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CHAPTER 1 introduction

1.1 WHAT IS INTERNSHIP?


Internship is a field project for a student of Business Administration of final year that gives the student a chance to apply business theory practically in any organizational environment. The objectives of internship are: 1. Practical fulfillment of MBA program. 2. Application of theoretical knowledge into practice. 3. Gaining work experiences. 4. Having an exposure for searching a good job in future. 5. Knowing/understanding gap between theoretical knowledge and practical situation. Parts of Internship Report: There are two parts of internship report. They are: Part A: Organization Part. Part-B: Project Part.

Prepared By- Md. Alamgir

1.2 Origin of the report


One of the most important factors for industrialization and economic development of a country is the availability of the credit facility. The continuing crisis of accumulation banking remains in loans the has main emerged of as nonmost performing and of the serious default banking

constraint in the path of economic development of Bangladesh as intermediary of a healthy vehicles capital are in harnessing market. But capital for accelerating the growth of the productive sectors in Bangladesh providing their the absence without at think the it loans and I proper appraisal even more go of beyond the credit Security fulfill the

dangerous as the depositors are put into great risk of losing money So, end, the crisis is very the critical by is might to analysis the First to overcome. approval First important gather

technical know-how

regarding

procedure Islami

practiced Bank Limited

Islami bank ltd. By preparing this report. This internship report on Security prepared partial requirement of the internship program as full credit subject of the BBA program of The University. In Bangladesh today financial secto r is one of the most established areas in the macroeconomic sector. Economy aspects private country. For this reason I prepared my internship report on First Security Islami Bank Limited. and of finance is carrier of the country. sector So for must the be economic development, banking

reformed. In the process of forming a good economic system, banks are paling an important role compare to the government banks in the

Prepared By- Md. Alamgir

1.3 Objective of the Study


To fulfill the partial requirement of the internship program as a full credit subject of the BBA program. To know about the sector of SME of FSIBL To get an overall idea about the SME Banking in Bangladesh. To know the operation of SME to develop the entrepreneur. To describe the service of SME Banking of FSIBL To analyze the barriers faced by the banks for SME Financing. To know about the contribution of SME in economic development of country. To know how the entrepreneur benefited from SME. To find out the sectors of SME in which such types of problems exist. To identify whether all process of SME are perfectly and effectively practiced or not.

To suggest a supportive role in the progress of SME banking system in financial sector.

Prepared By- Md. Alamgir

1.4 Scope of the Study


This study covered the overall SME banking system of First Security Islami Bank Limited and also includes the relationship of the credit management with the bank as well as principle covered by the bank as SME banking system.

1.5 Limitation of the Study


It is an uphill task to study the on the management so the report was completed under certain constrains which were: Difficulty in gaining accesses to financial sector. Non-availability of the most recent statistical data about the SME. As I am student it is not possible for me to collect all the necessary in formation from entrepreneur. I had to complete this report within a very short span of time that wa s not sufficient for investigation. Lake of Experience about SME financing.

Prepared By- Md. Alamgir

1.6 Methodology of the study


This report is based mainly on observations that I experienced during the internship period. Data required for this report were collected from the annual report of First Security Islami Bank. Apart form these; helpful information was collected from online resources.

1.7 Source of Data


The data sources used to prepare this report delineated as follows:

1. Primary Source:
a) Practical deskwork. b) Face to face conversation with the officers and executives. c) Face to face conversation with the clients. 2. Secondary Source: a) Annual report of First Security Islami Bank Limited. b) Prospectus of First Security Islami Bank Limited. c) Banks financial statement. d) Banks quarterly statement. e) Banks daily affairs. f) Broachers etc.

Prepared By- Md. Alamgir

CHAPTER 2 ABOUT
THE

FIRST SECURITY ISLAMI BANK LIMITED

2.1 Definition of Bank:


We can define A bank as an institution, usually incorporated with power to issue its promissory notes intended to circulate as money (known as bank notes); or to receive the money of others on general deposit, to form a joint fund that shall be used by the institution, for its own benefit, for one or more of the purposes of making temporary loans and discounts; of dealing in notes, foreign and domestic bills of exchange, coin, bullion, credits, and the remission of money; or with both these powers, and with the privileges, in addition to these basic powers, of receiving special deposits and making collections for the holders of negotiable paper, if the institution sees fit to engage in such business." Generally there are two main way of operating commercial bank. They are conventional banking and Islamic banking system.

2.2 Islamic Banking:


The Islamic banking has been defined in a number of ways. The definition that is given approved by Organization of Islamic Conference is most popular. According to The OIC, The Islamic bank is a financial institution whose status, rules, and procedures expressly state its commitment to the principle of Islamic Shariah and to the banning of receipt and payment of interest on any of its operations. It appears from the definition that Islamic banking is a system of financial intermediation that avoids receipt and payment of interest in its transactions and conducts its operation in a way that it helps

Prepared By- Md. Alamgir

achieve the objectives of an Islamic economy. And also it is operated on the basis of Mudaraba theory. According to Mudaraba theory, the relationship between bank and clients is not debtors-creditors, it is a relationship of trusteeship. The difference between Conventional and Islamic Banking are shown

in terms of a box diagram as shown below:

Conventional Banks 1 The functions and operating modes of conventional banks are based on manmade principles. The investor is assured of a predetermined rate of interest. It aims at maximizing profit without any restriction. It does not deal with Zakat. 1

Islamic Banks The functions and operating modes of Islamic banks are based on the principles of Islamic Shariah. In contrast, it promotes risk sharing between provider of capital and the user of funds. It also aims at maximizing profit but subject to Shariah restrictions. In the modern Islamic banking systems, it has become one of the serviceoriented functions of the Islamic banks to collect an distribute Zakat. Participation in partnership business is the fundamental function of the Islamic banks. The Islamic banks have no provision to charge any extra money from the defaulters. For the Islamic banks, it is comparatively difficult to borrow money from the money market. The Islamic banks, on the 7

3 4

3 4

Leading money and getting it back with interest is the fundamental function of the conventional banks. It can charge additional money in case of defaulters. For interest-based commercial banks, borrowing from the money market is relatively easier. The conventional banks give

Prepared By- Md. Alamgir

greater emphasis on creditworthiness of the clients. 9 1 0 1 1 A conventional bank has to guarantee its deposits. The status of a conventional bank, in relation to its clients, is that of creditor and debtors. The conventional Banking system has the recycling system. They charge interest on interest. 9 1 0 1 1

other hand, give greater emphasis on the viability of the projects. Strictly speaking and Islamic bank cannot do it. The status of Islamic bank in relation to its clients is that of partners, investors and trader. In Islami Banking system, there is no recycling of interest. There is markup/rebate system.

