This report, attempted to give on overview of Al-Arafah Islami Bank Limited in general
EXECUTIVE SUMMARY Banks plays vital role in the economy of the country. Countries development greatly depends on the activities of the banks. Commercial banks take deposit & give away loans. This loan build on industrializationâ€™s Commercial Bank helps in savings. Savings create investment. Investment contributes the GDP. Finally the commercial banks play on important role in import of country through opening of bank L/Cs. It helps to earn foreign currency by helping the exporters in export. This report is prepared on the basis of three months practical experience at Shahjalal Islami Bank Limited. The internship program helped to learn about the practical situation of a financial institution. This program helped to implement theoretical knowledge into practical & realistic work environment. In the age of modern civilization bank is playing its spending role to keep to the economic development wheel moving. The co-operation of the bank is needed in every economic activity. Bank provides means & mechanisms of transferring command over resources from those who have an excess of income over expenditure to those who can make use of the same for adding to the volume of productive capital. There are a large number of small savers with small amount of savings who are generally reluctant to invest their surplus income because of their lack of adequate knowledge about complicated investment affairs. The bank provides them with the safety, liquidity and profitability by means of different savings media offering varying degrees of a mix of liquidity return and safety of savings. The saving banks use as their key of business. They invest the savings in higher degree of return and maximize their profit in business. Shahjalal Islami Bank Limited is a scheduled Islamic commercial bank registered by the Bangladesh Bank. Shahjalal Islami Bank follows the rules and regulations prescribed by the Bangladesh Bank for Scheduled commercial banks. The functions of the bank cover a wide range of banking and functional activities to individuals, firms, corporate bodies and other multinational agencies.
Chapter One Introduction
1.1 Origin of Report: This report is based on an internship program. Stamford University Bangladesh, arranges internship program in attachment with its students after the completion of theoretical courses (i.e., after final semester) of program of Bachelor of Business Administration (BBA). Each intern must carry out a specific project, which is assigned by the concerned organization and approved by the Internship and placement authority of Stamford University Bangladesh. Consequently a report based on the project is to be submitted to the respective authority. In this particular report, the author is an intern of the previously mentioned program and the concerned organization is AIBL, which is a prominent private and the Bank of Bangladesh that based on Islamic law. Hence was placed in the Mouchak Branch of Al-Arafah Islami Bank Ltd. From 1st July , 2009 to 30th September 2009. In way of delegation, responsibility of carrying out the study has conferred upon the concerned intern.
1.2 Background: Bank and financial institution play an important role in financial inter mediation and thereby contribute to the overall growth in the economy. At present the financial system in Bangladesh consists of the central bank, nationalized commercial/specialized banks, private banks, foreign banks and other non-bank financial institution. This report is based on one commercial Bank that is the Al-Arafah Islami Bank Ltd.
1.3 Scope of the report The scope of the organizational part covers the organizational structure, background, and objectives, functional, departmental and Business performance of AIBL as a whole and the main part covers foreign exchange department of AIBL.
1.4 Importance of the study ⇒
To identify the problem of AIBL.
To achieve practical knowledge of banking side of AIBL.
To observe interrelated activities of general banking of AIBL.
To gain practical knowledge about over all banking system & especially general banking and foreign exchange sector.
1.5 Objective of the Report: The first objective of writing the report is fulfilling the partial requirements of the BBA program. In this report, attempted to give on overview of Al-Arafah Islami Bank Limited in general. Also in the major part, have shown the practical approach of Foreign Exchange. Some following objectives of the report are as shown. ⇒
To gain or achieve the practical Idea of banking System of AIBL.
To observe the economic condition of AIBL
To explain the general banking activities of AIBL.
To explain the activities of foreign exchange of AIBL
To identify the problems of AIBL prevailing in its banking system
To suggest some possible recommendations to overcome the problems.
1.6 Methodology of the study: In order to make the report more meaningful and presentable two sources of data and information have been used widely. ‘’The primary sources’’ which are as follows Face-to-face conversation with the Executives and officers of Bank. 1. Informal conversation with the client. 2. Practical work exposures from the different desks of the various departments of the Branch covered. 3. Relevant file study as provided by the officer’s concerned.
‘’The Secondary Sources’’ of data and information are: 1. Annual Report of Al-Arafah Islami Bank Ltd. 2. Periodicals published by Bangladesh Bank. 3. Various books, articles, compilations etc. Regarding general banking functions. Data Collection Method: Secondary: For the organization, part information has been collected through different published articles, journal. Primary: Formal questionnaire for data collection is not used. Information is collected through informal discussions with Relationship managers & respective Unit heads. Ratio analysis tools: Using tools of ratio analysis are given bellow: Tools used for analysis:
Bank profitability ratios 1. ROA=return on assets=NI /ATA=net income/ average total assets
2. ROE=return on equity=NI /SE=net income/ average stockholders' equity 3. PM=profit margin=NI /OI=net income/ operating income 4. ROD=return on deposits=NI /ATD=net income/ average total customer deposits 5. ROSC=return on shareholder capital=NI /SC=net income/ shareholder contributed capital 6. NOM=net operating margin=OI /IN=operating profit or income/ interest income
Bank efficiency ratios 7. IEE=interest income to expenses=(IN−IE) /ATLA=(interest income−interest expenses) /
average total loans and advances 8. OEA=operating expense to assets=OE/ATA=operating expenses/ average total assets 9. OIA=operating income to assets=OI /ATA=operating income/ average total assets 10. OER=operating expenses to revenue=OE/OI=operating expenses/ operating income (revenue) 11. ATO=asset turnover=IN/ATA=interest income/ average total assets
12. NIM=net interest margin=(IN竏棚E) /ATA=(net interest income竏地et interest expenses) / average total assets 13. NNIM=net non-interest margin=(NIN竏誰IE)/ATA=(net non-interest income竏地et noninterest expenses) /average total assets
Asset-quality indicators 14. PEA=provision to earning assets=PLL/ATLA=provision for loan losses / average total
loans and advances 15. APL=adequacy of provision for loans=ALL/ATLA=allowance for loan losses at the end of the year / average total loans and advances 16. WRL=write-off ratio=WR/ATLA=write-off of loans during the year / average total loans and advances 17. LR=loan ratio=ATLA/ATA=average total loans and advances / average total assets 18. LTD=loans to deposits=ATLA/ATD=average total loans and advances / average total customer deposits
Liquidity ratios 19. CTA=cash to assets=C/ATA=cash / average total assets 20. CTD=cash to deposits=C/ATD=cash / average total customer deposits Risk ratios 21. DTA=deposits to assets=ATD/ATA=average total customer deposits / average total assets 22. EM=equity multiplier=ATA/SE=average total assets / average stockholders' equity 23. ETD=equity to deposits=SE/ATD=average shareholders' equity / average customer total deposits 24. TLE=total liabilities to equity=TL/SE=average total liabilities / average stockholders' equity 25. TLSC=total liabilities to shareholder capital=TL/SC=average total liabilities / shareholder contributed capital 26. RETA=retained earnings to total assets=RE/ATA=retained earnings / average total assets Population: All the branches of Al-Arafah Islami Bank Ltd. exist in Bangladesh. Sample: Mouchak Branch of Al-Arafah Islami Bank Ltd. Observation period three months.
1.7 Limitation Objective of the practical orientation program is to have practical exposure for the students. My tenure was for twelve weeks only, which was somehow not sufficient. After working whole day in the office it way very much difficult, it not impossible to study again the theoretical aspects of banking. On the other hand to prepare my internship report I have faced some limitations as follows. ⇒
To collect data and information, it is a common tendency of any departments to keep back their departmental data and information.
Unavailability to required published documents.
Lack of my experience and efficiency to prepare the standard report.
observed that unskilled persons are available in AIBL; they are not able to teach us various aspects.
