking new challenges that the present world economy , particularly
the financial sector, has been facing.
To create a sound
economic system all the nations of the world urge to fashion and design their
economic lives in accordance with the precepts of Islam. In this regard all the
conventional banks are trying to reform their financial structure according to
the light of Islam.
Now More than 50 Islamic Banks and Islamic
institutions have been operating their business all over the world.Besides
Muslim countries,Islamic Banks are operating their banking business in non-
Muslim countries.
ISLAMI BANK AS A FINANCIAL
INSTITUTION
Islamic bank is a financial institution that performs ;most of
the standard banking activities oj the basis of profit-loss sharing system
conforming the principles of Islami shariah.It operates with the objectives to
implement and materialize the economic and financial principles of Islam in the
banking arena.According to Islami Banking Act 1983 of Malaysia,Islami Bank is a
Company which carries on Islami banking business…,Islami Banking bisomess means
baking business whose aims and operations do not involve any element which is
not approvedby the religion of Ilsam”.Islamic Banking is essentially normative
concept and could be defined as the conduct of in consonance with the ethos and
to the value system of Islam.”
The
Organisation of (Ali & Shaskar 1995, pp-20-25) Islamic bank is a "company which carries on Islamic
banking business .... Islamic banking business means banking business whose
aims and operations do not involve any element which is not approved by the
religion Islam" (Act No 4.276).
Shawki Ismail Shehta viewing the concept from the perspective of an
Islamic economy and the prospective role to be played by an Islamic bank
therein opines. "It is, therefore, natural and, indeed, imperative for an
Isamic bank to incorporate in its functions and practices commercial investment
and social activities, as an institution designed to promote the civilized
mission of an Islamic economy" (lbid)
.
Ziauddin Ahmed says, "Islamic banking is essentially a
nomative concept and could be defined as conduct of banking in consonance with
the ethos of the value system of Islam" (lbid).
It appears from the above
definitions that Islamic banking is a
system of financial intermediation that avoids receipt and payment of interest
in its transactions and conducts its operations in a way that it helps achieve
the objectives of an Islamic economy. Alternatively, this is a banking system
Whose operation is based on Islamic
principles of transactions of which profit and loss sharing (PLS) is a major
feature, ensuring justice and equity in
the economy. That is why Islamic banks
are often know as PLS-banks.
Four elements of Islamic Bank:
1 To avoid Bank interest.
2 Invest money on profit.
3 Invest money in Halal business.
4 follow shariah principles.
PROFIT AND RIBA
Profit : Profit
on loss comes from investment in business activities. Profit is the
result of ownership transaction and risk following the fours stages :
·
Transformation
through Bai /Buying Selling of goods.
·
Risk
of Transformation and Ownership.
·
Other
Condition of Shariah.
·
Result-Profit
on loss
Profit is the difference
between the value of production and the cost of production which is Halal
according to Islami Shariah
Interest
: Interest come from loan, credit, advance of money. The word used by the
Quran concerning "Interest" is Riba. The literal meanings of Riba are
money increase, increase of anything or increment of anything from its original
amount.
From the Islamic Shariah point of view, Riba is Harram.
OBJECTIVE OF ISLAMIC BANKING
·
To
eliminate interest
·
To
develop human resources for enhancing economic growth and quality of life.
·
To
cover the fulfillment of the basic needs of the people.
·
The
objectives of Islamic banking is not
only to earn profit, but to do good and welfare to the people. Islam upholds
the concept that money, income and property belong to Allah and this wealth is to be used for
the good of the society .
·
Islamic
banks operate on Islamic principles of profit and loss sharing ,strictly
avoiding interest, which is the root of all exploitation and is responsible for
large-scale inflation and unemployment.To avoid economic instability
·
An
Islamic bank is committed to do away with disparity and establish justice in the
economy, trade, commerce and industry; build socio-economic infrastructure and create employment
opportunities.To provede safety net for the weak, poor and distressed.
ISLAMI BANK IN BANGLADESH
In
August 1974, Bangladesh signed the Charter of Islamic Development Bank and
committed itself to reorganize its economic and financial system as per Islamic
system as per Islamic Shariah.
In Jnuary 1981, Late President Ziaur Rahmank while addressing
the 3rd Islamic Summit Conference held at Makkah and Taif suggested,
“The Islamic countries should develop a separate banking system of their own in
order to facilitate their trade and commerce.” This statement of Late President
Ziaur Rahman indicated favourable attitude of the Government of the People’s
Republic of Bangladesh towards establishing Islamic banks and financial
institutions in the country.
Earlier in November
1980, Bangladesh Bank, the country’s Central Bank, sent a representative to
study the working of several Islamic banks abroad.
In November 1982, a delegation of IDB Bangladesh and
showed keen interest to participate in establishing a joint venture Islamic
bank in the private sector. They found a lot of work had already been done and
Islamic banking was in a ready form of immediate introduction. Two professional bodies Islamic
Economics Research Bureau (ERB) and Bangladesh Islamic Bankers’ Association
(BIBA) made significant contributions towards introduction of Islamic banking in the country. They came forward to
provide training on Islamic banking to top bankers and economists to fill-up
the vacuum of leadership for the future Islamic banks in Bangladesh. They also
held seminars, symposia and workshops on Islamic economics and banking
throughout the country to mobilise public opinion in favour of Islamic
banking.
At last, in March 1983, the long drawn struggle
to establish an Islamic Bank in Bangladesh become a reality and Islami
Bank Bangladesh Limited was established; which including - 19 Bangladeshi national, 4 Bangladeshi
institutions and 11 banks, Financial institutes and government bodies of the
Middle East & Europe including IDB,
Two eminent personalities of the kingdom of Saudi Arabia.
Later, other four
Islamic Banks, Islamic insurance companies and Financial institution were established
in the country some traditional banks opened Islamic Banking Branches in some
major cities.
Al-Baraka
Bank Limited, called the second Islamic Bank in Bangladesh, commenced banking
business as a scheduled bank on May 20, 1987.
Superiority
of Islami Bank Bangladesh Ltd. than OVER TRADITIONAL BANKING
Isaamic bank is
superior over the traditionai bank for the following reasons:
o
Abolition of interest based loan market
o
All activities are conducted on interest-free system
according to Islamic Sharia principles.
o
There is no fixed cost of capital
o Stimulation for acceleratingsaving and capital
formation
o Efficient allocation of investment ,production
and profit
o Lower inflationary situation.
o Investment is made though different modes as
per Islamic Shariah.
o
Investment-income of the Bank is shared with the Mudaraba
depositors according to an agreed upon ration, ensuring a reasonably fair rate
of return on their deposits.
o
Establishment of adal to attain Ehsan and Falah in this life
and the life hereafter.
o
o
Easy recovery of investment capital.
o Aims to introduce
a welfare-oriented banking system and also establish equity and justice in the
field of all economic operations.
o Extend socio-economic and financial services
to individuals of all economic backgrounds with strong commitment in rural
uplift.
o Plays a vital role in human resources
development and employment-generation particularly among the unemployed youths.
o The possibility of bank faillureis remote.
Vision
The vision of IBBL
is to always strive to achieve superior financial performance, be considered a
leading Islamic Bank by reputation and performance.
·
To establish and maintain the modern banking techniques, to
ensure the soundness and development of the financial system based on Islamic
principles and to become the strong and efficient organization with highly
motivated professionals, working for the benefit of people, based upon
accountability, transparency and integrity in order to ensure stability of financial
system.
·
Try to encourage savings in the form of direct investment
·
Try to encourage investment particularly in projects which
are more likely to lead to higher employment.
Mission
To established
Islamic Banking through the introduction of a welfare oriented banking system
and also ensure equity and justice in the field of all economic activities,
achieve balanced growth and equitable development through diversified
investment operations particularly
in the priority sectors and less
development areas
of the county. To
encourage socio-economic upliftment and financial services to the low-income
community particularly in the rural areas.
Management of IBBL
Islami Bank Bangladesh Limited is
managed by a 24-member Board. Of the Directors 8 are foreigners and 16 are
local. A 9-member Executive Committee is formed by the Board of Directors for
efficient operation of the Bank, a Management Committee looks after the affairs
of the Bank.
REGISTERED OFFICE
Islami Bank Tower
40, Dilkusha Commercial Area
Dhaka-1000, Bangladesh, GPO Box No.
: 233
Phone : PABX-9563040 (Hunting 8
Lines), 9560099, 9567161, 9567162,9559417
Telex : 671620 IBANK BJ
Fax : 9564532, 9568634, Cable :
ISLAMIBANK
S.W.I.F.T : IBBLBDDH
E-mail : ibbl@ncll.com,
ibbl@agni.com
web.site : www.islamibankbd.com
|
Board of Directors
Chairman
Shah Abdul Hannan
Vice-Chairman
Yousuf Abdullah Al-Rajhi
Repr. of Al-Rajhi Co. for Industry
& Trade, K.S.A
Mir. Quasem Ali
Repr. of Ibn Sina Trust
Directors
A.N.M.A Zaher
Repr. of Ibn Sina Pharmaceutical Industry
Ltd.