2.3 History of the First Security Islami Bank


First Security Islami Bank Limited (FSIBL) was incorporated in Bangladesh on 29 August 1999 as a banking company under Companies Act 1994 to carry on banking business. It obtained permission from Bangladesh Bank on 22 September 1999 to commence its business. The Bank went for public issue on 20 July 2008 and its shares are listed with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE).The Bank carries banking activities through its Ninety two (92) branches in the country. The Bank converted its banking operation into Islamic Banking based on Islamic Shariah from traditional banking operation on 01 January 2009 after obtaining approval from High Court, Finance Ministry and Bangladesh Bank. The commercial banking activities of the bank encompass a wide range of services including mobilizing deposits, providing investment facilities, discounting bills, conducting money transfer and foreign exchange transactions, and performing other related services such as safe keeping, collections and issuing guarantees, acceptances and letter of

Prepared By- Md. Alamgir

credit. The Bank and its first branch at the busiest commercial hub of the country at 23, Dilkusha Commercial Area, Dhaka. Branch Networks and Inter Division and Branch Coordination All the 92 branches are computerized under distributed server environment. Another few branches are planning to open within December 2010. FSIBL has already started their on-line, SMS and ATM banking facilities for their clients. The Banking license for the Bank was issued by Bangladesh Bank on August 29, 1999 was opened on October 25, 1999 by Mr. M. Saifur Rahman, Ex-Honorable Finance Minister, Government of the Peoples Republic of Bangladesh as the chief guest. The Authorized Cap ital of

the Bank is Tk. 4,600,000,000 Its paid up Capital and reserve reached
at present Tk. 2,300,000,000 The sponsors of the Bank are the leading business personalities and eminent industrialists of the country having stakes in various segments of the national economy.

2.4 Vision
To be the premier financial institution in the country providing high quality products and services backed by latest technology and a team of highly motivated personnel to deliver excellence in banking.

2.5 Mission
1. 2. 3. 4. 5. 6. 7. 8. To contribute the socio- economical development of the country. Fast and accurate customer service. Balanced growth strategy. High standard business ethics. Steady return on shareholders equity. Innovative banking at a competitive price. Attract and retain quality human resource. Firm commitment to the society and the growth of national economy.

Prepared By- Md. Alamgir

2.6 First Security Islami Bank Now at Present


Having started its operations as a commercial bank in 1999, First Security Islami Bank is today a synonym of quality banking products. It has a diverse array of carefully tailored products and services to cater the needs of all customer segments. They have structured their operational strategies to address the special and often complex needs of the customers. In the growth graph, it has generated profit of Tk. 326,837,749 in the year 2012. The curve keeps soaring upward with dawn of everyday. Today First Security Islami Bank is one of the leading and one of the most successful banking institutions in Bangladesh with a total asset base of Tk. 47,978,552,952 as on 31.12.2009. First Security Islami Bank has now emerged as a major player in the financial sector. Listed in both the Dhaka and Chittagong stock exchange since late 2008 with an IPO that raised the paid-up capital of the bank to Tk. 230,000,000 the current price levels of its shares and turnover in trading is evidence of its high rating among investors. Banks are the pillars of the financial system. Specially, in Bangladesh, the health of the banking system is very vital because the capital market is little developed here. As the banks are still the major sources of credit and exercise great influence on the financial system, it is extremely important that the countrys banking system should be in good health in the interest of investment activities, meeting the needs of all kinds of finance and related matters. Over the years, First Security Islami Bank Ltd. has built itself as one of the pillars of Bangladeshs financial sector and is playing a pivotal role in extending the role of the private sector of the economy. The bank has a strong

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branch network nationwide with 61 branches to effectively address the needs of its cross- segment customer base.

Corporate Information Name of the Company First Security Islami Bank Limited
A scheduled commercial bank incorporated Legal Form on august 29,1999 as a public limited company under the companies act 1994 and bank companies act 1991. Commencement of Business Registered Office Website SWIFT Chairman Managing Director No. of Branches No. of SME Centers No. of Employees Stock Summary: Authorized Capital Paid up Capital Face Value per Share 25th October 1999 10, Dilkusha Commercial Area Dhaka-1000.

www.fsiblbd.com
FSEBBDDH

Mr. Saiful Alam (Masud) Mr. A. A. M. Zakaria


92 05 929

Tk. 4,600,000,000 Tk. 2,300,000,000


Tk. 100

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2.7 Board of Directors


Alhaj Md. Saiful Alam Chairman Alhaj Akkas Uddin Mollah

Chairman

Alhaj Late Hamidul Haq Director Alhaj Md Farooq

Alhaj Syed Nurul Arefeen

Vice Chairman

Vice Chairman

Farzana Parveen

Rahima Khatun

MS. Shamshad Jahan

Director

Director

Director

Atiqun Nesa

Md. Sharif Hossain

Alhaj A.K.M Ali Johar

Director

Director

Director

Alhaj Md. Wahidul Alam Seth

Shahidul Islam

Director

Director

Mohammed Oheidul Alam Director

Dr. Muhammad Loqman Director

Mr. Muhammad Ali Managing Director Managing Director

A.A.M Zakaria

2.8 Division of First Security Islami Bank


All policy formulation and subsequent executions are done in the Head Office. It comprises nine major divisions. They are described below: 1. Credit & Administration Division 2. Treasury and International Division 3. Internal Control and Compliance Division 4. Human Resources & Logistics Division 5. Marketing Division 6. Merchant Banking Division 7. Share Division &Information Technology Division

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2.9 Shariah Council


Shariah Council of the Bank is playing a vital role in guiding and supervising the implementation and compliance of Islamic Shariah principles in all activities of the Bank since its very inception. The Council, which enjoys a high status in the structure of the Bank, consists of prominent Ulema, reputed banker, renowned lawyer and eminent economist. Members of the Shariah Council meet frequently and deliberate on different issues confronting the Bank on Shariah matters. They also conduct Shariah inspection of branches regularly so as to ensure that the Shariah principles are implemented meticulously by the branches of the Bank. Chairman Vice Chairman and complied with M Mufti Sayeed Ahmed
M

2.10 Shariah Board

Mr.Sheika ( Mowlana)Mohammad Qutubuddin

Member Secretary
Moulana M. Shamaun Ali.