2.1 Shahjalal Islami Bank Limited (SJIBL): The “Shahjalal Islami Bank Limited” a Shariah Based Commercial Bank in Bangladesd was incorporated as a public limited company as on 1 st day of April 2001 under the Companies Act. 1994. The Bank started its commercial operation on May 10, 2001. The Bank has made a significant progress within a very short period of its existence and occupied an enviable position among its competitors after achieving remarkable success in all areas of business operation. The authorized capital of the Bank is Tk. 2,000 million and Paid up capital of the Bank stood at Tk. 1,872 million as on 31 December 2007. The total equity (capital and reserves) of the Bank as on December 31, 2007 stood at Tk. 3,040 million. Managing Director: Muhammed Ali Phone: +880 2 9570807, Mobile: 880 187031674 Contact Person: Md. Jillur Rahman, Deputy Managing Director Phone: +880 2 9568800
Dhaka-1000, Bangladesh Phone: +880 2 9570812, 7160591, 9561473 Fax:
E-mail: firstname.lastname@example.org, email@example.com, firstname.lastname@example.org. Web: www.shahjalalbank.com.bd
2.2 Shahjalal Islami Bank Limited at a glance With a view to materialize the dream of the people of Bangladesh for doing their banking transactions in line with what is prescribed by Islam, a group of highly successful entrepreneurs conceived an idea of floating a commercial bank styled as “Shahjalal Islami Bank Limited” which is named after the name of the renowned saint Hajrat Shahjalal (R) who dedicated his life for the cause of peace in this world and hereafter and for the service of humanity. The sponsors are reputed personalities in the field of trade & commerce, industry and finance. “Shahjalal Islami Bank Limited” offers the full range of banking services for personal and corporate customers, covering all segments of society within the framework of Banking Company Act and rules and regulations laid down by our central bank. Diversification of products and services include Corporate Banking, Retail Banking and Consumer Banking right from industry to agriculture, real estate to software and is backed by the latest technology. The Bank is being managed by a group of highly experienced professionals with diversified experience in finance and banking. The Management of the bank constantly looks after customers’ satisfaction and believes that a satisfied customer is a great Ambassador. The Bank has already achieved tremendous progress within only eight years. The bank has already ranked as one of the quality service providers & is known for its reputation. Offers the full range of banking services for personal and corporate customers, covering all
segments of society within the framework of Banking Company Act and rules and regulations laid down by our central bank. By now, the Bank established correspondent Banking relationship with 18 Banks covering their global network of 385 branches/units of International repute at different important locations. It also established accounting relationship with 10 Banks and maintaining 22 NOSTRO Accounts in 8 (eight) major Currencies at different convenient locations. The Board of Directors of our Bank consists of reputed Industrialists and Businessmen who are successful in their respective fields headed by Mr. Sajjatuz Jumma, the Chairman of the Board who is an eminent Industrialist & reputed businessman in Bangladesh and current Chairman of Islamic Banks Consultative Forum (IBCF). The Board generally deals with policy matters relating to management of Business and sets goal for the growth & development of the Bank as a whole, review of the same from time to time and gives necessary guidance to the management. The Bank is managed by a Team of professional Executives and Officials having profound banking knowledge & expertise in different areas of management and operation of Banks. The Team is headed by the immediate past Executive President and CEO of Islami Bank Bangladesh Ltd. (IBBL) for about 7 years. During his Incumbency, IBBL attained a remarkable growth & development. Above all, he had the opportunity to hold the position of Chairman of the Board of Directors of Islami General Insurance Company & then he Joined Shahjalal Islami Bank Ltd on February 25, 2004 as the Managing Director and Chief Executive Officer (CEO) to enrich Islamic Banking methodology in the Country. During the short span of time, Shahjalal Islami Bank so far introduced a good number of attractive deposit products to broaden the resource base and also Investment products to deploy the deposit resources so mobilized. Some more schemes covering the deposits, Investments & Services will be introduced gradually in near future suiting to the taste and requirement of the clients. The Bank has a strong Shariah Council consisting of prominent Ulama, Fuquah & Economists who meet periodically to confer decisions on different Shariah issues relating to Banking Operation & to address them and to give necessary guidance to the management on Shariah Principle. Since inception, Bank has been performing in all the sectors i.e. general Banking, Remittance, Import, Export and Investment. All our branches are fully computerized having on line Banking facility for the clients.
All activities of the Bank including its products and services are mainly for different economic groups of Bangladesh at home & abroad. Bangladeshi expatriates living abroad in different countries form a strong economic group who contribute greatly towards the economic development of the country.
2.3 Vision of SJIBL To be the unique modern Islami Bank in Bangladesh and to make significant contribution to the national economy and enhance customer’s trust and wealth, quality investment, employee’s value and rapid growth in shareholders equity.
2.4 Mission of SJIBL
To provide quality services to customers
To set high standards of integrity
To make quality investment
To ensure sustainable growth in business
To ensure maximization of shareholders wealth
To expand the customer’s innovative service acquiring state-of the-art technology blended with Islamic principles.
To ensure human resource development to meet the challenges of the time.
2.5 Objectives of SJBL From time immemorial Banks principally did the functions of moneylenders or "Mohajans" but the functions and scope of modern banking are now a days, very wide and different. They accept deposits and lend money like their ancestors, nevertheless, their role as catalytic agent of economic development encompassing wide range of services is very important. Business commerce and industries in modern times cannot go without banks. There are people interested to abide by the injunctions of religions in all sphere of life including economic activities. Human being is value oriented and social science is not value-neutral. Shahjalal Islami Bank believes in moral and material development simultaneously. "Interest" or "Usury" has not been appreciated and accepted by "the Tawrat" of prophet Moses, "the Bible" of prophet Jesus and "the Quran" of Hazrat Muhammad (sm). Efforts are
there to do banking without interest Shahjalal Islami Bank Limited avoids "interest" in all its transactions and provides all available modern banking services to its clients and wants to contribute in both moral and material development of human being. No sustainable material well-being is possible without spiritual development of mankind. Only material well-being should not be the objective of development. Socio-economic justice and brotherhood can be implemented well in a God-fearing society. The other objectives of Shahjalal Islami Bank include: •
To conduct interest-free and welfare oriented banking business based on Islamic Shariah.
To implement and materialize the economic and financial principles of Islam in the banking arena.
To contribute in sustainable economic growth.
To help in poverty alleviation and employment generations.
To remain one of the best banks in Bangladesh in terms of profitability and assets quality.
To earn and maintain a 'Strong' CAMEL Rating.
To introduce fully automated systems through integration of information technology.
To ensure an adequate rate of return on investment.
To maintain adequate liquidity to meet maturing obligations and commitments.
To play a vital role in human development and employment generation.
To develop and retain a quality work force through an effective Human Resources Management System.
To ensure optimum utilization of all available resources.
To pursue an effective system of management by ensuring compliance to ethical norms, transparency and accountability at all levels.
2.6 Strategies of SJIBL: The strategies of Shahjalal Islami Bank include: •
To raise capital.
To strive for customers’ best satisfaction and earn their confidence.
To manage and operate the Bank in the most effective manner.
To identify customers’ needs and monitor their perception towards meeting those requirements.
To review and update policies, procedures and practices to enhance the ability to extend better service to customers.
To train and develop all employees and provide them adequate resources so that customers' needs are reasonably addressed.
To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to employees in a timely fashion.
To cultivate a congenial working environment.
To diversify portfolio both in the retail and wholesale markets.
To increase direct contact with customers in order to cultivate a closer relationship between the bank and its customers.
