Investment Schemes for First Security Islami Bank Limited, Saver- Branch

Date of submission: ..

Investment Schemes for First Security Islami Bank Limited, Saver- Branch

Letter of Transmittal

February.. D.Mizanur Rahman Dean Department of Business Administration Faculty of Business & conomics Daffodil !nternational "ni#ersity $ub%ect: $ubmission of !nternship Report on Investment Schemes for First SecurityIslami Bank Limited, Saver- Branch.

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Dear Sir, ! ha#e much pleasure to present the report of the internship pro'ram ( Investment Scheam on First SecurityIslami Bank Limited, Saver- Branch. ! )ould li*e to ta*e this occasion to e+press to you my sincere 'ratitude for the placement to me in an or'anization li*e First $ecurity !slami Ban* ,imited. And for support and encoura'ement you ha#e al)ays so 'enerously e+tended to me in my )or*. ! ha#e tried my best to 'et an orientation to the practical )or* en#ironment and to 'ather all related information- and ha#e placed my hearty effort to prepare the report accordin'ly directed. ! hope that my report )ill meet your e+pectation and ser#e its purpose. Sincerely ours, .. .Md. Abu /aher .0abin1 !D0o:2&343343566 Batch : 36th .Ma%or in Mar*etin'1 7ro'ram: BBA !""roval certificate Letter of !uthori#ation

Date 7rofecor d.mizanur rahman Assitant 7rofessor Department of Business Administration Faculty of Business & conomics Daffodil !nternational "ni#ersity

Su$%ect& Declaration re'ardin' the validity of the Internshi" (e"ort. Dear Sir, /his is my truthful declaration that the Internshi" (e"ort ! ha#e prepared is not a copy of any Internshi" (e"ort pre#iously made by any other student. ! also e+press my honest confirmation in support of the fact that the said Internshi" (e"ort has neither been used before to fulfill any other course related purpose nor it )ill be submitted to any other person or authority in future. ours truly, )*d. !$u Taher )+a$in, !D0o:2&343343566 Batch : 36th .Ma%or in Mar*etin'1 7ro'ram: BBA

-erfect or for.ard /i korte ho$e $o%e na0

!$stract )Summary, First $ecurity Ban* ,imited .F$B,1 is one of the third 'eneration pri#ate ban*s in Ban'ladesh. F$B, commenced its commercial operations 9ctober 3666 )ith authorised capital BD/ 3:22 million and paid up capital BD/ ;22 million. /he Ban* has not yet entered into !79. By the end of ;22&- Ban*<s authorised capital and paid4up capital reached to BD/ =622 million and BD/ 3222 million respecti#ely. !n ;22& paid4up capital 're) by 33.33>.

r k eke add korte ho$e0

/able of ?ontents /opic 7a'e 0o. /itle 7a'e ,etter of /ransmittal

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,etter of Authorization ,etter of Appro#al Ac*no)led'ement 3. !ntroduction of the study 3.3. $tatement of the Research 7roblem 3.;. 9b%ecti#es of the study 3.=. $cope of the $tudy 3.5. ,imitations of the $tudy ;. Methodolo'y of the $tudy =. Discussion of the $tudy =.3. Meanin' of ?ustomer =.;. ?ustomer $er#ices =.=. 9r'an 'ram of the Mirpur43 Branch =.5. ?haracteristics of $er#ices =.:. @arious $er#ices pro#ided by the Mirpur43 Branch =.6. ?lassification of ?ustomer =.&. /he Ban*er ?ustomer Relationship =.&.3. $ome of the conditions and practices =.&.;. Ri'hts of customers =.&.=. Duties and 9bli'ations of a Ban*er =.8. /ermination of Ban*er4?ustomer Relationship 5. Result and Discussion :. Recommendations 6. ?onclusion &. References

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8. Appendi+

List of fi'ures

!ntroduction /his report is prepared for fulfillin' a partial reAuirement of both the BBA and the internship pro'ram. 9n this re'ard ! ha#e been posted in First $ecurity !slami Ban* ,imited .F$!B1-sa#ar branch for =4month duration internship pro'ram from 2342;4;233 to =342=4;233 and ha#e

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been ad#ised by the honorable mana'ement to submit my practical learnin' in )ritten from a different phases. Bein' stimulated by this constructi#e thou'ht of the mana'ement ! am submitted my paper for this phases mainly .Focused on the !n#estment acti#ities of First $ecurity !slami Ban* ,imited .F$!B1 sa#ar - branch. First $ecurity !slami Ban* ,imited .F$!B1 )as stablish in Ban'ladesh on Au'ust ;6 3666 as a ban*in' company under ?ompanies Act 3665.9n $eptember ;;- 3666. F$!B obtained permission from Ban'ladesh Ban* to commence its business. /he Ban* offers a )ide ran'e of ban*in' ser#ices throu'h its := branches in the countryincludin' acceptin' deposits- ma*in' loans- discountin' bills- conductin' money transfer and forei'n e+chan'e transactions- and performin' other related ser#ices such as safe *eepin'collections and issuin' 'uarantees- acceptances and letter of credit. At present- the ban* has 66 branches of )hich ;6 branches are in Dha*a Di#ision- ;: branches are in ?hitta'on' Di#ision- 26 branches are in $ylet Di#ision- 2= branches are in Ra%shahi Di#ision- 25 branches are in Bhulna Di#ision and 2; branches is in Barishal Di#ision. All the 66 branches are computerized under distributed ser#er en#ironment. Another fe) branches are plannin' to open )ithin December ;232. F$!B, has already started their on4line$M$ and A/M ban*in' facilities for their clients. /here )ere :; employees in the initial sta'e of the ban*. At present the number of employees has become appro+imately 8:6. /he ban* )as started )ith :22 core ta*a. 0o) its present capital is more then ;-222 core ta*a. /he tar'eted depository money for sa#ar branch )as ;2 la*h ta*a. But the branch )as able to collect deposit about 38 la*h ta*a in a competiti#e mar*et.

F$!B ha#e set up Cide Area 0et)or* throu'h Radio- Fiber49ptics & other a#ailable communication media systems to pro#ide any branch ban*in' to our customers. ?ustomer of one branch is no) able to deposit and )ithdra) money at any of our branches. All Branches are included in our Cide Area 0et)or*. 0o //DDD or cash carryin' )ill be necessary. First $ecurity !slami Ban* ,td. has officially launched $M$ ban*in' ser#ice from December 3&-;22&. For safe*eepin' of customerEs #aluables li*e important documents and 'oods li*e %e)elries and 'old ornaments- F$!B ,oc*er $er#ice is a#ailable in most of the Branches in urban areas.