Member
Moulana Abdus Shaheed Naseem

Member
Mohammad Azharul Islam

Member
Md. Abdul Maleq

Member Prof. Md. Sharif Hussain P

Member
Alhaj Md. Saiful Alam

Chairman, First Security Islami Bank Limited

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2.11 Organizational structure of First Security Islami Bank Ltd:


Managing Director Deputy Managing Director Senior Executive Vice President Executive Vice President Senior Vice President Vice President First Vice President Senior Assistant Vice President Assistant Vice President First Assistant Vice President Senior Principal Officer Principal Officer Senior Officer Officer Probationary Officer Junior Officer Assistant Officer Trainee Assistant Officer

First Security Islami Bank Ltd is one of the fastest growing banks among all the private Commercial Banks in Bangladesh. The institution Prepared By- Md. Alamgir 14

started its function back on 25th October, 1999. As a branch of First Security Islami Bank Ltd Jubilee Road Br. started its function on 9th August, 2001.

2.12 Management Hierarchy of FSIBL,


VP

AVP

Principal Officer

Senior Officer

Officer

Junior Officer

Assistant Officer

Trainee Assistant Officer

2.13 Different Departments involved in FSIBL,


There are various departments engaged in providing services to the clients in the FSIBL, Jubilee Road Branch. These are: 1) Customer Care Department. 2) Cash Department. 3) Accounts Department. 4) Investment Department. 5) Foreign Department. 6) IT Department 2.14 Statements prepared by Accounts section: 1. Sector wise balance position 2. Maturity balance sheet 3. Foreign currency statement 4. Branch Trail Balance 5. Liquidity position Prepared By- Md. Alamgir 15

6. Income expenses statement.

2.15 Products and Services of FIRST SECURTY ISLAMI BANK LTD.

1. General Products
a. Mudaraba Saving Account (MSD) b. Al-Wadiah Current Account c. Mudaraba Short Term Deposit (MSTD)

2. Deposit Scheme
a. Mudaraba Term Deposit Scheme (MTD) b. Mudaraba Double Benefit Scheme (MDBS) c. Mudaraba Monthly Income Scheme (MMIS) d. Mudaraba Monthly Saving Scheme (MMSS) 3. Investment Scheme a. b. c. d. e. Bai-Muajjal. Murabaha Wes Bills. Hire Purchase. Quard against TDR. Bills Purchase & Discount : a) In-Land. b) Foreign

f. Loan against trust receipt g. Consumer credit schemes. h. Staff loan.

4. Services a. b. c. d. Western Union Money Transfer First Solution & other money transfer Locker Services
Remittance- T.T., D.D., P.O, etc

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CHAPTER 3 CONCEPT
OF

SME BANKING

3.1 Definition:
According to the latest circular of BANGLADESH BANK (Date: 26/05/2008), the definition of small and medium enterprise sector is given below: Small Enterprise Small enterprise refer to those enterprise which are not any public limited companies and which fulfill the following criteria Service concern Having an investment of TK. 50,000 to TK. 50,00,000 excluding land and building or employing up to 25 worker. Business concern Having an investment of TK. 50,000 to TK. 50,00,000 excluding land and building or employing up to 25 worker. Manufacturing concern - Having an investment of TK. 50,000 to TK. 1,50,00,000 excluding land and building or employing up to 50 worker.

Medium Enterprise Medium enterprise refer to those enterprise which are not any public limited companies and which fulfill the following criteria Service concern Having an investment of TK. 50,00,000 to TK.10,00,00,000 excluding land and building or employing up to 50 worker.

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Business concern Having an investment of TK. 50,00,000 to TK. 10,00,00,000 excluding land and building or employing up to 50 worker. Manufacturing concern - Having an investment of TK.1, 50,00,000 to TK. 2,00,00,000 excluding land and building or employing up to 150 worker.

3.2 Overview of the SMEs in the economy in our country:


There is a great interest in small and medium enterprise (SME) as a major plank of poverty reduction in Bangladesh. The government has formulated comprehensive industrial policy 2005 by putting special emphasis for developing SMEs as a thrust sector for balanced and sustainable industrial development in the country to help deal with the challenges of free market economy and globalization. Some data with a national scope that are pertinent characterizing SMEs in Bangladesh as of 2001-2003 are presented in Table -1. The highlighted of this table is the following: There are some 78,440 private sector establishment of various size in Bangladesh with some 3.5 million workers employed with them. The urban Bangladesh accounts for some 60% of unit and 76% of employment in the private sector enterprises. Rural Bangladesh account for the rest. 93% of all unit in Bangladesh belong in the SME category, i.c. have between 20 and 99 employees. However, SMEs account for only 44% of the total employment of the enterprise sector.

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Private limited company by liability account for strictly a very small proportion of the total number of SMEs in Bangladesh. Table-1: Number of unit and level of employment in small and medium enterprise, 2001-03 Description No of unit % of total no of units Employment Small 39.9 50.9 740.4 Urbam Rural Total

Medium Large Small Medium Large Small Medium Large 3.17 4.036 29.0 1.29 .88 68.96 4.46 5.01 4.o 211.5 6.0 5.1 38.1 516.8 48.9 14.8 1.6 85.85 1.11 87.9 5.9 6.4

1257. 297.4 8.5 55.6

1712.6 % of total no of 21.14 Employment

234.66 1947.3 2.4 6.7 35.9

3.3 Contribution of SMEs in the economy:


In view of present economic development effort in Bangladesh the SME sector play in important role. These are reflected in the following performance/ activity of this sector. During the Fourth Five year plan, a total of 0.35 million jobs were created against the target of 0.4 million. Contribution of SME sector too GDP remained above 4.5% During the period from 2000- 2001 to 2004- 2005 despite decline in the amount of advance by the banking sector to this sector. SME sector employs 255 of total labor force. As a result, this sector is the present available sector for creation jobs. SME sector help alleviate poverty, increase income level of rural people and promote agro- industrial linkage in Bangladesh.

