Islami banking.doc

8/14/2019 Islami banking.doc

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Chapter 01

Introduction

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1.1 Introduction:

In order to rehabilitate the war devastated banking system of Bangladesh, after 16 th

December 1971, the government promulgated a law called Bangladesh Bank temporary!

"rder, 1971#cting $residents "rder %o & of 1971!' By this order the (tate Bank of

$akistan was declared as Bangladesh Bank and the offices, branches and assets of the

said (tate Bank was declared to be deemed as offices, branches and assets of Bangladesh

Bank' It was also declared by the #foresaid "rder that all currency notes and coins issued

by the said (tate Bank and government of $akistan and were in circulation in Bangladesh

shall be deemed to have issued by the Bangladesh Bank' By the steps stated above, the

banking system of Bangladesh started with a legal shape'

$rivate sector banks started functioning during the year 19)*+) with the ob-ective of

government policy to make sure effective and meaningful participation of the private

sector in the overall national economy'

.he number of banks in all now stands at 9 in Bangladesh' "ut of the 9 banks, four are

%ationali/ed 0ommercial Banks %0Bs!, &) local private commercial banks, 1& foreign

banks and the rest five are Development inancial Institutions DIs!' (onali Bank is the

largest among the %0Bs while Bank #sia is leading in the private ones' #mong the 1&

foreign banks, (tandard 0hartered and 2(B0 has become the largest in the country'

Besides the scheduled banks, (amabai 0ooperative! Bank, #nsar+3D$ Bank,

4armasansthan 5mployment! Bank and rameen bank are functioning in the financial

sector' Bangladesh Bank BB! regulates and supervises the activities of all banks'

.he perception of Islamic banking has been bloomed from the inspiration of building up

a society on -ustice in accordance with basic socio+economic principles of Islam' .he

difference between Islamic bank and conventional bank is on principles' .he functions of

this type of bank are completely different' .his bank is established on Islamic (hariah

and all types of transactions are free from interest' ustified profit is the basis of financial

&


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transaction of this bank' .his bank is committed to establish socio+economic -ustice'

Islami Bank Bangladesh 8imited is the first interest free commercial bank in (outh+5ast

#sia' .he bank has opened 196 branches and 1 (:5 centers covering important

commercial areas'

Islami Bank Bangladesh is a financial institution whose status, rules and procedures

e;pressly state its commitment to the principle of Islamic (hariah' 0onse

1.! "rigin o# the report:

.his report is based on an internship program' IB.?# arranges internship program to

gather practical knowledge about banking activities followed by IBB8 for @niversity

students as @niversities conducted with different organi/ation after the completion of

theoretical courses of program of :asters of Business #dministration :B#! A Bachelor

of Business #dministration BB#!' 5ach intern must carry out a specific pro-ect, which is

assigned by the IB.?#' 0onse


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1.$ "%&ectives o# the stud':

.he first ob-ective of writing the report is fulfilling the partial re


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1.()ethodolog' o# the stud':

or carrying out this pro-ect paper we had to study the actual banking operations of

IBB8'

In order to carry out this study, two sources of data and information have been used

a) Primary data

e discussed with the e;ecutives A officials of the IBB8 and found the appro;imate

data, which has been presented in the report' e also discussed with the officials of

conventional Banks A IB.?# regarding the issue and found necessary information,

which has been presented in the report'

b) Secondary data

#nnual ?eports of &*+&7 of Islami Bank Bangladesh 8td'

Desk report of the related department

:anuals of Islami Bank Bangladesh 8imited Bai+:urabaha, Bai+:ua--al,

Bai+(alam, :usharaka!

.raining sheets which are provided by Islami Bank .raining and ?esearch

#cademy IB.?#!'

#udit ?eports

ebsite

?elevant books, ?esearch papers, %ewspapers and ournals'

Internet and various study selected reports'

E


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1.* +cope o# the +tud':

.he scope of the organi/ation part covers the organi/ational structure, background, and

ob-ectives, functional departmentali/ation and business operation of IBB8 as a whole and

especially this report focuses on general banking and investment operation of IBB8'

1. -imitation o# the stud':

.here are some limitations in our study' e faced some problems during the study which

we are mentioning them as below+

i) Lack of time:

.he time period of this study is very short' I had only ) weeks in my hand to complete

this report, which was not enough' (o I could not go in depth of the study' :ost of the

times the officials were busy and were not able to give us much time'

ii) Insufficient data:

(ome desired information could not be collected due to confidentiality of business'

iii) Lack of monitory support:

ew officers sometime felt disturbed, as they were busy in their -ob' (ometime they

didnFt want to supervise us out of their official work'

iv) Other limitation:

#s we are newcomer, there is a lack of previous e;perience in this concern' #nd many

practical matters have been written from our own observation that may vary from person

to person'

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Chapter 0!

Corporate ro#ile o#

IBB-

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!.1 /e#inition o# Islamic %anking:

#n Islamic bank is a financial institution which operates with the ob-ective to implement

and materiali/e the economic and financial principles of Islam in the arena of banking'

=#n Islamic Bank is a financial institution whose status, rules and procedures e;pressly

state its commitment to the principle of Islamic (hariah and to the banning of the receipt

of interest on any of its operations>+OIC.

.he "rgani/ation of #li A (haskar 199E, pp+&+&E! Islamic bank is a Gcompany which

carries on Islamic banking business' Islamic banking business means banking business

whose aims and operations do not involve any element which is not approved by the

religion IslamG #ct %o '&76!'

iauddin hmed says, GIslamic banking is essentially a normative concept and could be

defined as conduct of banking in consonance with the ethos of the value system of IslamG

lbid!'

!.! Bangladesh Bank -icense #or IBB- operation:

.he bank operates within the frame work of the e;isting banking laws, rules and

regulation sub-ect to such minor ad-ustment that may be considered for an Islami Bank to

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function' In addition to the above all re


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business life' (o, the ob-ectives of the Islamic Banking may be derived from the broader

ob-ectives of the Islamic economy' .wo


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+econdl'to review critically the different models of Islamic banking presented over the

years in the conte;t of the practice of Islamic banking with a view to refining the theory

as well as improving the practice'

3hirdl'it is essential to put the whole theory and practice of Islamic banking in the

perspective of an Islamic economy and the Islamic moral and social order' #ny element

of the Islamic system however important cannot produce the desired results if it is

allowed to operate in isolation' It must lead to other complementary changes to complete

the process'

!.* 4ole o# contri%ution o# IBB- to Bangladesh Econom':

Islami Bank Bangladesh 8imited has many success stories of achievements' .hese are

summari/ed below

IBB8 is the pioneer institution of Islamic Banking in Bangladesh'

.he success of IBB8 has imbibed other sponsors at home and abroad to establish

Islamic Banking in Bangladesh' our national, one international Islamic Banks

have since been established in the country' # private sector traditional bank has

also established two full+fledged Islamic Banking branches' (everal other e;isting

and proposed traditional banks have also e;pressed their intention to introduce

Islamic Banking'

IBB8 has successfully mobili/ed deposits from a section of people who hither+to+

before did not make any deposit with interest based banks'

.he Islamic Banking products which are offered by IBB8 through its 196

branches located at important centers all over the country and spontaneous

acceptance of those products by the people proves the superiority of Islamic by

the people proves the superiority of Islamic banking'

IBB8s market share of deposit investment and ancillary business is steadily

increasing

IBB8 through still a tiny bank handless more than 1J of countrys e;port and

import trade'

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#mong the contemporary commercial Banks IBB8s position is first in respect of

mobili/ation of deposit, deployment of found and earning profit'

Investment in industrial sector occupies nearly 9'19J of IBB8s investment

portfolio' .his is a uni


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their customers' # substantial part of their financing would be for specific pro-ects or

ventures' .heir e


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"ur vision is to always strive to achieve superior financial performance, be concidered a

leading Islamic bank by repuyation and performance'

"ur goal is to establish and maintain the modern banking techni


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I3' .o play intermediately role if necessary'

3' .o insure the (hariah 0ompliance in Islami Banks by sending (hariah

Inspection report to the Bank :anagement'

3I' .o conduct training course on (hariah issues for 2uman ?esources

Development of the memberFs bank'

3II' .o arrange (eminar and (ymposium on banking issues'

3III' .o identify the problems and making recommendation'

IL' .o collect data and information regarding Islami banking the same to

others'

L' .o publish Books, ournal, :anual, Brushier and distributing the same

among the members bank'

LI' .o translate various Banking Books and #rticles into Bengali 8anguage

(ource Islami bank 0entral (hariah Board ournal 1st 5dition, :arch &!