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Back'round of the Study /his report has been prepared as a reAuirement of my internship pro'ram. /he report is based upon First $ecurity !slami Ban* ,imited. F$!B, ban*in' di#ision meets the needs of indi#idual customers )ith #arious products and ser#ices. /he F$!B, Ban*in' di#ision constantly faces challen'es and meets them by de#elopin' ne) products and ser#ices to fulfill the specific reAuirements of customers. F$!B, deli#ers stron' performance across the business and inte'rates recent acAuisitions. F$!B, further consolidates its presence in *ey mar*ets throu'h si'nificant in#estment in stren'thenin' distribution- deepenin' product capability and lunchin' inno#ati#e products & ser#ice. !n the past decade there has been a rapid chan'e in the economy in the country for increasin' the number of !slamic commercial ban*. At the same time ban*in' area is becomin' competiti#e as )ell as ser#ices are becomin' easier and faster. Cith the pro'ress of time competition amon' nationalized pri#ate commercial ban*s is increasin' day by day. And ban*s are emphasizin' on more inno#ati#e products and ser#ices to the respecti#e customers. !n order to sur#i#e in the competiti#e field of the ban*in' sector all or'anizations are loo*in' for better ser#ice opportunities to pro#ide their fello) clients. $o it has becomin' essential for e#ery person to ha#e some idea on the ban* and ban*in' procedure. $o F$!B, should ensure competiti#e products in ?onsumer Ban*in' Di#ision and measure the customer satisfaction

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Sco"e of the Study& /he scope of the study )ill be limited to the !n#estment scheme on First $ecurity !slami Ban* ,imited. /his study in fact ta*en )ithin its can#as of F$!B, as a )hole thou'h the internship )as done at F$!B,- the research )ill deal )ith the different deposits scheme and different aspects of ?onsumer ban*in' di#ision as )ell as a competiti#e analysis. /hat is confined to the customers of First $ecurity !slami Ban* ,imited.

7roblems of the study Chile nothin' comes alon' )ithout problem- ! also had faced some problems- )hich )ere pic*ed up belo): !t )as #ery difficult to collect the information from #arious personnel for their %ob constraint. F$!B, is #ery conser#ati#e and strict in pro#idin' confidential data.

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 Respondents )ere busy as )ell as reluctant to 'o throu'h the process of Auestionnaire. /he respondents sometimes did not a'reeable in pro#idin' accurate statistics and information. /he ban*ers are #ery busy )ith their %obs- )hich lead a little time consult )ith. /he communication 'ap bet)een the different personnel due to )or*load and una#ailability of data- )hich )ere confidential and lac* of sufficient co4operation from employees. Despite these limitations- ! ha#e tried my le#el best to prepare the report.

Lack of time& /he time period of this study )as #ery short. ! had only 8 )ee*s in my hand to complete this report- )hich is not enou'h. $o ! could not 'o in depth of the study. $ometimes the officials )ere busy )ith their day4to4day )or*.

Insufficient data& $ome desired information could not be collected due to confidentially of business.

1ther limitations& As ! am ne)comer- there is a lac* of pre#ious e+perience in this concern. And many practical matters ha#e been )ritten from any o)n obser#ation that may #ary from person to person.

*ethodolo'y& !t is a e+ploratory Research Methodolo'y Cith a #ie) to conductin' a research study- )hat is necessary is to desi'n the frame)or* and select the appropriate research methodolo'y. A research desi'n is simply a frame)or* or a plan for a study that may be used as a 'uide in collectin' and analyzin' data. 9n the other hand- the research methodolo'y is a )ay to systematically sol#e the research problem. Methodolo'y means the underlyin' principles and rules of or'anization of a philosophical system or inAuiry procedure. /here are #arious methods of conductin' the research- such as4 !nter#ie) Method- 9bser#ation Method- Fistorical Method- $tatistical Method- Guestionnaire Method and the li*e. Hi#en the 36

nature of the present study- it is reAuired to collect dataDinformation from the primary and secondary sources. Sam"lin' -lan& 2. -o"ulation& /he population of this research pro%ect is defined as fallo): a. lement b. "nit c. +tent d. /ime : +istin' !ndi#idual customers of $I!B, : 9nly those customers )ho ha#e an account in $I!B, : $I!B, ?ustomers : 8 $eptember 26 J & December 26

3. Sam"le Frame& !ndi#idual customer those )ho come to $I!B, and ha#e account or financial relation )ith the Ban*.

4. Sam"le si#e& /o conduct this research the sample size )as calculated by the follo)in' formula: n K .L; M pA1D e; Feren K sample size KN L K @alue of confidence le#el .62>1 from L table K 3.6: 7 K 2.: $o- A K .3 4 p1 pA K .p K 2.:- so A K 2.:1 K precision K 2.: M 2.: K 2.;: e K le#el of si'nificance .32> error1 K 2.3 .3.6:1 ; M 2.: M 2.: nK .2.31; K 68.26 K 68 .appro+imately1 Fence- reAuired sample size for conductin' this research pro%ect is &2.appro+.1 customers those )ho are account holder of $I!B,. 5. Sam"lin' -rocedure& For conductin' this research the $a#e branch of $I!B, )as ta*en into consideration to collect the data. !ndi#idual customers those )ho come to the Ban*

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and ha#e account or financial relation )ith the Ban* )ere selected by systematic random samplin'. For conductin' this research pro%ect the probabilistic samplin' procedure )as follo)ed in order to select the sample )hich is simple random samplin'. 6. Data Sources& !n order to meet the data reAuirement and collect the abo#e mentioned information follo)in' sources has been used: a. -rimary Data Sources& 7rimary data has been collected from the indi#idual account holder by Auestionnaire sur#ey. Also oral con#ersation has been done )ith different customers of the ban*. $. Secondary Data Sources& !mportant sources of secondary data for conductin' this research )ere: Different reports and %ournals of $hah%alal !slami Ban* Brochures and leaflets of the ban* Fead office circulars Annual reports. $ome unpublished information. Rele#ant business research boo*s. Cebsite of the ban* 7. Data collection instruments& Data collection instrument is the Auestionnaire )ith mostly close4ended as )ell open4ended Auestions. F. Data "rocessin'& /he data has been collected from the customers throu'h structured Auestionnaire. After that- data has processed throu'h the follo)in' )ays. At first the Auestionnaires has 'i#en a serial number. ?ustomers ans)ers are cate'orized accordin' to their personal information- present ban*in' habit- e+perience- preference- attitude- beha#ior about $I!B, and so on. After that customers ans)er are recorded in numeric fi'ure.

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Limitations of the Study& /he internship report is not free from limitations. /he study has been conducted on the sub%ect Investment Scheam on First SecurityIslami Bank Limited, Saver- Branch.

Bey limitations of the study are as follo)s: /ime )as the most mentionable limitation in preparin' of the internship report. /ime )as #ery short here that restricted the access to many a scopes for a comprehensi#e study. $ufficient boo*s- publications- facts and fi'ures are not a#ailableO these constraints narro)ed the path of analysis to accuracy. !f those limitations )ere not there- the report )ould be more concise and more substantial.

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!t )as really hard to collect data from such a bi' or'anization. My internship )as at the Investment Scheam on First Security slami Bank Limited.Saver Brance For better interpretation ! had to collect some information from the head office thou'h due to some di#isional secrecies and official confidentiality- ! )as not pro#ided )ith enou'h information.