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SME sector require lower energy supply, lower infrastructure facility and this sector impose less environmental risk. This contribution toward better utilization of local resources and skills that might otherwise remain unutilized. Small industries being labor oriented are capable of generating more employment. There are necessary to maintain and retail traditional skill and handcrafts. There are the only medium for diversification of rural economy and for peaceful and concurrent socio- economic development of all classes of people. From the above discussion, We can say that SMEs can play an important role in our economy and country.

3.4 Loan document needed for SME financing by Bank:


Criteria for loan selection are similar among financial institutions. Most frequently requested document by financial institution as a part of the loan application process include: Personal guarantee Business plan Appraisal of assed to be finance Purchases agreement

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Cash flow projection Personal financial statement Formal application for financing Business financial statement Tin certificate Citizenship certificate Bank solvency certificate Vat certificate Export license

3.5 About the sample Banks:


Dhaka Bank Ltd Prime Bank Ltd Dutch Bangla Bank Ltd Eastern Bank Ltd First security Islami Bank Ltd Mercantile Bank Ltd BRACK Bank Ltd

3.6 Criterion for Sample Selection :

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The banks for comparative analysis have been chosen in the basis of the following criterion: 3.6.1 Loan size: 1. Prime Bank Ltd Taka 1 Lac to Taka 75.00 Lacs 2. Dhaka Bank Ltd - Taka 0.50 Lac to Taka 50.00 Lacs 3. Eastern Bank Ltd- Taka 1 Lac to Taka 300.00 Lacs 4. Mercantile Bank Ltd- Taka 0.50 Lac to Taka 2.00 Lacs 5. Dutch-Bangla Bank Ltd- Taka 3 Lac to Taka 50.00 Lacs 6. BRAC Bank Ltd- Taka 3 Lacs to Taka 30.00 Lacs 7. First security Islami Bank Ltd- Taka 3 Lacs to 50 Lacs Among the banks EBL offers the highest loan amount to the customers where as the BRAC bank offers the lowest loan to its customers. 3.6.2 Rate of interest: 1. Prime Bank Ltd 13% to 15% p.a. 2. Dhaka Bank Ltd - 12% to 13% p.a. 3. Eastern Bank Ltd- 14% to 15% p.a. 4. Mercantile Bank Ltd- 15% p.a. 5. Dutch-Bangla Bank Ltd- 13% to 15% p.a. 6. BRAC Bank Ltd- 18% to 24% p.a.18 7. First security Islami Bank Ltd- 15% p.a. In terms of interest rate the Dhaka Bank Ltd offers the lowest rate of interest to its customers. The highest rate is charged by BRAC Bank Ltd. The Mercantile Bank Ltd. have the only bank that offers fixed rate for any loan customers. 3.6.3 Loan processing fees 1. Prime Bank Ltd .50 % of the loan amount.

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2. Dhaka Bank Ltd - .00 % of the loan amount. 3. Eastern Bank Ltd- not available 4. Mercantile Bank Ltd- not available 5. Dutch-Bangla Bank Ltd- not available 6. BRAC Bank Ltd- .50 % of the loan amount 7. First security Islami Bank Ltd- not available All the banks do not provide data about loan processing fees to their customers. The prime bank and BRAC bank limited only charges .50% as loan processing fess 3.6.4 Period of loan 1. Prime Bank Ltd 1 to 5 years. 2. Dhaka Bank Ltd 1 to 3 years. 3. Eastern Bank Ltd- up to 1 year. 4. Mercantile Bank Ltd- up to 2 years. 5. Dutch-Bangla Bank Ltd- 1.5 to 5 years. 6. BRAC Bank Ltd- 1 to 3 years. 7. First security Islami Bank Ltd- 1 to 5 years. Among the banks the highest loan maturity date is offered by DBBL and Mercantile Bank Limited offers the lowest maturity period 3.6.5 Mode of Finance 1. Prime Bank Ltd Term loan and working capital loan 2. Dhaka Bank Ltd Term loan and working capital loan 3. Eastern Bank Ltd- Only working capital loan 4. Mercantile Bank Ltd- Only term loan 5. Dutch-Bangla Bank Ltd- Only term loan 6. BRAC Bank Ltd- Only term loan 7. First security Islami Bank Ltd-Only term loan

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All the Banks providing SME financing facilities do not provide longterm loan to its customers. Among the banks Prime and Dhaka Bank limited both provides term loan and working capital loan to their customers. Other bank either provides term loan or working loan to its customers capital.

3.7 Portfolio Size of different banks in SME Sector.


Serial No 1 2 3 4 5 6 7 Name of the Bank BRAC Bank Ltd. Eastern Bank Ltd. Prime Bank Ltd. Dutch-Bangla Bank Ltd. Mercantile Bank Ltd. Dhaka Bank Ltd. First security Islami Bank Ltd Total (Tk in crore) Portfolio Size 950.00 300.00 108.44 16.38 6.63 5.72 11,31 1,398.48

(Source: Annual Repots of Prime Bank Ltd., Dhaka Bank Ltd., Eastern Bank Ltd., Mercantile Bank Ltd., Dutch-Bangla Bank Ltd. First security Islami Bank Ltd and BRAC Bank Ltd. 2007) From the table we can see that the BRAC bank has the highest investment in the SME sector followed by Eastern Bank Ltd. in second position. While the Prime Bank Ltd., Dutch-Bangla Bank Ltd., Mercantile Bank Ltd. and Dhaka Bank Ltd. are third, forth, fifth and sixth respectively.