!.10 4ole o# I/B #or Islamic Banking:

.he purpose of the Bank is to foster the economic development and social progress of

member countries and :uslim communities individually as well as -ointly in accordance

with the principles of (hriah i'e' Islamic law' .he functions of the Bank is to participate

in e


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!.11 Corporate in#ormation at a glance 5s on Fe%ruar'

!, !00


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1


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.hus, financial intermediation in an Islamic framework has been developed on the basis

of the above two principles' 0onse


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compared with an Islamic bank' compared with a conventional bank' It is, in

effect, a multi+purpose institution'

7' It can charge additional money

compound rate of interest! in case of

defaulters'

7' .he Islamic banks have no provision to

charge any e;tra money from the

defaulters')' In it very often, bankFs own interest

becomes prominent' It makes no effort to

ensure growth with e


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1' .he nature of deposits of Islamic Banks is different from that of conventional

Banks' .he Islamic Banks mobili/e deposit on :udaraba and #l+adiah basis under

Islamic (hariah, while conventional Banks do this on prefi;ed interest basis' .he

Depositors of Islamic Banks are business partners of the Banks and they share the

$rofitKloss of the business'

&' It is obligatory for Islamic Banks as per (hariah to pay Pakat while 0onventional

Banks do not act on such obligation' In the Bank 0ompany #ct, 1991 there is no

provision to pay Pakat by the Islamic Banks'

*' .he Islamic Banks deploy their funds as per different modes of

InvestmentKinancing approved by Islamic (hariah' :ost of the Investments of Islamic

banks are on Bai+:ode' In this mode Banks sell specified goods to the clients on cost

plus agreed upon profit or at a negotiable price payable after a certain fi;ed period' If, the

client fails to pay the price within the fi;ed period, the Islamic Banks cannot impose or

reali/e additional amount as income of the Bank'

' #s activities and operations of Islamic Banks particularly Investment $ort+folio is

completely separate form that of 0onventional Banks, the #ct and $rocedures for

initiation of legal action against the default clients should be separate under the

framework of Islamic urisprudence'

E' Inspections of Islamic Banks are made as per system adopted for 0onventional

Banks and sometimes by the Inspectors without having any knowledge of Islamic system

and law' .he inspection of Islamic banks should be done with a view to identifying both

general and shariah lapses by the persons having good knowledge of Islamic (hariah and

Banking'

!.1* Basic Functions o# IBB-:

.he functions of Islami Bank Bangladesh 8imited are as under

.o maintain all types of deposit accounts

.o make investment

.o conduct foreign e;change business'

.o e;tend other banking services

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.o conduct social welfare activities through Islami Bank oundation'

!.1 "rgani>ational +tructure o# IBB-:

&1

5;ecutive $resident 5$!

Deputy 5;ecutive $resident D5$!

5;ecutive 3ice $resident 53$!

(enior 3ice $resident (3$!

3ice $resident 3$!

(enior $rincipal "fficer ($"!

#ssistant 3ice $resident #3$!

$rincipal "fficer $"!

(enior "fficer ("!

"fficer

$robationary "fficer

#ssistant "fficer rade + I

#ssistant "fficer rade + II

#ssistant "fficer rade + III


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Chapter 0$

General Banking o#

IBB-

&&


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$.1 Introduction:

eneral Banking activities are the most important part of any bank' It also play a vital

role in deposit mobili/ation of the branch' eneral banking is the heart of all business

banking activities' .his department performs the core function of the bank, operates the

day+to+day transaction' It is the storage point of the all kinds of transaction of foreigne;change department, loans and advance department and itself' (o general banking

section is the lifeblood in banking service'

.he relationship between customer and banker begins with opening an account by the

customer' "pening an account binds banker and customer into contractual relationship'

#ll kinds of fraud and forgery are initiated by opening an account' .herefore, the bank

should take e;treme caution in selecting customers' 3arious general banking activities

are given stated below

$.! Functions o# General Banking:

unctions of eneral Banking department are as follows

#ccount opening section

?e


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(aving all transaction record in computer

0losing and transfer different types of accounts'

4eeping good relation with valued customers

$roviding necessary support to the customers

$.$ 3'pes o# ccount:

Bank receives deposit by different accounts' .here are two types of deposit accounts

i' #l+ wahdia

ii' :udaraba mode

l7 ?ahdia:0urrent account is conducted under #l+ wahdia system

)udara%a mode:under the :udaraba mode client are called sahib #l :all and bank

plays role as a :udarib

@nder the )udara%a )ode:

.here are many types of product under this :ode' .hese are as follows

:(# + :udaraba (avings #ccount

:2(# + :udaraba 2a-- (avings #ccount

:(B + :udaraba (avings Bond

:(( + :udaraba (pecial (cheme

:.D? + :udaraba .erm Deposit ?eceipt

::$D( + :udaraba :onthly $rofit Deposit (cheme

::( + :udaraba :ahor (avings #ccount

:(%# + :udaraba (hort %otice #ccount

$.( General characteristics o# deposit accounts:

l78a'adia Current AC 58C6

&


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#0# accounts are unproductive in nature as far as banks loan able investment fund is

concerned sufficient fund has to be kept in li


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ro#it: IBB8 offers a competitive price to attract depositors on the basis of market

forces'

3a%le: ro#it on /eposit

'ear :.D? #K0 :(# 2a-- :(( :(B*

month

6

month

1&

month

&

month

*6

month

1+1

years

11+

&Eyear

s

E

years

1year

s

Eyers )year

& )'*7J )'7E 9'1* 9'*& 9'E1 7'6 1'

6

1'6 1'

6

1&'*6 1'

6

11'))

&1 )'6J )') 9'&* 9'& 9'61 7'69 1'E

7

1'E7 1'E

7

1&'9 1'E

7

1&'1

&& 7'6J 7'9 )'&9 )'6 )'6* 6'7 11'&

&

11'6E 9'E 11'&& 9'E 1'79

&* 7'7J 7'*9 7'71 7')7 )' 6'* 1'

E

1')E )') 1'E )') 1'

& 6'&J 6') 6'76 6'91 7'E E'&) 9'16 9'E1 7'7E 9'16 7'7E )')1

&E 7'*1J 7'6E 7'9) )'1E )'*1 6'&* 11')

11'&& 9'1 1') 9'1 1'*9

&6 7'6&J 7'97 9'1 9'E) 1'7 6'7 11'&

6

11'69 1'*

11'&6 1'*

1'*9

&7 6')J 7'1 9' 9'& 9'6E 9'1 1'

1' 9'7 1' 9'7 9')

&) 6'EEJ 6')E )' )'* 9' 6' 9') 1'&E 9' 9') 9' 9'6

$.(.1 General practice in account opening section

8ho can open AC

$ersons over 1) years e;cept some restricted persons!

#ccount of club

#ssociation

#gent

overnment

(emi+overnment

"rgani/ation

8i


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Illiterate persons etc

$.(.! DC 5Dno? 'our Customer!

