Internship Report Overview of Islami Bank Bangladesh Limited

A S A U N I V E R S I T Y B AN G L A D E S H

A S A U N I V E R S I T Y B A N G L A D E S H

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Introduction

Objective of the Study

Scope of the Study

Limitation of the Study

Methodology

Chapter One: Introduction



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Bangladesh is one of the largest Muslim countries in the world. The people of this

country are deeply committed to Islamic way of life as enshrined in the Holy Qur'an and

the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their

economic lives in accordance with the precepts of Islam. The establishment of Islami

Bank Bangladesh Limited on March 13, 1983, is the true reflection of this inner urge of

its people, which started functioning with effect from March 30, 1983. This Bank is the

first of its kind in Southeast Asia. It is committed to conduct all banking and investment

activities on the basis of interest-free profit-loss sharing system. In doing so, it has

unveiled a new horizon and ushered in a new silver lining of hope towards materializing

a long cherished dream of the people of Bangladesh for doing their banking transactions

in line with what is prescribed by Islam. With the active co-operation and participation

of Islamic Development Bank (IDB) and some other Islamic banks, financial institutions,

government bodies and eminent personalities of the Middle East and the Gulf countries,

Islami Bank Bangladesh Limited has by now earned the unique position of a leading

private commercial bank in Bangladesh.

The major objectives of the present study are:

1. To present the Dividend of IBBL.

2. To highlight the planning & policies of IBBL to their customers.

3. To focus on facilities provided by IBBL to their customers.

4. To find out the practices & policies for providing dividend to their shareholders of

IBBL.

5. To identify the problems in planning & polices of the Bank.

6. To recommend the possible lines of actions to overcome the problems & modify

the policies of the Bank.

Introduction

Objective of the Study



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There is a large scope for doing the report in any Bank. This report provides practical

knowledge to the students about Bank’s dividend policies & practices. The students have

a great opportunity to acquire knowledge about the Banks policies & practices. After

studying this report we will able to know about the Dividend processing, Mission, Vision,

Aim & objective & so on about Islami Bank Bangladesh Ltd. By the report one can get

information easily of this Bank.

This Bank is different from other traditional bank of Bangladesh for that their

information is difficult to understand.

The all information of IBBL isn’t available & somewhere their information

isn’t clear.

We all are student and we have to face financial difficulties.

We have to answer some questions about our University those make us

Confident less.

This paper has been prepared relying on primary and secondary information. Primary

information has been obtained through the annual reports of IBBL and Interviewing

concerned personnel of the bank with the help of a semi structured interview schedule.

Sources of pertinent secondary information included our analysis and various

publications of the Bank, journals, newspapers and websites.

Scope of the Study

Limitation of the Study

Methodology



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Corporate Information

Mission & Vision

Aims and Objectives

Functions

Product & Services

Chapter Two: Organization Profile



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Corporate Information

(as on December 31, 2010) Date of Incorporation 13th March 1983

Inauguration of 1st Branch (Local office, Dhaka) 30th March 1983

Formal Inauguration 12th August 1983

Share of Capital

Local Shareholders 41.77%

Foreign Shareholders 58.23%

Authorized Capital Tk. 20,000.00 million

Paid-up Capital Tk. 7,413.10 million

Deposits Tk. 291,347.00 million

Investment (including Investment in Shares) Tk. 292084.00 million

Foreign Exchange Business:

Import Tk. 246,281.00 million

Export Tk.148,421.00 million

Remittance Tk. 214,629.00 million

Branches

Total number of Branches 251

Number of AD Branches 43

Number of Shareholders 52164

Manpower 10,068

Organizational Profile



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Mission To establish Islamic Banking through the introduction of a welfare oriented banking

system and also ensure equity and justice in the field of all economic activities, achieve

balanced growth and equitable development through diversified investment operations

particularly in the priority sectors and less developed areas of the country. To encourage

socio-economic uplift and financial services to the low-income community particularly in

the rural areas.