Mohammad Mosharraf Hussain, MP
Moulana Mohammad Kutubuddin
Repr. of Islami Economics Research
Bureau
Engr. Mustafa Anwar
Engr. Md. Eskander Ali Khan
Nazir Ahmed
Md. Shahidul Islam
Engineer Muhammad Dawood Khan
Professor Korkut Ozal
Repr. of Islamic Development Bank,
K.S.A.
Engr. Mohammad Fouad Al-Khateeb, K.S.A.
Repr. by :
Nur Mohammad Akon
Alternate Director
Abdullah Abol Fatih
Repr. of Bahrain
Islamic bank, Bahrain.
Mohammad Saeed Al-Sharif
Repr. of Dubai
Islamic Bank, U.A.E.
Abdel Al-Banwan
Repr. of Kuwait
Finance House, Kuwait
Sheikh Abdul Wahab A. Al-Houti
Repr. of Kuwait
Awqaf Public Foundation, Kuwait
Md. Fazle Azim
Mominul Islam Patway
Repr. of Maruf
Foundation
Md. Fayekuzzaman
Repr. of
Investment Corporation of Bangladesh
Abdur Raquib
Ex-Officio
Director
Executive
President
Membership in
International and National Bodies
International
Affiliations
This Bank is a
member of the under noted Foreign Organisations :
i) Accounting and Auditing Organizations for
Islamic Financial Institutions (AAOIFI), Manama, Bahrain.
ii) General Council for Islamic
Banks and Financial Institutions (GCIBFI), Manama, Bahrain and has also become
member of the Executive Committee of GCIBFI.
iii) International Chamber of
Commerce-Bangladesh.
Local Affiliations
The Bank is also member of the under noted Local Organsations :
i) Bangladesh Institute of Bank
Management (BIMB)
ii) The Institute of Bankers,
Bangladesh (IBB)
iii) Bangladesh Foreign Exchange
Dealers’ Association (BAFEDA)
v) Central Shariah Board for Islamic
Banks in Bangladesh
vi) Islami Banks Consultative
Forum (IBCF) and
vii) Dhaka Chamber of Commerce & Industry.
Table-1 : Five Years Performance of Ibbl At A Glance
Particulars
|
1998
|
1999
|
2000
|
2001
|
2002
|
Authorised
Capital
|
500.00
|
500.00
|
1,000.00
|
1,000.00
|
1,000.00
|
Paid-up
Capital
|
317.98
|
320.00
|
320.00
|
640.00
|
640.00
|
Reserved
Fund
|
1,011.84
|
1,115.61
|
1,759.65
|
1,998.04
|
2,852.07
|
Total
Equity
|
1,517.55
|
1,659.26
|
2,671.06
|
2,993.24
|
3,540.52
|
Deposits
(including Bills Payable)
|
20,021.69
|
25,190.65
|
32,112.81
|
41547.29
|
55,461.62
|
Investments (including Inv. in
Shares) (Gross)
|
17,366.27
|
22,198.26
|
29,563.20
|
37,648.75
|
49,185.92
|
Import
Business
|
20,238.30
|
20,396.00
|
25,327.00
|
25,907.00
|
33,788.00
|
Export
Business
|
14,894.30
|
14,798.00
|
16,889.00
|
16,082.00
|
16,673.00
|
Remittance
|
6,360.60
|
8,415.00
|
7,644.00
|
9,879.00
|
14,670.00
|
Total
Foreign Exchange Business
|
41,943.20
|
43,609.00
|
49,860.00
|
51,868.00
|
65,131.00
|
Total
Income
|
1,629.38
|
1,966.24
|
3,207.81
|
4,259.55
|
5,234.07
|
Total
Expenditure
|
1,480.99
|
1,787.93
|
2,877.57
|
3,683.43
|
4,240.02
|
Net
Profit before Tax
|
148.39
|
178.31
|
330.24
|
576.12
|
994.05
|
Payment
to Govt. (Income Tax)
|
51.94
|
62.41
|
104.03
|
181.48
|
397.62
|
Dividend
|
21%
|
21%
|
25%
|
25%
|
25%
|
Total
Assets (including Contra)
|
30,843.90
|
39,133.40
|
49,250.36
|
58,550.81
|
78,360.74
|
Total
Assets (excluding Contra)
|
23,025.33
|
31,314.82
|
39,362.27
|
49,458.22
|
65,080.70
|
Fixed
Assets
|
363.47
|
498.90
|
1,121.15
|
1,276.89
|
1,723.43
|
Number
of Foreign Correspondents
|
650
|
675
|
775
|
815
|
830
|
Number
of Shareholders
|
6,989
|
7,185
|
7,549
|
9,917
|
10,757
|
Number
of Employees
|
2,171
|
2,302
|
2,685
|
3,060
|
3,297
|
Number
of Branches
|
105
|
110
|
116
|
121
|
128
|
Book
Value per Share (Taka)
|
4,772
|
5,185
|
4,174
|
4,677
|
5,532
|
Earning
per Share (Taka)
|
270
|
362
|
353
|
617
|
932
|
Market
Value per Share (Taka) Highest)
|
2,65
|
2,300
|
3,305
|
3,205
|
3,956
|
Capital
Adequacy Ratio
|
11.39%
|
8.90%
|
10.59%
|
9.24%
|
8.64%
|
Note : One Million = Ten Lac
Functions of IBBL
The functions of Islami
Bank Bangladesh Limited are as under :
A)GENERALBANKING
It includes-
Mobilization of deposits
Rreceipts and payment of
cash
Handling transfer transaction
Operations clearing house
Maintenance of accounts
with Bangladesh Bank and other Banks
Vollections of checks and
bills
Issue and payment of Demand
Draft ,telegraphic transfer and Payment Order
Executing customers
standing instructions.
Maintenance of safe deposit
lockers
Maintenanceof internal
accounts of the bank.
While doing all the above
noted work IBBL issue cheques-book ,Deposite
account
operating forms,Sscards,
cheque book,ledger,cash books Deposit account ledger,
preparation statements of
accounts and passbook, balance different accounts and
calculates profits.
Islami Bank Bangladesh
Limited offers to open the following account to the
depositor
i.Al-Wadeeah
Current Account.
ii. Mudaraba Savings Account.
iii. Mudaraba Term Deposit Account : 3 month /6
moth /12 month /24 month /36 moth term.
iv. Mudaraba Special Notice Account.
v. Mudaraba Hajj Savings Account (a special
account to facilitate performance of Hajj by fixed income groups) : 1 year to
25 year term.
vi. Mudaraba Special Savings (Pension) Account-5
year and 10 year term.
vii. Mudaraba Savings Bond Scheme : 5 year and 8
year term.
viii.Mudaraba
Foreign Currency Deposit (Savings) Monthly Profit Deposit Account : encourages
foreign wage earners to remit foreign currencies
ix. Mudaraba
Monthly Profit Deposit Account : earn profit on a monthly basis
x. Mudaraba
Muhar savings Account : enables Muslims to build up fund to pay to their wives
the Muharana fixed at the time of marriage
o To operate Current Account on Al-Wadeeah principle
and all other deposit accounts on Mudaraba principle of Islamic Shariah.
o The Bank
distributes minimum 65% of its investment-income, earned through deploymnet of
Mudaraba deposits, among the Mudaraba Deposits.
Weightages of Different Mudaraba Accounts
:
Name
of Account
|
Weightage
|
1. Mudaraba Special Savings (Person) A/C : 10
years
|
1.30
|
2. Mudaraba Special Savings (Person) A/C : 5
years
|
1.10
|
3. Mudaraba Savings Bond : 8 years
|
1.25
|
4. Mudaraba Savings Bond : 5 years
|
1.10
|
5. Mudaraba Hajj Savings A/C
|
1.10
|
6. Mudaraba Monthly Profit Deposit A/C
|
1.05
|
7. Mudaraba Term Deposit A/C : 36 Months
|
1.00
|
8. Mudaraba Term Deposit A/C : 24 Months
|
0.98
|
9. Mudaraba Term Deposit A/C : 12 Months
|
0.96
|
10. Mudaraba Term Deposit A/C : 6 Months
|
0.92
|
11. Mudaraba Term Deposit A/C : 3 Months
|
0.88
|
12. Mudaraba Savings A/C
|
0.75
|
13. Mudaraba Special Notice A/C
|
0.55
|
The year 2002 was
another year of mobilization of deposits. Total deposits stood at Tk. 55,462.
million as on 31st December 2002 as against Tk. 41,647.00 million of
the preceding year registering an increase of Tk. 13,915.00 million, i.e., 33%
as compared to the growth rate of 12% of the banking sector. Total number of
depositors rose to 1,651,122 as on 31st December 2002 from 1,355,053
of the preceding year, registering an increase of 22%.