2.7 Equity of the Bank: Total equity of the Bank as on 31 th December 2006 was Tk. 1,362 million and the total equity stood at Tk. 3,040 million on 31th December 2007. Particulars Equity Fund (Capital & Reserve)
Equity Fund (Capital & Reserve) 3500 3000 2500 2000 1500 1000 500 0
(Figure in milloin) 2007 1,362
2.8 Deposits: The Bank mobilized a total deposit of Tk. 22,618 million as on December 31, 2007 as against Tk. 18,090 million as on December 31, 2006 showing an increase of 25%. The combination of competitive interest rates that offered sustained deposit raising efforts of the Bank and confidence reposed by customers in the Bank resulted in this growth of deposits. Steps are being taken to further increase the deposit base continuously at a reduced average cost of funds. 2006 18,090
(Figure in million) 2007 22,618
25,000 20,000 15,000 Deposit
10,000 5,000 0
2.9 PERFORMANCE OF SHAHJALAL ISLAMI BANK LIMITED AT A GLANCE: Balance Sheet As At 31 Decemberâ€™2007 (with compare 2006) 2007 Taka
PROPERTY AND ASSETS Cash Cash In Hand (Including Foreign Currencies) Balance with Bangladesh Bank & Sonali Bank(Including Foreign Currencies) Balance with other Bank and Financial
Outside Bangladesh Investments in securities Government Investments Murabaha, Bai-Muajjal etc. Bills Purchased & Discounted
Fixed Assets Including Premises Furniture -
and Fixtures etc. Other Assets
Non Banking Assets Total Assets
LIABILITIES AND CAPITAL
Liabilities Financial (Borrowings) from other Banks, Financial Institutions and Agents
Other Mudaraba Deposits
Paid-up Capital Statutory Reverse Retained Earnings
1,871,650,000 510,392,155 405,688,986
935,825,000 267,130,476 1,957,974
Total Shareholders’ Equity
Deposits and other Accounts: Al-Wadiah Current Deposit & Other Accounts Bills Payable Mudaraba Saving Deposits Mudaraba Term Deposits
Total Liabilities & Shareholders’ Equity
2.10 Departments of SJIBL All branches of Shahjalal Islami Bank Limited are divided into three departments: •
General Banking Department.
Foreign Exchange Department.
2.10.1 General Banking Department: General banking department is one of the most important departments of Shahjalal Islami Bank Limited. Basically bank provides the main services to the customer through this department. In general this section of the Shahjalal Islami Bank Limited is divided into five sections.
Accounts opening section
Bills and clearing section
2.10.2 Foreign Exchange Department: Banks play a very important role in effecting foreign exchange transaction of a country. Mainly transactions with overseas countries are in respect of imports; exports and foreign remittance come under the purview of foreign exchange department. Banks are the vital sectors by which such transactions are effected/settled. Central Bank records all sorts of foreign exchange transactions. The other banks dealing with foreign exchange are to report to Bangladesh Bank regularly (viz. daily, monthly, quarterly, yearly etc.). The foreign exchange department consists of three sections. They are: •
Foreign remittance section
2.10.3 Investment Department: Banking business consists of borrowing and lending, Bank act as an intermediary between surplus and deficit economic units. Thus a banker is a dealer in money and credit. Banks accept deposit from large number of customers and then lend a major portion of the accumulated money to those who wish to borrow. In this process banks secure reasonable return to the savers, make funds available to the borrowers at a cost and earn a profit after covering the cost of funds. Banks, besides their role of intermediation between savers and borrowers and providing an effective payment mechanism, have been allowed to diversify into many new areas of better paying business activities.
2.11 Credit Rating Report:
Long Term A+ April 03, 2008
Entity Rating Date of Rating
Short Term ST- 2
Credit Rating Information and Services Limited (CRISL) upgrades the rating of Shahjalal Islami Bank Limited(SJIBL) to A+ (pronounced as single A plus) from A (pronounced as single A) in the Long Term and reaffirms short term rating to ST-2.
2.12 Branches of SJIBL: The Bank has 33 branches all over the country with a worldwide network of correspondents. The Bank is going to open more branches in the current fiscal year to expand the network.
2.13 Hierarchy of SJIBL
Managing Director (MD) Deputy DeputyManaging ManagingDirector Director (DMD) (DMD) Senior SeniorExecutive ExecutiveVice VicePresident President Executive Vice President Executive Vice President(EVP) (EVP) Senior SeniorVice VicePresident President(SVP) (SVP) Vice VicePresident President(VP) (VP) Senior SeniorAssistant AssistantVice VicePresident President Assistant AssistantVice VicePresident President(AVP) (AVP) First FirstAssistant AssistantVice VicePresident President Junior JuniorAssistant AssistantVice VicePresident President Senior SeniorExecutive ExecutiveOfficer Officer(SEO) (SEO) Executive ExecutiveOfficer Officer(EO) (EO) First FirstExecutive ExecutiveOfficer Officer(FEO) (FEO) Junior JuniorExecutive ExecutiveOfficer Officer(JEO) (JEO) Assistant AssistantExecutive ExecutiveOfficer Officer(AEO) (AEO) Senior SeniorOfficer Officer(SO) (SO)
Officer Officer Junior JuniorOfficer Officer(JO) (JO) Trainee TraineeAssistant AssistantOfficer Officer
2.14 Social Welfare Activities: With a view to providing financial assistance to the poor and needy people of the society and also for the welfare of the community, to this perspective, bank has established “Shahjalal Islami bank Foundation” with the objective to provide health care, relief and rehabilitation, education, humanitarian of winter clothes during the winter etc. Shahjalal Islami Bank Foundation has a planning to establish the following projects and programs: •
Shahjalal Islami Bank International School and College
Shahjalal Islami Bank Hospital
The foundation have also drawn up programs to look after the education, health and medical requirements of all the people of rural areas where the bank has launched Rural Investment Programs with vision 2020. The foundation already introduced a program to reward poor student who passes SSC and HSC exam. Students who are not financially sound, the foundation gives financial assistance to them. The bank has started it from 2006 under these project 111 poor and meritorious students awarded by monthly scholarship and lump sum money at yearly basis. This will motivate students to do better in future. The bank appreciates the good things in the society.
Chapter Three Conceptual Framework
3.1 Islamic Banking Concepts: Islami Bank is a financial institution whose status, rules and procedures expressly state its commitment to the principle of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operation. For millions of Muslims, banks were institution to be avoided. Islam is a religion, which keeps Believers from the tellers’ window. Their Islamic beliefs prevent them from dealings that involve usury or interest (Riba). Yet Muslim needs banking services as much as anyone and for many purposes: to finance new business ventures, to buy a house, to facilitate capital Investment to undertake trading activities and to offer safe place for saving. Muslims are not averse to legitimate profit as Islam encourages people to use money in Islamic ally legitimate ventures not just to keep their funds idle. However in this fast moving world more than 1400 years after the Prophet (S.A.W) can Muslims find room for the principles of their religion? The answer comes with the fact that a global network of Islamic banks investment house and other financial institution have started to take shape based on the principals of Islamic finance laid down in the Quran and the Prophet’s traditions some 14 centuries ago. Islamic banking based on the Quranic prohibition of changing interest has moved from a theoretical concept to embrace more than 100 banks operating in 40 countries with multibillion-dollar deposits worldwide. Islamic banking is widely regarded as the fastest growing sector in the Middle Eastern financial services market. Exploding onto the financial scene barely thirty years ago an estimated $US100 billion worth of funds are now managed according to Shariah. The best-known feature of Islamic Banking is the prohibition on interest. The Holy Quran forbids the charging of ‘Riba’ on money lent. It is important to understand certain principles of Islam that underpin Islamic finance. Muslim scholars accepted the word ‘Riba’ to mean any fixed or guaranteed interest payment on cash advances or on deposits. The rules regarding Islamic finance are quite simple and can be summed up as follows: a) The predetermined payment over and above the actual amount of principal is prohibited. b) The lender must share in the profits or losses arising out of the enterprise for which the money was lent. c) Making money from is not Islamically acceptable
d) Ggharar (Uncertainty, Risk or Speculation) is also prohibited. e) Investment should only support practices or products that are not forbidden.
3.2 Objectives of Islamic Banking The objective of Islamic Banking is not only to earn profit but also to do good and welfare to the people. Islam upholds the concept that money, income and property belong to ALLAH and this wealth is to be used for the good of the society. The main objectives of Islamic Banking are as follows: 1. To conduct interest free banking. 2. To establish participatory Banking instead of Banking on debtor-creditor relationship. 3. To invest through different modes permitted under Islamic Shariah. 4. To accept deposits on profit-loss sharing basis. 5. To establish welfare oriented Banking System. 6. To extend operation to the poor, helpless and low income group for their economic enlistment. 7. To contribute in achieving the ultimate goal of Islamic economic system. 8. To facilitate the Islamic banking system in the country. 9. To create new entrepreneurs and to arrange required finance them.
