ibbl investment portfolio of

Investment Portfolio of Islami Bank Bangladesh Limited

1.1 Introduction:

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Internship program is a partial requirement for the degree of MBA of MIU. Every MBA

student is required to learn some practical knowledge within the pre-stipulated period by

observing the day to day activities of an organization. In this regard my internship program

started on 1st January, 2013 at Islami Bank Bangladesh Limited (IBBL).

Islamic banks are unconventional and specialized financial institutions that perform most of

the standard banking services and investment activities on the basis of profit and loss sharing

system conforming to the principles of Islamic Shari’ah. Out of 56 banking institutions, 8

banks are backed by Islamic mechanism and worldwide accepted Islamic morality and

established code of conduct. This paper, however attempts to describe the overall scenario of

Islami Bank Bangladesh Limited which is performing beneath the umbrella of Islamic

Shari’ah and approved welfare oriented principles and especially narrate the investment

activities of IBBL.

1.2 Importance of B anking in the economic s of Bangladesh:

A bank as a matter of fact is just like a heart in the economic structure and the Capital

provided by it is like blood in it. As long as blood is in circulation the organs will remain

sound and healthy. If the blood is not supplied to any organ then that part would become

useless, so if the finance is not provided to agricultural sector or industrial sector, it will be

destroyed. Loan facility provided by banks works as an incentive to the producer to increase

the production. Many difficulties in the international payments have been overcome and

volume of transactions has been increased. The modern economies in the world have

developed primarily by making best use of the credit availability in their systems. An

efficient banking system must cater to the needs of high end investors by making available

high amounts of capital for big projects in the industrial, infrastructure and service sectors. At

the same time, the medium and small ventures must also have credit available to them for

new investment and expansion of the existing units.

If the world was without banks, major part of the world’s population would be out of jobs.

The financial sector would have never emerged in the first place. It would be like a human

born without a backbone to support the torso. This means a void that would hinder the growth

of an economy.

1.3 Objectives of the study:

The objectives of the study are: of 48


Following are the main objectives

To analyze the different modes of investment of IBBL

To find out the strength and weakness of different modes of Investment of IBBL.

1.4 Methodology :

Extensive literature survey was made on the topic to successfully complete the study and this

helpful me to have an idea about the operations of Islami Banks & other Commercial Banks

in

Method of data collection: Observation method.

Sources of information : Both primary and secondary information sources were

used to complete this report.

Primary sources of data: Direct interview with bank employees on the basis of check

list to gather information regarding various modes of investment

operation.

Secondary sources of data: Annual report & Website of Islami bank Bangladesh Limited&

others documents of the bank, Bangladesh bank circulars and

regulations.

Methods of Analysis : Quantitative method.

Analytical Review :

Secondary data were tabulated and analyzed.

1.5 Limitation of the study:

There are some limitations of the study. These are given below: The study was limited to one bank Shortage of time for preparing the report was another constraint. Inadequate published information about bank also acted as a limiting factor. Resource constraint was also there. Insufficient information in websites of bank and in adequate database about Islamic

banks in Bangladesh Bank hindered the depth of the study. Busy working environment and lack of sufficient well informed officials stood in the

way of –depth study. Some data could not been collected for confidentiality or secrecy of management

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2.1 Related literature:

Many research works were conducted in the field of Islamic banking. a brief summary of the

earlier research works relevant to the concept operation, investment of the Islamic banking

systems were found to have been made by some academicians, parishioners etc. in such a

context, I summarize below some important and relevant work on traditional banking &

Islamic banking.

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Abu Sina (2000), in his Ph. D thesis “The Modes of Investment of Islamic Banks and

Nationalized Commercial Banks: A Comparative Study” stated the objectives to examined

the similarities and dissimilarities of the modes, to analyzed the performance of the banks and

identified the problems in investment. He shows that the modes of Islamic banks and those of

conventional NCBs are completely different in nature. He found that modes of investment

used by Islamic banks were more significant for the human welfare and social justice than the

modes of investment used by NCBs, which provided material welfare only. He highlighted

that the Islamic banks showed better performance than NCBs during 1992-1998.

Ahmed babikir, (1989), showed in his Ph. D thesis titled “the contribution of Islamic

banking to Economic Development: A Case Study of Sudan” that the Islamic banks invest in

short term (and equity) finance. The researcher also found that there are different factors

affecting the role, such as the character and strength of demand for financing productive

projects, the attitude of the Islamic banks management, government policies and the

structural rigidities characterizing the Sudanese economy.

1. Sina, M. Abu, The Modes of Investment of Islamic Banks and Nationalized Commercial

banks: A Comparative Study, Ph.D thesis, Islamic University, Kushtia.

2. Babikir O.Ahmed, The Contribution of Islamic Banking to Economic Development: the

case of the Sudan.Ph.d Thesis, University of Durham.U.K. In Abstracts of the Journal of

Islamic Social Science, Vol.8, No.1, 1991.

2.2 Definition of Islamic Bank:

The organization of Islamic conference (OIC) defines an Islamic bank as “a financial

institution whose statutes, rules and procedures expressly state its commitment to the

principals of Islamic Shariah and to the banning of the receipt and payment of interest on any

of its operation.” According Islamic banking Act 1983 of Malaysia Islamic bank is a

“company, 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 of

Islam.” It appears from the above definitions that Islamic banking is system of financial

intermediation that avoids receipt and payment of interest in its transactions and conducts its

operations in a way that it helps achieve the objectives of an Islamic economy. That is why

Islamic banks are often known as PLS-banks.

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2.3 Objectives of Islamic Bank:

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. Islamic banks operate on Islamic principles of profit and loss

sharing, strictly avoid interest, which is the root of exploitation and is responsible for large-scale

information and unemployment. An Islamic bank is committed to do away with disparity and

establish justice in the economy, trade, commerce and industry, build socio-economic infrastructure

and create employment opportunities.

2.4.1 RIBA and its basic features are:

The word used by the Quran concerning ‘interest’ is Riba. The literal meanings of Riba are

money increase, increase of anything or increment of anything from its original amount

(Maududi 1979, p.84). However, all increases are not considered as Riba in Islam. Money

may increase in business activities as well. This increase is not at all considered as Riba. The

increase, instead of being prohibited (Haram), is approved (Halal) in Islam. Islam prohibits

only those increases that are charged on the loan with a prefixed rate.

Muslim scholars equate interest with Riba. In the Shariah, Riba technically refers to the

premium that must be paid by the borrower to the lender along with the principal amount as a

condition for the loan or for an extension in its maturity (Chapra 1985,p.64). In other words,

Riba is the predetermined return on the use of money. In the past there has been dispute about

whether Riba refers to interest or usury, but there is now consensus among Muslim scholars

that the term covers all forms of interest and not only “excessive” interest (Khan 1985, p.52).

2.4.2 Basic characteristics of Riba as are:

Origin of riba is loan(Quard or Dayn)

Riba is excess over and above the principal loan

Riba is charged or paid only as a condition of loan or time and no other recompense,

price or exchange value is paid for the excess or Riba

Riba is related with time and become double and redouble and multiple with passage

of time

Riba is not related with the result of business.

2.4.3 RIBA and Profit

Most of the persons equate Riba with profit. In effect, they are fundamentally different from each

other. These misunderstanding will be removed if we look at the differences between Riba and

Profit. These differences are highlighted below:

RIBA Profit

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1. When money is “charged”, its imposed

positive and define results Riba

When money is used in trading its uncertain

result is profit.

2. By definition, Riba is the premium paid by

the borrower to the lender along with principal

amount as a condition for the loan.

By definition, profit is the difference

between the value of production and the cost

of production.

3. Riba is detrmined, and hence there is no

uncertainty on the part of either the givers or

the takers of loans.