Table-2 : Growth of Deposit : 1998 to 2002
Year
|
Deposit (Tk in Million)
|
|
1998
|
20,022
|
|
1999
|
25,191
|
|
2000
|
32,113
|
|
2001
|
41,547
|
|
2002
|
55,462
|
(b Investment
IBBL invests its
moneyin various sectors of the economy through different modes are permitted by
the Shariah and approved by theBangladesh Bank.The mdes of investmentare as
follows:
A)Ba-Mechanism
Bai-Murabaha
Bai-Muazzal
Bai-Salam
Istisna
B)Leasing,
Ijara,Hire Purchase(HP),Hire Purchase under Shirkatul Meilk(HPSM)
C)Shirkat
Mechanism
Musharaka
Mudaraba
Investment of the
Bank stood at Tk. 46,281.00 million as on 31.12.2002 as against Tk. 35,238.00
million as on 31.12.2001 showing an increase of Tk. 11,043.00 million, i.e. 31%
as against 18% growth of investment of the Banking sector. This increased
investment growth of the Bank in 2002 may be attributed to the thrust given to
promote investment in order to deploy the surplus liquidity.
Table-3 : Growth
of Investment : 1998 to 2002
Year
|
Growth of Investment
(Tk in Million)
|
|
1998
|
13,435
|
|
1999
|
20,585
|
|
2000
|
27,437
|
|
2001
|
35,238
|
|
2002
|
46,281
|
c) To Conduct Foreign Exchange Business
The foreign trade
handled by the Bank may be classified as under :
(i) Import Business
(ii) Export Business
(iii) Foreign
Remittance
(iv) Necessary
services relating foreign Business & Trade.
The achievement of Islami Bank in the area of foreign
exchange business has been quite phenomenal. The Bank has been providing
services to import and export trade and for repatriation of hard-earned foreign
exchange of Bangladeshis living and working abroad and has by now, consolidated
its position in these areas.
Table-4 : Foreign Exchange
Business
Year
|
Import
|
Export
|
Remittance
|
Total Foreign
Exchange Business
|
Growth Rate
|
1998
|
20,238.30
|
14,894.30
|
6,360.60
|
41,493.20
|
13%
|
1999
|
20,396.00
|
14,798.00
|
8,415.00
|
43,609.00
|
5%
|
2000
|
25,327.00
|
16,889.00
|
7,644.00
|
49,860.00
|
14%
|
2001
|
25,907.00
|
16,082.00
|
9,879.00
|
51,868.00
|
4%
|
2002
|
33,788.00
|
16,673.00
|
14,670.00
|
65,131.00
|
26%
|
International Correspondence
At the end of the year 2002 the number of foreign
correspondents were 830 with 225 Banks in 72 countries. This correspondent
relationship accrued substantial benefit to the Bank by way of expansion in its
services areas related to foreign trade and foreign exchange business. The Bank
endeavours to increase its banking relationship with international financial
institution to institution to offer smooth and efficient service to the
customers.
d) To extend other banking
services
à Human Resources Development
à Training & Motivation
à Staff Welfare Schemes
à Automation & Information
Technology
à Shared ATM network
à Swift
à Results
Operating Result and Profits
Income
Investment Income
: Total
Investment Income of the Bank stood as on 31st December, 2002 at
Taka 4,334.00 million as against Taka 3,482.00 million of preceding year
registering 24% over last year and which was 83% of the total income compared
to 82% of the year that ended 2001.
Non-investment income : Total Non-Investment Income of the
Bank as on 31st December, 2002 was Taka 900.00 million as against
Taka 778 million of preceding year registering 16% growth over last year and
which was 17% of the total income compared to 18% of the year 2001.
Expenditure
Profit Paid on Deposits (PPD) : The Bank has distributed Tk. 2,714.00 million among the
Mudaraba Deposits as Profit in 2002, being 72% of the Investment Income earned
through development of Mudaraba Fund as against minimum 65%, which was Tk.
2,187.00 million in 2001 out of the Investment Income of Tk. 4,334.00 million
and tk. 3,482.00 million in 2002 and 2001 respectively.
Administrative & Other Expenses : Total Administrative and other expenses as on 31st
December, 2002 was Taka 1,000.00 million as against Taka 850.00 million of
preceding year showing 18% growth over last year and which was 24% of the total
Expenditure compared to 23% of the year 2001.
Table-7 : Operating Result :
1998-2002
(in
million Tk.)
Year
|
Total Income
|
Total Expenditure
|
Gross Profit
|
1998
|
1629
|
1481
|
148
|
1999
|
1966
|
1788
|
178
|
2000
|
3208
|
2878
|
330
|
2001
|
4260
|
3683
|
576
|
2002
|
5234
|
4240
|
994
|
Dividend
The Board of Directors recommended 25% cash dividend for
2002, on the paid-up Capital of Tk. 640.00 million, for approval by the
Shareholders in this Annual General Meeting.
It may be mentioned here that, total 19 Non-Resident
Shareholders held 380,040 Shares during the year 2002. Total amount of Dividend
of Tk. 95,010,000/- @ 25% was due to them for the year 2001 out of which an
amount of Tk. 14,626,575/- has been deducted as Income Tax, an amont of Tk.
430,687.50 has been paid to a Local Academy as per advice of the Foreign
Shareholder and the balance amount of Tk. 79,952,737.50 equivalent to US$
1,386,864.48 has already been remitted to the Foreign Shareholders during the
year 2002. It may be mentioned here that the Bank has a good-track record in
paying cash dividend.
Table-8
: Ratio of Dividend
Year
|
Rate of Dividend
|
|
1998
|
21%
|
|
1999
|
21%
|
|
2000
|
25%
|
|
2001
|
25%
|
|
2002
|
25%
|
Branch Network
7 (seven) new Branches have been opened during the year
2002 raising the total number of Branches to 128 from 121 of the previous year.
The Bank plans to gradually open more Branches covering important commercial
places both in urban and rural areas. 7 (seven) Administrative Officers /Zones
are functioning all over the country for effective control, close supervision
and proper monitoring of the total operations of the Branches as well as
assisting them in the development of business.
Shariah
Council of the Bank
There is a Shariah Council of the Bank that consists of prominent
Ulema, reputed Bankers, renowned Lawyers and eminent Economists to advise and
guide on the implementation and compliance of Shariah principles in all the
activities of the Bank particularly on the modes of investments. The Council
enjoys a special status in the structure of the bank who meets frequently and
plays a vital role. Total number of meetings of the Shariah Council was during
2002. There is also a sub-Committee of the Shariah Council and they met on 11
occasions during 2002.
It also conducts Shariah inspection of Branches to ensure that the
Shariah principles are implemented and complied with by the Branches of the
Bank.
IBBL’s World rating
As per Banker’s Almanac (january 2001 edition) published
by the Reed Business Information, Windsor Court, England, IBBL’s world Bank is
1771 among 3000 banks selected by them. This position was 1902 among 4500
selected banks as on January T1999 edition.
IBBL’s country Rank is 5 among 29 banks as per ratings
made by the above Almanac on the basis of IBBL’s Financial Statements of the
year 2001.
1. Preliminary
discussion may have with the prospective client regarding his line of business,
experience & investment needs.
2. The
past performance of the client to be studied and Branch’s track record of
proposed investment.
3. If
the proposal found suitable the client may be asked to submit a formal
application along with necessary papers/documents.
Call
for Islamic Banking in the World
For an expanding economy, a developed
and efficient banking system is indispensable. Among others, it helps transfer
of financial resources from surplus units to deficit units and, hence, helps
accelerate the pace of development by securing uninterrupted supply of
financial resources to people engaged in numerous economic activities. The
tremendous development that the world economy has experienced in the last few
decades was contributed by several factors among which, growing institutional
supply of loan able funds must have in the human body. Both commercial banks
and other development financial institutions provide short, medium, and
long-term credits to businesspersons and entrepreneurs who usually take the
lead in ventures of economic development.
Institutional
supply of credit has been made possible by a system of financial
inter-mediation organized in a way where conventional banks collect small
savings from the public by offering them a fixed rate of interest and advancing
the loan able funds out of the deposited money to enterprising clients charging
relatively higher rates of interest. The margin between these two rates is the
banks income. In addition, banks also provide many other services to the public
for which it receives service charges. Despite the outstanding contribution of
the conventional banking system(interest-based) several ancient and modern
economists are critical about its efficiency level. Some economists consider
the role of interest in the conventional banking mechanism as a major negative
factor that contributes to cyclical fluctuations in the economy (Minsky 1982).
More recent concern over the potential instability of the world monetary and
financial system was expressed by Maurice Allais, a Noble Laureate in the
called for an urgent reform of the World Economic order (Allais 1993, pp13-16)
. Others vehemently opposes the argument for using rate of interest as a
stabilizing tool in the economy (Saud 1980, p. 88) . This called for the emergence
of a new system of banking capable of tacking new challenges that the present
world economy , particularly the financial
sector, has been facing.
To create a sound
economic system all the nations of the world urge to fashion and design their
economic lives in accordance with the precepts of Islam. In this regard all the
conventional banks are trying to reform their financial structure according to
the light of Islam.
WHAT IS ISLAMIC BANK ?
An Islamic bank is a financial institution that operates with the
objective to implement and materialise the economic and financial principles of
Islam in the banking arena.