.his type of form is mandatory for opening #ccount' or opening #K0 the following

things are mandatory+

0ommissioner 0ertificate

.wo copy passport si/e photo of client'

"ne copy nomineeFs photo'

(ign of introducer is verified

$.(.$ ccount "pening 4egister

#fter fulfilling all the re


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0ustomer has to certify by different department of bank that he or she has no liabilities to

this branch of the bank' .hen total particulars of the #K0 holder will prepare and sent to

the customerFs desired branch' 8iability of recogni/er is secondary and account holder is

primary'

$.* -ocal 4emittance

IBB8 sells and purchase $'"', D'D' and .'.' to its customers only' I. does not offer

remittance service fre


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Demand Draft is very much popular instrument for remitting money from one corners of

a country another' .he instrument is basically used for transfer and payment' Difference

between pay order and demand draft is in terms of place only $'"' is used for remitting

money within the city whereas D'D' is used for within the country' D'D' too constitutes

current liability on the part of a bank' #t IBB8 D'D' is not sold to people other than its

customer'

ccounting entries #or issuance o# //

0ashKpartyFs #K0++++++++++++++++++++++++Dr

IB #K0++++++++++++++++++++++++++++++++++0r

Income #K0 0ommission+++++++++++++0r

Charges For Issuing //

+ervice Charge:

.k' 1 to .k' 1, .k' 17+

#bove .k' 1, 1 .k' for every 1,

;at:

1EJ of principle amount

$.*.$ 3elegraphic 3rans#er 5336

.elegraphic transfer is one of the fastest means of transferring money from one branch to

another or from one to another' .he .'.' issuing bank instructs its counterpart by tested

tele; message regarding remittance of money' %o instrument is given for .'.' unless both

parties have account as money is transferred'

ccounting entries #or issuance o# 33

0ashK?emitterFs #K0Kche


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.k' 1 to .k' 1, .k' 17+

#bove .k' 1, 1 .k' for every 1,

;at:

1EJ of principle amount

$. Clearing Collection /epartment

$..1 Clearing

#s far safety is concerned customers get crossed che


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dishonored then authori/ed branch send the che


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1' ?eceived seal on deposit slip'

&' IBB8 8ocal "ffice $rincipal Branch crossing indicating them as collecting banks'

*' 5ndorsement given G$ayees #K0 will be credited on reali/ation'

' 5ntry on register from where a controlling number is given'

0ollecting bank can collect it either by its branch of by the drawers bank' .hey will

forward the bill then to that particular branch' "B0 number will be given on the

following letter' %ow following procedures will take place in case of the following two

cases'

A. ills !"oileted "hrou#h ranch):

If the bill is forwarded to a branch they will collect it through IB0 procedure' 0ollecting

branch will receive and I'B'0'# from that particular agent branch according treatment

from the angle of collecting branch will be'

#K0 concerned branch'''''''''''''''''''''''Dr'

0ustomer #K0 ''''''''''''''''''''''''''''''''''''''''''0r'

Income #K0 commissionC postage''''''''''''''''''''0r

In this case commission will be charged by the collecting branch, not the agent branch'

. ills Collected "hrou#h $ra%er&s ank:

#ccounting treatment for the collecting branch will be

a' 0learing '''''''''''''''''''''''''''''''''''''''''''''''Dr'

b' 0ustomer #K0''''''''''''''''''''''''''''''''''''''''0r'

$..* In?ardBills #or Collection 5IBC6

In this case bank will work as an agent of the collection bank' .he branch receives a

forwarding letter and the bill' %e;t steps are

1' 5ntry in the I'B'0' registers number given

&' 5ndorsement given +G"ur branch endorsement confirmedG

*' .he instrument is sent to clearing for collection''''''''''''''''''''''''Dr'

' :iscellaneous 0reditor #K0 "B0''''''''''''''''''''''''''''''''''''''''0r'

%ow following $rocedures will take place in case of the following two cases

*&


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Credit 3ransaction:hen a branch re


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bank' .here are three keys of the vault which are given to three seniors most officers'

Daily as estimated amount of cash brought out from the vault for transaction purpose' %o

more than .k' crore brought at once from the vault on a single day'

$.9.$ Cash acking and 2andling

0ash packing and handling needs a lot of care as any mistake may lead to disaster'

$acking after banking hour when the counter is closed, cash are packed according to

denomination' %otes are counted several times and packed in bundle, stetted and stumped

with initial'

$.9.( Evening Banking

#fter the banking hour the cash counter is closed' But sometimes customers come to

draw or deposit money after the service hour' 2owever, their money is received or aid

recorded in the ne;t daybook' .his is known as evening banking'

$. /ispatch +ection

$..1 In?ard dispatch

1' Inward mail, other than those which are registered, marked confidential and

addressed personally to same official, may be opened by an authori/ed member of

staff who should enter in the inward mail register and mention the serial number

of the mail register on the letterK paper received, affi; =received> date stamp on it

and delivery the same to the concerned officials against acknowledgement'

&' 8etters addressed personally to any official shall be opened by the address only'

*' ?egistered mails and mails marked confidential will be opened by an officer or

management in small Branches' #ll these letters shall however enter in the inward

mails registers'

' (top payment instructions and court orders shall be received authori/ed officials

who will immediately note date A time on it and take necessary steps'

$..! "ut?ard dispatch

1' "utward letters must be serial number and entry in the register with name and

address'

*


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&' 5ach typist will maintain a typist master file and dispatch 0lark also maintain a

separate master file for future record'

*' 8ocal letters may be delivered through peon book' If the area is large and letters

are many then service are given through post office'

' 8etter dispatched must be entered in the outward mail register and bear proper

postal stamps if sent through post office'

E' If the letters are sent by registered post or courier service, postal or courier receipt

must be maintained by the dispatch department in a file' (imilarly

acknowledgements received back should be maintained in the file

Chapter 0(

*E


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Investment o#IBB-

(.1 Introduction:

Investment operation of a Bank is vital important as the greatest portion of total revenue

is generated from it ma;imum risk is centered in it and a Bank e;istence mostly depends

on prudent management of its Investment $ort+folio' .o survive in world economy, a

bank should have to contribute in the proper resources mobili/ation through its efficient

investment policy so that it is profitable, safe and li


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.he special feature of the investment policy of the Bank is to invest on the basis of profit+

loss sharing system in accordance with the tenets and principles of Islami (hariah

5arning profit is not only motive and ob-ective of the BankFs investment policy but also

emphasis is given in attaining social welfare and in creating employment opportunities'

(.! /eposit mo%ili>ation:

In recent years Islami Bank Bangladesh 8imited had succeeded in attracting increased

deposit' Investment of the Bank increased to .k' 166)1&'7) million as on in &7 from

.k' 1*&)1&' million in &6' .he percentage of deposit growth in &7 was &E'6J'

.otal number of depositors of IBB8 increased to *)&79' 8ac in &7 from

*&71*1' 8ac of the preceding year, registering an increase of 19J'

Basically Islami Bank has its own product line such as :udaraba (avings #ccount

:(#!, :udaraba (pecial (cheme :((!, :udaraba .erm Deposit :.D?!, :udaraba

(hort %otice #ccount :(%#!, :udaraba :onthly $rofit Distribution (cheme

::$D(! etc' this 5ntire $roduct makes a tremendous response over the client' :ore

over the client are becoming very much interested to accept the new methodology

introduced by IBB8 instead of conventional banking where there is no use of .erms call

interest..hen most recently IBBl has introduced a new product call :udaraba (aving'

Bond already augment resources matching with its structure, it has received tremendous

response' In 199), 1 year and five yearFs .erm :udaraba (pecial (aving pension!