3.3 Evolution of Islamic Banking Islamic Banking comes into reality through a long theoretical exercise of several renowned Islamic scholars and economists. The first attempt to establish an Islamic financial institution took place in Pakistan in 1950. In the modern world, the pioneering role in establishing the first Islamic Bank in 1963 named â€˜Mit- Ghamarâ€™ Saving Bank in Egypt at rural area of Nile Delta. As on today, there are many Islamic financial institutions operating through out the world covering both Muslim and non-Muslim countries of various socio-economic environment. The first Islamic bank in Malaysia was established in 1983. In 1993, commercial banks, merchant banks and finance companies were allowed to offer Islamic banking products and services under the Islamic Banking Scheme (IBS). These institutions however, are required to separate the funds and activities of Islamic banking transactions from that of the conventional banking business to ensure that there would not be any co-mingling of funds.
In Malaysia, the National Syariah Advisory Council additionally set up at Bank Negara Malaysia (BNM) advises BNM on the Shariah aspects of the operations of these institutions, as well as on their products and services.
3.4 Legitimate Business Contracts for Islamic Banks The modes of mobilization in Islamic banks have derived from the overall permissible contracts in Islam. In what follows we fast describe the concept of Aqd or contract form business perspective and then discuss the legitimate forms contracts that can be used in Islamic banks for both deposit collection and their profitable employment. A business contract can be defined as the exchange of a thing of value by another thing of value with mutual consent. There are four element of an Aqd or contract: 1. Contrat(Aqd). 2. Subject Matter (Mabeâ€™e). 3. Price (Thaman). 4. Prossession of delivery (Qabdh).
3.5 Common practices of Islamic banks in mobilization of funds The common practices of Islamic banks in the sources of funds may be described as follows:
3.5.1 Current Accounts All Islamic banks operate current account on behalf of their client individuals and business firms. These accounts are operated for the safe custody of deposits and for the convenience of customers. There is little different between conventional banks as far the operation of current accounts is concerned. There are two dominant views about current account. One is to treat demand deposit as amnah (trust). A trust deposit is defined by the Jordan Islamic Banks as â€œcash deposits received by the bank where the bank is authorized to use the deposits at its own risk and responsibility in respect to profit or loss and which are not subject to any conditions for withdrawals or depositingâ€?.
3.5.2 Saving Account
All Islamic banks operate saving accounts. It must be pointed out that any return on capital is Islamically justified only if the capital is employed in such a way that it is expected to a business risk. Savings accounts at Islamic Banks Generally operate as follows: 1. Savings accounts are opened with the condition that deposits provide the bank with an authorization to invest. 2. Depositors have the right to deposit and withdraw funds. 3. The profits in savings accounts are calculated on the minimum balance maintained during the month. Depositors participate in the profits of savings accounts with effect from the beginning of the month following the month in which the deposits are made. Profits are not calculated with effect from the beginning of the month in which a withdrawal is made from the account. 4. A minimum balance has to be maintained in order to qualify for a share in profit.
3.5.3 Investment Deposit Investment deposits are Islamic banks counterparts of term deposits or time deposits in the conventional system. They are also called profit and Loss-Sharing (PLS) Accounts or Participatory Account. However they can be distinguished from traditional fixed term deposits in the following manner: 1. Fixed term deposits in the conventional system operate on the basis of interest while investment accounts in Islamic banks operate on the basis of profit sharing Instead of promising depositors a predetermined fixed rate of return on their investment the bank tells them only the ratio in which it will share the profits with them. 2. While fixed term deposit are usually distinguished from each other on the basis of their maturities investment deposits can be distinguished on the basis of maturity as well as on the basis of purposes as it is possible to give special instructions to the bank to invest a particular deposit in a specified project or trade. The main distinguishing characteristics of investment deposits can be described as follows: 1. Deposit holders do not receive any interest. Instead they participate in the share of the profits or losses. 2. Usually these accounts are opened for a specific period e.g. three months, six month, one year or more.
3. The return on investment is determined according to actual profit s from investment operations of the bank and shared in an agreed proportion by depositors according to the amount of their deposits and the period for which the bank holds them. 4. Generally speaking depositors do not have the right to withdraw from these accounts as is customary in time deposits in conventional banks.
3.6 Islamic Financial Vehicles Islamic banks around the world have devised many creative financial products based on the risk sharing and profit sharing principles of Islamic banking. For day to day banking activities a number of financial instruments have been developed that satisfy the Islamic doctrine and provide acceptable financial returns for investors.
3.6.1 Al-Mudaraba (Profit sharing) This implies a contract between two parties whereby one party the rabb al mal (beneficiary; owner or the sleeping partner), entrusts money to the other party called the mudarib (managing trustee or the labor partner). Important features of Mudaraba are as follows: 1. The division of profits between the two parties must necessarily be on a proportional basis and cannot be a lump sum or guaranteed return. 2. The investor is not liable for losses beyond the capital he has contributed. 3. The mudarib does not share in the losses except for the loss of his time and efforts.
3.6.2 Murabaha This is the sale of a commodity at a price, which includes a stated profit, which includes a stated profit known to both the vendor and the purchaser. This can be called a cost plus profit contract. The buyer in deferred payments usually pays the price back. Under Murabaha the Islamic bank purchases in its own name, goods that an importer or a buyer wants and then sells them to him at an agreed mark-up. This technique is usually used for financing trade, but because the bank takes title to the goods, and is therefore engaged in buying and selling its profit derives from a real service that entails a certain risk and is thus seen as legitimate.
3.6.3 Musharaka (Profit and loss sharing)
This is a partnership normally of limited duration formed to carry out a specific project. It is therefore similar to a western- style joint venture, and is regarded by some as the purest from of Islamic financial instrument, since it conforms to the underlying partnership principles of sharing in and benefiting from risk. In this case the bank enters into a partnership with a client in whom both share the equity capital and perhaps even the management of a project or deal and both share in the profits or losses according to their equity shareholding.
3.6.4 Ijarah (Lease financing) Another popular instrument is leasing which is designed for financing an asset or equipment. It is a manfaah (benefit) or the right to use the asset or equipment. The lessor leases out an asset or equipment to the client at an agreed rental fee for a pre-determined period pursuant to the contract.
3.6.5 Ijara Wa Iktina (Hire Purchase) Equivalent to the leasing and installment loan, hire- purchase, practices that put millions of drivers on the road each year. These techniques as applied by Islamic banks include the requirement that the leased items be used productively and permitted by Islamic law.
3.6.6 Muqarada This technique allows a bank to flat what are effectively Islamic bonds to finance a specific project. Investors who buy muqaradah bonds take a share of the profits of the project being financed, but also share the risk of unexpectedly low profits or even losses.
3.6.7 Bai-Salam A buyer pays in advance for a specified quality of a commodity, deliverable on a specific date at an agreed price. This financing technique, similar to a futures or forward- purchase contract is particularly applicable to seasonal purchase but it can also be used to buy other goods in cases where the seller needs working capital before he can deliver.
3.6.8 Istisna (Purchase order)
This is a sale and purchase agreement whereby the seller undertakes to manufacture or construct according to the specification given in the agreement. It is similar to bai salam the main distinction being the nature of the asset and method of payment. Istisna generally covers those things which are customarily made to order and advance payment of money is not necessary as required in bai salam. The method of payment in istisna is flexible.
3.6.9 Bai-Muajjal The terms ‘Bai’ and ‘Muajjal’ have been derived from Arabic words ‘Bai’ and ‘Ajl’. The word ‘Bai’ means purchase and sale. The word ‘Ajl’ means fixed time or a fixed period. ‘BaiMuajjal’ means sale for which payment is made at a future fixed date or within a fixed period. In short, it is a sale on credit. ‘Bai-Muajjal’ may be defined as a contract between a buyer and seller under which the seller sells specific goods to the buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installment’s.
3.6.10 Hire Purchase under Shirkatul Melk Shirkat means partnership. Shirkatul Melk means share in ownership when two or more persons supply equity to purchase an asset own the same jointly and share the benefit as per agreement and bear the loss in proportion to their equity, the contract is called Shirkatul Melk contract.