Limitations of the Study&

From the be'innin' to the end- the study has been conducted )ith the intention of ma*in' it as a complete and truthful one. Fo)e#er- many problems appeared in the )ay of conductin' the study. Durin' the study it )as not possible to #isit the )hole area co#ered by the ban* althou'h the financial statements and other information re'ardin' the study ha#e been considered. /he study considers follo)in' limitations:

/he time period for this study )as short. Ban*in' la) and 7ractice conflict fe) area.

All the concerned personnel of the ban* ha#e not been inter#ie)ed. ,ac* of in4depth *no)led'e and analytical ability for )ritin' such report. ,ac* of e+perience. ,earnin' o#erall acti#ities- )hole mechanism of ban*in' and performance of a ban* )ithin = months is really difficult. mployees are so much busy )ith their re'ular acti#ities and cannot pro#ide enou'h time for me. Ban* has some policy for not disclosin' some data and information for ob#ious reasons that could be #ery much essential.

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Findin's Most of the costumers do not *no) the re'ulations of the in#estment modes. $horta'e of human resources in !n#estment $ection. Deposit schemes fa#orin' to the customers. $enior le#el e+ecuti#es should be more cooperati#e )ith the subordinates. Re'ardin' security ser#ice of the ban*- account openin' and closin' system- phone Auery- cash )ithdra) and deposit facility- credit profit rate- online ban*in'- e+ternal and internal en#ironment are satisfactory to the customers.

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 Most of the customers are ser#ice holder and businessmanO they li*e to come to F$!B, because near to residence D office D )or* place- better ser#ice- easier ban*in' procedure. mployees of the ban* are more cooperati#e )ith the customers. mployees of the ban* ha#e 'ood *no)led'e to sol#e the Aueries of the customers. places. Accordin' to the data analysis customers feelin' about ban*in' in F$!B, are #ery satisfied.

Accordin' to the customers opinion more A/M booths needed to be setup in different

(ecommendations

Different types of products and ser#ices are a#ailable in F$!B, but clients are not concerned about that so ad#ertisement and promotional acti#ities should be increased. !ncreasin' more deposit schemes under consumer ban*in'. 7ro#idin' prompt ser#ice in account openin'. 0o) a day- the online ban*in' ser#ice is #ery much popular in all o#er the )orld- so the ban* should try to de#elop in this side. F$!B, should increase Debit card & credit card facilities. $I!B, online ser#ice should be fast & accurate. /he )ebsite of $I!B, is not 'ood enou'hO most of the pa'es are under construction. /he pa'e should be constructed as soon as possible. $hould increase the A/M Booths. More manpo)er is reAuired to run the business smoothly. mployee trainin's and )or*shops should be administered in order to 'i#e them *no)led'e and professionalism in customer interactions. /hey should be tau'ht about ho) to deal )ith the problem of customers and problematic situations.

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 7hysical and technolo'ical facilities should be increased in e#aluatin' credit proposals. +perienced and e+pert personnel should be *ept )ithin the ban*- )hich )ill lead to a Auality selection of clients $I!B, should more focus on customer needs. /hey need to concentrate more on their e+istin' ser#ices and product inno#ation. A yearly conference )ith the employees should be arran'ed )here they )ill e+chan'e their #ie)s )ith the mana'ement about different aspects. /his )ill help to increase the efficiency of the employees. 7rompt ser#ice should be 'i#en to the customers. !n this re'ard arran'in' %ob rotation re'ularly for employees to impro#e the s*ills in different types of ser#ice. /his )ill increase the efficiency of the ser#ice. More emphasis should be 'i#en on the customers< complaint. !nformal trainin' can be a )ay to impro#e the s*ills of the employee. Allocatin' %ob responsibility to the employees accordin' to their profit. /ry to create a 'ood ima'e to customers throu'h different promotional tools 8. 8onclusion $hah%alal !slami Ban* ,imited is one of the leadin' !slamic sharah based commercial ban* in Ban'ladesh. $I!B, is committed to pro#ide e+cellent ser#ice to its #alued customers. /he mana'ement of $I!B, al)ays 'i#es special efforts to uphold the interest and trust of their customers. By pro#idin' e+cellence ser#ice and special effort $hah%alal !slami Ban* has placed itself to a stron' position amon' all the ban*s. /he main focus of $I!B, is to concentrate on the consumer demand- )hich differentiates $I!B, )ith other ban*s. $I!B, has been successfully created a brand ima'e !slamic sharah based in the mar*et and is maintainin' a stron' position in the mar*et. But still it has some )ea*ness- )hich can be easily o#ercome. $I!B, has much more potential to e+plore the e+istin' mar*et. $o- to be the number one fore#er they ha#e to be #ery perfect in their business. ;=

A ban* cannot be able to reach the 'oal until it ma*es the customer satisfied by pro#idin' ser#ice as much as the customer needs. After preparin' this report it becomes #ery e#ident to say that there should be a 'oal to ma*e the customer al)ays happy and satisfied )ith the ser#ice- only then a ban* can run its business safe and soundly in this competiti#e era. !n fine it can l said that ?onsumer Ban*in' di#ision is the department of $hah%alal !slami Ban* )hich comes closure to the customers. $I!B, has an efficient & effecti#e team )ith performances in an e+cellent manner. $o- considerin' all the ser#ice of $I!B, should become more conscious to deal )ith its customers as the customers ha#e no) more choice to ban* )ith others.

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333 !ims 9 o$%ectives /o conduct interest4free ban*in'. /o establish participatory ban*in' instead of ban*in' on debtor4creditor relationship. /o in#est on profit and ris* sharin' basis. /o accept deposits on Mudaraba & Al4Cadeah basis. /o establish a )elfare4oriented ban*in' system. /o e+tend co4operation to the poor- the helpless and the lo)4income 'roup for their economic enlistment. /o play a #ital role in human de#elopment and employment 'eneration. /o contribute to)ards balanced 'ro)th and de#elopment of the country throu'h in#estment operations particularly in the less de#eloped areas. /o contribute in achie#in' the ultimate 'oal of !slamic economic system.

Islamic Bankin' in Ban'ladesh /here are currently se#en commercial ban*s operatin' under !slamic principles. /hey are: 3. ;. =. 5. :. 6. &. !slami Ban* Ban'ladesh ,imitedAl4Arafah Ban* ,td. $ocial !n#estment Ban* ,td+im Ban* ,td$hah%alal !slami Ban* ,td. !cb !slamic Ban* ,td First security !slami Ban* ,td.