Profit is post-determined, and hence its

amount is not known until the activity is

done.

4. Riba cannot be negative, it can’t best be very

low or zero.

Profit can be positive, zero or even

negative.

5. From Islamic Shariah point of view, it is

Haram.

From Islamic Shariah point of view, it is

Halal.

Table-2.1: Difference between RIBA and Profit

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2.5 The relationship between Banking system and Islam

Figure-2.1: The Relationship between Banking System and Islam.Source : Arif, M (1982).

Conventional Bank 1. Loan

4. Principle Investment 3. Good 2. Cash

Payment

ISLAM

AQIDAH AKHLAQSHARIAH

POLITICAL ACTIVITIES ECONOMIC ACTIVITIES SOCIAL ACTIVITIES

BANKING &FINANCIAL ACTIVITIES

IBADAT MUAMALAT

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BankBank Bank Client

Bank Client


Islamic Bank4. Cost plus agreed profit

3. Goods

2.

Good 1. Cash Payment

Figure-2.2: Banking Procedures of Islamic & commercial Bank

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SupplierSupplier

BankBank Bank ClientBank Client

SupplierSupplier


ISLAMI BANK BANGLADESH LIMITED

3.1.1 Introduction

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

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

Naturally, it remains a deep cry in their hearts to fashion and design their economic lives in

accordance with the precepts of Islam. The establishment of Islami Bank Bangladesh Limited

on March 13, 1983, is the true reflection of this inner urge of its people, which started

functioning with effect from March 30, 1983. With the active co-operation and participation

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

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

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

commercial bank in Bangladesh.

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3.1.2 The H istory of Islami Bank Bangladesh Limited (IBBL)

Islami Bank Bangladesh Limited (hereinafter called “IBBL”) was established on March 13,

1983 as a public limited company under the Companies Act, 1913 (amended in 1994). The

bank started commercial operation on March 30, 1983 under the ambit of Banking

Company’s Ordinance 1962, later on the Banking Companies Act, 1991 as the first interest-

free Islamic Shari’ah based commercial bank. IBBL issued share to the public in 1985 and

positioned in the Blue Chip Index of country’s both bourses i.e. ‘DSE20’ and ‘CSE30’. It’s

authorized capital and paid up capital is TK. 5,000 million and TK. 3,802 million

respectively. IBBL is the first ever issuer of Mudaraba Perpetual Bond in the country worth

of Tk. 3,000 million. IBBL’s well diversified product line offers a wide range of commercial

banking services both asset-based and liability based. It is pioneer in introducing Islamic

banking and created a strong brand image by offering wide range of Islamic investments and

deposit schemes. The bank was sponsored by Foreign Institutions, local institutions, a group

of local businessmen representing various business groups and other important personalities

of Middle East and Europe. The corporate Head Office of the Bank is at its own premises at

Islami Bank Tower, 40, Dilkusha Commercial Area, Dhaka.

3.1.3 Aims and objectives

To conduct interest-free banking

To establish participatory banking instead of banking on debtor creditor relationship

To invest on profit and risk sharing basis

To accept deposits on Mudaraba & Al-Wadeah basis

To establish a welfare-oriented banking system

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

economic up liftmen

To play a vital role in human development and employment generation

To contribute towards balanced growth and development of the country through

investment operations particularly in the less developed areas.

To contribute in achieving the ultimate goal of Islamic economic system

3.1.4 Mission

To establish Islamic banking through the introduction of welfare oriented banking and also

ensure equity and justice in the field of all economic activities, achieve balanced growth and

equitable development through diversified investment operations particularly in the priority

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sectors and less development areas of the country. To encourage social economic up liftmen

and financial services to the low –income community particularly in the rural areas.

3.1.5 Vision

The vision of IBBL is to always strive to achieve superior financial performance, be

considered a leading Islamic Bank by reputation and performance.

To establish and maintain the modern banking techniques, to ensure the soundness and

development of the financial system based on Islamic principles and to become the strong

and efficient organization with highly motivated professionals, working for the benefit of

people, based upon accountability, transparency and integrity in order to ensure stability of

financial system.

Try to encourage savings in the form of direct investment.

Try to encourage investment particularly in projects, which are more likely to lead to higher

employment.

3.1.6 Goals and objective of the B ank:

To conduct interest-free banking.

To establish participatory banking instead of banking on debtor-creditor relationship

To invest through different modes permitted under Islamic Shariah.

To accept deposits on profit-loss sharing basis.

To establish a welfare-oriented banking system.

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

economic development.

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

To contribute towards balanced growth and development of the country through

investment operations particularly in the less development areas.

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

3. 1.7 General Banking Functions of IBBL

General banking activities of IBBL includes the following:

a) Mobilization of deposits

b) Receipts and payment of cash

c) Handling transfer transaction

d) Operations of clearing house

e) Maintenance of accounts with Bangladesh bank and other Banks.

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f) Collection of cheques and bills

g) Issue and payment of Demand Draft, Telegraphic transfer and Payment Order.

h) Executing customers standing instructions.

i) Maintenance of safe deposit lockers

j) Maintenance of internal accounts of the bank.

While doing all the above noted work IBBL issue cheque-book, Deposit account operating

form, SS cards, cheque book, ledgers, cash books Deposit account ledgers, preparation

statements of accounts and pass book, balance different accounts and calculates profits.

3. 1.8 Management of IBBL Islami Bank Bangladesh limited is being managed by a board of directors comprising foreigners and local. An executive committee is formed by the board of directors for efficient and smooth operation of the Bank. Besides a management committee looks after the affairs of the bank.Organizational Structure of the Company

Figure-3.1: Organizational Structure of the Company

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3. 2 Corporate information: (As on Diary 2013 of IBBL)

Table no.3.02: Corporate Information of IBBL

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Date of Incorporation 13th March 1983

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

Formal Inauguration 12th August 1983

Share of Capital

Local Shareholders 37.76%

Foreign Shareholders 62.24%

Authorized Capital Tk. 20,000.00 million

Paid-up Capital Tk. 12,509.64million

Deposits Tk. 4,16,109.00 million

Investment Tk. 4,14,629.00 million

Foreign Exchange Business Tk. 648303.00 million

Equity Tk. 38,804.00 million

Zones 14

Number of Branches(Including SME/Agriculture Branches) 276

Number of Shareholders 60,173

Manpower 12,06

No. of own ATM Booths 192


4.1 IntroductionInvestment is the action of deploying funds with the intention and expectation that they will

earn a positive return for the owner (Brokington 1986, p.68). Funds may be invested in either

real assets or financial assets. When resources are used for purchasing fixed and current

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assets in a production process or for a trading purpose, then it can be termed as real

investment. The establishment of a factory or the purchase of raw materials and machinery

for production purposes are examples in point. On the other hand, the purchase of a legal

right to receive income in the form of capital gains or dividends would be indicative of

financial investments. Specific examples of financial investments are: deposits of money in a

bank account, the purchase of Mudaraba Savings Bonds or stock in a company. Ultimately,

the savings of investors in financial assets are invested by the respective company into real

assets in the form of the expansion of plant and equipment. When money is deposited with an

Islamic Bank, the bank, in turn, makes investments in different forms approved by the

Islamic Shariah with the intent to earn a profit. Not only a bank, but also an individual or

organization can use Islamic modes of investment to earn profits for wealth maximization.

4.2 Investment Objectives of IBBL

The objectives and principles of investment operations of the Banks are: The investment fund strictly in accordance with the principles of Islamic Shariah. To diversifies its portfolio by size of investment, by sectors (public and private), by

economic purpose, by securities and by geographical area including industrial, commercial and agricultural.

To ensure mutual benefit both for the Bank and the investment client by professional appraisal of investment proposals, judicious sanction of investment, close and constant supervision and monitoring therefore.