3.6.11 Quard-Al-Hasan It is a virtuous loan. Through this mode, Bank provides loan to its customer for a certain period, which bears no profit/loss/compensation.
3.6.12 Direct Investment Islamic Bank without the help/assistance of any client may directly invest its fund/capital in share, securities, business and industry. Profit and loss in this business is exclusively, the internal matter of the Bank. The concepts of equity and morality are at the root of Islamic banking .In Islam moral and equitable values from an integral part of the rules of law governing contractual and financial relations to such an extent that the relationship, which exists between equity law and relation, is an organic rather than supplementary relationship. The importance of Islamic banking has increased dramatically over the past 10 years. The main differences between Western and
Islamic style banking is the concentration on people and their businesses rather than on accounts it is a much more grass roots banking according to one expert.
Chapter – Four
Activities of the SJIBL Motijheel Branch 4.1 Introduction of SJIBL, Motijheel Branch: This branch was established 23rd August, 2007 it is situated at the Ground floor & First Floor, 99 Karim Chamber, Motijheel C/A. Dhaka-1000. It has been providing Islamic banking services for the customers.
4.2 Objectives: •
To provide Islamic banking service to the people within the commanding area.
To expand business based on Islamic Shariah.
To keep position in the competitive market.
To contribute in profitability of SJIBL
4.3 Department of the Branch: •
Account opening department
Foreign exchange department
4.4 Number of Accounts:
AL-Wadiah Current Deposit (ACD)
Mudaraba Savings Deposit (MSD)
Mudaraba Short Notice Deposit (MSND)
Doble Profit M.Savings Scheme (DPMSS)
Education Deposit Scheme (EDS)
Hajj Palon Scheme (HAJJ)
House Deposit Scheme (HDS)
InLand Doc. Bill Purchase (IDBP)
Lakhopoti Dep. Scheme (LDS)
Multiple Benefits M. S. Scheme (MBMSS)
Monthly Deposit Scheme (MDS)
Monthly Income Scheme (MIS)
Millionaire Scheme – 12 Yrs (MS12)
Millionaire Scheme – 12 Yrs (MS15)
Millionaire Scheme – 20 Yrs (MS20)
Millionaire Scheme – 25 Yrs MS25
Marriage Deposit Scheme (MSD)
Mohor Deposit Scheme (MSD)
M. Term Deposit Scheme (MTDR)
Non Resident FC Depo. – Dollar (NRFCD)
4.5 Statement of Affairs on SJIBL Motijheel Branch: Account No.
Sundry Deposits 9020824002
S/D- Sundry Creditors
S/D- Tax on Profit of Deposit
S/D- Tax on Bills
S/D- Excise Duty on Deposits
S/D- Margin of LC
S/D- Margin of LG
S/D- Risk Fund for HHD Scheme
S/D- Risk Fund for Ijara
S/D- Leased/ Ijara Deposits
S/D- FC Held for B/B Payment USD
S/D- Clearing adjustment A/C
4.6 A list of Employees of the SJIBL Motijheel Branch: SL. 01
Designation Senior Assistant
02 03 04 05
Manager Junior Assistant Vice President Executive Officer First Executive Officer Senior Officer
1 3 2 3
Management Trainee Officer
Trainee Senior Officer
Number of Employer & 1
4.7 Products of Shajalal Islami Bank Limited, Motijheel Branch: 4.7.1 Deposits: Shahjalal Islami Bank Limited accepts deposits on the basis of Mudaraba in the following types of accounts, and pays profit, like that of dividend in these accounts, except AL-Wadiah Current Account. The relationship between banker and customer is not debtor-creditor relationship of conventional banks. The depositor is a partner in business with Shajalal Islami Bank Limited. Customers' deposit their fund in the following types of Accounts: 1. Mudaraba Short Notice Deposit Account 2. Mudaraba Savings Account 3. Mudaraba Term Deposit Account 4. Other Scheme Deposit Accounts Average 70% of profit earned by the bank is distributed proportionately among depositors annually.
4.7.2 Investments Modes: To provide interest-free Banking Shahjalal Islami Bank has adopted the following modes of investment: 1. Musharaka (equity participation on the basis of sharing profit and loss) 2. Mudaraba (sharing of profit and loss in business where one of the partners provides expertise and management and other partner provides capital remaining inactive) 3. Murabaha (buying and selling of commodities goods etc. with profit) 4. Bai-Muajjal (credit sale with profit) 5. Ijara (leasing for rent) 6. Hire purchase or Shirkatul Melk 7. Bi-Salam (purchasing of agricultural products while in production and providing advance oney to the producers) 8. Istisna (purchasing of industrial products while in production and providing advance money to the producers). 9. Quard.
4.7.3 Computer Services: Shahjalal Islami Bank is computerized and provides the following services some of these services will be introduced soon. Shahjalal Islami Bank Limited introduced a few schemes, which are very popular: •
Any Branch Banking
SMS Push Pull Services 9. Other Delivery Channel Services (to be implemented)
4.7.4 Deposit Schemes: •
Double the Money Scheme
Monthly Income Scheme
Monthly Deposit Scheme
Mudaraba Bibaho Scheme (New Product)
Mudaraba Cash Waqf Deposit Scheme (New Product)
Special Term Deposit Scheme (New Product)
Mudaraba Mohor Deposit Scheme (New Product)
Mudaraba Shikhkha Deposit Scheme (New Product)
Mudaraba Housing Deposit Scheme
Mudaraba Lakhopoti Deposit Scheme
Mudaraba Small Business Deposit Scheme
4.7.5 Investment Schemes: •
Doctors Investment Scheme
Education Investment Scheme
Executives Investment Scheme
Marriage Investment Scheme
Overseas Investment Scheme
Household Durable Scheme
Small Business Investment Scheme
Housing Investment Scheme
Small Enterpreneurs Investment program
Medium Enterpreneurs Investment program
Rural Investment Program (RIP)
Car Investment Scheme
CNG Conversion Investment Scheme
4.7.6 Services: •
SJIBL VISA Card :
Card is considered as a new dimension of product resulting from technological development in the banking arena. In line with our affiliation with VISA International for VISA ATMs and POS, the following two products are launched broadening service products of the Bank to the clients’: 1.
VISA Electron (SJIBL VISA Debit Card - local)
VISA Prepaid (SJIBL VISA Prepaid Card)
SJIBL VISA Debit Card: To a customer, “My card, my money” concept is used for Debit Card. Any accountholder of SJIBL can apply for a SJIBL VISA Debit Card against his/her Al-Wadiah Current Deposit (AWCD), Mudaraba Savings Deposit (MSD) or Mudaraba Short Notice Deposit (MSND) Account. He/she is fully authorized to enjoy the benefits of cash withdrawal from ATMs, liberty of shopping, dining, paying utility bills and having access account information through SMS, etc. round the clock. SJIBL VISA Prepaid Card (Local): SJIBL VISA Prepaid Local Cards are open to the customers even having no account with Shahjalal Islami Bank Limited. Cardholders can have
the card against prepayment and have access from anywhere in Bangladesh. SJIBL VISA Prepaid Local Cards are accepted locally at all VISA labeled merchant outlets, ATMs, etc. SJIBL VISA Prepaid Card (International): SJIBL VISA Prepaid International Cards are also open to the customers even having no account with Shahjalal Islami Bank Limited. Cardholders can have the card endorsing US Dollar paying against Travel Quota, Exporters Retention Quota or marking Lien of his/her FC Account. SJIBL VISA Prepaid International Cards are accepted world wide at all the VISA labeled merchant outlets, ATMs, etc. SJIBL VISA Prepaid Card (Dual): The Dual Card is a hassle free product, no need to carry two separate plastic cards for local and international card. Now, with one plastic card the Cardholders can enjoy all the benefits and make transactions locally & globally from their Prepaid card account at all the VISA labeled merchant outlets, ATMs, etc. SJIBL VISA Souvenir Card (Gift Card â€“ Local): SJIBL Souvenir Card is a very attractive and stylish product. Like a Gift Card, SJIBL Souvenir Card can be used by anyone wishes to. The intending customer may have the card instantly or may customize the card as required. The SJIBL Souvenir Cards are accepted locally at all the VISA labeled merchant outlets, ATMs, etc. Usage Limit Description Cash withdrawal limit (total) Cash withdrawal limit (amount) Balance checking Mini statement printing PIN change Invalid PIN retry count Card usage limit in ATMs (total)
Transaction Limit 4 times per day Tk. 20,000 per day 4 times per day 2 time per day 2 times per day 3 times per day 10 times per day
SMS Service :
Welcome to the convenience of accessing your banking needs from anywhere anytime. Shahjalal Islami Bank again fulfilled the demand of time in the era of modern banking technology by introducing the Mobile banking i.e. SMS / Push Pull Service. We offer a range of ways for you to access and manage your money.