The
Organisation of (Ali & Shaskar 1995, pp-20-25) Islamic bank is a "company which carries on Islamic
banking business .... Islamic banking business means banking business whose
aims and operations do not involve any element which is not approved by the
religion Islam" (Act No 4.276).
Shawki Ismail Shehta viewing the concept from the perspective of an
Islamic economy and the prospective role to be played by an Islamic bank
therein opines. "It is, therefore, natural and, indeed, imperative for an
Isamic bank to incorporate in its functions and practices commercial investment
and social activities, as an institution designed to promote the civilized
mission of an Islamic economy" (lbid)
.
Ziauddin Ahmed says, "Islamic banking is essentially a
nomative concept and could be defined as conduct of banking in consonance with
the ethos of the value system of Islam" (lbid).
It appears from the above definitions that Islamic banking is a system of financial
intermediation that avoids receipt and payment of interest in its transactions
and conducts its operations in a way that it helps achieve the objectives of an
Islamic economy. Alternatively, this is a banking system Whose operation
is based on Islamic principles of
transactions of which profit and loss sharing (PLS) is a major feature,
ensuring justice and equity in the economy.
That is why Islamic banks are often know
as PLS-banks.
MEANING OF INTEREST
The word used by the Quran concerning
'interest' is Riba. The literal meanings of Riba are money increase, increase
of anything or increment of anything from its original amount (Maududi 1997, p.84) . However, all
increases are not considered as Riba in Islam . Money may increase, in business
activities as well. This increase is not at all considered as Riba. The
increase, instead of being prohibited (Haram), is approved (Hala) in Islam .
Islam prohibits only those increases that are charged on the loan with a prefixed rate .
Muslim scholars equate interest with
Riba. In the Shariah, Riba technically refers to the premium that must be paid
by the borrower to the lender along with
the principal amount as a condition for the loan or for an extension in its
maturity (Chapra 1985, p.64). In
other words, Riba is the predetermined return on the use of money. In the past
there has been dispute about whether Riba refers or usury, but there is now
consensus among Muslim scholars that the term covers all forms of interest and
not only " excessive " interest (
Khan 1985,52).
The most important
characteristic of Riba is that it is the positive and definite result of money
when changed . In other words, when money begets money, without being exchanged for goods or services, it is
called Riba.
Its basic characteristics are :
·
It
must be related to loan.
·
A
prefixed amount of money to be paid when due.
·
A
time is fixed for the repayment.
·
All these elements for repayment are taken as conditions
for loan.
PROFIT AND RIBA
Profit : Profit
on loss comes from investment in business activities. Profit is the
result of ownership transaction and risk following the fours stages :
·
Transformation
through Bai /Buying Selling of goods.
·
Risk
of Transformation and Ownership.
·
Other
Condition of Shariah.
·
Result-Profit
on loss
Profit is the difference between the value of production
and the cost of production which is Halal according to Islami Shariah
Interest
: Interest come from loan, credit, advance of money. The word used by the
Quran concerning "Interest" is Riba. The literal meanings of Riba are
money increase, increase of anything or increment of anything from its original
amount.
From the Islamic
Shariah point of view, Riba is Harram.
Comparison between
Riba and Profit
Riba
|
Profit
|
1. One goods-fungible
|
1. Two goods
|
2. Loan-Ownership retained
|
2. Ownership Exchanged
|
3. Excess-without exchange value
|
3. Equity of Value
|
4. No transformation
|
4. Transformation
|
5. No
Risk of Transformation and ownership
|
5. Risk
home
|
6. No relation with result imposed
|
6. Is the result
|
7. Certain
|
7. Uncertain
|
OBJECTIVE OF ISLAMIC BANKING
·
The
objectives of Islamic banking is not
only to earn profit, but to do good and welfare to the people. Islam upholds
the concept that money, income and property belong to Allah and this wealth is to be used for
the good of the society .
·
Islamic
banks operate on Islamic principles of profit and loss sharing ,strictly
avoiding interest, which is the root of all exploitation and is responsible for
large-scale inflation and unemployment.
·
An
Islamic bank is committed to do away with disparity and establish justice in
the economy, trade, commerce and industry; build socio-economic infrastructure and create employment
opportunities.
Islamic Banking Movement Throughout The World
The expansion and unfolding of islamic banking alongwith
traditional interest based banking is a
recent phenomenon . Islamic banking is an inseparable part of Islamic
banking is an inseparable part of Islamic economy. During the fifties it was
only a subject matter of research and
was limited to the writings of scholars and philosophers. During the sixties
actual experiments were made and in the seventies Islamic banking institutions
started gaining strength .The eighties and nineties are the period of
consolidation and now Islamic banking is coming up as the only welfare banking
system of the modern world.
The first attempt : Interestingly, the concept of Islamic
Banking is several decades old. The first attempt to establish an Islamic financial
institution took place in Pakistan in the late 1950s with the establishment of
a local Islamic bank in a rural area (Wilson 1983). Some pious landlords who
deposited funds at no interest, and then loaned to small landowners for
agricultural development initiated the experiment. The borrower did not pay
interest on the credit advanced, but a small charge was levied to cover the
bank’s operational expenses. The charge was far lower than the rate of
interest.
The second attempt :
The second
pioneer experiment of putting principles of Islamic banking and finance into
practice was conducted in Egypt from 1963 to 1967 through the establishment of
the Mit Ghamar Savings Bank in a rural area of the Nile Delta. The experiment combined the idea
of German savings bank with the principles of rural banking within the general
framework of Islamic values (Ahmed 1992). The bank’s operation was based on the
same Islamic principle i.e. no-interest to the depositors or from the
borrowers. Unlike the Pakistani bank, the borrower had to have deposits in the
bank in order to request a loan. The experiment soon became successful; more
branches were opened in different parts of the country, and the amount of
deposits increased. Hence, what started as a single bank operation expanded to
form a network of local savings banks. Although the project made a good start
and initial results were more than encouraging, it suffered a setback owing to
charges in the political atmosphere. Nevertheless, the project was revived in
1971 under the name of Nasser Social Bank. This was the first Islamic bank in
an urban setting based in Cairo. The bank is a public authority with an
autonomous status (Ahmed 1992). The principles of operation of the Naser Social
Bank are very similar to those of the Mit Ghamr
Savings Bank. However, the latter offers a full range of normal banking
services and a wide range of investment activities through equity participation
(Ashker 1987, pp. 18-35).
Tabunq Hajji : a successful attempt- Islamic banking, with a very different approach
contemporary to that in Egypt, emerged in Malaysia. It was a financial
institution developed for the pilgrims of Malaysia. These institutions were
established in response to what was the contention of the Malaysian Muslims
that money spent on pilgrimage must be clean and untained ‘with Riba’. Since
this was not possible created. Consequently, Pilgrims Savings Corporation was
established in 1963, which was later on incorporated into the Pilgirims
Management Fund Board (Tabung Hajji) in 1969 (A. Ahmad 1993).
Other attempts : Next to follow was the Dubai Islamic Bank in 1975. The
Dubai Islamic Bank is a public limited company having its office Dubai, U.A.E.
with capital of 50 million Dirhmas. Since then, a number Islamic bank and
financial institutions have been established of different parts of the world
and have been functioning successfully.
A significant development in Islamic banking has been the
granting of an Islamic bank license in Saudi Arabia to the fifty-year old
“Al-Rajhi Company”, a firm noted for its currency, exchange and commercial
activities, whose assets exceed $ 5 billion. The film started operation in 1985
under the name of “Al-Rajhi Banking Investment Corporation” and has since
developed active relationships with major manufacturing and trading companies
in Europe and several U.S. corporations. (Mangla, Uppal & Swamy 1988, p.
54).
An example of multi-cooperation at the government level
in the field of Islamic banking, is the Islamic Development Bank, which was
founded in 1975 as a multi-national corporation by several Muslim countries.
The purpose of the bank is to support and economic development in Muslim
nations within an Islamic Framework.
A second example of Islamic banking in the West comes
from Luxembourg, where the Islamic Banking System International Holding was
established in 1978 as a joint-stock company. Its purpose was to establish
international Islamic banks in different parts of the western countries were
there are communities of Muslims, and to participate in investment projects in
Islamic and non-Islamic countries.
Dar-al-mal-al-Islami (DMI), based in Geneva, was established in
1981. DMI aims to foster an Islamic financial system based on equity and social
justice by incorporating three types of institutions - banking of the 1970s. The movement took
basically two forms. First, an attempt was made to estabish Islamic financial
institutions side-by-side with traditional banking. In such attempts, two types
of institutions were evolved: Islamic banks were established mostly in Muslim
countries; and Islamic investment and holding companies started in some Muslim
but mostly in non-Muslim countries.
Iran : The process of
Islamization of Islamic banking in Iran has proceeded in three distinct phases.
Nationalization, restructuring and reorganization of the entire banking system
characterized phase one taking place between 1979 and 1982. (Khan &
Mirakhor 1989). the second phase began in 1982 and lasted until 1986. It was a
phase primarily characterized by adoption of legislative and administrative
steps in order to implement a clearly articulated model of Islamic banking
(Iqbal & Mirakhor 1987, p. 106). The third phase , which continues till
now, began in 1986. This phase defines the role of the Islamic banking system
differently from the earlier phases. The system is now expected to be an
integral part of the Islamic government, and thus a direct instrument of its
policies.