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2.1 1.2 0.4 7.8 0.5 21.6 Brac bank Eastern Bank Markentail Bank Prime Bank 66.4 Dhaka Bank Dutch Bangla Bank FSIBL

Graph 1: Portfolio Size of Six different banks in SME Sector :

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3.8 Problems for financing SMEs:


SME sector faces a number of problems (Ahmed, 2000) to facilitate institutional credit. These problems were looked into from the perspective of both borrower and lenders. Problems from borrowers perspective: Access to loan Collateral Complexity increases cost of loan Extremely short grace period Absence of comprehensive guidelines Longer loan processing time and associate cost of uncertainty Lack of basic infrastructure, inputs, managerial efficiency and inadequate sanction Problems from lenders perspective: Lack of information on loan application requirement among the SME loan seekers Absences of an appropriate and clear-cut legal framework for enforcing quick recovery In addition, the following problems are identified in the SME sector: Prepared By- Md. Alamgir 26

a. Inadequate allocation of fund for public sector. b. Lack of co-ordination among lending agencies. c. Shortage of long-term credit. d. Unstable share market. e. Lack of technological information. f. Lack of uniform delivery model and training. g. Absences of utilization of BSCIC services of NCBs for utilization of surplus fund. h. Lack of technology assessment, innovation and adaptation of technology. i. Lack of marketing effort and exploring new markets. j. Competitive product market because of market economy.

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CHAPTER 4 SECTOR
OF

SME FINANCE

4.1 Bonik SME


Now our SME clients are being involved in foreign trade, their network has been expanded throughout the world. To facilitate the foreign trade transactions of the SME clients, FSIBL is offering a product named Bonik SME.

Purpose
To settle foreign trade payment & import document retirement line (mainly import financing, e.g., L/C and LTR facility).

Key Features

Loan Amount: Min. BDT 5.00 lac to Max. BDT 50.00 lac. Tenure: For each L/C highest 04 months and for each LTR highest 06 months. L/C Margin and Commission: As per negotiation. Fast and quality service. No hidden charge.

Eligibility

Having business experience for at least 2 years in the same line. Age Limit: 20 years to 60 years.

Required Documents

Last twelve months sales statement. Last twelve months bank statement. Valid Trade License of last two years. National Voter ID/ Passport of the borrower.

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4.2 Chalantika SME


To operate your business with extra ease, term loan is not always the only solution. Keeping this capital requirement for your business, FSIBL is offering a package of working capital solution [50% term loan & 50% revolving credit (cash credit) facility] to run the business smoothly.

Purpose
To meet up working capital requirement of the business

Key Features

Loan Amount: BDT 5.00 lac to BDT 50.00 lac. Tenure: For revolving loan- Maximum 01 year (Renewable). For Term Loan- Maximum 36 months. Interest Rate: Competitive interest rate. Fast and quality service. No hidden charge. Registered Mortgage of Property is required.

Eligibility

Having business at least 2 years in the same line. Age Limit of the Borrower : 20 years to 60 years.

Required Documents

Last twelve months sales statement. Last twelve months bank statement. Valid Trade License of last two years. National Voter ID/ Passport of the borrower. Photographs of the borrower and the guarantors. Utility bills of business.

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4.3 Green SME


To save our beloved earth from the disaster of Green House Effect, FSIBL is offering ECO friendly product Green SME. Under this product, you can get finance for ETP plants in different sectors, Eco friendly vehicles, Eco friendly fields (reduce CO2 emission), Bio Fertilizer, Bio gas plants, Solar plants and Eco friendly any other business. Mode of finance shall be Term Loan mainly.

Purpose

To facilitate establishment of eco friendly projects.

Key Features

Loan Amount: Max. 300 lac. Tenure: Max. 60 months. Interest Rate: Competitive interest rate. Fast and quality service. No hidden charge.

Eligibility

Having business for at least 2 years in the same line. Age Limit: 20 years to 60 years.

Required Documents

Last twelve months sales statement. Last twelve months bank statement. Valid Trade License of last two years. National Voter ID/ Passport of the borrower. Photographs of the borrower and the guarantors. Utility bills of the concerned business.

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4.4 Jantrik SME


When any SME client wants to purchase any machine or vehicle for business, FSIBL is there with the offer of Jantrik SME through which the client can get a lease finance facility.

Purpose

To procure machinery or vehicle for SME business purpose.

Key Features

Loan Amount: BDT 5.00 lac to BDT 50.00 lac. Tenure: Max. 60 months. Interest Rate: Competitive interest rate. Fast and quality service. No hidden charge.

Eligibility

Having business for at least 2 years in the same line. Age Limit: 20 years to 60 years.

Required Documents

Last twelve months sales statement. Last twelve months bank statement. Valid Trade License of last two years. National Voter ID/ Passport of the borrower. Photographs of the borrower and the guarantors. Utility bills of the concerned business.

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4.5 NGO Shohojogi SME


From the very beginning, one of the goals of First Security islamic Bank Ltd. is to provide services to the under privileged people of remote areas. Keeping that idea in mind, the First Security islamic Bank Ltd. has come forward with a product for SME customers named NGO Shohojogi SME. NGO Shohojogi SME ensures wholesale financing through the reputed NGOs in the country whose past records are remarkable, repayment behaviors are satisfactory, growth rates are significant and above all loan monitoring & recoveries are above 95%.

Purpose

To provide loan facility to the small enterprise through wholesale lending to the NGOs.

Key Features

Loan Amount: Max. limit BDT 500.00 lac Tenure: Max. 48 months. Interest Rate: Competitive interest rate. Fast and quality service. No hidden charge. Monthly installment basis.

Eligibility

Any type of NGO having certificate from Micro Credit Regulatory Authority to operate business in Bangladesh. Having business at least for 5 years in the same line. Age Limit: 20 years to 60 years.

Required Documents
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Last twelve months sales statement. Last twelve months bank statement. Valid Trade License of last two years. Personal guarantee of all the directors.

4.6 Shachchondo SME


Who does not want Shachchondo in life? For the financial ease in your business, FSIBL is offering Shachchondo SME product through which you can enjoy both overdraft and term loan facilities.

Purpose
To meet up working capital requirement of the business.

Key Features

Loan Amount: BDT 15.00 lac to BDT 50.00 lac. Tenure: For 1st time loan- 12 months to 30 months. For Repeat Loan- 36 moths to 48 months. Interest Rate: Competitive interest rate. Fast and quality service. No hidden charge. A FDR shall be taken covering minimum 25% of the total ticket size. The SOD facility shall be allowed upto 90% of the FDR amount.

Guarantor shop.

must

be

renowned

business

person

and

have

permanent residence in the commanding area/ possession of the

Business premise must be owned/ possession held by the borrower.

Eligibility

Having business for at least 5 years in the same line.