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!$,AM!? M9D $ F!0A0? At the be'innin' it is better to 'i#e a clear definition of (!slamic Modes of FinanceP. /he )ord (ModesP literally means (methodsP- or in other )ords- it refers to systematic and detailed rules- stipulations and steps to be follo)ed for accomplishin' a specific thin'. /he thin' that needs to be accomplished in this conte+t is- ho)e#er- the sub%ect matter of each of the said modes- i.e. any of the different types of in#estment acti#ities .trade- leasin'- real estatemanufacturin'- a'riculture- a'riculture production etc.- or- usin' $hariah e+pressions Murabaha- Mudaraba- Mushara*a- !%arah- !stisna- etc.1. /he )ord (FinanceP in one of its different meanin's refers to the supply of money capital or credit- pro#ided by either a person .household1- or an or'anization .pri#ate or public J financial or non financial1. /he )ord (!slamicP is inserted in the abo#e e+pression to restrict the type of rules that can 'o#ern different modes of finance to the $hariah rules. A complete definition for the term (!slamic Modes of FinanceP< may be 'i#en as follo)s: BA!4M"RABAFA /he terms QBai4MurabahaQ ha#e been deri#ed from Arabic )ords Bai and Ribhun. /he )ord EBaiE means purchase and sale and the )ord RRibhun< means an a'reed upon profit. (Bai4 MurabahaQ means sale for an a'reed upon profit. Bai4Murabaha may be defined as a contract bet)een a buyer and a seller under )hich the seller sells certain specific 'oods permissible under !slamic $hariah and the ,a) of the land to the buyer at a cost plus an a'reed upon profit payable today or on some date in the future in lump4sum or by installments. /he profit may be either a fi+ed sum or based on a percenta'e of the price of the 'oods. M"$FARABA .7AR/0 R$F!71 /he )ord Mushara*a is deri#ed from the Arabic )ord $hari*ah meanin' partnership. !slamic %urists point out that the le'ality and permissibility of Mushara*a is based on the in%unctions of the GuraEn- $unnah- and !%ma .consensus1 of the scholars. !t may be noted that !slamic ban*s are inclined to use #arious forms of $haria*t4al4!nan because of its built4in fle+ibility. At an !slamic ban*- a typical Mushara*a transaction may be conducted in the follo)in' manner. 9ne- t)o or more entrepreneurs approach an !slamic ban* to reAuest the financin' reAuired for a pro%ect. /he ban*- alon' )ith other partners- pro#ides the necessary capital for the pro%ect. All partners- includin' the ban*- ha#e the ri'ht to participate in the pro%ect. /hey can also )ai#e this ri'ht. /he profits are to be distributed accordin' to an a'reed ratio- )hich need not be the same as the capital proportion. Fo)e#er- losses are shared in e+actly the same proportion in )hich the different partners ha#e pro#ided the finance for the pro%ect. M"DARABA /he term Mudaraba refers to a contract bet)een t)o parties in )hich one party supplies capital to the other party for the purpose of en'a'in' in a business acti#ity )ith the understandin' that any profits )ill be shared in a mutually a'reed upon. ,osses- on the other

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hand- are the sole responsibility of the pro#ider of the capital. Mudaraba is also *no)n a Girad and MuAaradah. Mudaraba is a contract of those )ho ha#e capital )ith those )ho ha#e e+pertise- )here the first party pro#ides capital and the other party pro#ides the e+pertise )ith the purpose of earnin' Falal .la)ful1 profit )hich )ill be shared in a mutually a'reed upon proportion. /his type of business #enture ser#es the interest of the capital o)ner and the Mudarib .a'ent1. BA!4$A,AM Bai4$alam is a term used to define a sale in )hich the buyer ma*es ad#ance payment- but the deli#ery is delayed until some time in the future. "sually the seller is an indi#idual or business and the buyer is the ban*.

!$/!$0AEA $A, /he !stisnaEa sale is a contract in )hich the price is paid in ad#ance at the time of the contract and the ob%ect of sale is manufactured and deli#ered later. /he ma%ority of the %urists consider !stisnaEa as one of the di#isions of $alam- /herefore- it is subsumed under the definition of $alam. But the Fanafie school of Iurisprudence classifies !stisnaEa as an independent and distinct contract. /he %urists of the Fanafie $chool ha#e 'i#en #arious definitions to !stisnaEa some of )hich are: (/hat it is a contract )ith a manufacturer to ma*e somethin'Q and Q!t is a contract on a commodity on liability )ith the pro#ision of )or*Q. /he 7urchaser is called EMustasniaE contractor and the seller is called E$aniaE ma*er or manufacturer and the thin' is called EMasnooaE- manufactured- built- made. GARD FA$A0 .Bene#olent loans1 Gard Fasan is a contract in )hich one of the parties .the lender1 places into the o)nership of the other party .the borro)er1 a definite parcel of his property- in e+chan'e nothin' more than the e#entual return of somethin' in the same #alue of the property loaned. BA!4M"AIIA, .Deferred $ale1 /he terms QBaiQ and QMua%%alQ are deri#ed from the Arabic )ords EBaiE and RA%al<. /he )ord EBaiE means purchase and sale and the )ord EA%alE means a fi+ed time or a fi+ed period. QBai4 Mua%%alQ is a sale for )hich payment is made at a future fi+ed date or )ithin a fi+ed period. !n short- it is a sale on credit. /he Bai4Mua%%al may be defined as a contract bet)een a buyer and a seller under )hich the seller sells certain specific 'oods- permissible under $hariah and la) of the country- to the buyer at an a'reed fi+ed price payable at a certain fi+ed future date in lump sum or in fi+ed installments. !IARAF

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FuAaha .%urists1 ha#e defined !%araha as o)nership of a benefit for consideration. /his is also *no)n as lease or Fire contract. Al4!%arah is an Arabic term. /his has been deri#ed from the Arabic term ("%rP or ("%ratP )hich means Rconsideration< or Rreturn< or R)a'es<. Accordin' to !slamic $hariah .%urisprudence1- !%arah is a contract bet)een t)o parties J the lessor and the lessee- )here the lessees .Firer or Musta%ir1 ha#e the ri'ht to en%oyDreap a specific benefit a'ainst a specified considerationDrentD)a'es from the lessor J the o)ner .Mua%%ir1.