Pakistan Pakistan
adopted a policy of gradual transformation of its banking system from February
1979 after several years of study and preparation by the government-appointed
Council of Islamic Ideology (CII). The process started when the President of
Pakistan announced that interest was to be removed from the economy within a
period of three years. Three of the specialized credit institutions - the House Building Corporation, National
Investment Trust, and Mutual Trust Funds of Investment Corporation of Pakistan - were to remove interest from their financing
operations immediately.
Bangladesh In
August 1974, Bangladesh signed the Charter of Islamic Development Bank and
committed itself to reorganize its economic and financial system as per Islamic
system as per Islamic Shariah.
In Jnuary 1981, Late President Ziaur Rahmank while addressing
the 3rd Islamic Summit Conference held at Makkah and Taif suggested,
“The Islamic countries should develop a separate banking system of their own in
order to facilitate their trade and commerce.” This statement of Late President
Ziaur Rahman indicated favourable attitude of the Government of the People’s
Republic of Bangladesh towards establishing Islamic banks and financial
institutions in the country.
Earlier in November
1980, Bangladesh Bank, the country’s Central Bank, sent a representative to
study the working of several Islamic banks abroad.
In November 1982, a delegation of IDB Bangladesh and
showed keen interest to participate in establishing a joint venture Islamic
bank in the private sector. They found a lot of work had already been done and
Islamic banking was in a ready form of immediate introduction. Two professional bodies Islamic
Economics Research Bureau (ERB) and Bangladesh Islamic Bankers’ Association
(BIBA) made significant contributions towards introduction of Islamic banking in the country. They came forward to
provide training on Islamic banking to top bankers and economists to fill-up
the vacuum of leadership for the future Islamic banks in Bangladesh. They also
held seminars, symposia and workshops on Islamic economics and banking throughout
the country to mobilise public opinion in favour of Islamic banking.
At last, in March 1983, the long drawn struggle
to establish an Islamic Bank in Bangladesh become a reality and Islami
Bank Bangladesh Limited was established; which including - 19 Bangladeshi national, 4 Bangladeshi
institutions and 11 banks, Financial institutes and government bodies of the
Middle East & Europe including IDB,
Two eminent personalities of the kingdom of Saudi Arabia.
Later, other four
Islamic Banks, Islamic insurance companies and Financial institution were
established in the country some traditional banks opened Islamic Banking
Branches in some major cities.
Al-Baraka
Bank Limited, called the second Islamic Bank in Bangladesh, commenced banking
business as a scheduled bank on May 20, 1987.
Superiority
of Islami Bank Bangladesh Ltd. than other conventional Banks of Bangladesh
Through its steady
progress and continuous success, IBBL has earned the reputation of being one of
the leading private sector banks of the country. The distinguishing features of
IBBL which are made it superior than any other conventional banks are mentioned
below :
o All activities are conducted on
interest-free system according to Islamic Shariah principles.
o Investment is made though different modes as
per Islamic Shariah.
o Investment-income of the Bank is shared with
the Mudaraba depositors according to an agreed upon ration, ensuring a
reasonably fair rate of return on their deposits.
o Aims to introduce a welfare-oriented banking
system and also establish equity and justice in the field of all economic
operations.
o Extend socio-economic and financial services
to individuals of all economic backgrounds with strong commitment in rural
uplift.
o Plays a vital role in human resources
development and employment-generation particularly among the unemployed youths.
o Portfolio of investment and investment
policy have been specially tailored to achieve balanced growth & equitable
development through diversified investment operations particularly in the
priority sectors and in the less developed areas of the national economy.
Superiority
of Islami Bank Bangladesh Ltd. then any other Islami Banks of Bangladesh.
·
Islami Bank Bangladesh Limited is treated as leading Islami
Banks of Bangladesh. Because this Bank is too much committed to Islami Shariah
through an organisation with highly motivated and qualified professionals
toward Islami Shariah than any other Islami Banks of Bangladesh.
Islami Bank
Bangladesh Limited (IBBL) was incorporated as the first Shariah based interest
free bank in South East Asia an the 13th March 1983 as a public
limited company under the Companies Act, 1913.
Vision
The vision of IBBL
is to always strive to achieve superior financial performance, be considered a leading
Islamic Bank by reputation and performance.
·
To establish and maintain the modern banking techniques, to
ensure the soundness and development of the financial system based on Islamic
principles and to become the strong and efficient organization with highly
motivated professionals, working for the benefit of people, based upon
accountability, transparency and integrity in order to ensure stability of
financial system.
·
Try to encourage savings in the form of direct investment
·
Try to encourage investment particularly in projects which
are more likely to lead to higher employment.
Mission
To established
Islamic Banking through the introduction of a welfare oriented banking system
and also ensure equity and justice in the field of all economic activities,
achieve balanced growth and equitable development through diversified
investment operations particularly
in the priority sectors and less
development areas
of the county. To
encourage socio-economic upliftment and financial services to the low-income
community particularly in the rural areas.
Aims and Objective
o To
conduct interest-free banking.
o To
establish participatory banking instead of banking on debtor-creditor
relationship.
o To
invest through different modes permitted under Islamic Shariah.
o To
accept deposits on profit-loss sharing basis.
o To
establish a welfare-oriented banking system.
o To
extend co-operation to the poor, the helpless and the low-income group for
their economic upliftment.
o To
play a vital role in human development and employment generation.
o To
contribute towards balanced growth and development of the country through
investment operations particularly in the less developed areas.
o To
contribute in achieving the ultimate goal of Islamic economic system.
Management of IBBL
Islami Bank
Bangladesh Limited is managed by a 24-member Board. Of the Directors 8 are
foreigners and 16 are local. A 9-member Executive Committee is formed by the
Board of Directors a Management Committee looks after the affairs of the Bank.
The year 2002 was
another year of mobilization of deposits. Total deposits stood at Tk. 55,462.
million as on 31st December 2002 as against Tk. 41,647.00 million of
the preceding year registering an increase of Tk. 13,915.00 million, i.e., 33%
as compared to the growth rate of 12% of the banking sector. Total number of
depositors rose to 1,651,122 as on 31st December 2002 from 1,355,053
of the preceding year, registering an increase of 22%.
Table-2 : Growth of Deposit : 1998 to 2002
Year
|
Deposit (Tk in Million)
|
|
1998
|
20,022
|
|
1999
|
25,191
|
|
2000
|
32,113
|
|
2001
|
41,547
|
|
2002
|
55,462
|
(b) To make Investment
Islami Bank
Bangladesh Limited being an ideological banking organisation is firmly
committed to implement and materialize the economic and financial principles of
Islam in the banking arena and thereby to do disparity and establish justice in
the trade, commerce, and industry and build socio-ecnomic infrastructure,
create opportunities for employment and income generation and property
alleviation, contribute to the socio-economic enlistment and sustained economic
growth of the country by providing
different types investment facilities.
Keeping the same
in view, side by side with Commercial and Industrial Investment operations,
many special Investment Schemes have been introduced by the Bank over the years
like -
(i) Rural Development Scheme
(ii) House-hold durables Scheme
(iii) Investment Scheme for Doctors
(iv) Transport Investment Scheme for Doctors
(iv) Transport Investment Scheme
(v) Mirpur Silk-weavers’ Investment Scheme
(vi) Small Business Investment Scheme
(vii) Agricultural Implements Investment Scheme
(viii) Car Investment Scheme,
(x) Poultry Investment Scheme Investment Scheme,
(xi) Small Transport Investment Scheme
(xii) Micro-Industries Investment Program,
targeting different economic groups.
Investment of the
Bank stood at Tk. 46,281.00 million as on 31.12.2002 as against Tk. 35,238.00
million as on 31.12.2001 showing an increase of Tk. 11,043.00 million, i.e. 31%
as against 18% growth of investment of the Banking sector. This increased
investment growth of the Bank in 2002 may be attributed to the thrust given to
promote investment in order to deploy the surplus liquidity.
Table-3 : Growth
of Investment : 1998 to 2002
Year
|
Growth of Investment
(Tk in Million)
|
|
1998
|
13,435
|
|
1999
|
20,585
|
|
2000
|
27,437
|
|
2001
|
35,238
|
|
2002
|
46,281
|
c) To Conduct Foreign Exchange Business
The foreign trade
handled by the Bank may be classified as under :
(i) Import Business
(ii) Export Business
(iii) Foreign
Remittance
(iv) Necessary
services relating foreign Business & Trade.
The achievement of Islami Bank in the area of foreign
exchange business has been quite phenomenal. The Bank has been providing
services to import and export trade and for repatriation of hard-earned foreign
exchange of Bangladeshis living and working abroad and has by now, consolidated
its position in these areas.