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33

Age Limit: 30 years to 55 years.

Required Documents

Last twelve months sales statement. Last twelve months bank statement. Valid Trade License of last two years. National Voter ID/ Passport of the borrower. Photographs of the borrower and the guarantors. Utility bills of the concerned business.

4.7 Sommriddhi SME


Can you imagine FSIBL is offering you four times loan facility against your encephala securities like FDR !!!!! To avoid encashment of your long held savings - FSIBL is with you with this amazing product Sommriddhi SME. Suppose, you have Tk. 5 lac deposit as FDR with our bank and now you want some capital in your business. But you intend to avoid encasement of your long held savings. If so, do not think anything else, just grab this offer.

Purpose

Any justifiable business purpose.

Key Features

Loan Amount: Max. limit 50.00 lac. Tenure: Max. 48 months. Interest Rate: Competitive interest rate. Fast and quality service. No hidden charge. Lien of FDR of 25% of the total loan amount.

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Eligibility

Having business for at least 2 years in the same line. Age Limit: 20 years to 60 years.

Required Documents

Last twelve months sales statement. Last twelve months bank statement. Valid Trade License of last two years. National Voter ID/ Passport of the borrower. Photographs of the borrower and the guarantors. Utility bills of the concerned business.

4.8 Swabolombi SME


As an entrepreneur, definitely you need working capital to run your business smoothly. To get this working capital generally you need to keep some collateral security like land as mortgage to the Bank. But you do not have any landed property or any cash security of your own. So ? Would it be the end of your dream ? FSIBL will never let you stop because your business is our responsibility. First Security Islamic Bank Ltd. has Swabolombi SME Collateral free Term Loan in its basket. Just come with proper documents & get it.

Purpose

Any justifiable business purpose.

Key Features
Prepared By- Md. Alamgir 35

Loan Amount: BDT 5.00 lac to BDT 25.00 lac. Tenure: For Trading & Service Industry 30 months. For Manufacturing industry 36 months. Interest Rate: Competitive interest rate. Fast and quality service. No hidden charge. Up to BDT 25.00 lac is collateral Free.

Eligibility

Having business for at least 2 years in the same line. Age Limit: 20 years to 60 years.

Required Documents

Last twelve months sales statement. Last twelve months bank statement. Valid Trade License of last two years. National Voter ID/ Passport of the borrower. Photographs of the borrower and the guarantors. Utility bills of the concerned business.

CHAPTER 5 PERFORMANCE
EVALUATION OF

FSIBL

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36

5.1 Comparative analysis of the total amount of deposit Over the years 2005, 2006, 2007,2008,2009.

Deposit
Year 2005 2006 2007 2008 2009 In Taka (000) 460000 1016267 1243475 1425642 1675246

Trend of Total Deposits Over the last 5 Years

2000000 1500000 1000000 500000 0

2005

2006

2007

2008

2009

5.2 Total Capital (taka in million)

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37

Year 2006 2007 2008 2009 2010 2011

Total Capital 1147.28 1347.91 2862.19 3379.03 4582.21 5622.11

Total Capital 4,582.21 million


5000.00 4000.00 3000.00 2.000.00 1.0000.00 0.00 2006 2007 2008 2009 2010

35.60%

2011

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5.3 Remittance (taka in million)


Year 2006 2007 2008 2009 2010 2011 Remittance 48.44 330 585.84 558.75 843.47 942.57

Remittance Tk. 843.47 million


900 800 700 600 500 400 300 200 100 0

60% 2007

558.75 558.844

843.47

330

48.44

2006

2007

2008

2009

2010

2011

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39

5.4 Foreign remittance


Foreign remittance of the bank stood at taka 843.47 million as of December 31 2010 as against TK. 558.75 million in 2009. besides the bank has taken initiatives to make remittance arrangements with some leading exchange houses at abroad.

5.5 Paid up capital (taka in million)


Year 2006 2007 2008 2009 2010 2011 Total capital 900.00 1000.00 2300.00 2300.00 3036.00 4000.00

Paid up Capital Tk. 3,036 million


3000 2500 2000 1500 1000 500 0.00 2006 2007 2008 2009 2010 2011

32%

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40

5.6 LOANS & ADVANCE


Loan and advance is the main source of banks income. Commercial banks earn 80% of its profit from loan and advances. The loan and advance of First security islami bank is shown below:

Provide lone in different sector Agriculture & Fisheries Large & medium Enterprise Working capital Export credit Commercial credit Small & Cortege Industry Others Amount 11.58% 18.79% 32.30% .22% 17.93% 1.90% 17.29%

Concentration of lone & advance

Agriculture & Fisheries Large & medium enterprise Working capital

17.29 1.9 17.93 0.22

11.58 18.79

Export credit 32.3

Commercial credit Small & cortege 41 industey

Prepared By- Md. Alamgir

In FY05 after adverse impact of devastation flood and declining trend in interest rate FSIBL, continued to explore its area of credit and was successful to build up a sizable quantum of credit, which stood at tk.6.722.83 million as on 31.12.2008, registered an overall increase by 63.80 percent over 2006. The total credit as on 31st December 2008 was Tk.6, 722.81 million. In compliance to regulatory requirement and to avoid risk of single industry or large loan concentration and to maintain the Banks credit excellence relating management, FSIBLs credit yield exposure, mainly tenor, collateral to proper security Trade small risk proper Finance, &medium

valuation etc. the credit portfolio of FSIBL was further diversified. facilities concentrated on Agriculture and related sector, project entrepreneurs. finance, wholesale and retail

trading, service sector, transport sector ,hospital,

5.7 Credit Risk of First Security Islami Bank Limited:


Principal Risk Components Weight

Business/Industry Risk Financial Risk Management Risk Security Risk Relationship Risk

18% 50% 12% 10% 10%

10 10

18

Business/Industry Risk Financial Risk Management Risk Security Risk

12

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50

Relationship Risk

42

5.8 Balance sheet


FIRST SECURITY ISLAMIC BANK BALANCE SHEET AS AT 31 DECEMBER 2010
particulars Note s 3 2010 4857543203 612173146 4245369057 1036199077 926081336 110117741 2859354561 2331134100 528220461 5212390316 4 47640238696 4483664468 573610332 2169188462 8 6361979779 9 5634495916 7 3354827146 2009 5033532439 432907731 4600624708 731150321 494050218 237100103 1852026032 1610674000 241352032 38725874774 35616450493 3109424281 376477387 1259491999 47978552952