To make investment keeping the socio-economic requirement of the country in view. To increase the number of potential investors by making participatory and productive

investment. To finance various developments schemes for poverty alleviation, income and

employment generation with a view to accelerating sustainable socio economic growth and up liftmen of the society.

To invest in the form of goods and commodities rather than give out cash money to the investment clients.

To encourage social up liftmen enterprises. To shun even highly profitable investment in fields forbidden under Islamic Shariah and is

harmful for the society.

4.3 Investment Functions of IBBL:

IBBL invests its money in various sectors of the economy through different modes and permitted by Shariah and approved by the Bangladesh Bank. The modes of investment are as follows:

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Bai- Mechanism Ijara MechanismA) Bai-MurabahaB) Bai-MuajjalC) Bai-SalamD) Bai-Istisa’aE) Bai-Asraf

A) Mudaraba

B) Musharaka

A) Hire Purchase Under shirkatul Melk

Share Mechanism


One by one are discussed below:

4.3.1 Bai-Modes:

4.3.1.1 Bai-Murabaha:

Meaning of Murabaha:The terms "Bai-Murabaha" have been derived from Arabic words Bai and Ribhun. The word 'Bai' means purchase and sale and the word ‘Ribhun’ means an agreed upon profit. “Bai-Murabaha" means sale for an agreed upon profit. Bai-Murabaha may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods permissible under Islamic Shariah and the Law of the land to the buyer at a cost plus an agreed upon profit payable today or on some date in the future in lump-sum or by installments. The profit may be either a fixed sum or based on a percentage of the price of the goods.

Types of Murabaha:In respect of dealing parties Bai-Murabaha may be of two types

- Ordinary Bai-Murabaha, and- Bai-Murabaha order on and Promise.

4.3.1.2 Bai-Muajjal (Deferred Sale)

Meaning of Bai-Muajjal:

The terms "Bai" and "Muajjal" are derived from the Arabic words 'Bai' and ‘Ajal’. The word 'Bai' means purchase and sale and the word 'Ajal' means a fixed time or a fixed period. "Bai-Muajjal" is a sale for which payment is made at a future fixed date or within a fixed period. In short, it is a sale on credit.

4.3.1.3 Bai-Salam:

Meaning of Bai-Salam:

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Bai-Salam is a term used to define a sale in which the buyer makes advance payment, but

the delivery is delayed until some time in the future. Usually the seller is an individual or

business and the buyer is the bank.

The Bai-Salam sales serve the interests of both parties (Ibid).

1. The seller receives advance payment in exchange for the obligation to deliver the

commodity at some later date. He benefits from the Salam sale by locking in a price

for his commodity, thereby allowing him to cover his financial needs whether they

are personal expenses, family expenses or business expenses.

2. The purchaser benefits because he receives delivery of the commodity when it is

needed to fulfill some other agreement, without incurring storage costs. Second, a

Bai-Salam sale is usually less expensive than a cash sale. Finally a Bai-Salam

agreement allows the purchase to lock in a price, thus protecting him from price

fluctuation.

4.3.1.4 Istisna'a Sale:

Definition of Istisna'a Sale:

The Istisna'a sale is a contract in which the price is paid in advance at the time of the

contract and the object of sale is manufactured and delivered later (IDB 1992, p.28). The

majority of the jurists consider Istisna'a as one of the divisions of Salam; therefore, it is

subsumed under the definition of Salam. The Purchaser is called 'Mustasnia' contractor and

the seller is called 'Sania' maker or manufacturer and the thing is called 'Masnooa',

manufactured, built, made (ABIIB). Islamic banks can utilize Istisna'a in two ways.

1. It is permissible for the bank to buy a commodity on Istisna'a contract then sell it after receipt for cash or deferred payment.

2. It is also permissible for the bank to enter into a Istisna'a contract in the capacity of seller to those who demand a purchase of a particular commodity and then draw a parallel Istisna'a contract in the capacity of a buyer with another party to manufacture the commodity agreed upon in the first contract.

4.3.2 Ijara Modes

4.3.2.1 HIRE PURCHASE UNDER “SHIRKATUL MELK (HPSM)”:Hire purchase under shirkatul melk is a special type of contract which has been developed through practice. Actually, it is a synthesis of three contracts:

1. Shirkat 2. Ijarah3. Sale

Sirkatul Melk:

Shirkat means partnership. Shirkatul melk means share in ownership. When two or more

persons supply equity, purchase an asset, own the same jointly, and share the benefit as per

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agreement and bear the loss in proportion to their respective equity, the contract is called

Shirkatul Melk contract.

Ijarah:

The term Ijarah has been derived from Arabic words Ajr and Ujrat which means

consideration, return, wages or rent. This is really the exchange value or consideration,

return, wages, rent of service of an asset. Ijarah has been defined as a contract between two

parties, the Hiree and Hirer where the enjoys or reaps a specific service or benefit against a

specific consideration or rent from the asset owned by the Hiree.It is a hire agreement under

which a certain asset is hired out by the Hiree to a Hirer against fixed rent or rentals for a

specified period.

Sale:

This is a sale contract between a buyer and seller under which the ownership of certain goods

or assets is transferred by seller to the buyer against agreed upon price paid/ to be paid by the

buyer.

Thus, in hire purchase under Shirkatul Melk mode both the bank and the client supply equity

in equal or unequal proportion for purchase of an asset like land , building, machinery,

transport etc. purchase the asset with that equity money ,own the same jointly, share the

benefits as per agreement and bear the loss in proportion to their respective equity. The share,

part or proportion of the asset owned by the bank is hired out to the client partner for a fixed

rent per unit of time for a fixed period. Lastly, the bank sells and transfer the ownership of

it’s share/ part/portion to the client against payment of price fixed for that part either

gradually part by part or in lump sum within the hire period or after the expiry of the hire

agreement.

Stages of HPSM: HPSM has got three stages:

1. Purchase under joint ownership2. Hire and3. Sale and/ transfer of ownership to the other partner hirer.

4.3.2.3 Qard Hasan (Benevolent loans):Qard Hasan is a contract in which one of the parties (the lender) places into the ownership

of the other party (the borrower) a definite parcel of his property, in exchange nothing more

than the eventual return of something in the same value of the property loaned.

Ausaf Ahmad (1998, p.49) mentioned that since interest on all kinds of loans is prohibited

in Islam, a loan that is to be given in accordance with the Islamic principle, has to be, by

definition, a benevolent loan (Qard Hasan) i.e. a loan without interest. It has to be granted

on the grounds of compassion, i.e. to remove the financial distress caused by the absence of

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sufficient money in the face of dire need. Since banks are profit driven organizations, it

would seem that there is not much opportunity for the application of this technique.

However, Islamic banks also play a socially useful role. Hence they make provisions to

provide Qard Hasan besides engaging in income generating activities.

4.3.3 Share Modes

4.3.3.1 Mudaraba:

Definition of Mudaraba:

The term Mudaraba refers to a contract between two parties in which one party supplies

capital to the other party for the purpose of engaging in a business activity with the

understanding that any profits will be shared in a mutually agreed upon. Losses, on the other

hand, are the sole responsibility of the provider of the capital. Mudaraba is also known a

Qirad and Muqaradah (Shirazi 1990, p.31).

4.3.3.2 Musharaka (Partnership):

Meaning of Musharaka:

The word Musharaka is derived from the Arabic word Sharikah meaning partnership.

Islamic jurists point out that the legality and permissibility of Musharaka is based on the

injunctions of the Qura'n, Sunnah, and Ijma (consensus) of the scholars. It may be noted

that Islamic banks are inclined to use various forms of Shariakt-al-Inan because of its built-

in flexibility. At an Islamic bank, a typical Musharaka transaction may be conducted in the

following manner.