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9perational /echniAues of !slamic Ban* $9"R? $ 9F F"0D$ /he financial resources of the !slamic ban*s consist of ordinary capital resources comprisin' paid4up capital and reser#es- and funds rose throu'h borro)in's from the central ban* and other ban*s .inter4ban* borro)in'1- and issue of !slamic financial instruments. /he ma%or part of their operational funds is- ho)e#er- deri#ed from the different cate'ories of deposits accepted on the !slamic principles of Al4Cadiah .safe custodianship1 and Mudaraba .trust financin'1. For the sa*e of ease of understandin' )e call these t)o sources as R7rimary< and R$econdary<. /hese are discussed as under. 7R!MARS $9"R? $ 7aid4"p ?apital !slamic ban*s are public limited companies incorporated under the companies Act- )hich are listed on the $toc* +chan'e. !ndi#iduals and institutions- local and forei'n- ha#e subscribed their capital. For e+ample- the First !slamic ban* of Ban'ladesh 4 !slami Ban* Ban'ladesh ,imited .!BB,14 is a %oint #enture of Ban'ladesh and o#erseas capital in the ratio of =8:6;. !ts local capital is o)ned by the Ho#ernment of Ban'ladesh and pri#ate indi#iduals and institutions. Reser#es /he central ban* also reAuires that e#ery !slamic ban* shall maintain a reser#e fund. Before any di#idend is declared- an !slamic ban* shall transfer to the reser#e fund out of the net profits of each year- after due pro#ision has been made for La*at and ta+ation- a certain percenta'e of the net profits in order to build up adeAuate reser#es. !f the central ban* is satisfied that the a''re'ate reser#e fund of an !slamic ban* is adeAuate for its business- it may by order in )ritin' e+empt the ban* from this reAuirement for a period of one year. !n Ban'ladesh- the !BB, besides maintainin' the statutory reser#e- has built up an !n#estment ,oss 9ffsettin' Reser#e .!,9R1 by appropriatin' 32 .ten1 percent of the ban*Es annual in#estment profits. ,iAuid Assets #ery !slamic ban* is further reAuired to *eep at all times minimum amount of liAuid assets a'ainst its deposit liabilities e+pressed as certain percenta'e of the deposits- as may be prescribed from time to time by notice in )ritin' by the central ban*. For this purpose- liAuid assets mean .i1 cash in ban*- .ii1 balances )ith the central ban*Dother desi'nated ban*s- .iii1 Ho#ernment !n#estment ?ertificates- and .i#1 such other assets as may be appro#ed by the central ban*. Failure to *eep the minimum liAuid assets in#o*es penalty for each day of deficiency. Borro)in' From ?entral Ban* /o tide o#er temporary liAuidity shorta'es !slamic ban*s- as member ban*s- are entitled to borro) from the central ban*- as the lender of last resort. !n such cases- !BB, does not pay interest li*e the con#entional ban*s. $uch borro)in' from the central ban* is treated as a 7,$ deposit )ith the !slamic ban*s and profit is paid at the rate payable on correspondin' 7,$ deposit of the ban*. !nter4Ban* Borro)in'

;6

/he !slamic ban*s ha#e established interest4free fund arran'ements )ith local and forei'n ban*s on the basis of reciprocity. 0ormally- under prior arran'ement- the !slamic ban*s *eep surplus funds )ith selected ban*s. Chen needed- these ban*s also place interest4free compensatin' balance )ith the !slamic ban*. !f balances are not eAual- then periods for )hich funds placed are ad%usted. $ ?90DARS $9"R? $ !slamic ban*in' is a response to such e+i'encies. !t mobilizes sa#in's of the common people in line )ith !slamic $hariah. /echniAues employed by !slamic ban*s for sa#in' mobilization are as follo)s. Al4Cadiah Account !slamic ban*s recei#e deposits in their Al4Cadiah account. /his account is similar to the demand deposit account of interest4based ban*s. ?on#entional interest4based ban*s do not pay interest on this type of deposit account. !n addition- depositors may )ithdra) all or a part of the funds deposited in this account )ithout restriction. /he term Al4Cadiah means deposit of money allo)in' somebody to claim the funds in the account. /he ban* as trustee preser#es and safe *eeps the funds deposited. /hus- depositors feel safe *eepin' their money )ith the ban* because the ban* pro#ides assurance of returnin' their money on demand. Heneral Mudaraba Account /he Mudaraba account of !slamic ban*s is different from the chec*in' account of an interest4 based ban*. Mudaraba is a form of business contract )here one party supplies money and the other mana'es the business by in#estin' labor and time. 7rofits 'enerated from the #enture are shared by both in a proportion a'reed upon at the time of contract. Fo)e#er- in this arran'ement- the financier is solely responsible for any loss that may be incurred. /he financier of the business is *no)n as $ahib al Mal- Rabbul Mal or o)ner of the capital and the mana'er of the business is called Mudarib or entrepreneur. /erm Mudaraba Account !slamic ban*s also recei#e term deposit from their clients. /he term deposit is- of coursealto'ether different from that of the interest4based ban*s. Fi+ed term deposits recei#ed by !slamic ban*s are called Q/erm Mudaraba DepositsQ. Henerally an !slamic ban* recei#es these types of deposits for a minimum period of = months to = years at the ma+imum. /he ban* in#ests the money- and shares any profits )ith the depositor based upon a percenta'e a'reed upon at the time of contract. !n the e#ent a loss in incurred- depositors share the loss in proportion to the deposit in their account. At the end of the term the contract terminates and the depositors )ithdra) their money- plus or minus any 'ains or losses. /he depositors- if they li*e- can a'ain deposit their money for a ne) term under a ne) contract. 0o chec*boo* is issued a'ainst a /erm Mudaraba Deposit- ho)e#er- /erm Mudaraba ?ertificate is pro#ided to the depositor.

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/erm Mudaraba Account !slamic ban*s also recei#e term deposit from their clients. /he term deposit is- of coursealto'ether different from that of the interest4based ban*s. Fi+ed term deposits recei#ed by !slamic ban*s are called Q/erm Mudaraba DepositsQ. Henerally an !slamic ban* recei#es these types of deposits for a minimum period of = months to = years at the ma+imum. /he ban* in#ests the money- and shares any profits )ith the depositor based upon a percenta'e a'reed upon at the time of contract. !n the e#ent a loss in incurred- depositors share the loss in proportion to the deposit in their account. At the end of the term the contract terminates and the depositors )ithdra) their money- plus or minus any 'ains or losses. /he depositors- if they li*e- can a'ain deposit their money for a ne) term under a ne) contract. 0o chec*boo* is issued a'ainst a /erm Mudaraba Deposit- ho)e#er- /erm Mudaraba ?ertificate is pro#ided to the depositor. $pecial Mudaraba Account Chen an !slamic ban* recei#es a Mudaraba deposit for in#estment in some specific businesssector- or pro%ect- the deposit is called a Q$pecial Mudaraba DepositQ. !n this case- an !slamic ban*- )hile recei#in' deposits- comes to an a'reement )ith the depositors that the money to be recei#ed )ill be in#ested in some specific business such as the fertilizer or salt businessO or in some specific sector li*e the industrial sector- te+tile sector- e+port4import sectorO or in some specific in#estment sector of the ban* such as real estate- shippin' or a special pro%ect. 7rofits earned from these types of specific pro%ects are distributed bet)een the ban* and the $pecial Mudaraba depositors based a pre#iously a'reed to percenta'e. As before- in the e#ent of a lossthe depositors share the loss in an amount proportional to their deposits in the account. 8entral Bankin' in Islamic Frame.ork !ntroduction /he central ban* has the sole authority to issue money .currency1 and the responsibility to re'ulate the ban*in' system in order to secure the #alue of money and realize the other ob%ecti#es of monetary policy. Money ser#es as the medium of e+chan'e and the commonly accepted means of payment- and as such as a measure of #alue. +cessi#e fluctuations in the #alue of money lead to economic distortions and causes social ineAuities. !nflation 'i#es )indfall 'ains to the rich and the business people but causes hardship to the fi+ed and lo)4 income 'roups by erodin' their purchasin' po)er. Corse still- deflation often depri#es the latter of their employment and means of li#elihood. /he phenomena of inflation and deflation are characteristic of the financial system based on the institution of interest- )hich is prohibited in !slam. 9b%ecti#es of monetary policy in !slam ?onsistent )ith the !slamic ideals of social %ustice- eAuity- fairness and balance- there are three ma%or ob%ecti#es of monetary policy in an !slamic economy- )hich discards interest. /hese ob%ecti#es are: $tability in the #alue of moneyO conomic )ell4bein' )ith full employment and optimum rate of economic 'ro)thO and Distributi#e %ustice.