Vision Our vision is to always strive to achieve superior financial performance, be

considered a leading Islamic Bank by reputation and performance.

Our goal is to establish and maintain the modern banking techniques, to ensure the

soundness and development of the financial system based on Islamic principles and to

become the strong and efficient organization with highly motivated professionals,

working for the benefit of people, based upon accountability, transparency and integrity

in order to ensure stability of financial systems. We will try to encourage savings in the

form of direct investment. We will also try to encourage investment particularly in

projects which are more likely to lead to higher employment.

1. To conduct interest-free banking. 2. To establish participatory banking instead of banking on debtor-creditor

relationship. 3. To invest on profit and risk sharing basis. 4. To accept deposits on Mudaraba & Al-Wadeah basis.

Mission & Vision

Aims and Objectives



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5. To establish a welfare-oriented banking system.

6. To extend co-operation to the poor, the helpless and the low-income group for

their economic upliftment.

7. To play a vital role in human development and employment generation.

8. To contribute towards balanced growth and development of the country through

investment operations particularly in the less developed areas.

9. To contribute in achieving the ultimate goal of Islamic economic system.

The functions of Islami Bank Bangladesh Limited are as under:

1. To maintain all types of deposit accounts. 2. To make investment.

3. To conduct foreign exchange business. 4. To extend other banking services.

5. To conduct social welfare activities through Islami Bank Foundation.

Al-Wadeeah Current Account

Mudaraba Savings Account

Mudaraba Term Deposit Receipt

Mudaraba Special Notice Account

Mudaraba Special Savings (Pension ) Account

Mudaraba Hajj Savings Account

Mudaraba Savings Bond Scheme Account

Functions

Products & Services

Deposit Scheme



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Mudaraba Foreign Currency Deposit Scheme (Savings)

Mudaraba Waqf Cash Deposit Account

Mudaraba Monthly Profit Deposit Scheme

Mudaraba Muthor Savings Deposit Scheme

Bai-Muajjal Bai-Murabaha Hire Purchase under Shirkatul Meelk Murabah Musharaka Bai-Salam Equity & Entrepreneurship Fund Of Bangladesh Bank

Household Durable Scheme Housing Investment Scheme Real Estate Investment Program Transport Investment Program Car Investment Scheme Investment Scheme For Doctors Small Business Investment Scheme Agriculture Implements Investments Investment Scheme Micro Industries Investment Scheme Mirpur Silk Weavers Investment Scheme

Investment Modes

Rural Development Scheme

Special Schemes



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Facilities Getting IBBL ATM Card Cash Withdrawal Procedure Issuing Branches Location Of ATM Booths BTTB Bill Payment Procedure IBBL Schemes-Installment payment Procedure

Locker Service SWIFT Reuter

ATM Services

Special Service

Foreign Exchange Business



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Dividend

Dividend Policy

Analysis of Dividend policies of IBBL

Chapter Three: Dividend & Dividend Policy



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Dividend:

Dividend refers to that portion of a firm’s earnings which are paid out to the

shareholders.

Forms of Dividends:

Cash dividend

Dividend can be paid in the forms other than cash:

Stock Dividend

Stock Repurchases

Stock Dividend (Bonus Share):

The payment of dividend to the existing shareholders in the form of stock.

Often firm pay stock dividends as a replacement for or a supplement to cash dividend.

Firm find the stock dividend a way to give owners something without having to use cash.

Generally, when a firm needs to preserve cash to finance rapid growth, a stock dividend

is used.

Stock Repurchase:

The repurchase by the firm of outstanding common stock in the market

place. Stock repurchase enhance shareholders value by;

o Reducing the number of share outstanding and thereby raising earnings

per share,

o Sending a positive signal to investors in the market place that management

believes that the stock is undervalued, and

o Providing a temporary floor for the stock price, which may have been

decline.