(cheme has been introduced to meet the e;pectation of the e;istingKpotential depositors

of the Bank that has also received tremendous response'

(.$ Investment:

Investment of the bank increased to .k' 1,,9&1 :illion as on *1'1&'&7 where the

investment of preceding year is .k' 1,1*,E7E million and the growth rate in &7 is

&7'6J rather than the growth rate of the preceding year 17'&J'this increased

*7


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investment growth of the bank in &7 is due to promote investment for effective

utili/ation of depositorsF fund'

3a%le7(.1 +ector78ise Investment

(ector+wise distribution of investment as on *1st December &7 vis+S+vis the

corresponding period of last year is given below

.aka in :illion

+ector7?ise Investment !009 !000

+ector mountH to 3otal

Investmentmount

H to 3otal

Investment

Industrial 7),7)) E'*7J 6&,6& EE'1EJ0ommercial *,)77 *'&)J &),9) &E'E&J

?eal 5state ),E)) E'9*J ),*E) 7'*6J

.ransport 6,)E '7J E,)9 E'19J

#griculture &,6E6 1')*J &,7&& &'J

"thers ,E&7 *'1&J ,979 '*)J

.otal 19&1 1J 11*E7E 1'J

Chart7(.1 Comparison o# +ector78ise Investment as on $1.1!.!007

*)


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54.37%30.28%

5.93%

4.47%

1.83%

3.12%

Industrial

commercial

Real Estate

Agriculture

Transort

!t"ers

3a%le7(.$ )ode ?ise Investment:

5)illion in 3aka6

)ode7?ise Investment !009 !00

)ode mountH to 3otal

Investment

mountH to 3otal

Investment

Bai+:urabha 7*,)** E'9EJ E9,6E E&'*6J

2ire $urchase @nder

(hirkatul :elk

E,&1 *'6J *9,*99 *'69J

Bai+:ua--al 6,E6 'E&J 6,9&1 6'9J

$urchase A %egotation 11, 7'6&J ,)7 '&7J

Huard 1,9EE 1'*EJ 1,97 1'7J

Bai+(alam 1,1E* ')J 96 ')J

:udaraba E '*J E 'J

:usharaka 1* '1J 1* '1J

.otal 1,9&1 1J 11*,E7E 1J

*9


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Chart7(.$ Comparison o# )ode ?ise Investment as on $1.1!.!009

$ursuant to the Investment $olicy adopted by the Bank a 7+year $erspective Investment

$lanF has been drawn+up for the year &* to &7 and put into implementation' .he plan

aims at diversification of the investment port+folio by si/e, sector geographical area,

economic purpose and securities to bring in phases all sectors of the economy and all

types of economic groups of the society within the fold of BankFs investment operations'

(.( "%&ectives and principles o# Investment:

42.71%

22.01%

10.#1%

10.47%

8.58%

2.87%

1.35%

0.93%

0.40%

0.0#%

0.01%

$udaraa &a'ings

$udaraa Term (eosit

)urrenc* + )ontingenc*

$udaraa &ecial &a'ings

$udaraa &a'ings ,ond

$udaraa $ont"l* -roit

(eosit &c"eme

$udaraa &/(

,ills -a*le

$udaraa a

$udaraa oreign )urrenc*

(eosits

$udaraa $u"or &a'ing


41/88

.he ob-ectives and principles of investment operations of the Bank are

.o invest fund strictly in accordance with the principles of Islami (hariah'

.o diversity its investment portfolio by si/e of investment, by sectors public and

private! by economic purpose, by securities and by geographical area including

industrial, commercial A agricultural'

.o ensure mutual benefit both for the Bank and the investment client by

professional appraisal of investment proposals, -udicious sanction of investment

close and constant supervision and monitoring thereof'

.o make investment keeping the socio economic re


42/88

.he Bank e;tends investments under the principles of Bai+:urabaha, Bai+

:ua//al, 2ire $urchase under (hirkatul :eelk and :udaraba' .he Bank is

making sincere efforts to go for investment under :udaraba principle in near

future'

(.* 3he salient #eatures o# investment o# IBB-:

.he salient features of the investment policy are outlined below

"bservance of the legal investment limited of the Bank'

"bservance of legal investment limited per client'

"ptimum utili/ation of inevitable fund'

$rofitability of the investments'

(afety and security of the investments'

Investment at minimum possible risk e'g' default risk and li


43/88

0ategori/ation categories!

$rocessing and appraisal

(anction

Documentation

$urchase of goods by the Bank

.aking delivery of goods by the Bank

(ales and delivery of goods to the client

(.9 /i##erent )odes o# Investment:

.here are three types of investment :echanism which are as follows

1. Bai7)echanism 53rading )ode6:

a' Bai+:urabaha

b' Bai+:ua--alc' Bai+(alam

d' Bai+IstinhnaFa

&'I&ara )echanism

a' 2ire $urchase

b' 2ire $urchase under (hirkatul :elk

$. +hare )echanisms

a' :udaraba

b' :usharakah

(.9.1 Bai7)echanism 53rading )ode6:

*


44/88

a6 Bai7)ura%aha

.he terms =Bai+:urabaha> have been derived from #rabic words and Bai and ?ibhun!'

.he word means purchase and sale and the word means an agreed upon profit =Bai+

:urabaha> means sale on agreed upon profit' Bai+:udarabaha may be defined as a

contract between a buyer and a seller under which the seller sells certain specific goods

permissible under Islamic (hariah and the 8aw of the land!, to the buyer at a cost plus

agreed profit payable in cash or on any fi;ed future date in lump+sum or by go downs'

.he profit marked+up may be fi;ed in lump+sum or in percentage of the cost price of the

goods'

Important #eature:

1' It is permissible for the 0lient to offer an order to purchase by the Bank

agriculture goods deciding its specification and committing him to buy the same

from the Bank on :urabaha, i'e' cost plus agreed upon profit'

&' It is permissible to make the promise binding upon the 0lient to purchase from the

Bank, that is, he is to either satisfy the promise or to indemnify the damages a

caused by breaking the promise without e;cuse'

*' It is permissible to take cashKcollateral security to guarantee the implementation

of the promise or to indemnify the damages'

' It is also permissible to document the debt resulting from Bai+:urabaha by a

uarantor, or a mortgage, or both lay any other debt' :ortgage Kuarantee K0ash

(ecurity may be obtained prior to the signing of the #greement or at the time of

signing the #greement'


45/88

E' (tock and availability of goods is a basic condition for signing a Bai+:urabaha

#greement' .herefore, the bank must purchase the goods as per specification of

the 0lient to ac


46/88

Categori>e the proposal as under:

Bai7)ura%aha Commercial:

Investment for $urchase and sale goods to individual KirmK0ompany for 0ommercial

purpose shall be termed as Bai+:urabaha 0ommercial'

Bai7)ura%aha Industrial

Investment to industrial undertakings in the orm of 8and, Buildings, :achineries,

5 means sale for which payment is made at a future fi;ed date or within

fi;ed period' In short, it is a sale on 0redit' Bai+:ua--al may be defined as a contract

between a buyer and a seller under which the seller sells certain specific goods

permissible under Islamic (hariah and the 8aw of the 0ountry!, to the buyer at a cost

plus agreed profit payable in cash or on any fi;ed future date in lump+sum or by go

downs' .he seller may also sell the goods purchased by him as per order and

specification of the Buyer'

Important Features:

i' Bank is not bound to declare cost of goods and profit mark+up separately to the

client'

ii' (port delivery of the item and payment is deferred'

6


47/88

iii' "wnership and possession of the goods is transferred by the Bank to the client

before receipt of sale price'

iv' 0lient may offer an order to purchase by the Bank any specified goods and

committing himself to buy the same from the Bank on Bai+:ua--al :ode'

v' It is permissible to make the promise binding upon the client to purchase from the

Bank' .hat is he is to either satisfy the promise or to indemnify the damage

caused by breaking the promise'

vi' 0ashK0ollateral (ecurity should be obtained to guarantee the implementation of

the promise or to indemnify the damages'

vii' :ortgageeKuaranteeK0ash (ecurity may be obtained before Kat the time of

signing the agreement'

viii' (tock and availability of goods is a pre+condition for Bai+:ua--al agreement' .he

responsibility of the bank is to purchase the desired goods at the disposal of the

client to ac


48/88

Categori>ation:

Categori>e the proposal as under

Bai7)ua&&alJ Commercial:

Investment for $urchase and sale goods to individual KirmK0ompany for 0ommercial

purpose shall be termed as Bai+:urabaha 0ommercial'

Bai7)ua&&al Industrial:

Investment to industrial undertakings in the orm of 8and, Buildings, :achineries,

5


49/88

Bai+(alam is a mode of investment allowed by Islamic (haria in which

commodityies!Kproduct(! can be sod without having the said commodity ies!