=3

For a proper appreciation of the abo#e4mentioned ob%ecti#es of monetary policy and ho) these may be realized- they are e+plained belo). Sta$ility in the value of money !n an !slamic economy- it is almost mandatory on the central ban* to preser#e the #alue of money. /hus- the central ban* should allo) e+pansion of money supply to the e+tent it is %ustified by a possible contribution to 'ro)th in real balances. /he stability in the #alue of money should be accorded hi'h priority because of the uneAui#ocal stress of !slam on honesty and fairness in all human dealin's- and because of the ne'ati#e impact of inflation on socio4 economic %ustice and 'eneral )elfare. But- rather than absolute- this ob%ecti#e )ould mean relati#e stability in the 'eneral price le#el. Absolute price stability is neither feasible nor desirable as it may conflict )ith the optimum 'ro)th and full employment ob%ecti#e of the monetary policy. :conomic ;ro.th and :m"loyment Chile inflation is incompatible )ith the 'oals of an !slamic economy- prolon'ed recession and unemployment that cause human sufferin's are also unacceptable. Monetary policy hastherefore- to aim at a hi'h rate of economic 'ro)th )ith full employment and utilization of producti#e resources. Fo)e#er- ma+imization of economic 'ro)th per se and at all costs is not the ob%ecti#e of monetary policy in an !slamic economy. Material prosperity is to be attained )ithin the frame)or* of !slamic #alues. !t should not be attained throu'h the production of essential and morally 4 Auestionable 'oods and ser#ices. !t should not lead to an e+cessi#e and o#erly4rapid use of Allah4'i#en resources at the e+pense of future 'enerations- and it should not be harmful to present or future 'enerations by de'eneratin' the moral and physical en#ironment. n#ironmental de'eneration )ith de'radation and depletion of land- )ater and forest resources and serious air and )ater pollution are already matters of 'reat concern around the )orld. Fence the concept of (sustainable de#elopmentQ- )hich means meetin' the needs of the present 'eneration )ithout compromisin' the needs of future 'enerations. conomic de#elopment and sound en#ironmental mana'ement are complementary aspects of the same a'enda. Cithout adeAuate en#ironmental protection- de#elopment )ill be underminedO )ithout de#elopment- en#ironmental protection )ill fail. Distri$utive <ustice Monetary policy should be used acti#ely to promote the 'oal of distributi#e %ustice and pre#ent concentration of )ealth and economic po)er in an !slamic economy. Fo)e#er- too much concern )ith distributi#e %ustice in formulatin' and implementin' monetary policy may ad#ersely affect its o#erall efficiency and effecti#eness in attainin' the other 'oals of monetary policy. e.'. 'ro)th- employment and de#elopment. Reduction in income ineAualities and necessary redistribution should be an important policy ob%ecti#e of an !slamic state and hence the domain- mainly- of its fiscal policy. Monetary policy can contribute to this ob%ecti#e.

=;

-ro$lems and 8hallen'es of Islamic Bankin' in Ban'ladesh 3. 0ature of the 7roblem and ?hallen'es /he !slamic ban*s in the )orld ha#e been facin' a number of challen'es. $ide by side- the !slamic ban*in' in Ban'ladesh is also facin' numerous problems of challen'es. First- they ha#e not yet been successful in de#isin' an interest4free mechanism to place their funds on a short4term basis. /hey face the same problem in financin' consumer loans and 'o#ernment deficits. $econd- the ris* in#ol#ed in profit4sharin' seems to be so hi'h that almost all of the !slamic ban*s in Ban'ladesh ha#e resorted to those techniAues of financin' )hich brin' them a fi+ed assured return. As a result- there is a lot of 'enuine criticism that these ban*s ha#e not abolished interest but- they ha#e- in fact- only chan'ed the nomenclature of their transactions. /hird- the !slamic ban*s do not ha#e the le'al support of the ?entral ban* in Ban'ladesh- do not ha#e the necessary e+pertise and trained manpo)er to appraise- monitor- e#aluate an audit the pro%ects that are reAuired to finance. As a result- they can not e+pand despite ha#in' hu'e e+cess financial liAuidity. /he implementation of an interest4free ban*in' in Ban*in' raises a number of Auestions and potential problems )hich can be seen from the macro and micro operational point of #ie). A partial list of the issues confrontin' !slamic ban*s in Ban'ladesh includes. ;. 7roblems Related to Macro 9peration of the !slamic Ban*s ,iAuidity and ?apital @aluation of ban* Assets Financial $tability /he 9)nership of Ban*s ,ac* of ?apital Mar*et and !nterest4free Financial !nstruments !nsufficient ,e'al protection ?ontrollin' and $uper#ision by the ?entral ban* on the Basis of !slamic $hariah ,ac* of "nified $hariah Rulin's Absence of !slamic !nter4Ban* Money Mar*et 0e) Ban*in' Re'ulations Accountin' principles and 7rocedures $horta'e of $upporti#e and ,in* !nstitutions $horta'e of $*illed and /rained Manpo)er in !slamic $hariah ban*in' ,ac* of ?o4operation amon' the !slamic Ban*s ,ac* of Familiarity by !nternational Financial and 0on4financial $ector )ith !slamic 7roducts and procedures. $e#ere ?ompetition in the Financial $ector conomics slo)do)n and 7olitical $ituation of the ?ountry !nadeAuate /rac* Record of !slamic Ban*in' Absence of !nfrastructure for !nternational !slamic /rade Financin' Defaultin' ?ulture of the Borro)ers $hort4term Asset ?oncentration in the !slamic Ban*s

==

,ac* of ?ourse or paper on !slamic conomics- Ban*in' and Finance at the ducational !nstitutions. ,ac* of "niform 9perational procedure of !slamic Ban*in' ,ac* of $pecialised !slamic Ban*s and 0on4Ban* financial !nstitutions ,ac* of ?onsortium or $yndication of the !slamic Ban*s ,ac* of Farmonization of !slamic financial 7ractices ,ac* of !nter4country $tudy on the practical 9perations of !slamic Ban*in' ,ac* of $econdary $ecuritisation Mar*et ,ac* of ?oordinated Research Cor* on !slamic conomics- Ban*in' and finance ,ac* of Ape+ /rainin' !nstitute for the !slamic Ban*s.