Mobile Banking is a secured & flexible solution that delivers the banking services to its customers through a range of mobile devices using SMS / Push Pull technology. It provides banking services to the registered clients access to account information and real-time transaction capabilities from the mobile phones at a true “Anywhere, Anytime, Anyhow” convenience. As a leading private sector bank in Bangladesh the Shahjalal Islami Bank Limited presents the Mobile banking i.e. SMS / Push Pull service. Services: 1. Balance Inquiry 2. Cheque Book Request 3. Cheque Leaf Status 4. FC Rate Information 5. Cheque Stop Payment Instruction 6. Statement Request by Courier/Post 7. Statement request by E-mail 8. Last Three Transaction Statement 9. Help inquiry 10. PIN Change
• GP Bill Collection: Grameen Phone subscribers availing the service to pay their bills, advances, security deposit and other related charges through all branches of Shahjalal Islami Bank Limited.
4.8 Remittance: •
Kushiara Money Transfer’s a definition of safety and reliability and a popular Money Transfer Company in United Kingdom (U.K.). Kushiara offers “Instant Cash” next day collection from Bank counter at most cities in Bangladesh and “Quick Credit” to beneficiary’s account in all over the Bangladesh.
4.8.2 Western Union: Western Union a fast, reliable and convenient way to send a money transfer Western Union Financial Services Inc. U.S.A. is the number one and reliable money transfer company in the world. This modern Electronic Technology based money transfer company has earned world wide reputation in transferring money from one country to another country within the shortest possible time. Shahjalal Islami Bank Limited has set up a Representation Agreement with Western Union Financial Services Inc. U.S.A. Millions of people have confidence on Western Union for sending money to their friends and family. Through Western Union Money Transfer Service, Bangladeshi Wage Earners can send money quickly from over 280,000 Western Union Agent Locations in over 200 countries and territories world wide- the world’s largest network of its kind, only by visiting any branches of Shahjalal Islami Bank Limited in Bangladesh. The money sent by your loved ones is very special to you indeed. So, at Western Union, we offer the following benefits:
Reliability: Our customers have benefited from our electronic money transfer for over 150 years. Each transfer can be tracked electronically to make sure that you receive the money your loved one has sent. Speed: When your loved one sends you money, within minutes you can receive it in Bangladesh. Convenience: •
Bank account is not required!
Just go to a Shahjalal Islami Bank Limited branch anywhere in Bangladesh offering Western Union Money Transfer. Thensimply fill a form and collect your money.
Shahjalal Islami Bank Limited has 26 such branches all over Bangladesh and Western Union has over 280,000 agent locations across 200 countries and territories.
3 easy steps to receive your money:
Your loved ones deposit the money at any Western Union Agent location and get a receipt with MTCN.
He/she then informs you about the amount sent (sender name, amount, sending country, receiver name and MTCN).
You go to the nearest Shahjalal Islami Bank Branch with a valid identity card. You fill a simple form and receive the money.
4.8.3 SWIFT Service Shahjalal Islami Bank Limited is a member of the society for Worldwide Inter Bank Financial Telecommunication (in abbreviation S.W.I.F.T). SWIFT is the industry-owned cooperative supplying secure, standardized messaging services and interface software to nearly 8,100 financial institutions in 207 countries and territories. SWIFT members include banks, broker-dealers and investment managers. The broader SWIFT community also encompasses corporate as well as market infrastructures in payments, securities, treasury and trade.
Chapter Five General Banking
5.1 General Banking: Financial institution/ intermediary that mediates or stands between ultimate borrowers and ultimate lenders is knows as banking financial institution. Banks perform this function in two ways- taking deposits from various areas in different forms and lending that accumulated amount of money to the potential investors in other different forms. General Banking is the starting point of all the banking operating. General Banking department aids in taking deposits and simultaneously provides some ancillaries services. It provides those customers who come frequently and those customers who come one time in
banking for enjoying ancillary services. In some general banking activities, there is no relation between banker and customers who will take only one service form Bank. On the other hand, there are some customers with who bank are doing its business frequently. It is the department, which provides day-to-day services to the customers. Every day it receives deposits from the customers and meets their demand for cash by honoring cheques. It opens new accounts, demit funds, issue bank drafts and pay orders etc. since bank in confined to provide the service everyday general banking is also known as retail banking.
General Banking Section of a branch is designed•
To serve the general people for saving money
To ensure smooth transaction for commercial people and
To ensure security of preaches wealth of the clients and also for all other important activities.
The general banking involves the following activities-
5.2 Account opening One cannot be a customer of the bank without opening an account. Account opening is an agreement between the customer and the bank. The form of account opening acts as a contract evidence. So account opening is one of the most important activities of a bank. The rules and regulations for opening of an account can vary according to types of accounts.
Types of Accounts One cannot imagine the banking business without deposits. So the most important activity of the commercial bank is to receive the deposits from the customers Shahjalal Islami Bnak’s deposits can be divided as follows—
i. AL-Wadiah Current Deposit For private, individuals, merchants, traders, importers and exporters mill and factory overset this type of account is advantageous. The minimum deposit of Tk.5000 for opening of a current account is required with reference. The benefits of current account are as follows•
Statement of account on monthly basis/any time.
Statement by fax on demand
Any number of transactions a day.
ii. Mudaraba Savings Deposit There is restriction on withdrawals. Frequent withdrawal is prohibited. The saving account is primarily for small-scale savers. The main objective of this A/C is promotion of saving money. Highlights of the Account
7 days notice is required for withdrawal of large amount.
Frequent withdrawal is not encouraged.
Minimum amount of Tk.2000.00 is required as initial deposit.
Normally withdrawal is not allowed more than one time in a week
iii. Mudaraba Short Notice Deposit (MSTD) The Bank offers more profits in the short-term deposit than savings account. The depositors must keep their money for at least six months to get the profit. Generally it is suitable for various big companies, organizations and govt. departments
iv) Mudaraba Term Deposit Receipt (MTDR) When an account of cash is kept in the bank for a fixed period of time these deposits cannot withdraw money from the bank before the maternity of a fixed period. When the depositors open these types of account the banker issue a receipt acknowledging the receipt of money, on deposit account. For three and six and twelve months the rate of interest is 12.5%, 12.75%, and 13% respectively.
v) Monthly income scheme: It is a monthly income scheme that really makes good sense. A sure investment for a steady return.
Highlights of the Scheme:
Minimum deposit TK, 50,000.00 and profit will be TK, 450.00.
Higher monthly income for higher deposit.
The scheme is for a 5-year period.
Objectives of the scheme •
The depositors have to fill up forms for opening this account.
The receipt, which is provided by the bank to the customers, is not transferable.
The Bank will not provide profit to means if this deposit is withdrawer within one year of opening the account.
vi) Mudaraba multiple Deposit scheme Investment leads a country to industrialization. But saving is the main source of investment. Without saving a country cannot build up capital. For this reason saving is called the skeleton of development. This is a nine years deposit, which increases the deposit more than triple. Shahjalal Islami Bank offers mudaraba multiple savings by creating more conscious and encouraging people to save.
vii) Hajj Deposit Scheme: Hajj deposit at monthly installment from 1(one) year to 25 (twenty five) years are accepted under the above scheme to enable the account holder to perform hajj out of the accumulated saving with profit.
vii) Money Grower Money gradually grows in this account. It is a monthly savings scheme. It secures the future with ease. A small saving today will provide comfort tomorrow. There are several types of Money Grower Scheme which are given bellow:
• Education Deposit Scheme (EDS) Savings Period and Monthly Installment Rate the savings period is for 10, 15, or 20 years. Monthly installment rate is: M.Inst.