Types of Musharaka: Musharaka may take two forms:

i) Permanent Musharaka and ii) Diminishing Musharaka.

Diminishing Musharaka:

Diminishing or Digressive Musharaka is a special form of Musharaka, which ultimately

culminates in the ownership of the asset or the project by the client. It operates in the

following manner. The Bank participates as a financial partner, in full or in part, in a project

with a given income forecast. An agreement is signed by the partner and the bank, which

stipulates each party's share of the profits. However, the agreement also provides payment

of a portion of the net income of the project as repayment of the principal financed by the

bank. The partner is entitled to keep the rest. In this way, the bank's share of the equity is

progressively reduced and the partner eventually becomes the full owner.

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4.4 Welfare Investment Schemes of Islami Bank Bangladesh Limited:

Islami Bank Bangladesh Limited (IBBL) offer Twelve Welfare Investment Schemes for the

Welfare of population of Bangladesh.

The Welfare Investment Schemes of IBBL are as Follows:

Household Durable Scheme.

Investment Scheme for Doctors.

Small Business Investment Scheme.

Housing Investment Scheme.

Transport Investment Scheme.

Car Investment Scheme.

Rural Development Scheme (RDS).

Agriculture Implement Investment Scheme

Micro Industries Investment Scheme.

Mirpur Silk Weavers Investment Scheme.

Industry Investment Scheme.

Investment on Real Estate.

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Investment Portfolio of IBBL

5.1 INTRODUCTION:

Beloved people of Bangladesh given a space for Islami Bank in the year 1983 with a hope to

perform their activities in banking sector in accordance with the rules of Islamic Sharia`h.

Islami Bank Bangladesh Limited has not only able to implement that dream of people into the

reality but also established their self as a key-player in banking sector of Bangladesh. In some

cases IBBL has been playing a leading role as captain in this industry. The Bank has already

been able to earn the trust of every section of people of the country, the huge amount of

deposit Tk.4,16,035 million of the bank is the indicator of this faith. As a developing partner

of country the bank has already invested Tk.3,87,619 million in different sector of economy

which is contributing a lot to the growth of GDP.

5.2 GLOBAL ECONOMY:

Despite some scattered signs of improvement in recent months, the world economic situation

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and prospects continue to be challenging. After a marked slowdown, the growth of global

economic was halfhearted in 2012. Most developed economies are still struggling to

overcome the economic sadness originating from the financial crisis. Developed countries,

especially in Europe, continue to struggle to break through this vicious circle.

5.3 NATIONAL ECONOMY

In the middle of the recession in Euro Zone and deadlock with US fiscal policy, the economy

of Bangladesh has passed just concluded year ‘2012’ with mixed experience where successes

in Remittance, Ready Made Garments (RMG) and agriculture are lighted with the darkness in

sectors like financial mislead, excessive government borrowing and instable power sectors.

Deceive in financial sectors particularly Hall-Mark scam, reckless government borrowing

from private sectors and frequent accidents and employee dissatisfaction in RMG sector, and

instable energy sector (Electricity & Gas) is fading the image of country’s economy.

The country’s remittance in Financial Year 2011-12 that has played a vital role to maintain

import payment and foreign exchange demand. But it is disappointing for Bangladesh that

some promising destinations have shut their door for Bangladeshi workers. Agriculture, the

third most important pillar of Bangladesh economy, secured the internal economy.

5.4 BANKING SCENARIO:

5.4.1 Increase in Bad Loan:

The immediate past year was a tough year for banking sector. Bad loan has increased by more

than Tk.7000 crore to roughly Tk.36,000 crore till September 2012. Adding the amount of

Hall-Mark scam overdue stood at around Tk.40,000 crore. Some banks incurred huge losses

from the Share market business. Foreign exchange market was highly volatile as value of

taka against Dollar ranged from Tk.88 to Tk.79. The contractionary monetary policy played a

crucial role to gain the value of Taka.

5.4.2 Liquidity crisis:

Severe liquidity or cash crisis has been going on in the banking sector. Banks have become

under pressure to get rid of this problem. As immediate solution to crises, banks are

increasing their interest rates on deposits. Their deposit management cost is increasing as

they are collecting deposits at a high rate. Some of them are increasing their lending rate to

cope up with this additional cost. As the interest rate on bank financing is rising, the cost of

investment of the entrepreneurs is also increasing. As a result cost of production is rising. The

entrepreneurs are avoiding bank financing as their cost of production is increasing. According

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to the bank analysts, the situation in the banking sector is not good at all.

5.4.3 Increase of Profit Rate on Investment:

The businessmen have become worried with the increase of the profit rate. The commodity

price is getting out of the reach of the mass people. The businessmen are apprehending that

the inflation will increase further in the future. The Federation of Bangladesh Chambers of

Commerce and Industries (FBCCI) has urged intervention of the Bangladesh Bank on

reducing the higher profit rate, keeping the service charges within the tolerable level, and

revising the profit rates for the financing in the productive sector.

5.4.4 BB’s Policy for Provision and Investment Rescheduling:

The new guidelines of Bangladesh Bank for provision and investment rescheduling created

the panic in the banking sector in the middle of the year but at the end of the year the central

bank revise their guidelines which relax a bit of the bankers.

5.5 ECONOMIC FORECASTING:

Slow pace of exports and imports that marked the just concluded year might pose major

threats to the economy. Besides, high spread in investment and deposit rate and massive

government borrowing from private sectors cut the investment of private sector. The Padma

bridge graft allegation, Hall-Mark scam, Destiny fund embezzlement, fire incidence at a

RMG unit of Ashulia, and political instability may slower the pace of economic growth.

Already USA has expressed that if working environment in RMG sectors in our country not

develop they will cut the opportunity of tariff free export (Prothom Alo dated 07.01.2013).

In encourage of these obstacles, World Bank has degraded the status of Bangladesh to 5 steps

and ranked the country at the bottom of 185 countries in respect of electricity connection. It

has huge negative connotation that leads to slower investment.

5.6 OPPORTUNITIES:

In a situation as above investment must be made to profitable productive sectors.

Productive export earning manufacturers may be encouraged as a new client by IBBL.

Special focus will be given to non-traditional exporters & high value yielding

exporters.

Similarly industries that produce import substitute products will also be benefited at

the

time of depreciation of taka.

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As bankers we will have to hunt clients with profitable import substitute projects.

Profitable industries that uses local raw material will be given highest priority.

In selecting clients, we need to give special attention to project’s profitability, ability

to

service financial expenses and resiliency.

5.7 STRATEGIES AND ACTION PLAN FOR 2013: 1. To observe strictly the principles of Islamic Shari’ah in Investment operations. 2. To give preference to Short-term investment to Long-term investment for maintaining a

balanced portfolio.3. To ensure optimum utilization of the Bank’s investible fund.4. To look into profitability of Investments.5. To ensure safety and security of Investments.6. To enhance capacity and capability of the employees of the Bank to handle investment

operations through conveying appropriate training.7. To arrange training and motivational programs for investment clients and their officials on

Islamic Banking.8. To develop new Entrepreneurs.9. To induct best of the best investment clients, check migration of good investment clients.10. To launch dynamic campaign to hunt good investment clients.11. To engage each and every employee of the Bank to invent good business arena.12. To be aware of over-financing and under financing and to give prompt decision on investment

proposals.13. To have a clear picture of investment opportunities in the market – Size, Sector, Geographical

Area, Economic Purpose, Security-wise, density wise and educational level.14. To obtain proper Primary and Collateral Securities and ensure proper Supervision, Monitoring

and Control of Investment.15. To keep our investment cost minimum to offer competitive and lower rates and facilities to

the clients.16. To give due consideration to high risk, high return and low risk, low return investment

proposals.17. To encourage investment involving less risk weight.18. To deploy at least 60% of mobilized fund locally by the concerned Branch.19. To observe strictly the Single Party Exposure Rule.20. To prefer Syndication for large investment.21. To give due importance for investment in various development, employment generation &

poverty alleviation schemes like Real Estate, Transport, Doctors, RDS, Small Business, HDS, Agricultural Implements etc.