Property & assets

Cash In hand Balance with Bangladesh bank and its agent Balance with other bank & financial institution In Bangladesh Out Bangladesh Investment in shares & securities General investment Bills purchase & discounted Investment Government other Fixed assets including premises, furniture &fixtures Other assets Non banking assets Total assets LIABLITIES & CAPITAL Deposits and other accounts Other liabilities

42423092722 2690049475

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Total liabilities Capital/shareholder equity Total liabilities & shareholder equity

5969978631 3 3920011486 6361979779 9

45113142197 2865410755 47978552952

5.9 FSIBL Highlights First Security Islamic Bank ltd. Highlights For the year ended 31 December 2010 particulars
Paid-up-capital Total capital fund Capital surplus Total assets Total deposit Total investment Total contingent liabilities & commitment Investment deposit ratio Percentage classified investment Profit before tax & provision Amount of classified investment Provision kept against classified investment Provision surplus

31.12.2010
3036000000 4582217485 29266485 63619797799 56344959167 52123909164 8859668340 92.51 2.61 1203600731 1361392000 542894000 13658789

31.12.2009
2300000000 3379035832 267692742 47978552952 42423092722 38725874774 5971673066 91.28 2.14 750837749 830515000 507694000 53834571

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Cost of fund Profit earning assets Non Profit earning assets Return on investment Return on assets Income from investment Earning per share (tk.)

8.90 56040956802 7578840997 9.24 1.89 264208027 2.33

9.28 41371529125 6607023827 2.79 1.56 53510527 1.42

5.10 FSIBL Statement of Fixed Assets First Security Islamic Bank ltd. Statement of Fixed Assets As at 31 December 2010
COST Particulars 2009 Addition during The year Sales / Tran sfer durin g The year Balanc e as on 2010 DEPRECIATION Balanc e as on 2010 Jan. Charge during the year Adjustm ent Sales/ transfer 2010 Dec. Written down 2010 Dec.

Building Furniture & fixture Office equipment Vehicles Books Total 2010

66227032 24009004 7 17841003 0 37845372 78837 52265131 8

6395394 3 1080413 86 8088991 6 6631850 3442 2595205 37

13018 0975 34813 1433 25929 9946 44477 222 82279 78217 1855

37699 0 66587 335 65294 951 13843 196 71459 14617 3931

1646781 2323340 4 2991681 2 7586526 4069 6238759 2

2023 771 8982 0739 9521 1763 2142 9722 7552 8 2085 6152

128157204 258310694 164088183 23047500 6751 573610332

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Total 2009

29737499 8

2354108 20

52265 1318

11300 6566

4154482 6

8377461

3 1461 7393 1

376477387

CHAPTER 6 ANALYSIS
AND

FINDINGS

OF

FSIBL

6.1 Break Even Analysis:


Break-Even Analysis is commonly known as the Cost-Volume-Profit (CVP) analysis. Break-even analysis shows the relationship between cost and revenue with respect to profit. By showing the break-even point, this analysis says the minimum level of output or sales that is required to equate the cost. Moreover, break-even analysis provides a clear idea about the required volume of sales to earn a target profit. Thus break-even analysis helps the decision criteria.
Fixed Cost

BEP =
Sale per unit - Variable Cost per unit

6.2 Sensitivity Analysis:


Sensitivity analysis provides the picture of relative changes in overall profitability due to change in any variable. Usually changes (increase) in material and other variable cost or changes (decrease) in selling price are being taken into consideration for making sensitivity analysis.

6.3 Ratio Analysis:


Ratio analysis is the analysis and interpretation of data given in the financial statement such as: Balance Sheet, Income statement etc. Ratio is the quantitative expression of relationship between two

Prepared By- Md. Alamgir

46

accounting figures. Ratio analysis gives a clear picture about the strength and weakness of a firm, the analysis are: Liquidity Ratio: i. Current Ratio ii. Acid test etc. Activity Ratio: i. Inventory turnover Ratio ii. Debtors/Receivable turnover Ratio iii. Total asset turnover Ratio etc. Solvency Ratio: i. Debt-Equity ratio Ii. Debt to total asset ratio iii. Debt service coverage ratio etc. Profitability Ratio: i. Profit Margin ii. Return on Investment iii. Return on Equity etc. its historical performance and current financial condition. The common ratios that are being used in

Ratio Analysis:
Ratio Analysis
SI.NO. 1 2 Particular Return on Average Assets (ROAA) Return on Average Assets (after tax) 2011 2.98 1.65 2010 1.74 0.38 2009 2.70 1.37 2008 2.39 1.32 2007 2.35 1.34

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47

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Return on Average Equity (after tax) Net Interest Margin(average) Net Interest Margin Efficiency Ratio Return on Investment Profit Margin Return on Risk Weighted Asset Burden coverage Ratio of fees income Interest yield Marginal cost of fund Burden cost of fund Burden yield on advances Profit on lending Yield on advanced Interest expenses to total expenses Salary exp. To total overhead exp Salary exp. To total fees income Expenses coverage Return on paid-up capital Productivity ratio Per employee deposit Staff per branch Capital to deposit

25.12 4.78 4.46 40.46 15.72 21.25 4.22 58.96 10.31 13.77 8.38 9.27 14.73 5.46 14.40 76.52 57.89 98.18 72.66 36.51 32.24 29.21 23.97 8.95

5.54 4.39 3.88 37.96 8.80 13.05 2.69 63.59 10.34 12.77 7.64 8.13 13.58 5.45 13.15 77.87 47.36 74.49 78.87 7.27 29.68 24.30 24.60 8.95

21.39 4.39 4.06 38.64 10.20 18.18 4.35 74.43 11.96 13.87 8.89 9.67 15.34 5.67 14.81 87.44 43.38 58.28 78.44 23.74 32.74 28.81 21.43 9.85

28.25 3.32 2.39 38.40 6.02 21.03 4.03 72.57 11.00 10.68 6.82 7.22 12.09 4.87 12.72 89.97 43.33 59.71 79.97 31.37 31.37 27.35 21.88 6.34