7roblem Related to Micro 9peration of the !slamic Ban*s : !ncreased ?ost of !nformation ?ontrol o#er ?ost of Funds. Mar*4up Financin' and ?orrupted Mar*4up +cess Resort to the Murabaha Mode of Financin' "tilization of !nterest Rate of fi+in' the 7rofit Mar'in in Bai4Modes Financin' $ocial ?oncerns. ,ac* of 7ositi#e Response to the ReAuirement of 'o#ernment Financin'. Failure of !slamic Ban*s to Finance Fi'h Return 7ro%ects. $acrifice of allocati#e fficiency ,oss of Distributi#e fficiency. Depression of 7rofit. ,ac* of Full4fled'ed $hariah Audit. Fraud4For'ery or corruption in !slamic Ban*s. Minimum Bud'et for Research and De#elopment. Cor*in' n#ironment. !ssuance of ,etter of Huarantee .,DH1 Minimum Bud'et for Research and De#elopment. ,ac* of $hariah Manual or Huidelines. !slamic !n#estment Ris* Analysis and measurement Methodolo'y. 0on4e+emption of $tamp Duty for 7urchasin' 7roperty by Ban*s. ,ac* of ?o4operation bet)een !slamic Ban*s and !slamic 0H9s for e+tendin' Microcredit. ,ac* of stablishment of ,in*s )ith other /rainin' !nstitutes and $hariah $uper#isory Bodies. ,ac* of !ntention of the Mana'ement to be strict )ith $hariah Huidelines. /he abo#e problems are some of the burnin' problems confrontin' the !slamic ban*s in Ban'ladesh. Fo)e#er it is felt that much operational )or* and in4depth research )or*

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has to be underta*en to allo) the !slamic ban*s to flourish )ith hi'hest Auality and stren'th. The Future of Islamic Bankin' in Ban'ladesh 3. 0eed for Re4or'anization of the Chole financial $ystem Re#ie) of the problems of !slamic ban*in' in 'eneral and !slamic ban*s of Ban'ladesh in particular poses a challen'in' feature for the promotion and sur#i#al of !slamic ban*s in Ban'ladesh. /he policy implication is not that !slamic ban*s should ne#er be floated )ithin the con#entional ban*in' frame)or*. Rather it is the con#entional ban*in' system )hose operational mechanism needs to be re4e+amined and con#erted into 7,$ system considerin' beneficial impact of the latter on the economy. Fo)e#er- as lon' as !slamic ban*s are to operate )ithin thecon#entional ban*in' frame)or*- the recommendations under the follo)in' heads may be ta*en note of. ;. 0e) ban*in' philosophy for the !slamic Ban*s /here seems to be a 'ap bet)een the ideals and actual practice of !slamic ban*s in Ban'ladesh. !n their reports- boo*lets- bulletins and posters there ban*s e+press their commitment to stri#in' for establishin' a %ust society free from e+ploitation. $tudy sho)s that a little pro'ress has been achie#ed so far in that direction. /hou'h this failure is attributed mainly to the per#asi#e influence of con#entional ban*in' system itself- lac* of #i'ilance of the promoters of !slamic ban*in' in realizin' the ob%ecti#e is no less to blame. /here should be a throu'h re#ie) of policies that ha#e been pursued by these ban*s for about a decade and points of departure ha#e to be identified to redesi'n their of action. =. Future 7olicy and $trate'y /he first action that deser#es immediate attention is the promotion of the ima'e of !slamic ban*s as 7,$ ban*s. $trate'ies ha#e to be carefully de#ised so that the ima'e of !slamic character and sol#ency as a ban* is simultaneously promoted. /o this end- 7ilot schemes in some #ery selected areas should be started to test inno#ati#e ideas )ith profit4loss4sharin' modes of financin' as ma%or component. !slamic ban*s should clearly demonstrate by their actions that their ban*in' practices are 'uided by profitability criterion thereby establishin' that only !slamic ban*in' practices ensures efficient allocation of resources and pro#ide true mar*et si'nals throu'h 7,$ modes. !slamic ban*s should continuously monitor and disseminate throu'h #arious means the impact of their operations on the distribution of income primarily bet)een the ban* and the other t)o parties: the depositors and the entrepreneurs- and then on different income 'roups of the society. /hese presuppose establishment of a fully eAuipped research academy in each !slamic ban*. 5. $teppin' for Distributional fficiency. /he tas* is more challen'in' for !slamic ban*s- as they ha#e toe promote their distributional efficiency from all dimensions to'ether )ith profitability- !slamic ban*s- step by step- ha#e to be con#erted into profit4loss4sharin' ban*s by increasin' their percenta'e share of in#estment financin' thou'h 7,$ modes. /he !slamic ban*s- to do that- can be selecti#e in choosin' clients for financin' under 7,$ modes. /hey should establish direct functional relationship bet)een the income of the depositors and bet)een the income the income of the ban* and that

=:

of the entrepreneurs. /he relationship impro#es )ith share of ban* financin' under 7,$ modes increases. :. 7romotion of Allocate fficiency /he !slamic ban*s can impro#e their allocate efficiency be satisfyin' social )elfare conditions in the follo)in' manner. First- they should allocate a reasonable portion of their in#estible funds in social priority sectors such as a'riculture .includin' poultry and fishery1- small and cotta'e industries and e+port4led industries li*e 'arment- shrimp culti#ation. $econdly- )hen the percenta'e shares of allocation of in#estible funds are determined amon' the sectors of in#estment financin'- profitability of pro%ects should be the criterion for allocatin' in#estment funds. /he criterion )ould be best satisfied if more and more pro%ects )ere financed under 7,$ modes. 6.Modern ban*in' 7olicies and practices !slamic ban*s- )ith a #ie) to facin' the 'ro)in' competition either fello)4!slamic ban*s or the con#entional ban*s )hich ha#e launched !slamic ban*in' practices- )ill ha#e to adapts their functionin' in line )ith modern business practices- thou'h impro#ement and e+pansion of the ran'e of dealin' in the ban*in' sector. /hus- it is necessary for them to pro#ide comprehensi#e ban*in' and in#estment ser#ices to clients and simultaneously to ta*e ad#anta'e of modern technolo'ical brea*throu'hs in areas such as electronic communicationcomputerization etc. &. Ho#ernment and ?entral ban* Responsibilities Ho#ernment should thin* acti#ely for the promotion of !slamic ban*in' in Ban'ladesh considerin' its pro4de#elopment role. !t should amend e+istin' financial la)s- acts and re'ulations to create fa#orable en#ironment conduci#e to smooth operation of !slamic ban*s. /he ban* Reforms ?ommittee may be entrusted to draft an !slamic Ban*in' Act. Ho#ernment should also allo) establishment of !slamic insurance and other subsidiary companies in order to facilitate their operation. Ban'ladesh Ban* should de#elop some !slamic Monetary and sa#in' instruments and create separate )indo) for transactions )ith the !slamic ban*s and a full4fled'ed !slamic ban*in' Department for analyzin'- super#isin'- monitorin' and 'uidin' purpose- thereby facilitatin' !slamic ban*s for their smooth de#elopment in Ban'ladesh. 8. !nter4!slamic Ban* ?o4operation and 7erspecti#e 7lan All !slamic ban*s should come for)ard to help each others and adopt a perspecti#e plan say for ;2 years for !slamization of the ban*in' system of Ban'ladesh. /o actualize this missionthey should set4up immediately and Ape+ Research Academy and /rainin' !nstitute desi'ned )ith modern tools. Boo*s and other accessories. -ros"ects of Islamic Bankin' in Ban'ladesh !n my understandin' the prospect of !slamic Ban*in' is #ery bri'ht. Muslim people e#ery)here )ant !slamic Ban*in'. !n Ban'ladesh- to 'i#e an e+ample- 3: con#entional Ban*s ha#e opened separate !slamic branches recently. Fi#e hundred applications are pendin' )ith