22. To achieve diversification plan of the investment portfolio by Size, Sector, economic purpose and Geographical Area as per ‘5 Year Investment Policy And Perspective Investment Plan 2012-2016’.

23. To give emphasis on national priority sectors like Green Banking projects, financing farmers etc.

24. Explore suitable sector & areas for cluster investment in line with Govt. Agriculture Policy & Bangladesh Bank directive.

25. To fix up individual targets from the beginning of the year for recovery of overdue, classified, rescheduled and written off investment.

26. To give more attention and continuous effort for recovery of instalment overdue against term and rescheduled investment.

27. To take precautionary initiatives to avoid fresh overdue investment.

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28. To fix up a time frame for early settlement of top overdue clients.29. To uphold the existing leadership in the market.30. To give preference to increase investment up to the size of Tk.500 million and to reduce

investment above the size of Tk. 500 million. 31. To discourage investment in Spinning and Textile sector.32. To encourage investment in export oriented sector.33. Branch must follow/comply with the terms and conditions of sanction advice before

disbursement.34. To provide due importance to customer orientation.35. To give preference to make investment in SME36. To comply strictly the 4 point commitments of investment.37. To give concentration in consolidation of branch investment.38. To list missing clients of the branch and take appropriate steps to get back them.39. To prepare an exit plan with those clients who are not performing well.40. To arrange early adjustment of investment before maturity and allow applicable rebate to

them.41. To give priority in the following sectors:

i.Agro based innovative projects;ii. Environment friendly projects;iii. RMG projectsiv. PPP projects through Mudaraba Sukuk or any other suitable mechanism.v. Renewable power projects etc.

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5.8 Performance of Investment in 2013:

5.8.A. GENERAL ISSUES

1. General Investment: General Investment stood at Tk.387,619 million in

2012 as against Tk.324,099 million in 2011. Additional investment of

Tk.63,520 million has been deployed during the year 2012. Achievement

of the target is 106% with 19.60% that was 15.83% in 2011, 22.80% in

2010, 19.16% in 2009 and 24.18% in 2008.

Achievement of Ceiling is

106% with 20% growth that

was

15.83% in 2011, 22.80% in

2010, 19.16% in 2009 &

24.18% in 2008

2. Investment Income: Income from General Investment stood at

Tk.41,392 million in 2012, as against Tk.30,868 million in 2011,

showing the growth rate of 34% in 2012 that was 22% in 2011, 21% in

2010 and 6% in 2009. The bank achieved the yearly target by 110%.

Achievement of Target is

110%

with 34% growth

that was 22% in 2011,

21% in 2010 & 6% in 2009

3. Induction of new Investment Clients: During the year 2012, 54297

new Investment clients have been inducted as against 47,733 clients

inducted in 2011 that was 35679 in 2010 and 11689 in 2009. Average

induction of new Investment Client is 4525 per month in 2012 as against

3978 Clients in 2011 that was 2981 in 2010 and 974 in 2009.

New Clients inducted 54,297

in 2012 as against 47733 in

2011

Monthly average :

4525 clients in 212 against

3978 in 2011

4. Shari’ah Compliance: Doubtful Income due to Shari’ah lapses has

decreased by 3.65% from 4.50% of 2011 to 0.85% of 2012 which was

8.66% in 2008. 13.34% in 2006 & 57.07% in 2000.

Doubtful Income decreased

from

4.50% in 2011 to 0.85% in

2012

5.8.B. OVERDUE, CLASSIFIED, RESCHEDULED AND WRITTEN OFF INVESTMENT

1. Overdue investment increased by Tk.3176 million during the year

2012 from Tk.6435 million to Tk. 9611 million representing 2.48% to

total General Investment in 2012 as against 1.99% in 2011.

Overdue Investment

increased from 1.99% (in

2011) to 2.48% in 2012.

2. Classified investment increased by Tk.5046 million during the year

2012 from Tk.8292 million to Tk.13338 million representing 3.44% to


Classified Investment

increased from 2.56% (in

2011) to 3.44% in 2012.

3. Rescheduled investment decreased by Tk.1342 million during the year

2012 from Tk.32,298 million to Tk. 30,956 million representing 7.99%

to total General Investment in 2012 as against 9.97% in 2011.

Rescheduled Investment

decreased from 9.97% (in

2011) to 7.99% in 2012.

4. Written off investment decreased by Tk.292 million during the year

2012 from Tk.2737 million to Tk3029 million representing 0.78% to


Written off Investment

decreased from 0.84% (in

2011) to 0.78% in 2012.

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5.8.C.2. ECONOMIC PURPOSE-WISE INVESTMENT1. Investment against Agriculture & Agro-based Industry stood at Tk.

22,427 million showing a decrease by Tk. 7,851 million from Tk.30,278 million. Investment in this sector stood at 5.79% showing a decrease by 3.56% from 9.34% of 2011, as against 11.75% allocated in the plan. Now the figure shows near actual position which was shown inflated earlier due to posting of wrong E.P. Code by the branches.

Decreased by 3.56% from 9.34% of 2011 (shown inflated due to wrong posting of E.P. Code by the branches) to 5.79% in 2012.

2. Industrial Investment stood at 49.38% showing an increase by 5.52% from 43.86% of 2011, as against 40.54% allocated in the plan. In this sector, investment increased by Tk.49,245 million from Tk.142,164 million to Tk.191,409 million. Growth rate recorded at 34.64% as against overall growth of 19.60%.

Increased by 5.52% from 43.86% of 2011 to 49.38% in 2012 with 34.64% growth.

3. Investment against Trade stood at 29.16% showing a decrease by 3.36% from 32.52% of 2011, as against 32.00% allocated in the plan. In this sector, investment increased by Tk. 7,617 million from Tk. 105,404 million to Tk.113,021 million. Growth rate recorded at 7.23% as against overall growth of 19.60%.

Decreased by 3.36% from 32.52% of 2011 to 29.16% in 2012 with 7.23% growth.

4. Real Estate Investment stood at 5.99% showing an increase by 0.43% from 5.56% of 2011, as against 6.50% allocated in the plan. In this sector, investment increased by Tk.5,216 million from Tk.18,015 million to Tk.23,231 million. Growth rate recorded at 28.95% as against overall growth of 19.60%.


5. Transport Investment stood at 1.78% showing a decrease by 0.34% from 2.12% of 2011 as against 2.45% allocated in the plan. In this sector, investment increased by Tk.31 million from Tk. 6,856 million to Tk. 6,887 million. Growth rate recorded at 0.45% as against overall growth of 19.60%.


6. RDS Investment stood at 2.68% showing an increase by 0.50% from 2.18% of 2011, as against 2.50% allocated in the plan. In this area investment increased by Tk. 3321 million from Tk.7,072 million to Tk. 10,393 million. Growth rate recorded at 46.96% as against overall growth of 19.60%.


7. Investment under other Special Schemes stood at 1.23% showing a decrease by 0.19% from 1.42% of 2011 as against 2.25% allocated in the plan. In this area, investment increased by Tk. 175 million from Tk. 4,589 million to Tk. 4,764 million. Growth rate recorded at 3.81% as against overall growth of 19.60%.