29.46 3.35 2.87 39.74 6.91 19.59 4.68 65.66 9.75 11.58 7.08 7.63 11.90 4.27 13.04 81.29 48.46 73.81 81.29 29.19 29.19 23.38 22.35 6.46

6.4 Asset Quality Ratio (%):


Asset Quality Ration
SI.NO. 1 2 Particulars Performance Ratio % Nonperforming loan to total loan Loan loss reserve to total loan 2011 2.84 2.83 2010 5.06 4.45 2009 5.03 2.50 2008 0.46 1.13 2007 0.04 1.01

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48

3 4 5

Loan loss reserve to NPL NPL reserve to NPL Loan to deposit

99.35 49.52 77.04

88.02 61.74 79.42

49.81 28.21 74.03

242.98 20.00 76.18

2404.24 39.75 64.33

CHAPTER 7 FINDING, RECOMMENDATION


AND

CONCLUSION

OF

FSIBL

7.1 Findings of First Security Islamic Bank Limited:


While working at Jubliee Road Branch, Chittagong, I have attained a newer kind of experience. After collecting and analysis data I have got some problem of the FSIBL. These problems completely from my personal viewpoint, which is given below: Lack of update products is a drawback of the general banking area of the FSIBL . New products such as student loan, medical loan, marriage loan are not available in FSIBL. From the clients view introducer is one of the problems to open an account. It is general problem to all commercial bank. They face troubles with those clients who have not any knowledge in banking transactions and banking rules.

As the deposit is heart of running the banking activities FSIBL Deposit growth not good. Because FSIBL deposit rate is low other than commercial bank such as Dhaka Bank, Prime bank Mercantile Bank, HSBC Bank, Bank Asia etc. FSIBL has not recruited competent people to filling its lower and mid level position they recruit only once a year. This is really tough to recruit high skilled employees.

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49

Lack of proper training arrangement of employees. As a result of technological change such as use of new software There are few staffs who have lacking in computer knowledge are not efficient enough to finish every task immediately so before utilizing new technology proper training should be arrange. Clients generally complain that rate of interest for various type of credit is quite high. investment is repaying loan. one problem is that bank always follows the policy of risk averse in the world today all the organization are moving in approach of risk taking. As a result it is facing some problems and also facing competition from other bank The recovery of capital in small business loan section is threatened. FSIBL has insufficiencies of Authorized Dealer Branch in respect of the total foreign business. Bank has only six branches, which have AD licenses. As a result in total foreign exchange business is very small in respect of total market. Per-shipment inspection certificate should obtain from the exporter of back to back L/C. Because it reduce it fraud and forgery in case of import against master export L/C, but all the time this preshipment inspection certificate are not wanted by the bank FSIBL does not promote itself for catering its services to the public or the business organization. In many cases productivity from loaned inadequate that borrower become incapable in

7.2 Recommendations
The existing credit policy is good enough to run the bank. But as the competition is increasing day by day the bank should take some measures so that they can distinguish it from the others. The credit

Prepared By- Md. Alamgir

50

management of First Security Islami Bank Ltd. can follow the following suggestion to improve their performance and distinguish from others: 1. Giving authority to the Branch officials to take decisions to sanction a loan. Right now, for every loan decision is made by Head office. But to faster the speed of loan sanction the branch should be authorized to take decision. 2. Rebate charge on loan should be increased so that more customers are attracted to make loan. 3. The period of loan should be extended. 4. The bank management can give permission to its branches to design or change lending products on the basis of local demand. 5. The bank should recruit some young and energetic executives to ensure timely recovery of disbursed consumer credit loan. 6. The clients of loan should be facilitated with online Banks and other benefits. 7. FSIBL should upgrade its website regularly and provide details information of loan Scheme. 8. FSIBL Bank may also promote its loan program through different advertising tools i.e. TV adds, News paper adds etc. 9. The Bank management can reduce the interest rate. Because of high interest rate, some good loans turn to bad loans. But if the interest rate decreases than the default loan will also decrease. 10. To risk grade the credit, the bank can follow other models besides the credit risk grading model. Because the credit risk grading model is not hundred percent up to the mark. 11. The bank management should always be concerned about the change in industry so that they can notice the change and take proper actions to adopt the situation. The credit management of Southeast Bank Ltd. can follow the abovementioned suggestion to improve their performance so that they

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51

can be competitive in the market and can gain some competitive advantage.

7.3 Conclusion
Banking has become the inspirable part of social transaction. From the very early age it had taken in our society in the non-institutional form. After the Second World War as a financial product lending had been fully structured and institutionalized in USA and other developed countries. Now banking sector play an important role in modern society and private commercial bank has competitive, diversified and dynamic compared to traditional banking system. In banking sector FSBL is a name of trust, to improve the life style of the people, to develop the business environment. Day by day its area of serving is increased all over the country through setting up new branch at new place. FSBL take a vital part in export and import business of Bangladesh through their regulatory services and best quality services. The economy of any country depends with the import and export position of the country. By observing the banking system in FSBL jubilee Road Branch for one month it is clear to me without bank involvement that kind of work cannot be possible. FSBL is providing opportunity of gaining practical knowledge for the students like internship program. During the period of my internship program I tried my best to understand the concern. However it is also concern that this period of time was not enough to understand everything of the concern. If any one wants to work in banking sector he must have to know about all the department in a bank because one department works related with another department works. I wanted to know about the credit section of the bank because banks main earnings depend with that section. But I cant because of the limited period. Even though I tried my best level to make the informative, this Prepared By- Md. Alamgir 52

report contain many errors, there may be some printing mistakes no doubt for this reason I apologize.

Bibliography:
1. Annual Report of First Security Islami Bank Limited. 2. Prospectus of First Security Islami Bank Limited. 3. Web Site Of First Security Islami Bank Limited: www.fsiblbd.com. 4. Amader Barta- A quarterly news bulletin, First Security Islami Bank Limited. 5. Industry- A Weekly supplement- Special Supplement on CAMELS Rating. 6. Various Web Sites related to Islami Banking Systems. 7. Islamic Financial System-By Md. Nusrat e Aziz- First Edition, 8. Previous Internship Reports. 9. UCPDC-600, 2007 Revision.

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