Kproducts! either in e;istence or physical Kconstructive possession of the seller' If

the commodity ies!Kproduct(! are ready for sale, Bai+ (alam is not allowed in

(hariah' .hen the sale may be done either in Bai+:urabaha or Bai+:ua--all mode

of investment'

enerally, industrial and agricultural products are purchasedKsold in advance

under Bai+(alam mode of investment to infuse finance so that product is not

hankered due to shortage fundKcash'

It is permissible to obtain collateral security from the seller client to secure the

investment from any ha/ards via non+supplyKpartial supply of commodity

ies!Kproduct(!, supply of low


50/88

Industrial Including small and cottage!

#gricultural

"thers, if any'

c6 IsteshnaKa

Isteshnaa is a contract between a manufacturerKseller and a buyer under which the

manufacturerKseller sells specific products! after having manufactured, permissible under

Islamic (hariah and 8aw of the 0ountry after haying manufactured at an agreed price

payable in advance or by go downs within a fi;ed period or onKwithin a fi;ed future date

on the basis of the order placed by the buyer'

Important #eature:

IstisnaFa is an e;ceptional mode of investment allowed by Islamic (hariah in

which products! can be sold without having the same in e;istence' In the

products! are ready for sale' Istisnaa is not allowed is (hariaf' .hen the sale may

be done either in Bai+:urabaha or Bai+:aa--al mode of investment' in this mode,

deliveries of goods are deferred and payment of price may also be deferred'

It facilitates the manufacturer sometimes to get the price of the goods in advance,

which he may use as capital for producing the goods'

It gives the buyer opportunity to pay the price in some future dales or by go

downs'

E


51/88

It is a binding contract and no party or is allowed to cancel the Istisnaa contract

after the piece is paid and received in full or in part or the manufacturer starts the

work'

Istinaa is specially practiced in manufacturing and industrial sectorsC however, it

can be practiced in agricultural and constructions sectors also 0lass %ote, #bul

2ussain!'

(.9.! I&ara )echanism 5-easing )ode6

a6 2ire urchase AI&arah

.he term I-arah has been derived from the #rabic works #-r and @-rat which means

consideration, return, wages or rent' .his is really the e;change value or consideration,

return, wages, rent of service of an #sset' I-arah has been defined as a contract between

two parties, the 2iree and 2irer where the 2irer en-oys or reaps a specific service on

benefit aginst a specified consideration or rent from the asset owned by the 2iree' It is a

hire agreement under which a certain asset is hired out by the 2iree to a 2irer against

fi;ed rent or rentals for a specified period'

%6 2ire urchase under +hirkatul )elk

2ire purchase under shirkatul :elk is a special type of contract which has been

developed through practice' #ctually, it is a synthesis of three contracts (hirkat, I/ara

and sale' (hirkat means partnership' (harikatul :elk means share an ownership' hen

two or more persons supply e


52/88

benefit as per agreement and bear the loss in proportion to their respective e


53/88

I3' #s the ownership of hired portion of the asset lies with the 2ire Bank! and rent is paid

by the 2irer 0lient! against the specific benefit, the rent is not considered as price or part

of price of the asset'

3' In the 2ire $urchase under (hirkatul :elk #greement the 2ire Bank! does not sell or

the 2irer 0lient! does not purchase the asset but the 2ire Bank! promise to sell asset to

the 2irer 0lient! part by part only, if the 2irer 0lient! pays the cost price K e


54/88

L' 5ffectiveness of the sale contract depends on the actual sale and transfer of ownership

of the asset by the 2ire to the 2irer' It is sold and transferred part by partC it will become

effective part by part and with the sale and transfer of ownership of every share K part'

.he hire contract for that share K part will lapse and the rent will be reduced

proportionately' #t the end of the hire period when the full title of the asset will be sold

out and transferred to the 2irer 0lient!, the 2irer will become the owner of both the

benefit and the asset conse


55/88

2ire urchase under +hirkatul )elk 3ransport

2ire $urchase under (hirkatul :elk investment in the form of .ransport +Bus, .ruckm

0ar, .a;i, 8aunch, (teamer, 0argo 3essel, #ir .ransport etc, shall be termed as 2ire

$urchase under (htrkatuT :elk .ransport'

2ire urchase under +hirkatul )elk 4eal Estate

2ire $urchase under (hirkatul :elk investment in the form of 8and, Building, :arket,

#partments, for useKrental shall be termed as 2ire $urchase under (hirkatul :elk ?eal

5state'

2ire urchase under +hirkatul )elk 4eal Estate

2ire $urchase under (hirkatul :elk investment in the form of asset for useKrental under

any scheme all is termed as 2ire $urchase under (hirkatul :elk (cheme'

(.9.$ +hare )echanism

a6 )udara%ah

It is a form of partnership where one party provides the funds while the other provides the

e;pertise and management' .he first party is called the (ahib+#l+:aal and the latter is

referred to as the :udarib' #ny profits accrued are shared between the two parties on a

pre+agreed basis, while capital loss is e;clusively borne by the partner providing the

capital'

Important #eatures:

Bank supplies capital as (ahib+#l+:all and the client invest if in the business

with his e;perience'

EE


56/88

#dministration and management is maintained by the client'

$rofit is divided as per management'

Bank bears the actual loss alone'

0lient can not take another investment for that specific business without the

permission of the Bank 0lass, %otes, 2ussain, and #bul!'

%6 )usharaka

#n Islamic financial techni


57/88

(.9.( "ther )odes o# Investment

3here are t?o other modes o# investment ?hich have limited impact in our countr':

a6 Luard

.he word GHuardG is an #rabic wordG which means loan or credit on advance' .he literal

meaning of Huard is giving Gungible goodsG for use without any e;tra value returning

those goods' It must follow the principle of e


58/88

Huard means loan without interest and 2asana means beautiful' Huard+e+2asana implies

beautiful loan on good faith or beneficial loan' Islami Bank IBB8! does not recover any

charge,even service, from Huard+e+2asana account' 8oanee has to repay the principal

amount' .his loan facility in e;tended only to deserving cases on compassionate grounds

and special welfare consideration' .he principal amount is refundable within a reasonable

time' Islami Bank IBB8! grants this loan not only for consumption purpose but also for

owning factors! of production' .he ultimate ob-ects of both the consumption and

production Huard+e+2asana are to enable the loanees to support economic problems'

In Islami Bank IBB8! an investment is created against pledge of :udaraba .erm

Deposit ?eceipt :.D?!' enerally )J of the :.D? is allowed to the holder for 2alal

activities without any profit' "nly .4'&K+is reali/ed as service charge per deal' It is

called Huard against .erm Deposit ?eceipt H.D?!'