Table-4 : Foreign Exchange
Business
Year
|
Import
|
Export
|
Remittance
|
Total Foreign Exchange
Business
|
Growth Rate
|
1998
|
20,238.30
|
14,894.30
|
6,360.60
|
41,493.20
|
13%
|
1999
|
20,396.00
|
14,798.00
|
8,415.00
|
43,609.00
|
5%
|
2000
|
25,327.00
|
16,889.00
|
7,644.00
|
49,860.00
|
14%
|
2001
|
25,907.00
|
16,082.00
|
9,879.00
|
51,868.00
|
4%
|
2002
|
33,788.00
|
16,673.00
|
14,670.00
|
65,131.00
|
26%
|
International Correspondence
At the end of the year 2002 the number of foreign
correspondents were 830 with 225 Banks in 72 countries. This correspondent
relationship accrued substantial benefit to the Bank by way of expansion in its
services areas related to foreign trade and foreign exchange business. The Bank
endeavours to increase its banking relationship with international financial
institution to institution to offer smooth and efficient service to the
customers.
(d) To extend other banking
services
à Human Resources Development
à Training & Motivation
à Staff Welfare Schemes
à Automation & Information
Technology
à Shared ATM network
à Swift
à Results
à Human Resources
Developments
Total number of employees of the Bank stood at 3,297 as
on 31st December 2002 as against 3,060 as on 31st
December 2001.
Table-5
: Human Resource Position : 1998 to 2002
Category
|
1998
|
1999
|
2000
|
2001
|
2002
|
% to Total
|
Officer
|
1,846
|
1,823
|
2,186
|
2,552
|
2,692
|
82%
|
Staff
|
2
|
1
|
0
|
0
|
0
|
.--
|
Sub-Staff
|
323
|
478
|
499
|
508
|
605
|
18%
|
Total Human Resource
|
2,171
|
2,302
|
2,685
|
3,060
|
3,297
|
100%
|
Total Branch
|
105
|
110
|
116
|
121
|
128
|
--
|
Per Branch employee
|
21
|
21
|
23
|
25
|
26
|
--
|
In 2002, total 237 officials were recruited to meet the
additional requirement of human resource to handle the increased volume of
business, man new branches and also bring all the officials within the training
program of the Bank. In order to keep pace with the additional human resource
requirement and to enhance the employment opportunity of the country, periodic
recruitment is done as per need of the Bank.
à Training & Motivation
Islami Bank Training & Research Academy (IBTRA) was
established simultaneously with the establishment of the Bank in the year 1983
for the purpose of training to human resource at all levels and conducting
research programs. To cater to the increasing training and research needs, the
Academy has been up-graded in 1994. For ensuring academic Council has been
formed with reputed Bankers, prominent Ulema, eminent Economist, Executive
Director of Bangladesh Bank Training Academy (BBTA) and Director General of
Bangladesh Institute of Bank Management (BIBM). These illustrious individuals
formulate policies to provide special emphasis on (i) Islamic Economics and
Banking and (ii) practical operations on both Conventional and Islamic Banking
system.
The Bank has its own 8 (eight) stored training complex at
Mohammadpur, Dhaka were the residential training courses are conducted.
Table-6 : Various human resources training activities during
2002
Serial No.
|
Program
|
No. of Training
Facilitated
|
No. of Officials
Trained
|
1
|
Academy
Training
|
40
|
1,041
|
2
|
Workshops
|
7
|
174
|
3
|
Executive
Development Programs
|
3
|
285
|
4
|
Training at other
Organizations (BIBM, IBIT) Information Technology Division of Head Office
& Other Organizations
|
55
|
348
|
5
|
International Training
(Thailand, Dubai, India, Hong Kong, China, and Malaysia)
|
--
|
48
|
Besides the above training, 5 Internships Programs for
130 BBA & MBA students were awarded. The list is shown below :
o Department
of Finance & Banking Department, University of Dhaka
o Department
of Management, University of Dhaka
o Asian
University of Bangladesh, Dhaka
o Ahsanullah
University of Science and Technology, Dhaka
o Darul
Ihsan University, Dhaka
o Queens
University, Dhaka
o Peoples
University, Dhaka
o International
Islamic University, Chittagong.
à Staff Welfare Schemes
The Bank believes in supporting its
employees and offering incentives and motivation for its continued
profitability and prosperity. With a view to supporting these lofty objectives,
the Bank operates a contributory Provident Fund, Social Security fund, Gratuity
Fund and a Benevolent Fund for the employees of the Bank. These Funds are
managed by separate Board of Trustees.
à Automation & Information Technology
To meet the growing demand for
rendering prompt and tailor made services to the customers; the Bank experts
its efforts continuously to automate all sorts of transactions in the Branches.
I.T. Division has equipped Branches and Departments with required number of
computers and related peripherals and is developing and implementing required
software programs. Specially, the Integrated Branch Banking System (IBBS) is
offering enormous support for the cause of expansion of the Bank by adding huge value to its
services and by saving a lot of time and manpower. I.T. Division has developed
and implemented the Share Management, Central Store Management and Inventory
control Software, an internet (ibblnet) which is providing various information
to the Officials of IB Tower. An integrated Human Resources Management System
for the Human resources Division has been designed and developed. The Automated
Time Attendance System (ATAS) has been developed and installed in the Had
Office. The would help to introduce accuracy, efficiency and one-stop service
in the branches. Besides, the Bank has approved a plan for developing WAN
(Worldwide Area Network) enabled banking software by in-house developers.
Presently, all 128 Branches are conducting their deposit and investment
operation through the support of computer automated software. 35 (thirty five)
new Branches have come under Local Area Network (LAN) in the year 2002, raising
LAN facilities to 82 Branches. Training programs have been arranged on IBBS
(Integrated Branch Banking System) during this year and several training
program for basic computer operation were conducted both in-house and outside
computer training institutes.
à Shared ATM (Automated Teller Machine)
Network
Islami Bank has made giant strides in the field of
Technology enabled Banking with its introduction of E-Cash Service – a shared
Automated Teller Machine (ATM) network comprising 9 (nine) banks of the
country. Islami Bank Bangladesh Limited may withdraw cash, check balance, pay
BTTB and Grameen Phone bills and deposit money instalments of Hajj, Pension,
Muhor and HDs schemes of IBBL sold 3,650
ATM cards by its Card Cell. Above 5,000 transactions are made by IBBL card
holders every month through which an amount of Tk. 5,00,000.00 + is drawn per
day which saves a lot of time and money for the Bank besides a good amount of
cost free deposit could be collected for the Bank.
à SWIFT :
IBBL has become member of SWIFT (Society for Worldwide
Inter-Bank Financial tele-communication) in 1000 and thus providing a secured
and accurate communication network for financial transactions including L/C,
Remittance etc. SWIFT has been installed in 29 (twenty nine) AD (Authorised
Dealer in Foreign Exchange Business) Branches upto 31.12.2002 for rendering better
services to the exporters, importers and remittance business.
Ã
REUTERS
In today’s globally connected world, information faster
than the speed of light brings organizational success. For ensuring maximum
strategies through access to global information, the Bank has also become
member of REUTERS. This membership allows the bank to receive regular updated
information regarding exchange rates, metal markets and other commodity prices,
which help IBBL in making correct and prompt business decisions.
(e) To conduct Social welfare activities
through Islami Bank Foundation
With a vies to providing
financial assistance to the poor and needly people through various
income generating, health care, relief and rehabilitation, education,
humanitarian, dawa and special programmes, the Islami Bank Foundation was established. It has established the
followings :
1. Four
modern Islami Bank Hospitals at (i)
two in Dhaka, (ii) one in Rajshahi and (iii) one in Khulna.
2. Three
Islami Bank Community Hospitals at
(i) Satkhira, (ii) Manikganj and (ii) Rangpur.
3. The
Service Centres in the district of
(i) Noakhali, (ii) Manikganj and (iii) Feni and several other projects for
socio-economic development of the country.
4. Five
Vocational Training Institute named Islami Bank Institute of Technology (i)
two at Dhaka; (ii) one at Bogra, (iii) one at Sylhet and (iv) the other at
Chittagong.
5. Islami Bank Physiotherapy and Disabled
Rehabilitation Centre (IBPDRC) at Mohammadpur, Dhaka - enabling the physically retarded individuals
to be self-reliant through proper physiotherapy treatment and by imparting
special skills.
6. Bangladesh Sangskritic Kendro - a Cultural Center in Dhaka to save the younger
generation from derailment and uphold & promote our own culture.
7. Distressed Woman Rehabilitation Center - a facility for shelter, training and rehabilitation of
destitute and shelterless widows and divorced women.
The Islami Bank Foundation has also advanced its activity
in the following areas :
a. Islami Bank International School &
College in Dhaka city giving stress on values & moral teachings,
essential for the students to become responsible citizens.
b. Monorom-Islami Bank Crafts & Fashions - a sales center at Dhaka that plays a
significant role for economic upliftment of poor and distressed women through
providing sales opportunities of their products.
The Foundation has
also drawn up a plan to look after the education, health and medicare
requirements of the people of the area where the Bank has launched Rural Development
Scheme. The authority has also decided to establish a Medical College in Rajshahi subject to the approval of the
Health Ministry.
The Foundation has
spent Taka 79.20 million during the year 2002 for (a) Income Generating
Projects (b) Education (c) Health & Medicare (d) Humanitarian (e) Relief
& Rehabilitation (f) Dawah Activities etc.