5.8.C.3. AREA-WISE INVESTMENT

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SL Year 2008 2009 2010 2011 2012

1 2 3 4 5 6 7 8

Amount 13,175 6,850 18,761 30,278 22,427

% to G.Inv. 6.89% 3.01% 6.70% 9.34% 5.79%

Amount 3,951 2,278 7,150 13,059 2,788

% to G.Inv. 2.07% 1.00% 2.56% 4.03% 0.72%

Amount 9,224 4,572 11,611 17,219 19,638

% to G.Inv. 4.82% 2.01% 4.15% 5.31% 5.07%

Amount 106,302 118,593 136,261 142,164 191,409

% to G.Inv. 55.59% 52.05% 48.70% 43.86% 49.38%

Amount 53,512 52,771 67,517 74,423 73,244

% to G.Inv. 27.98% 23.16% 24.13% 22.96% 18.90%

Amount 52,790 65,822 68,743 67,741 118,165

% to G.Inv. 27.61% 28.89% 24.57% 20.90% 30.49%

Amount 54,410 75,354 84,883 105,404 113,021

% to G.Inv. 28.45% 33.07% 30.34% 32.52% 29.16%

Amount 7,183 9,140 14,599 18,015 23,231

% to G.Inv. 3.76% 4.01% 5.22% 5.56% 5.99%

Amount 3,088 3,717 4,872 6,856 6,887

% to G.Inv. 1.61% 1.63% 1.74% 2.12% 1.78%

Amount 3,012 3,752 5,110 7,072 10,393

% to G.Inv. 1.58% 1.65% 1.83% 2.18% 2.68%

Amount 23 2,414 3,468 4,589 4,764

% to G.Inv. 0.01% 1.06% 1.24% 1.42% 1.23%

Amount 1,774 8,042 11,861 9,721 15,487

% to G.Inv. 0.93% 3.53% 4.24% 3.00% 4.00%

36 Total Investment 191230 227863 279815 324,099 387,615

37

Amount 112,766 134,054 167,841 207,171 254,653

% to G.Inv. 58.97% 58.83% 59.98% 63.92% 65.70%

Amount 67,107 78,227 85,124 94,574 99,408

% to G.Inv. 35.09% 34.33% 30.42% 29.18% 25.65%

Amount 40 665 4,309 1,019 2,142

% to G.Inv. 0.02% 0.29% 1.54% 0.31% 0.55%

Amount 11,317 22,541 21,335 21,335 31,415

% to G.Inv. 5.92% 9.89% 7.62% 6.58% 8.10%

Total Gen. Investment 191230 227863 279815 324,099 387,615

(Amount in Million Taka)

5 YEARS INVESTMENT PERFORMANCE AT A GLANCE

28 Agriculture & Agro Industry

Economic Purpose-wise Investment

a. Agriculture

b. Agro-based Industry

29 Industry

a. Project (HPSM)

b. Working Capital

30 Trade

31 Real Estate

32 Transport

33 RDS

34 Other Special Schemes

35 Other Investment

a. Bai- Mode

Mode wise Investment

b. Ijara Mode

c. Share Mode

d. Others


1. Rural Investment stood at 13.83% showing an increase by 0.90% from 12.93% of 2011, as against 14.50% allocated in the plan. In this area, investment increased by Tk.11684 million from Tk.41,910 million to Tk.53,594 million. Growth rate recorded at 27.88% as against overall growth of 19.60%.

Increased by 0.90% from 12.93% of 2011 to 13.83% in 2012 as against 14.50% in the plan with 27.88% growth.

2. Urban Investment stood at 86.17% showing a decrease by 0.90% from 87.07% of 2011, as against 85.89% allocated in the plan. In this area, investment increased by Tk.51,836 million from Tk.282,189 million to Tk.334,025million. Growth rate recorded at 18.37% as against overall growth of 19.60%.


5.8.C.4. MODE-WISE INVESTMENT1. Investment under Bai-Mode stood at 65.70% showing an increase by

1.77% from 63.92% of 2011 as against 61.24% allocated in the plan. In this area, investment increased by Tk.47,482 million from Tk.207,171 million to Tk.254,653 million. Growth rate recorded at 22.92% as against overall growth of 19.60%.


2. Investment under Ijara (HPSM) Mode stood at 25.65% showing a decrease by 3.53% from 29.18% of 2011 as against 30.85% allocated in the plan. In this area, investment increased by Tk.4,834 million from Tk. 94,574 million to Tk.99,408 million. Growth rate recorded at 5.11% as against overall growth of 19.60%.


3. Investment under Share Mode stood at 0.55% showing an increase by 0.24% from 0.31% of 2011 as against 0.94% allocated in the plan. In this area, investment increased by Tk.1,124 million from Tk.1019 million to Tk.2,142 million. Growth rate recorded at 110% as against overall growth of 19.60%.

Increased by 0.24% from 0.31% of 2011to 0.55% in 2012 with 110% growth.

5.9.DETAILED ANALYSIS

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5.10 Investment Analysis with Graphical Presentation :5.10.A.1. SHARIAH COMPLIANCE

2006 2007 2008 2009 2010 2011 2012

Series1 13.34% 8.97% 8.66% 3.82% 3.32% 4.50% 0.85%

13.3

4%

8.97

%

8.66

%

3.82

%

3.32

%

4.50

%

0.85

%

0.00%

5.00%

10.00%

15.00%

Doubtful Income

5.10.A.2. INDUCTION OF NEW INVESTMENT CLIENTS IN 2012

MEIS

No. of Clients

No.of Employees

Per Employee

Performance

No. of Clients

No. of Clients

Rank

1 2 3 4 5 6 7 8

1 Sylhet 3663 432 0.71 683 4346 6

2 Barisal 2541 484 0.44 2725 5266 3

3 Rangpur 1565 343 0.38 4834 6399 2

4 Bogra 1468 430 0.28 3341 4809 4

5 Rajshahi 1593 488 0.27 2951 4544 5

6 Mymensingh 1314 421 0.26 2956 4270 7

7 Khulna 2142 703 0.25 4604 6746 1

8 Noakhali 1083 366 0.25 2351 3434 10

9 Comilla 1230 433 0.24 1810 3040 11

10 Ctg. South 1322 507 0.22 421 1743 12

11 DNZ 1499 675 0.19 2308 3807 8

12 Ctg. North 742 456 0.14 726 1468 13

13 DSZ 1022 649 0.13 2413 3435 9

14 DCZ 696 699 0.08 - 696 14

15 Corp. Brs. 294 608 0.04 - 294 15

Total 22174 7694 0.24 32123 54297

Main Stream Total

Sl. Zone

5.10.A.3. COMPARISON OF INDUCTION OF NEW INVESTMENT CLIENTS

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Main Stream MEIS Total Monthly Average

1 2012 22174 32123 54297 4525

2 2011 25508 22225 47733 3978

Sl. YearSummary of New Induction

During the year 2012, 54297 new Investment clients have been inducted as against 47,733 clients inducted in 2011 that was 35679 in 2010 and 11689 in 2009. Average induction of new Investment Client is 4525 per month in 2012 as against 3978 Clients in 2011 that was 2981 in 2010 and 974 in 2009.