(. /i##erence %et?een Islamic Banking Conventional Banking incase o# Investment )odes:

Islamic Banking Conventional Banking

01. @nder 3rading modes

Buying and selling should be confirmed in

Islamic banking' .hree components should

be ensured+ e;istence of goods, having the

possessionK ownershipK title and transfer of

ownership' #s per clients order bank will

procure the goods and then sell to the client

with adding profit' Huotation cash memo

and other papers if any! should be in favor

In conventional banking, due to basic

difference in principle, no type of loans

and advances can be compared with

trading modes' 2owever, there is an

apparent similarity at operational level of

the trading mechanism with the 0ash

0redit hypothecation and pledge! of

conventional banks' But the concept of

E)


59/88

of bank of ensure procurement of goods'

oods once sold can not be resold i'e' in

case of payment failure bank can not charge

on the goods al ready sold' In practice, bank

charge compensation to control willful

default which is not reali/ed as income in

bankFs books of accounts' 0ustomary

trading modes are Bai :ua--al, Bai

:urabaha and Bai (alam'

buying and selling between Bank and

client is absolutely absent' 0ompound

interest is charged and accounted for in

case of failureKdelay of payment'

0!. @nder +hirkat modes:

(hirkat modes are :udaraba and:usharaka' :udaraba principle is the same

as mentioned in case of deposit

mobili/ation' :usharaka is the e


60/88

Chapter 0*

6


61/88

Foreign Echange

o# IBB-

*.1 )eaning o# Foreign Echange:*.1 )eaning o# Foreign Echange:

oreign 5;change means currency A trade e;change say conversion of one to another'

.his is a part of economic A (cience' .his is a big deal divided into different currencies

instrument such as Draft, .raveler 0he


62/88

1' Bank A client'

&' Different Banks in the same foreign e;change market'

*' Different Bank A (chedule Bank of the same country'

' Different 0ontrol Bank'

Islami a Bank follows the following the two craters in respect A payment of foreign

e;change

1' 8ocal currency market value A

&' oreign currency market value'

5;change is being controlled

1' .o stabili/e the rate of e;change'

&' .o protect domestic industries'

*' or proper implementation of plans'

' .o increase the bargaining strength

E' .o check over invoicing A @nder invoicing

6' .o check the Blank marketing and smuggling

7' or regulating the international movements of goods

*.$ uthori>ed /ealer Branch:*.$ uthori>ed /ealer Branch:

Bangladesh bank in e;ercise of the power under section * of oreign 5;change

regulation #ct' 197 issues a license to schedule Bank where they have ade


63/88

&' oreign 5;change 0ircular'

*' $ublic %otice

' Import A 5;port $olicy a/ette

E' :inistry of 0ommerce 0ircular

6' B0D circular'

7' uide lines for foreign e;change regulation'

)' "ther authori/ation i'e' %B0 Dept!

*. )ethods o# e##ecting pa'ment o# IBB-:*. )ethods o# e##ecting pa'ment o# IBB-:

Islami Bank follows the following methods to make payments between countries'

1' 3elegraphic 3rans#er 5336:.his is an instruction for transfer of money by

.elegram, 0able or tele; from a bank in one country to another Bank in different

center' .his is an instruction form the Importers Bank to the e;porters Bank' .he

.. charge is reali/ed by us from the partly as per Bank circular'

&' )ail 3rans#er 5).36:.his transfer is the order to pay cash to a * rdparty' .his

.ransfer is sent by mail A the charge must be reali/ed as per Bank circular'

*' /ra#ts Cheue:# draft is pay order issued by one Bank to another Bank or its

branch'

+ome common terms used in Foreign Echange:

"ver Bought:.his position known as long position'

"ver +old:.his position known as short position'

-IB"4:8ondon Inter Bank "ffer ?ate'

+8IF3:(ociety for orld ide Inter Bank inancial .elecommunication'

C2I+:0learing 2ouse Inter Bank $ayment (ystem'

"+34" AC:"ur #K0 with you i'e' out #K0 with #merican 5;press'

;"+34" AC: .heir #K0 with us, #l+ ?a-i #K0 with IBB8'

-"4" AC:.his #K0 i'e' third Bank ?elationship'

C@: #sian 0learing @nion'

6*


64/88

*.9 @ni#orm Customs and ractices #or /ocumentar' Credits*.9 @ni#orm Customs and ractices #or /ocumentar' Credits

5@C/C6:5@C/C6:

.he I00 @niform 0ustoms and $ractice for Documentary 0redits @0$!, first published

in 19**, are the universally recogni/ed set of rules governing the use of the Documentary

0redit in international commerce' Banking associations and individual Banks in more

than 1 countries and territories adopted the previous revision of 19)*'

.his revision of the @0$, the first for ten years, takes into account a range of important

consideration+ including international -udicial decisions, technical innovations in banking

and other industries, case studies and day to day practice to offer a thoroughly revised

and up to date series of rules'

.hree years in preparation, the 9 #rticles of the new @0$ has come into effect onanuary 1, 199 that indispensable guide to Documentary 0redit usage' .hey provide a

comprehensive and practical working aid to bankers, lawyers, importers, e;porters,

transport e;ecutives and everyone involved in international trade'

*. ctivities o# Foreign Echange:*. ctivities o# Foreign Echange:

.here are three kinds of foreign e;change transaction

1' Import

&' 5;port A

*' ?emittance'

In the following these are discussed in brief'

*..1 I)"43*..1 I)"43

)eaning o# Import)eaning o# Import

Import means lawfully carrying out of anything from one country to county for Buying' It

will be occurred according to the overnment law'

Important olic' "rderImportant olic' "rder

Based on the needs of commodity and availability of finance, overnment declares

policy' or import of goods for a particular period having approval from the %ational

#ssembly is defined as Import policy order' Import policy is a guideline of a set of rules

6


65/88

envisaged by overnment #uthority i'e' the :inistry of .rade and commerce for the

registered importer for import of goods inside the country'

/uration/uration

5arlier import policy has been formulated for two years' But present import policy order

has been formulated for E five! years, 5ffect from the 1 thune 1999 to *thune &*

and valid till announce of new import policy order' If re


66/88

*' %otwithstanding anything mentioned else where, all imports into Bangladesh shall be

sub-ect to such general or specific conditions as many have been prescribed in this order'

' In addition to the conditions mentioned in the control list the conditions' ?estrictions

and procedures for import of various items mentioned in the test portion of this order,

shall as usual, apply in case of import of those items'

E' If, while determining the import status of an items mentioned in the control list the

description of goods does not conform to the 2'('0 0ode mentioned against item, or any

discrepancy arises between the 2'( 0ode and the description of goods, in that case the

description of goods shall prevail, In other words, if the import of a particular item is

shown as banned in the control list, or is shown as importable as sub-ect to fulfillment of

conditions in the list, the said ban or restriction as the case may be, shall e


67/88

date of issuance of 80# from by Bank or registration of 80# form within Bangladesh

Bank registration unit as the case may be'

/ocument reuired to %e su%mitted along ?ith -C Form:

Importers in both public sector and private sector shall submit to their nominated banks

the following documents along with the 8K0 authori/ation orm for opening letter of

credit'

a! 8K0 application form duly signed by the importer'

b! Indent for goods issued by indenture or pro+forma invoice obtained from

the foreign supplier, as the case may be and

c! Insurance cover note'

Import -AC 5-etter o# Credit6:Import -AC 5-etter o# Credit6:

# letter of credit is a conditional Bank undertaking of payment' In other words letters of

credit is a letter form the importer Bankers to the e;porter that the bills if drawn as per

terms A conditions complied with will be honored on presentation'

Definition of 8K0

# letter of 0redit is a conditional bank undertaking of payment' In other words letters of

credit is a letter form the importer bankers to the e;porter that the bills if drawn as per

terms and conditions are compiled with will be honored on presentation

#s per @0$D0 E a credit may be either

i! ?evocable'

ii! Irrevocable'

.he 0redit, therefore, should clearly indicate whether it is revocable or irrevocable' In the

absence or such indication the credit shall be deemed to be irrevocable'