Operating Result and Profits
Income
Investment Income
: Total
Investment Income of the Bank stood as on 31st December, 2002 at
Taka 4,334.00 million as against Taka 3,482.00 million of preceding year
registering 24% over last year and which was 83% of the total income compared
to 82% of the year that ended 2001.
Non-investment income : Total Non-Investment Income of the
Bank as on 31st December, 2002 was Taka 900.00 million as against
Taka 778 million of preceding year registering 16% growth over last year and
which was 17% of the total income compared to 18% of the year 2001.
Expenditure
Profit Paid on Deposits (PPD) : The Bank has distributed Tk. 2,714.00 million among the
Mudaraba Deposits as Profit in 2002, being 72% of the Investment Income earned
through development of Mudaraba Fund as against minimum 65%, which was Tk.
2,187.00 million in 2001 out of the Investment Income of Tk. 4,334.00 million
and tk. 3,482.00 million in 2002 and 2001 respectively.
Administrative & Other Expenses : Total Administrative and other expenses as on 31st
December, 2002 was Taka 1,000.00 million as against Taka 850.00 million of
preceding year showing 18% growth over last year and which was 24% of the total
Expenditure compared to 23% of the year 2001.
Table-7 : Operating Result :
1998-2002
(in
million Tk.)
Year
|
Total Income
|
Total Expenditure
|
Gross Profit
|
1998
|
1629
|
1481
|
148
|
1999
|
1966
|
1788
|
178
|
2000
|
3208
|
2878
|
330
|
2001
|
4260
|
3683
|
576
|
2002
|
5234
|
4240
|
994
|
Dividend
The Board of Directors recommended 25% cash dividend for
2002, on the paid-up Capital of Tk. 640.00 million, for approval by the
Shareholders in this Annual General Meeting.
It may be mentioned here that, total 19 Non-Resident
Shareholders held 380,040 Shares during the year 2002. Total amount of Dividend
of Tk. 95,010,000/- @ 25% was due to them for the year 2001 out of which an
amount of Tk. 14,626,575/- has been deducted as Income Tax, an amont of Tk.
430,687.50 has been paid to a Local Academy as per advice of the Foreign
Shareholder and the balance amount of Tk. 79,952,737.50 equivalent to US$
1,386,864.48 has already been remitted to the Foreign Shareholders during the
year 2002. It may be mentioned here that the Bank has a good-track record in
paying cash dividend.
Table-8
: Ratio of Dividend
Year
|
Rate of Dividend
|
|
1998
|
21%
|
|
1999
|
21%
|
|
2000
|
25%
|
|
2001
|
25%
|
|
2002
|
25%
|
Branch Network
7 (seven) new Branches have been opened during the year
2002 raising the total number of Branches to 128 from 121 of the previous year.
The Bank plans to gradually open more Branches covering important commercial
places both in urban and rural areas. 7 (seven) Administrative Officers /Zones
are functioning all over the country for effective control, close supervision
and proper monitoring of the total operations of the Branches as well as
assisting them in the development of business.
Shariah
Council of the Bank
There is a Shariah Council of the Bank that consists of prominent
Ulema, reputed Bankers, renowned Lawyers and eminent Economists to advise and
guide on the implementation and compliance of Shariah principles in all the
activities of the Bank particularly on the modes of investments. The Council
enjoys a special status in the structure of the bank who meets frequently and
plays a vital role. Total number of meetings of the Shariah Council was during
2002. There is also a sub-Committee of the Shariah Council and they met on 11 occasions
during 2002.
It also conducts Shariah inspection of Branches to ensure that the
Shariah principles are implemented and complied with by the Branches of the
Bank.
Corporate
Communication, Publicity and Public Relations
For the development of a dynamic organization, especially
ideological commercial financial house like Islami Bank Bangladesh Limited,
corporate communication and public relations, planned publicity and
motivational publication are essential. Islami Bank Bangladesh Limited is
always advanced front-runner in managing the perceptions of the society and
educating them on the competitively
advantageous modes of Islami banking. Under its multi-pronged approach, since
its inception, the Bank has been relentlessly working to familiarize the people
with the concepts and operations of Islamic banking. For this purpose,
publicity and public relations occupy an important place in the day-to-day
activities of the Bank. Towards gradual attainment of this objective, a good
number of booklets, brochures, folders and magazines were published.
Additionally, a number of seminars &
and functions were organized to disseminate the concepts of Islamic
economics and Banking. The leading newspapers and magazines of the country have
published editorials, features and in-depth reports on the reports on the
performances of different types of welfare oriented schemes and progress of the
Bank during the course of the year. Besides research-oriented journal 'Islamic
Banking' and quarterly in-house Bangla magazine 'Islami Bank Parikrama', a
half-yearly English news bulletin 'Islam Bank Newsletter' was published this
year.
Achievement
National and international ratings of
IBBL
IBBL’s past performances have been evaluated by
Bangladesh Bank, several credit rating agencies home & abroad and by the
local press.
International Press
“In the midst of a difficult Banking system known to be
plagued by high non-performing loans (NPLs), one could easily conclude that it
would be difficult to find a bank that is different from norm. However, IBBL
provides a refreshing change and is, thus a pleasant surprise. Although it does
not command the market share as the 4 public sector banks, IBBL, which claims
to have little interference in lending from the government, has nonetheless, managed
to find a niche market of its own-says the ‘BANK ATCH’ a New York based
interrelation Credit Rating Agency in its January 30, 1998 issue. “As a market
leader offering banking services based on the Islamic rule of Shariah, IBBL’s
profitability trend has been quite impressive. The Bank’s ability to keep its
return on asset (ROA) well above the industry’s average, reflected its
resilience to possible shocks in the banking system. Concerns over massive NPLs
and under provisioning are common amongst local banks. But this seems well
resolved in IBBL. IBBL’s good performance and solid capital base have indeed
provided refreshing change found within a banking system saddled and held back
by huge NPLs “the above agency continued to comment to comment in the same issue.
National Press
“It is one of a few local banks according to CAMEL
(Capital, Assets, Management, Earnings & Liquidity) rating made by the
Bangladesh Bank. It holds the highest amount of liquidity among all banks and
its ability to keep return on assets at 1.07 percent is well above the banking
sector’s average of 0.33 percent” - The Financial Express, Dhaka commented in its
issue of May 28, 1998.
“The Holiday” in its 29th August, 1997 issue
carried out a report under the heading “Setting a precedence of sound banking”
and commented “While the country’s banking system is burdened with bad debt
portfolios and also suffers from a
liquidity shortage, the Islami Bank Bangladesh Ltd. (IBBL) has created a unique
precedence by improving its reserve and deposit positions substantially, making
handsome profits, and offering attractive
dividends to its share holders and depositors”.
IBBL’s World rating
As per Banker’s Almanac (january 2001 edition) published
by the Reed Business Information, Windsor Court, England, IBBL’s world Bank 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 29 banks as per ratings
made by the above Almanac on the basis of IBBL’s Financial Statements of the
year 2001.
Award and Prizes :
International & National Perspective
IBBL was awarded for several times by international &
national organizations. The Global Finance, a reputed London based quarterly
magazine, awarded IBBL has the best bank of the country for the year 1999 and
2000.
IBBL has got the 2nd
prize of National Export Fare for its pavilion of Service Organisation in 1985.
Slogan
of the year 2003
“Quality
investment for development and Growth.”
Investment
Policy
Investment operation of a Bank is vital importance the
greatest share of total revenue is generated from it, maximum risk is centered
in it and the very existence of a Bank mostly depends on prudent management of
its Investment Port-folio.
As such, for efficient deployment of mobilized resources
in profitable, safe and liquid investments, a sound, well-defined, well-planned
and appropriate Investment Policy framework is necessary prerequisite for
achieving the goal of the Bank.
The special feature of the investment policy of the Bank
is to invest on the basis of profit-loss sharing system in accordance with the
tenets and principles of Islami Shariah Earning of profit is not the only
motive and objective of the Bank’s investment policy rather emphasis is given
in attaining social good and in creating
employment opportunities.
Pursuant to the Investment Policy adopted by the Bank a
7-year Perspective Investment Plan’ has been drawn-up for the year 1995 to 2002
and put into implementation. Recently a further 5-year perspective investment
plan has been drawn up for the year 2003 to 2007 and put into implementation.
The plan aims at diversification of the investment port-folio by size sector
geographical area, economic purpose and securities to brings in phases all
sectors of the economy and all types of economic groups of the society within
the fold of Bank’s investment operations.
Objectives
and Principles
The objectives and principles of investment operations of
the Bank are :
à To invest fund strictly in
accordance with the principles of Islami Shariah.
à To
diversity its investment portfolio by size of investment, by sectors (public
and private) by economic purpose, by securities and by geographical area
including industrial, commercial & agricultural.
à To
ensure mutual benefit both for the Bank and the investment client by
professional appraisal of investment proposals, judicious sanction of
investment close and constant supervision and monitoring thereof.
à To
make investment keeping the socio economic requirement of the country in view.