5.10.B. OVERDUE, CLASSIFIED, RESCHEDULED & WRITTEN OFF INVESTMENT5.10.B.1. TREND OF OVERDUE, CLASSIFIED, RESCHEDULED & WRITTEN OFF INVESTMENT

2006 2007 2008 2009 2010 2,011 2,012

Amount 4,155 4,043 4,494 5,648 5,008 6,435 9,611 % to Gen. Inv. 3.45% 2.63% 2.35% 2.48% 1.79% 1.99% 2.48%

3.45%

2.63% 2.35% 2.48%1.79% 1.99%

2.48%

1.00%

2.00%

3.00%

4.00%

5.00%

Trend of Overdue Investment(Amount in Million Taka)

2006 2007 2008 2009 2010 2,011 2,012

Amount 3,898 4,426 4,311 5,063 4,656 8,292 13,338 % to Gen. Inv. 3.14% 2.54% 2.17% 2.12% 1.66% 2.56% 3.44%

3.14%2.54%

2.17% 2.12%1.66%

2.56%

3.44%

1.00%

2.00%

3.00%

4.00%

5.00%

Trend of Classified Investment(Amount in Million Taka)

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2006 2007 2008 2009 2010 2,011 2,012

Amount 6,562 8,419 13,170 29,304 24,849 32,298 30,956 % to Gen. Inv. 5.29% 4.84% 6.63% 12.26% 8.88% 9.97% 7.99%

5.29% 4.84%

6.63%

12.26% 8.88%9.97%

7.99%

4.00%

7.00%

10.00%

13.00%

Trend of Rescheduled Investment(Amount in Million Taka)

2006 2007 2008 2009 2010 2,011 2,012

Amount 2,967 3,045 2,843 2,765 2,554 2,737 3,029 % to Gen. Inv. 2.39% 1.75% 1.43% 1.16% 0.91% 0.84% 0.78%

2.39%

1.75%1.43% 1.16% 0.91% 0.84% 0.78%

0.50%

1.50%

2.50%

3.50%

Trend of Written off Investment(Amount in Million Taka)

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5.10.B.2.DETAILED POSITION OF OVERDUE, CLASSIFIED, RESCHEDULED & WRITTEN OFF INVESTMENT

(Amount in Million Taka)

Sl. ParticularsPosition as

on 31.12.10

Position as on

31.12.11

Target for 2012

Position as on

30.11.12

Position as on

31.12.12

Increased/(decreased)Dec'11 to 31.12.12

1 2 3 4 5 6 7 8=(7-4)

1 Total Gen. Investment 279,820 324,099 364,000 375,851 387,619 63,520

2 Full overdue 5,008 6,434 9,500 14,320 9,611 3,177

3 % of full overdue to Gen. Investment 1.79% 1.99% 2.61% 3.81% 2.48% 0.49%

4 Overdue Invt. which is not classified & not rescheduled

1,800 3,627-

7,389 4,525 898

5 % with Gen. investment (4/1) 0.64% 1.12% - 1.97% 1.17% 0.05%

6 a) Instalment overdue against rescheduled Invt. 2,566 3,892 - 4,704 4,350 458

b) Instalment overdue against HPSM Invt. 267 1,240 - 914 1,852 612

Total Instalment overdue (6a+6b) 2,833 5,132 - 5,618 6,202 1,070

7 a) % agaisnt Gen. Investment (6a/1) 0.92% 1.20% - 1.25% 1.12% -0.08%

b) % against Gen. Invt.(6b/1) 0.10% 0.38% - 0.24% 0.48% 0.10%

% of instalment overdue to Gen. Invt.(7a+7b) 1.01% 1.58% - 1.49% 1.60% 0.02%

8 Total Overdue including instalment overdue (2+6a)

7,574 10,326 - 19,024 13,961 3,635

9 % of total overdue to Gen. Investment 2.71% 3.19% - 5.06% 3.60% 0.42%

10 Total Classified Investment 4,656 8,292 7,000 21,581 13,338 5,046

11 % of classified investment to Gen. Investment 1.66% 2.56% 1.92% 5.74% 3.44% 0.88%

12 Net Classified Investment (Net of provision & suspense amount)

2,329 4,668 - 12,660 6,480 1,812

13 % of net classified Invt. to Gen. Investment 0.83% 1.44% - 3.37% 1.67% 0.23%

14 Provision Requirement (Un-classified & Classified Invt.)

5,272 7,048 8,180 13,403 9,538 2,490

15 a) Rescheduled Investment (profit bearing) 14,312 14,715 - 15,101 16,627 1,912

b) Rescheduling Invt. (non profit bearing) 10,537 17,583 - 13,013 14,329 (3,254)

Total Rescheduled Investment (15a+15b) 24,849 32,298 - 28,114 30,956 (1,342)

16 a) % of Performing Res.Invt. to Gen. Invt. 5.11% 4.54% - 4.02% 4.29% -0.25%

b) % of NP Res.Invt. to Gen. Invt. 3.77% 5.43% - 3.46% 3.70% -1.73%

% of Rescheduled Invt. to Gen. Investment 8.88% 9.97% - 7.48% 7.99% -1.98%

17 Total non-performing Investment 16,993 29,502 - 36,848 32,192 2,690

18 % of non-performing Invt. to Gen. Inv. 6.07% 9.10% - 9.80% 8.31% -0.80%

19 Amount of Written off Investment 2,554 2,737 - 2,950 3,029 292

20 % of Written off Invt. to Gen. Investment 0.91% 0.84% - 0.78% 0.78% -0.06%

21 Cash recovery from Written off Investment 274 78 300 86.67 108.20 30.44

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5.10.C. PERFORMANCE IN RESPECT OF PERSPECTIVE INVESTMENT PLAN 2012-2016

5.10.C.1.SIZE-WISE INVESTMENT5.10.C.1.1. SIZE-WISE INVESTMENT IN COMPARISON WITH PLANTable-1 (Amount in Million Taka)

Over PlanOver actual

as on 31.12.11

Amount % Amount % Amount % Amount % Amount % 1 2 3 4 5 6 7 8 9(7-3) 10(9/3) 11(8-6) 12(8-4)