Right Share:

Existing shareholders will get priority to purchase share at the time of

issuing of new common stock. This right is known as “Pre-emptive Right”.

Dividend



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Stock Splits:

Stock split has no effect on firms capital structure. A stock split is a method

commonly used to lower the market price of a firm’s stock by increasing the number of

shares belonging to each shareholder. The reason for stock split is that, the firm believes

that its stock is priced too high and that lowering the market price will enhance trading

activity.

Reverse Stock Split:

Sometimes it can also happen .For example: 1-for-4 split, one new share is

exchanged for four old shares. Reverse stock splits are initiated to raise the market price

of a firm’s stock when it is selling at too low price.

Cash dividend payment procedures:

1. Board of Directors Meeting:

Dividend decision- whether to declare dividend and what amount to pay

cash dividends to stockholders is decided by the board of directors of a corporation.

2. Amount of Dividend:

What amount or percentage of net income will be declared as dividend and

payment period is a key decision of the board meeting.

3. Relevant Date:

If the directors of the firm declare a dividend, they also typically issue a

statement indicating the dividend decision, the record date and the payment date.

4. Record Date:

All persons whose names are recorded as stockholders on the date of

record, receive a declared dividend at a specified future time.

5. Ex dividend Date:

Period, beginning 4 business days prior to the date of record, during which

a stock is sold without the right to receive the current dividend. This 4 days remain for

updating or transfer of ownership.

6.Payment Date:

The actual date on which the firm mails the dividend payment to the

holders of the record.



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#Owner Considerations:

Before establishing the dividend policy, the firm must consider some subject

which are related to its majority of shareholders.

(1) Tax status: If a firm has a large percentage of wealthy stockholders who are in

high tax bracket, it may decide to pay out a lower percentage of its earnings.

(2) Owner’s investment opportunities: A firm should not retain funds for

investment in projects yielding lower returns than the owners could obtain from

external investments of equal risk.

(3)Potential dilution of ownership:

If a firm pays out a high percentage of earnings, new capital will have to be

raised with common stock. The result of a new stock issue may be dilution of both

control and earnings for the existing owners.

# Market Consideration:

Shareholders often view a dividend payment as a signal of the firm’s future success.

A stable and continuous dividend is a positive signal, conveying the firm’s good health.

Shareholders are likely to interpret a passed dividend payment due to loss or to very low

earnings as negative signal

Types of Dividend Policies:

The firm’s dividend policy must be formulated with two basic

objectives in mind: providing for sufficient financing and maximizing the wealth of the

firm’s owners.

Constant-Payout-Ratio Dividend Policy:

The dividend payout ratio indicates the percentage of each dollar

earned that is distributed to the owners in the form of cash. It is calculated by dividing the

firm’s cash dividend per share by its earnings per share .With a constant-payout-ratio

dividend policy, the firm establishes that a certain percentage of earnings is paid to

owners in each dividend period.

Dividend Policy



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Regular Dividend Policy:

The regular dividend policy is based on the payment of a fixed dollar

dividend in each period. This policy provides the owners with generally positive

information thereby minimize their uncertainties .Under this policy dividends are almost

never decreased.

Low-Regular-and-Extra Dividend Policy:

Under this dividend policy, a firm is paying a low regular dividend,

supplemented by an additional dividend when earnings are higher than normal in given

period. By giving the low regular dividend the firm gives investors a stable income

necessary to build confidence in the firm, and the extra dividend permits them to share in

earnings from an especially good period. The extra dividend should not be regular event.

Factors Affecting Dividend Policy: Some factors affecting dividend policy. These are given bellow:

1. Legal Constraints:

An earnings requirement limiting the amount of dividends is sometimes

imposed. With this restriction, the firm cannot pay more in cash dividends than the sum

of its most recent and past retained earnings. However, the firm is not prohibited from

paying more in dividend than its current earnings.