Yrs 10 Yrs 15 Yrs 20 Yrs
22,158 47,204 92,772
55,395 1,18,011 2,31,929
1,10,790 2,36,022 4,63,858
2,21,580 4,72044 9,27,716
6,64,740 14,16,132 27,83,148
11,07,900 23,60,220 46,,38,580
• Monthly Deposit Scheme (MDS) Savings Period and Monthly Installment Rate the savings period is for 5, 8, or 10 years. Monthly installment rate is:
TK.10,000 TK.25,000 TK.50,000
Yrs 5 Yrs 8 Yrs 10 Yrs
80,250 1,55,000 2,22,000
1,60,500 3,10,000 4,44,000
4,01,250 7,75,000 11,10,000
8,02,500 15,50,000 22,20,000
20,06,250 38,75,000 55,50,000
40,12,500 77,50,000 1,11,00,000
• Millionaire Scheme – 12 Yrs (MS12) Savings Period and Monthly Installment Rate the savings period is for 12, 15, 20, or 25 years. Monthly installment rate is: M.Inst. Yrs 12 Yrs 15 Yrs 20 Yrs 25 Yrs
10,00,000.00 10,00,000.00 10,00,000.00
• Mohor Deposit Scheme (MSD) Savings Period and Monthly Installment Rate the savings period is for 3, 5, or 8 years. Monthly installment rate is: M.Inst.
Yrs 3 Yrs 5 Yrs 8 Yrs
42,743 80,250 1,55,000
85,486 1,60,500 3,10,000
1,28,229 2,40,750 4,65,000
1,70,972 3,21,000 6,20,000
2,12,715 4,01,250 7,75,000
4,27,430 8,02,500 15,50,000
â€˘ Marriage Deposit Scheme (MSD) Savings Period and Monthly Installment Rate the savings period is for 10, 12, 15 or 20 years. Monthly installment rate is: M.Inst.
Yrs 10 Yrs 12 Yrs 15 Yrs 20 Yrs
55,395 76,261 1,18,011 2,31,929
1,10,790 1,52,522 2,36,022 4,63,858
2,21,580 3,05,044 4,72,044 9,27,716
3,32,370 4,57,566 7,08,066 13,91,574
4,43,160 6,10,088 9,44,088 18,55,432
5.3 Account Closing: First a customer has to submit an application with his/her signature mentioning that he/she wants to close his/her A/C. Then the signature will be verified by the officer. Customer has to certify by different department (Advance, Foreign Exchange department) of Bank that he/she has no liabilities to the Bank. After that the Customer's A/C is debited and then Bank issues a Pay Order in the name of A/C holder.
5.4 Account Transfer: Customer has to submit an application mentioning that he/she wants to transfer his/her A/C to his desired Branch and the officer will verify the signature, Customer has to be certified by different department of Bank that he/she has no liabilities to the bank. Then total particulars of A/C holder will prepare and sent to the Customer's desired branch. Liability of Recognizer is secondary and account holder is primary.
5.5 General Practice at Regarding Accounts, in Account Opening Register: After fulfilling all the requirements for opening account necessary entries are given in the account opening register. There are several registers for several accounts as MSD, ACD, SND, MDS and MTDR etc. Date of opening name of the account holder, nature of business, address, initial deposit, and introduction, and various information's are recorded in that register. New accounts number is given from the list of new numbers provided by the computer department.
5.6 Cheque Book: Cheque book is issued to the new customer after opening account. Two separate cheque books are given for current and saving accounts. AWCA accounts Cheque book consists 25 and 50 leafs, while MCA account Cheque book has 10 leafs. There is a cheque book issue register in this regard; where Cheque book number, leaf number, date of issue etc. information are kept. All the necessary numbers are the sent to the computer department to give entry in the program.
5.7 Pay Order (PO): Pay Order an instrument, which is used to remit money with in a city thorough banking channel the instruments are generally safe as most of them are crossed.
5.8 Clearing: As far safety is concerned customers get crossed check for the transaction. As we know crossed check cannot be encased from the counter rather it has though been collected through banking channel i.e. clearing. A client of SJIBI received a check of another bank, which is located within the clearing range deposit, the checks in account at SJIBL New SJIBL will not the money until the check is honored.
5.9 Transfer: Transfer delivery is a Cheque collection procedure among internal branches within the Clearing House. When a Cheque is deposited to another Branch Office, then collecting branch on that date send the Cheque to their Local Office, finally send that Cheque to the respective branch and takes necessary action for honoring Cheque. If the Cheque is dishonored then authorized branch send the Cheque to the local office and Local Office send that Cheque to the collecting branch on the collecting date. Here Clearing house function is not required because transactions occur among the same bank between several branches.
5.10 Outward Bills for Collection (OBC):
Customers deposit cheque, draft etc for collection attaching with their deposit receipt. Instrument within the range of clearing are collected through local clearing house but the other which are outside the clearing range are collected through OBC mechanism. A customer of SJIBL principal branch local office Dhaka is depositing a check of Sonali Bank Cox's-Bazar. New as a collecting bank SJIBL principal branch will perform the following tasks: •
Received seal on deposit slip.
SJIBL local office principal branch crossing indicating them as collecting bank.
Endorsement give payees A/C will be credited on realization.
Entry on register from where a controlling number is given.
Collecting bank can collect it either by its branches of by the drawer's bank they will forward the bill then to that articulate branch. OBC number will be given on the forwarding letter.
5.11 Inward Bills for Collection (IBC): In this case bank will work as an agent of the collection bank branch receives a forwarding letter and the bill. Next steps are: •
Entry in the IBC register, IBC number given.
Endorsement given- "our branch endorsement confirmed".
The instrument is sent to clearing for collection.
Miscellaneous creditor A/C.
Internship position & Duties Throughout internee period have worked with more or less all the CSO (Customer Service Officer) and try to help at level best to help them in their work. So basically know more about general banking. The tasks that have done throughout my internee period are given below:
6.1 Account Opening Section:
The started internee with responsibility of Customer Service Officer. The assigned to work with account opening department. In a whole day have to open more than 10 accounts. Customer account opening is a lengthy process. If the customers have the documents that she/ he is needed to open that particular; he or she must fill an account correctly. If there is any problem found in the fulfillment of the from is wrongly filled, the from will be return on next day. So the form must be filled correctly. If all the things are right, the CSM give the permission to open the account. They have to fill up a KYC (Know Your Customer) from to have more idea about the customer. The main purpose of this from is to give all necessary information regarding the account, like the charges, benefits and if any specific inquiry the customer ideas. I also open FDR account, DPS, different type of account like•
Mudaraba Short Notice Deposit
Account Mudaraba Savings Account
Mudaraba Term Deposit Account
Other Scheme Deposit Accounts
The process of opening an account is given in the flow chart below: Client come and show interest to open an account
Fill KYC form, check the clients has necessary documents & information to open an account
If has then give him the application form to fill up
If hasn’t serve the application. Form & inform the necessary documents to bring next day
Check the application form carefully and whether it include necessary documents Get the signature of the client on the register
Deliver the welcome pack and the ATM card
6.2 Clearing Section: I have worked total more than 10 days in this section. The main responsibilities was received several cheques from their clients. I also attached in the front side of the cheque clearing seal and at the back side endorsement seal. My responsibility to ensure account number, account holder name, which bank’s cheque etc. After confirming this I sent this cheque to my boss. He was responsible for completing the other tasks.
6.3 Provide information of all types customers query: The provided information to all type of customer queries. Each day many people come to the branch with various types of problems. Tried best to give them the proper information and try to solve their problem. Some of the information that provided are given bellow: •
Account opening requirements, DPS related information, FDR information, some type of loan facilities different type of debit card related queries and their benefits.
Give instruction for address change, signature change, and mandate instruction, nominee change, and account closing information, DPS closing information, FDR closing formalities, pay order, document issue and all type of queries.