Classi#ication o# -AC:

'?evocable 8K0, Irrevocable 8K0, 0onfirmed 8K0, .ransferable 8K0, Divisible 8K0,

?evolving 8K0, ?estricted 8K0, ?ed 0lause 8K0, reen 0lause 8K0, Back+to+Back 8K0

3'pes o# -AC:

67


68/88

1' ?evocable 0redit

#s per #rticle no' ) a! # revocable credit is a credit which can be amended or canceled

by the issuing bank at any time without prior notification to the seller since to offers little

security to the seller'

&' Irrevocable 0redit

#s per #rticle no 9 an irrevocable credit constitutes a definite undertaking of the issuing

Bank' # credit cannot be amended or cancelled without the agreement of all parties' It

gives the seller grater assurance of payment' #n irrevocable credit can be either confirms

or unconfirmed dependant on the desire of the seller'

Classi#ication o# importer:Classi#ication o# importer:

Importers are those who ate authori/ed by the import .rade authority i'e' A 00I A 5 for

import of goods essential for consumption or for production purposes'

.here are mainly three types of importers'

1' 0ommercial Importer

&' Industrial Importer

*' Importers under age 5arner (cheme

1' 0ommercial ImporterIt means an importer registered under the importers, e;porters and indention registration

order 19)1 who import goods from sale, when issued to commercial importers, given the

category held by him with I.0 classification and public notice against which they are

admitted into import trade'

&' Industrial importers

hen issued to an industrial consumer, gives the items of import as raw materials and

packing materials and spare parts, the value of entitlement and I.0 classification'

*' Importers under 5(

It means registration importers who import only under the 5(' In this scheme, the

foreign e;change re


69/88

-AC -IC3I" 4"CE/@4E F"4 "EIG -AC-AC -IC3I" 4"CE/@4E F"4 "EIG -AC

or opening 8K0 the client is to submit to the bank an application in the printed format of

the designated bank' .his is called 8K0 application form which is also an agreement

between the importer and the bank' .he form is to be stamped under stamp #ct' In force

in Bangladesh' .he importer must submit the 80# A I:$ and indent or contract'

$urchase orderKpro+forma invoice duly accepted by the importer! along with 8K0

application'

.he 8K0 application must be completedK filled in and signed by the authori/e person of

the importer giving the following particulars

a' ull name and address of the supplier of beneficiary and importer'

b' Brief description of the goods'

c' 8K0 value for @(V, etc' 0? value! which must not e;ceed the 80# value'

d' .he unit price,


70/88

8K0 amount can be decreased provided the relevant Indent is amending accordingly and

with the consent of beneficiary'

5ach of clauses of the 8K0 can be amended provided the parties involve the 8K0 consent

to it' $rocedure or preparation and dispatch

#mendment is to be typed in the Banks printed format' .he copies of the amendment

must be dispatched to all concerned as done in dispatching the 8K0' #mendment be kept

in the 8K0 file chronologically date wise'

Bank charge:

#mendment commission is to be reali/ed form the party as per instruction of Bangladesh

Bank ' 5' 0irculars'

#ccounting procedure'

Dr' $artyFs #K0'

0r' 0ommission #K0'

0r' $ostage A .elegraph #K0'

-ia%ilit':

If the amount of 8K0 increased the liability voucher is to be passed as under

Dr' 8iability as per contra 5( 8K0!'

0r' #sset as per contra 5( 8K0!'

Dr' #sset as per contra 5( 8K0!'

0r' 8iability as per contra 5( 8K0!'

# fresh 8iability is to be passed including amount of increase on the date of amendment'

BCD 3" BCD -AC:BCD 3" BCD -AC:

:eaning of Back to Back 8K0:eaning of Back to Back 8K0

7


71/88

Back to Back 8K0 is a type of import 8K0 either in inland or in abroad, which open

against lien on valid e;pert 8K0'

In our country in e;port garment this method of finance is widely used and very well

known to the manufacturers of garments' Bangladesh e;porter received an irrevocable8K0' for supply readymade shirts from an #merican Bank' or manufacture of the

ordered shirts the e;porter' Dose not has re


72/88

&' Backward lender must have!

*' .o continuous


73/88

Check up the document:

Before lodgment, documents must be checked with 8K0 file' 0heck up as under

1' Invoice

&' Bill of 8ading

*' Draft

' Bank forwarding date'

1' I%3"I05

a! .he invoiced amount tallied with draft amount'

b! .he invoice is shown by the beneficiary ad s signed by him'

c! Description of goods in the invoice and bill of 8ading are identical'

&' Bill of 8ading

re also to be referred to the draw for their acceptance'

.he reply of importer is to reach to the Bank within 7& hours in case of non+acceptance'

.he dishonor is to be communicated to the negotiating bank within reasonable time'

@nusual delay in communication of dishonor is not acceptable to the negotiating Bank

and the issuing Bank forfeits its right to claim refund'

?etirement $rocedure for Deferred $ayment of issuance BillsK BB Bills ?etirement $rocedure for Deferred $ayment of issuance BillsK BB Bills

8hen the dra#t is returned %' the dra? 5importer6 a#ter dul' accepted %' him the

#ollo?ing procedure to %e maintained.

1' .he maturity date is to be worked out and noted in the bill ?egister and also in

due date diary' .he due date diary may be maintained by the dealing officer ad the

:anager in+charge of foreign 5;change Determent'

&' .he oreign 0orrespondent should be advised the due date maturity and be

authori/ed to debit the %"(.?" account or to claim reimbursement on due date

as per 8K0 terms'

7*


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*' #ll the documents delivered to the importer e;cept accepted bill of e;changeK

draft'

*..! EM"43)eaning o# Eport:)eaning o# Eport:

5;port means lawful carrying out of anything from one country to another country for

sale

/e#inition o# Eporter/e#inition o# Eporter

.he importers and e;ports trade of the country is regulated by the Imports 5;ports

0ontrol #ct 19E' %o person Kfirm is allowed to e;port any thing from Bangladesh unless

he is registered with 00I and 5 under the registration order Importer and 5;porter!

19E&' .o become an e;porter an 5?0 e;port ?egistration 0ertificate! must be obtained

from the office of 00I A 5'

Eport under -AC

5;porters are allowed to e;port the commodity under irrevocable letter of credit' @nder

this type of e;port, e;porter will ship the goods as pr terms of the credit and will get

payment as per arrangement of the credit'

General 4ules #or Eport

.here are some rules, which are mandatory for e;port of any goods form Bangladesh'

.he rules are as under

1! %o $erson can e;port any goods from Bangladesh, unless he is duly registered as an

e;porter with the 00I A 5'

&! #ll e;port must be declared on the 5L$ form, which is consisting of copies'

*! 5;port mush is against any of the following

a! 5;port 8K0'

b! irm 0ontract'

c! #dvance $ayment'

! .ransport documents related to land route or sea and any other #uthor)i/ed Dealer'

.he #irway Bill and any other documents of title to cargo may be drawn to the order of

a Bank in the country of import' 2owever in case of advance payment, transport

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document may be drawn to the order of oreign Importer Bank endorsement of transport

documents is prohibited' Directions under (l' %o' shall not apply in the following cases

+tages )echanism o# Eport+tages )echanism o# Eport

1! 5;porter will make the goods ready for shipment'

&! #rrangements have to be taken for inspection of the goods by the competent

authority as per credit terms'

*! 5;porter will declare on 5L$ form against e;port 8K0Kirm 0ontractK #dvance

payment'

! 5;porter have to arrange approval for e;port from custom authority on 5L$ from by

submitting 5;port 8K0, 5;port permission from 00I A 5, Huota clearance from 5$B,

@'D' in case of garments, invoice, packing list along with shipping bill prepared by 0A

agent'