2. Contractual Constraints:

Often the firm’s ability to pay cash dividends is constrained by restrictive

provision in a loan agreement. Constraints on dividends help to protect creditors from

losses due to the firm’s insolvency.

3. Internal Constraints:

The firm’s ability to pay cash dividends is generally constrained by the

amount of liquid assets (cash and marketable securities) available. Although it is possible

for a firm to borrow funds to pay dividends.

4. Growth Prospects:

The financial requirements are directly related to how much it expects to

grow and what assets it will need to acquire. A large, mature firm has adequate access to



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new capital, whereas a growing firm may not have sufficient funds available. A growing

firm like to have to depend on internal financing, so it is likely to pay out less amount of

income as dividend. On the other hand, a more established firm is in better position to

pay out large amount of income as dividend.

.

By the information of Islami Bank Bangladesh Ltd. we are not able to get information

about what type of dividend policy they maintaining. So we have analyzed the financial

statement of IBBL of the last 5 years. The working is given bellow:

Particulars 2006 2007 2008 2009 2010

Cash Dividend 15% - - 10% -

Stock Dividend 10% 25% 30% 20% 35%

Total 25% 25% 30% 30% 35%

Amount of dividend in

TK. 86,40,00000 95,04,00000 142,56,00000 185,32,80,000 259,45,90,000

Net Income 140,05,90000 142,73,60,000 267,48,00000 340,35,50,000 446,34,70,000

Div. % of Earning 61.69 % 66.58% 53.30% 54.45% 58.13%

No. of Share 34,56,000 3,80,16,000 4,75,20,000 6,17,76,000 7,41,31,200

Dividend per Share 250* 25 30 30 35

*In 2006 the value of share was 1000 tk. & the number of share was

low.

Analysis of Dividend policies of IBBL



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Result of Analysis

2006: In 2006 the number of share was 34,56,000 & the value of per share were

tk.1,000. They issued 15% cash and 10% stock dividend which was 61.69% of their total

earnings. In 2006 their dividend per share was 250 tk.

2007: In 2007 the number of share was 3,80,16,000 & the value of per share were

tk.100. They issued 25% stock dividend which was 66.58% of their total earnings. In

2007 their dividend per share was 25 tk.





tk.100. They issued 10% cash and 20% stock dividend which was 54.45% of their total

earnings. In 2009 their dividend per share was 30tk.




By measuring the last 5 years financial statement, we can say that IBBL pay

nearly same amount of dividend per year. So that IBBL follows regular dividend

policy depending on DPS.



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Total Dividend (%)

Dividend per Share (Tk.)

250

25 30 30 35050

100150200250300

2006 2007 2008 2009 2010

0%

5%

10%

15%

20%

25%

30%

35%

2006 2007 2008 2009 2010

25% 25%

30% 30%

35%



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Findings

Conclusion

Recommendation

Chapter Four: Findings, Conclusion, Recommendation



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# IBBL maintain Islamic banking systes.

# A lot of services provided by IBBL.

# Their website isn’t improved.

# Their services are very difficult to understand.

# Their dividend policy isn’t mentioned.

# Their banking system is better than others.

IBBL introduce different types of banking system in Bangladesh. They provided banking

services according to Islam. IBBL provided a regular amount of dividend to their

shareholders and their service is better than other some banks of Bangladesh. Although

they have some problems but those are very easy to overcome. If IBBL able to overcome

those problems than it may be the best Bank of Bangladesh.

# They should mention their dividend policy on their annual report.

# They should modify their website.

# They should make easy the name of their services.

# IBBL should inspire their employees to be more co operative with their customers.

Conclusion

Findings

Recommendation



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Web Site: www.islamibankbd.com

Report: Annual report of IBBL 2006

Annual report of IBBL 2007




Reference

Internship Report Overview of Islami Bank Bangladesh Limited

Documents

foreign exchange business

ratio dividend policy

regular dividend policy

islami bank bangladesh

low regular dividend

pay cash dividends

banking system

firms ability