The gave information of western union money transfer. The used to give information, like from which country the money can be sent and in which banks money can be received. The usually tell about the formalities or requirements to be maintained to receive the money.
6.4 Verification of signatures of different issue: Verification of signature is very important for banking transaction. Because one of the important proves to be an account holder is the signature. It was also a risky issue. I used to verified signature for different issues, like•
For balance inquiry.
For stop payment instruction.
For address change, nominee change, mandate instruction, signature change.
For cheque book delivery.
For DPS, MSD, SND, FDR account opening.
For DPS, MSD, SND, FDR certificate delivery.
6.5 Learning Points: The learnt so many things about the banking sector especially Islamic banking system. Now, it is very clear to how Shahjalal Islami Bank Limited operates their operation in this country. The explain this as follows: •
How to open their several account in their bank?
What are the requirements for opening their account?
How to provide information to their client?
How clients can gather their account statement and know to balance?
What are the procedures to close an account?
How cash sections provide the service to their clients?
How clearing house operates their operation?
The not well informed about PO but after the completion of internship program the mechanism of this has been clear to me.
How to prepare different company’s salary sheet by using their software?
Finally, learned how to prepare an internship report?
SWOT Analysis, Findings, Recommendation and Conclusion 7.1 SWOT Analysis of SJIBL, Kawran Bazar Branch: 7.1.1 Strength: •
Fully computerized accounts maintenance.
Money counting machine for making cash transaction easy and prompt.
In SJIBL Bank SWIFT is being used for foreign trade related operations like letter of credit, fund transfer, guarantee, etc with optimum security.
Well decorated and air conditioned facilities.
SJIBL has a well-diversified pool of human resources, which is composed of people with high academic background. Also, there is a positive demographic characteristicmost employees are comparatively young in age yet mature in experience.
SJIBL provide ATM debit card and nonstop banking facilities.
Structural set up and business location is strategic.
Wide product line
Bank is very alert to preserve the asset quality of the bank.
Continuous training both at home and abroad is going on the develop the skill of human resources.
Shahjalal Islami Bank’s assets position is quite satisfactory
7.1.2 Weakness: •
Dependent on fixed deposits.
Limited Market Share.
Absence of an ungraded website.
Lack of setting arrangement for the waiting customers.
Limited branch network.
Sometimes it seemed to me that charges and other fees are very high compared to other private banks. It frequently creates customer dissatisfaction.
Some officials dealing with retail products have not been as a professional as a private bank does require.
Sometimes the Customer Service Officers were so busy that it creates delay to the customer service. And at the end of the day the closing were also delayed.
Most of the time there were problem with the ATM machine. In ATM, It sometimes remained out of order, some time out of cash and sometimes customer face the problem of cash and credit capture.
Charges of statement or certificates are very high.
7.1.3 Opportunity: Here the opportunity means an area of buyer need or potential interest in which a bank can perform profitably. If the management can use the continuous support properly it can enjoy huge opportunity for improving its growth. Other opportunities are•
Expansion of new area of investment
Credit card business
Regulatory environment favoring private sector bank.
Technical support to small Scale industries (SSI) in order to enable them to run their enterprises successfully.
SME and Agro based business.
Besides, the Bank is to provide full range of commercial banking services.
7.1.4 Threat: The environmental threat is a challenge posed by an unfavorable trend or development that would lead to deterioration in sales or profit. Bank’s other threats are as follows•
Number of potential competitors in home and abroad is increasing day by day.
Restless political condition in Bangladesh, such as Strike, Boom blast, etc. threats the prosperity of Bank.
Market pressure for lowing Profit rate.
The bank must be bound to follow the rules of central Bank.
Findings While working on Shahjalal Islami Bank Limited, Motijheel Branch attained a newer kind of experience. After collecting and analyzing data some findings. These findings are completely my personal view to research work.
Shahjalal Islami Bank Limited has lack of strong supervision for which loans are defaulted.
Shahjalal Islami Bank Limited also hasn’t proper monitoring system.
In terms of repayment large loan has performed better than small sized loan.
This bank started on-line service newly. As a resulted customers are not getting the full service by the on-line service. Sometimes they have to face problem with on-line account.
Branches are very much enthusiastic to provide more service to the clients. General Banking Division is an efficient department. They are very much prompt to give decision to their valued client. Head Office Credit committee sits regularly on weekly basis. They never keep any things pending.
Lack of good cooperation is identified among the work procedures and among the employees of the bank, which results in lengthiness and ineffective service. The employees of the bank cannot provide effective and efficient services to the customers because of lack of computer facility.
The number of human resources in the Computer section is really insufficient to give services to huge number of customers.
The investment of the branch is too low in comparison to the total deposits of the branch.
The Bank has given less emphasis on long-term financing.
Shahjalal Islami Bank Limited has also shortage of efficient management information system.
Recommendation The practical experience in SJIBL for only three months. Shahjalal Islami Bank Ltd introduces a new dimension of business among the local bank in the financial market of Bangladesh in Retail Product Management. But in the complex business environment and diversified business world these products cannot meet the customer needs. Today, customer classes are vibrant and it is difficult to keep the customers without an appropriately designed and also is not properly market driven. Developing a market driven product management system is essential for any company if the company would like to win the competitive condition and would like to survive in futuristic competitive market setting. In this regard, following specific recommendations are forwarded for the development of product management of Shahjalal Islami Bank Ltd.
Officials whom are involved in Customer Services should be trained properly. Because some time they cannot give proper suggestions to the customer queries. Though they try to give their best.
Their jobs should be mentioned more frequently
They should be made somewhat free from doing business
Link between Customer Service Officer’s and Customer Service Manager should be easier
Number of ATM booth can be increased
ATM should take good care. Because it has been seen that most of the time they remain out of order or out of cash
Relationship between Bank and customer should be increased
Charges and fees may be reduced for more customer satisfaction
There should be a code of conduct for the SJIBL officials, which should followed
Motijheel Branch should have token system
The website of SJIBL should upgrade regularly
Last but not the list, the employees must be motivated when they do something good and creative.
Conclusion Shahjalal Islami Bank Ltd, Motijheel branch is one of the most potential Islami banks in the Islami banking sector. It has a large portfolio with huge assets to meet up its liabilities and the management of this bank is equipped with the expert bankers and managers in all level of management. So it is not an easy job to find out the drawbacks of this branch as a new branch. But the branch needs more employees for its substantial growth. would rather feel like producing my personal opinion about the ongoing practices in Motijheel Branch.
Shahjalal Islami Bank limited is a leading Private Islami bank in Bangladesh with superior customer bases that are loyal, faithful, worthy towards the bank. The service provided by the young energetic officials of the Shahjalal Islami Bank Limited is very satisfactory. As an Islami bank SJIBL has to follow the rules of Bangladesh bank despite the fact that these rules sometime restrict the foreign business to some extent. During my internship in this branch I have found its General Banking and Investment department to be very efficient; therefore this department plays a major role in the overall profitability of the branch and to the Bank as a whole. The Bank's drive towards market leadership as well as quality in choosing business will continue in the coming years although competition is intensified with the opening of more financial institutions. The Bank is optimistic that the volume of business will increase in future through pragmatic and market friendly policies. The Bank shall continue to explore new Branches for Banking. We shall endeavor to adopt customer-oriented policies and introduce new techniques that will help to earn profit and increase greater confidence of the existing/ prospective customers. If Shahjalal Islami Bank Ltd, Motijheel Branch adopts professionalism within the frame work of Shariah, they will be able to earn handsome “Halal Profit” and higher return to the depositors and share holders. Ultimately, public will get more confidence on this type of Banking.
Bibliography ■ References Book: 1. Sk. Nazibul Islam & Atul Chandra Pandit; Training Course on Credit Management, February 25 – March 08, 2007. 2. Gup & Kolari; Commercial Banking, McGraw-Hill. 3rd Edition. 3. Dr. A. R. Khan; Bank Management. 4. Prospectus of Shahjalal Islami Bank Limited. 5. Annual Report 2008 of Shahjalal Islami Bank Limited. 6. Brochures of Shahjalal Islami Bank Limited. 7. www.shahjalalbank.com.bd 8. www.bangladesh-bank.org