E! #fter completion of custom formalities, shipping company will receive the goods and

will issue B'8'

6! 5;porter will collect visaK license and certificate of origin for final documentation'

7! 5;porter will submit the full set of documents to the negotiating bank for negotiation'

)! %egotiation bank will dispatch the documents to the issuing bank for clearance of the

goods from destination against payment as per credit terms'

*..$ 4E)I33CE*..$ 4E)I33CE

)eaning o# 4emittance)eaning o# 4emittance

.he word =?emittance> originates from the word =remit> which means to transmit

moneyK fund' In banking terminology, the work =remittance means transfer of fund one

place to another' hen money transferred from one country to another is called =oreign

?emittance>

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3'pes o# 4emittance:3'pes o# 4emittance:

oreign remittance may be classified into'

Inward oreign ?emittance'

"utward oreign ?emittance'

)echanism o# 4emittance)echanism o# 4emittance

0#D+ oreign currency #K0 Dollar'

0#$+ oreign currency #K0 Dollar'

:0D+ :udaraba foreign currency deposits'

$0+ $rivate foreign currency'

0#D+ 5;p'+ oreign currency #K0 dollar e;port'

%?"+ %on residence dollar'

%?.+ %o residence .aka'

$D#$+ properly development #K0 dollar'

$D#$+ properly development #K0 pound'

Instruments o# Foreign 4emittances:Instruments o# Foreign 4emittances:

0ash for Dollar, $ound, rance r' ?iyal or any other currency'

.'0' .ravelers 0he


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Chapter 0

+8"3 nal'sis o#

IBB-

+8"3 -+I+ "F IBB-:

5very organi/ation has some internal (trengths and eaknesses as well as they have also

some e;ternal opportunities and threats' .o survive in world competitive market, every

77


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organi/ation should emphasi/e on (". analysis that help to take proper decision and

to achieve the ultimate goal of the organi/ation' #s a internee of IBB8 %ew :arket

Branch, I have tried to find out what are their (trengths and eakness as well as

opportunities and threats are stated below

.1 +34EG32+ .! 8EDE++E+

S' Ade(uate inance

S* +ore funds for Investment

S, -onest and eliable /mployees

S0 .eli#ious )eelin#s of the people

1' Centrali2ed $ecision +akin#

1* Lack of up3to3date e(uipments

1, $eficiency of e4pertise

10 Lack of Advertisin#

15 Lack of ade(uate employees

.$ ""43@I3IE+ .( 324E3+

O' Innovative and modern customer

service

O* etainin# vast customers

O, Special ima#e

O0 Poverty alleviation

"' ules and re#ulations

"* Islamic ankin# Operation introduced

by conventional ankin#.

", Call money system

"0 Lo%er salary structure

.1 +34EG32+

7)


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S' Ade(uate inance

Islami Bank Bangladesh 8td' has ade


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O' Innovative and modern customer service

.his bank can introduce more Innovative and modern customer services to its customers to

survive better in the competition market

O* .etainin# vast customers

IBB8 has a vast opportunity to hold most of the customers by e;tending its banking

operation all over the country as most of the people of Bangladesh are religious minded'

O, Poverty alleviation

IBB8 has a great opportunity to save the countyFs poor people from being taking loan from

different %"s or few banks with higher interest rate'

O0 Special ima#e

IBB8 has created special image to the people as a more reliable bank' $eople believe that if they

keep their money in Islami bank it will be more secured than other banks'

.( 324E3+

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"' .ules and re#ulations

?ules and regulations of Bangladesh Bank defers with Islamic Banking (ystem' (o they have

to face various problems to operate their activities according to the Islamic (hariah'

"* Lo%er salary structure

%ow many of the Banks are hiring young talent and e;pertise employees with higher

remuneration where IBB8 could not hire skilled manpower because of lower salary structure

compared to other banks'

", Call money system

In the money market of Bangladesh, there is no call money system of Islami (hariah'

"0 Islamic ankin# operation introduced by conventional ankin#

1ew other conventional banks have started to open their Islamic Banking operation shortly'

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Chapter7 09

Conclusion

4ecommendations

)&


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Conclusion:

Islamic bank Bangladesh limited is a bank which operates it s activities according to

Huaran and (unnah' Its banking activities are based on profit Y loss sharing' It does not

create any illegal pressure on client'

.he strength of islami bank Bangladesh limited is + employees of Islamic Bank

Bangladesh 8td' are honest because they strongly believe in Islamic rules and regulations'

.hey do not take any types of bribe form clients' (o believes of people are increasing on

the activities of Islamic Bank Bangladesh limited' :any people of Bangladesh are

involving with IBB8 for doing their daily financial activities' It has a bright future

because it has got huge customers than other conventional banks in Bangladesh that are

based on interest'

.he weaknesses of Islamic bank Bangladesh limited are + although it is getting bright

future but it does not operate its activities 1J based on Islamic shariah' Because still

there is not e;isted an Islamic environment in the economic activities of Bangladesh' It is

performing its daily financial transaction with other financial institution that are not

based on Islam' In this case, it is involving with some %on+Islamic activities

unintentionally' "n the other hand every client is not 1J honest' (o they are taking

investment form IBB8 and after maturity, they are showing loss on that pro-ect

intentionally' (o IBB8 is losing some profit form their investment'

.hreats of Islami Bank Bangladesh 8imited are + at this time, many financial institutions

have commenced their financial activities according to Islamic shariah' .his type of

organi/ation will create more competition in the financial market' (o it is a threat for

Islamic bank Bangladesh limited'

#fter all, although it is facing some problem, it has a bright future and day+by+day it is

enhancing its financial activities over the country' :any organi/ations are following to

IBB8 and they are starting their business based on Islamic (hariah in our economy'

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4ecommendations:

It is not une;pected to have many problems in any organi/ation' I have found some of the

problems of IBB8' .o solve these problems, I can suggest following recommendations

1' .his Bank should arrange a wide varieties of regular programs like GIslamic alsaG

G"aa/ :ahfilG G(eminarG G:os


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appoint skilled manpower so that they can provide more innovative and

modern customer services'

Bi%liograph':

Books:

#hmed, Piauddin 19)*, Evaluation of Islamic Banking, Institute of $olicy (tudies,

8ahore, $akistan'

?a


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Balance Sheet

Islami Bank Bangladesh

Limited

)6


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)7


88/88

PROPERTY & ASSETS 31.12.2007 31.12.200

Tk. Tk.)as" 17076455162 2351894

)as" in "and including .oreign currenc* 2907141037 141014

,alance it" ,( ,an6 + its agent %an6 141#9314125 2210879

,alance it" ot"er ,an6 + inancial Institutions 4012328480 132912

In ,anglades" 2353854350 75931

!utside ,anglades" 1#58474130 5#981

$one* at call + s"ort notice

In'estment in s"are + securities 203#5710399 35577#

o'ernment 20341950000 353400!t"er 23760399 2376

In'estments 144920#09595 11357507

eneral In'estment etc 133881027350 10#7040#

,ills urc"ased + (iscounted 11039582245 #87100ied Assets including -remises urniture + itures 3987232#75 3724#9

10000136044547217745"ther assets :

Total Assets%on Banking #ssets 1913#2349717 150252821663252862921324194035248ibilities8I#BI8I.U A

#((5.( :17#7587001890283048)urrent + ot"er accountDeposits A

"ther account 191#5151#75 1401#123103#9282#25872279475$udara%a &a'ing (eositsBills

payable #2403504533 5211854518853512573952213542#Bearer 0ertificate of

Deposits:udaraba .erm Deposits :

101957271717826184480$udara%a -eretual ,ond"ther:udaraba Deposits 3000000000

1184133625410007232797Total Libilities"ther 8ibilities 1795210134#3 14024558-aid u )aital0apitalK(hare+Zholder 5

Islami banking.doc

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