à To
increase the number of potential investors by making participatory and
productive investment.
à To
finance various development schemes for poverty alleviation, income and
employment generation with a view to
accelerate sustainable soico-economic growth and for upliftment of the society.
à To
invest in the form of goods and commodities rather than give out cash money to
the investment clients.
à To
encourage social upliftment enterprises.
à To
shun even highly profitable investment in fields forbidden under Islamic
Shariah and are harmful for the society.
à The
Bank extends investments under the principles of Bai-Murabaha, Bai-Muazzal,
Hire Purchase under Shirkatul Meelk and Mudaraba. The Bank is making sincere
efforts to go for investment under Mudaraba principle in near future.
Importance
of Assessing of Investment Needs
Assessment of Investment needs is necessary for the
following reasons.
1. To detect actual Investment limit of
Bank.
2. To detect actual Investment against
obsolete /out dated/non trading items.
3. To assess the quality, quantity,
price and marketability of the commodities
4. To ensure proper follow-up
supervision and monitoring of the Investment.
5. To ensure capacity of the client in
handling Investment activities.
6. to over come the situation of
Division of found by the clients
7. To ensure trading instead of lending of money.
8. To ensure payment against delivery of
goods.
9. To ensure actual buying and selling
of goods.
10. To select proper & genuine
Investment client.
11. To ensure viability/profitability of
the project.
12. To ensure compliance of Shariah
Principles.
13. To maintain discipline in the
Investment port-folio of the Branch.
14. To secure the Investment.
15. To allow Investment for appropriate
period.
16. To handle the Investment proposal efficiently.
17. To ensure investment for productive
purpose.
18. To identify the tenure of investment
to be made i.e. for short term /mid term /long term.
19. To know the objective of Investment.
20. To ensure profitability of all
concerned.
21. To ensure welfare of the society.
22. To ensure Business ethics.
23. To minimize the risk of investment.
24. To ensure national interest.
25. To ensure recovery of investment in
time.
26. To comply the Bank’s target regarding
diversification of Investment.
Induction of Investment
Clients
Why of Induction
Potential clients may be advised to open Al-Wadiah
Current Account, if there is no such account. The client should maintain the
current account, satisfactorily for a reasonable period.
1. Preliminary
discussion may have with the prospective client regarding his line of business,
experience & investment needs.
2. The
past performance of the client to be studied and Branch’s track record of
proposed investment.
3. If
the proposal found suitable the client may be asked to submit a formal
application along with necessary papers/documents.
Criteria for selection
Clients of the Bank for following Investment are to be
selected with prudence and good judgement. It should be kept in mind that the
person are important than their properties. They must have good character,
commitment, capability, integrity and means. Their past performance must be
verified first. None should be entertained without verification of his
background, experience in the line of business, credit worthiness, financial
needs, capacity to handle the finance applied for. Favouratism, personal
relationship with a client must not get any consideration for providing Bank’s
Investment. A detailed credit report of the client must be prepared and all
necessary information’s should be collected and verified at the time of
selection of the client. Client’s of distant area/beyond control should not be
entertained.
The following factors/qualities /information may be
considered at the time of selection of investment client.
1.
Brief history of
financial /credit transaction of the client.
2.
Social and financial
behaviour of the client should be verified /assessed.
3.
Ability of the client
of utilization of credit / Investment
fund.
4.
Ability of the client
regarding repayment of Investment.
5.
Equity of the client.
6.
Effect of National
& International Economic problems/crisis.
7.
Analysis of
Investment Risk.
The above mentioned factors may be categorized under
5-C’s.
1. Character
2. Capacity
3. Capital
4. Collateral
5. Condition
1. Character
a) The Human Factor
·
Personal Circumstances
(nationality, age, health condition, etc.)
·
Credit Track Record
·
Technical
Qualifications (including business experience).
·
Capacity to deal with
people (or to manage relationships).
b) Management
Assessment
·
Business Experience
·
Management Succession
·
Credit Displine.
·
“Lifestyle”.
c) Experience
Every account officer
believes that experience in business is an extremely strong test of credit
worthiness.
|
i.
Age of applicant
|
ii.
Years in current business/company
|
|
iii.
Total number of years business experience.
|
d) Succession
Stability of business
leadership in the event of the owner’s incapacity
|
i.
Is spouse involved in the business
|
ii.
Are adult children and/or relatives involved in the business.
|
|
iii.
Is there a succession plan in place.
|
e) Personal Finance
/Credit Discipline
The objective is to
measure the applicant’s discipline in personal and business finance.
|
i.
Credit cared bills payments.
|
ii. Others : Power,
telephone, Water bills (business & personal)
|
|
iii. Existing
relationships with other bank’s lenders.
|
f) Lifestyle
Lifestyle variables are an
attempt to measure integrity which is turn is (potentially) positively
correlated with investment/ loan repayment
|
i. Personal feed back from
employees, customers and suppliers.
|
ii. Personal feedback from
neighbors, community members and Bank personal.
|
|
iii. Membership in local
or National industry association.
|
|
iv. Membership in
community or religious institution.
|
2. Capacity :
a) The Performance
Factor
·
Deployment of
Resources (How much is the Investment need and how will it be used ?)
·
Profitability
Prospects of the project and the Enterprise (How will the project impact on the
enterprise ?)
b) Financial Assessment
·
Profitability.
·
Liquidity.
·
Solvency.
·
Profitability
Because of the
deficiencies in measuring and evaluating net income, the idea is to measure
the trend and not the absolute value.
|
i.
Sales growth
|
ii.
Net income margin pattern
|
|
·
Liquidity
Current ratio is the only
indicator measured as an absolute value, the other two are measured by the
trend.
|
i. Current ratio.
|
ii.
Days receivables outstanding.
|
|
iii.
Days inventory holding.
|
·
Solvency
There is a considerably
high risk in making Investment to highly leveraged organizations
|
i.
Debt-to-equity ratio.
|
ii.
Operation cash flow to Investment amount.
|
|
3. Capital
The Financial Factor
·
Client’s stake in
business.
·
Solvency of the
enterprise.
·
Availability of
reserve resources.
·
Other sources of
income.
4. Collateral :
The Security Factor
·
Ensuring the Critical
Success Factors of the Business.
·
Quality of
Collateral’s.
·
Value of
Collateral’s.
·
Location of
Collateral’s.
·
Ease of Marketability
of Collateral’s.
Necessary for
preparation of credit report
Preparation of credit report of the investment client is necessary and very
much important for the for the following reasons /purposes.
1. To select investment client carefully
and judiciously.
2. To ensure quality investment.
3. To ascertain credit worthiness of the
client.
4. To ensure adequate securities both
primary and collateral.
5. To ensure clients business
establishment and line of business.
6. To ensure proper valuation of Assets
and liabilities.
7. To ensure prompt disposal of
Investment proposals.
8. To Stoop Malpractices.
9. To handle investment activities
efficiently.
10. To administer accountability.
11. To ascertain Joint responsibility of
Bank Officials and Investment client.
12. To recover Invested amount in time.
13. To maximize profitability of all concerned.
14. To safeguard interest of the Bank and the Client.
15. To avoid classification of Investment.
16. To avoid stuck-up situation of invested fund.
Present Status of
Bank’s Investment Portfolio
1. The Bank should go for investment in
large-scale dairy farming and other milk processing projects and poultry
farming which is not worth mentioning at
present.
2. The quantum of Bank’s investment
against fishing is very negligible. There is scope for investment in :
·
Shrimp culture.
·
Sweet water fishery
including pond fishery.
·
Marine fishing.
3. The Bank’s investment for
construction purpose shall continue to be made within the ceiling prescribed in
the Plan.
4. Presently the Bank’s export
Investment is mostly centered in readymade garments and the Bank is yet to
enter into the area of investment in major traditonal and non-traditional
exportable items like jute & jute goods, frozen foods, hosiery products,
tea, leather and leather products knitwear (Textile), basic chemical
products/pharmaceuticals, electric goods (wires and cables), electronic
goods/components, handicrafts, fruit juice concentration projects (small and
medium scale only), other.
5. Besides the existing items of import,
the Bank should go for investment in import in the following areas :
·
CDSO being imported
by edible refineries.
·
Cotton yarn.
·
Coal and hard coke.
·
Fresh fruits.
·
Spices.
·
Dry fruits
·
Pulses
·
Onions
·
C.I. sheets
·
B.P. sheets
·
Motor vehicles
·
Bi-cycle spares
·
Tyres & tubes
·
Bitumen
·
Other items
6. A. Investment against real estate of the Bank
shall continue to be made within the ceiling prescribed in the plan.
B. The bank’s investment against agriculture, fishery,
forestry, (other than working capital investment) and working capital
investment are not significant compared to other private commercial banks. As
such, the Bank shall make attempt for extension of investment in these sectors.
C. Bulk
investment of all banks (nationalized commercial banks and private commercial
banks) is in the hand of limited number of borrowers, though the position of
Islami Bank is to some extent better, yet efforts need to be made for further
diversification of investment by size of investment accounts and concentration
of investment in the hands of limited few clients is to be avoided.
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