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!slamic Ban* Ban'ladesh ,td. for openin' of ne) braches. !BB, has already 3=; branches in the country. /he position may not be same in all countries. But if !slamic Ban*in' succeeds in any country- the positions )ill same in e#ery Muslim country in my %ud'ment. /his means- that first !slamic Ban* in any country should be )ell mana'ed and successful so that people ha#e faith in this system. stablished !slamic Ban*s should co4operate by lendin' competent officials in settin' up ne) !slamic Ban*s. /he problems mentioned in the precedin' pa'es are not insurmountable. Most of them can be sol#ed )ith more research and dedicated efforts. !DB- 9!? FiAh Academy- !nternational !slamic Ban*in' or'anizations and indi#idual !slamic ban*s should put more resources in research in !slamic Ban*in'- Finance and conomic issues. ?ooperation of ?entral Ban*s and the Ho#ernments )ill be needed in some areas. ! ha#e no doubt in mind that !slamic ban*in' )ill e+pand more and more in the entire )orld.

=&

-erformance of the Islamic Bankin' System 8om"arative "osition of the Islamic Bankin' sector in Ban'ladesh, 3==> )In million T/., ;rou" Banks Islamic Bankin' sector !ll "rivate Banks !ll Banks Total De"osit 3AA66> B2335=.5 2574274.7 Investment 3A565>.3 >A>6>6.3 233=B23.3 :?cess li@uidity asset >>53.5 52A74.2 BA237 *an"o.er A33= 436>7 2=A562 Branches 4=A 26>4 7447

1463164

1600000 1400000 1200000 1000000 800000 600000 400000 200000 0

912240

787575

1220912

Comparative possition in million TK.

288557

Islamic Banking sector

284547

!eposit Investment

ll private Banks

ll Banks Total

/he 'ro)th of !slamic ban*in' in Ban'ladesh is pro'ressin' day by day. /he remar*able shift or con#ersion of the con#entional ban*s and their branches into !slamic lines 'i#es the si'nal of hi'h acceptance of the interest4free ban*in' by the public in 'eneral. /he !slamic ban*in' industry continued to sho) stron' 'ro)th in ;22& in tandem )ith the 'ro)th in the economyas reflected in the increased mar*et share of the !slamic ban*in' industry in terms of assetsfinancin'- and deposits of the total ban*in' system.

=8

/he !slamic ban*s in Ban'ladesh started from a #ery limited resource base. But )ith the passa'e of time- they ha#e sho)n stron' performance in respect of mobilization of deposits. /otal deposits of the !slamic ban*s and !slamic ban*in' branches of con#entional ban*s stood at /a*a 388::&.5 million in $eptember- ;22&. /his )as ;&.6> of the deposits of all pri#ate ban*s and 3;.6> of the deposits of the total ban*in' system. /otal in#estment of the !slamic ban*s and the !slamic ban*in' branches of the con#entional ban*s stood at /a*a 385:5&.; million at the end of $eptember- ;22&. /his )as =3.5> of all pri#ate ban*s and 3:.3> of the total ban*in' system of the country. /he $tatutory ,iAuidity ReAuirement .$,R1 for the !slamic ban*s is fi+ed at 32> since the inception of the first !slamic Ban* in 368=. /his remains unchan'ed till date )hile $,R for the traditional commercial ban*s has been chan'ed many times- )hich presently is fi+ed at 38>. !t is e#ident from /able 3 that almost all of the !slamic ban*s ha#e been facin' e+cess liAuidity problem )hile only one ban*- the 9riental Ban* ,imited- is maintainin' liAuidity position belo) the reAuired le#el. Fo)e#er- the e+cess liAuidity of the !slamic ban*s and !slamic ban*in' branches of con#entional ban*s as of $eptember ;22& )as to the tune of /a*a &&5;.5 million .38.:> of pri#ate ban*s and &.6> of all ban*s1- )hich ori'inated mainly due to the non4responsi#eness of 'ood borro)ers for credit demand and the absence of adeAuate interest4 free financial instruments in the country. !slamic ban*s and the !slamic ban*in' branches of the con#entional ban*s ha#e created enou'h employment opportunities in the ban*in' sector by pro#idin' a 'ood number of %obs to the people. /he total persons employed in the !slamic ban*in' system )ere 8;;2 as on $eptember- ;22&. /his )as ;:.;> of the pri#ate sector ban*sE total employment and &.6> of all ban*s. /he total number of branches of the !slamic ban*s- includin' the !slamic ban*in' branches of the con#entional ban*s- in the country stood at =28 in $eptember- ;22&- of )hich ;=6 )ere urban and &; )ere rural. /he number of !slamic ban* branches )as 36.6> of all pri#ate ban*s and 5.6> of the ban*in' system of the country.

=6

SC1T analysis Stren'th Di#ersified o)nership pattern $tron' mar*et share Hood Financial performance Hood in#estment portfolio ?omfortable ,iAuidity position +perienced mana'ement team $ound FR de#elopment pro'rammes !mpro#ement in automation Cide branch net)or* $i'nificant in#ol#ement in corporate social responsibility Ceakness& "nmatched asset #ersus capital 'ro)th ,imited dele'ation of po)er ,imited modern customer ser#ice facilities Moderate reco#ery of rescheduled in#estments Fi'h lar'e in#estment e+posures !nitial sta'e of system based internal control procedures 1""ortunities& !n#estment in $M and A'ro based industry Real time online ban*in' ?redit card in dual currency ?reation of !slamic Money mar*et product !ntroduce abo#e : years !slamic bond Threats& Mar*et pressure for increasin' the $,R 9#erall liAuidity crisis in money mar*et Ho#ernment pressure to reduce in#estment rate !ncrease the capital adeAuacy position

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8onclusion& /he ban*in' system of Ban'ladesh is composed of a #ariety of ban*s )or*in' as 0ationalized ?ommercialBan*s .0?Bs1- 7ri#ate Ban*s- Forei'n Ban*s- $pecialised Ban*s and De#elopment Ban*s. Fo)e#er- ;8 outof :2 ban*s in Ban'ladesh are pri#ate- of )hich only &namely !slami Ban* Ban'ladesh ,imited- !?B !slamic Ban*- Al4Arafah !slami Ban* ,imited$ocial !n#estment Ban* ,imited- +im Ban*-$hah%alal Ban* and First security Ban* ,td ha#e been operatin' as !slamic ban*s. Besides these full4fled'ed !slamic ban*s- 32 con#entional ban*s in the pri#ate sector ha#e opened ;: full4fled'ed !slamic ban*in' branches and !slamic Ban*in' ?ounter respecti#ely to deal )ith the !slamic ban*in' business parallel to their con#entional operations.

References: 3. ))).dsebd.or' ;. ))).islamiban*bd.com =. Ban* Fund Mana'ement by A.R Bhan

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