1 Up to Tk. 0.20 M 11,025 3.40% 13,468 3.70% 14,801 3.82% 3,776 34.25% 0.12% 0.42%

2 Tk. 0.20 to 1.00 M 10,195 3.15% 12,012 3.30% 12,144 3.13% 1,949 19.11% -0.17% -0.01%

3 Tk. 1.00 to 2.50 M 15,499 4.78% 18,564 5.10% 17,940 4.63% 2,441 15.75% -0.47% -0.15%

4 Tk. 2.50 to 5 M 15,034 4.64% 19,110 5.25% 20,093 5.18% 5,059 33.65% -0.07% 0.54%

5 Tk. 5 to 10 M 11,194 3.45% 14,560 4.00% 14,726 3.80% 3,532 31.55% -0.20% 0.35%

6 Tk. 10 to 50 M 25,203 7.78% 29,120 8.00% 30,251 7.80% 5,048 20.03% -0.20% 0.03%

7 Tk. 50 to 100 M 15,491 4.78% 18,200 5.00% 16,606 4.28% 1,115 7.20% -0.72% -0.50%

8 Tk. 100 to 150 M 9,286 2.87% 11,284 3.10% 11,692 3.02% 2,406 25.91% -0.08% 0.15%

9 Tk. 150 to 300 M 21,077 6.50% 25,844 7.10% 24,432 6.30% 3,355 15.92% -0.80% -0.20%

10 Tk. 300 to 500 M 16,332 5.04% 18,928 5.20% 18,714 4.83% 2,382 14.59% -0.37% -0.21%

11 Tk. 500 to 750 M 18,138 5.60% 19,110 5.25% 17,582 4.54% (556) -3.07% -0.71% -1.06%

12 Tk 750 to 1000. M 12,888 3.98% 13,468 3.70% 11,937 3.08% (951) -7.38% -0.62% -0.90%

13 Above Tk 1000 M 142,737 44.04% 150,332 41.30% 176,703 45.59% 33,966 23.80% 4.29% 1.55%

324,099 100% 364,000 100% 387,619 100% 63,520 19.60% - -

11,025 3.40% 13,468 3.70% 14,801 3.82% 3,776 34.25% 0.12% 0.42%

21,220 6.55% 25,480 7.00% 26,945 6.95% 5,725 26.98% -0.05% 0.40%

36,719 11.33% 44,044 12.10% 44,885 11.58% 8,166 22.24% -0.52% 0.25%

51,753 15.97% 63,154 17.35% 64,977 16.76% 13,224 25.55% -0.59% 0.79%

62,947 19.42% 77,714 21.35% 79,703 20.56% 16,756 26.62% -0.79% 1.14%

88,150 27.20% 106,834 29.35% 109,954 28.37% 21,804 24.73% -0.98% 1.17%

103,641 31.98% 125,034 34.35% 126,560 32.65% 22,919 22.11% -1.70% 0.67%

112,927 34.84% 136,318 37.45% 138,252 35.67% 25,325 22.43% -1.78% 0.82%

134,004 41.35% 162,162 44.55% 162,683 41.97% 28,679 21.40% -2.58% 0.62%

150,336 46.39% 181,090 49.75% 181,398 46.80% 31,062 20.66% -2.95% 0.41%

173,763 53.61% 182,910 50.25% 206,221 53.20% 32,458 18.68% 2.95% -0.41%

168,474 51.98% 200,200 55.00% 198,979 51.33% 30,505 18.11% -3.67% -0.65%

155,625 48.02% 163,800 45.00% 188,640 48.67% 33,015 21.21% 3.67% 0.65%

181,362 55.96% 213,668 58.70% 210,916 54.41% 29,554 16.30% -4.29% -1.55%

142,737 44.04% 150,332 41.30% 176,703 45.59% 33,966 23.80% 4.29% 1.55%

Upto Tk. 0.20 M

Sl. No.

Size of AccountPosition as on

31.12.2011Growth

Changes as on 31.12.12

Total

Plan for 2012Position as on

31.12.2012

Upto Tk. 1.00 M

Upto Tk. 5.00 M

Upto Tk. 10.00 M

Upto Tk. 50.00 M

Upto Tk. 100 M

Above Tk. 750 M

Upto Tk. 1000 M

Above Tk. 1000 M

Upto Tk. 2.50 M

Upto Tk. 150 M

Upto Tk. 300 M

Upto Tk. 500 M

Above Tk. 500 M

Upto Tk. 750 M

As per 5-Year Investment Policy and Perspective Investment Plan 2012-2016, due importance has been given to increase portfolio share of Investment in all sizes up to Tk.100 Million over all sizes above Tk.100 Million. Investment up to Tk.100 Million was targeted to stay at 34.35% by the end of the year 2012. Up to this range our Investment increased by 0.67% from 31.98% as on 31.12.2011 to 32.65% as on 31.12.2012 showing a growth rate of 22.11%.

of 48


5.10.C.1.2. SIZE WISE INVESTMENT: BANKING SECTOR & IBBL (as on 30.06.2012)

All Banks

SOBs SBs FBs PCBs IBsIBBL

(31.12.12)

1 2 3 4 5 6 7 8 9

1 Up to Tk. 5.00 M 25.91% 27.89% 56.50% 29.53% 21.88% 25.45% 16.76%

2 Tk. 5 M to 100 M 36.00% 22.07% 25.75% 43.70% 40.80% 41.70% 15.89%

Up to Tk. 100.00 M 61.91% 49.96% 82.25% 73.22% 62.68% 67.15% 32.65%

3 Tk. 100 M to 500 M 25.03% 28.38% 13.99% 20.75% 25.44% 21.75% 14.15%

4 Above Tk. 500 M 13.07% 21.66% 3.76% 6.02% 11.88% 11.10% 53.20%

Above Tk. 100 M 38.09% 50.04% 17.75% 26.78% 37.32% 32.85% 67.35%

Total 100% 100% 100% 100% 100% 100% 100%

SL No Size

[[[[[

Chart-1 Chart-2

Up to Tk 5 M

26.83%

Tk 5 M to 100 M

36.80%

Tk.100 to 500 M25.15%

Above Tk. 500 M

11.22%

All Banks

Up to Tk 5 M

16.76%

Tk 5 M to 100 M15.89%

Tk.100 to 500 M

14.15%

Above Tk. 500 M 53.20%

IBBL

1. All Banks Investment/Advances are concentrated by 61.91% in the sizes up to Tk.100 Million and 38.09% in the sizes above Tk.100 Million.2. State Owned Banks Investment/Advances are concentrated by 49.96% in the sizes up to Tk.100 Million and 50.04% in the sizes above Tk.100 Million.3. Specialised Banks Investment/Advances are concentrated by 82.25% in the sizes up to Tk.100 Million and 17.75% in the sizes above Tk.100 Million.4. Foreign Banks Investment/Advances are concentrated by 73.22% in the sizes up to Tk.100 Million and 26.78% in the sizes above Tk.100 Million.5. Private Commercial Banks Investment/Advances are concentrated by 62.68% in the sizes up to Tk.100 Million and 37.32% in the sizes above Tk.100 Million.

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5.10. C.1.3. SIZE WISE INVESTMENT: IBBL’S ACHIEVEMENT SINCE 2009

Table-4 (Amount in Million Taka)Achievement

Plan Actual Plan Actual Plan Actual Plan ActualChange up to 2012 over 2009

1 2 3 4 5 6 7 8 9 10 11= (10-4)

1 Up to Tk. 0.20 M 3.50% 2.75% 4.50% 3.12% 3.70% 3.40% 3.70% 3.82% 1.07%

2 Tk. 0.20 to 1.00 M 3.50% 2.90% 5.00% 2.99% 4.40% 3.15% 3.30% 3.13% 0.23%

3 Tk. 1.00 to 2.50 M 5.00% 4.14% 6.00% 4.43% 5.00% 4.78% 5.10% 4.63% 0.49%

4 Tk. 2.50 to 5 M 4.00% 3.14% 5.00% 3.99% 4.80% 4.64% 5.25% 5.18% 2.04%

5 Tk. 5 to 100 M 16.00% 14.17% 17.50% 15.30% 16.00% 16.01% 17.00% 15.89% 1.72%

6 Tk. 100 to 500 M 20.00% 13.96% 18.00% 14.56% 15.00% 14.41% 15.40% 14.15% 0.19%

7 Tk. 500 to 750 M 7.50% 6.17% 7.00% 5.64% 5.50% 5.60% 5.25% 4.54% -1.63%

8 Tk 750 to 1000. M 7.50% 5.28% 7.00% 4.23% 4.60% 3.98% 3.70% 3.08% -2.20%

9 Above Tk 1000 M 33.00% 47.50% 30.00% 45.73% 41.00% 44.04% 41.30% 45.59% -1.91%

Total 100% 100% 100% 100% 100% 100% 100% 100% N/ A

Achievement

Plan Actual Plan Actual Plan Actual Plan ActualChange up to 2012 over 2009

1 2 3 4 5 6 7 8 9 10 11= (10-4)

1 Up to Tk.5.00 M 16.00% 12.93% 20.50% 14.53% 17.90% 15.97% 17.35% 16.76% 3.83%2 Tk. 100 to 750 M 27.50% 20.12% 25.00% 20.20% 20.50% 20.00% 20.65% 18.68% -1.44%

3 Upto Tk. 100 M 32.00% 27.10% 38.00% 29.84% 33.90% 31.98% 34.35% 32.65% 5.55%4 Above Tk. 100 M 68.00% 72.90% 62.00% 70.16% 66.10% 68.02% 65.65% 67.35% -5.55%



9 Upto Tk. 1000 M 67.00% 52.50% 70.00% 54.27% 59.00% 55.96% 58.70% 54.41% 1.91%

10 Above Tk. 1000 M 33.00% 47.50% 30.00% 45.73% 41.00% 44.04% 41.30% 45.59% -1.91%

Size of Account

2009 2010 2011 2012

2012

Sl.

Sl. Size of Account

2009 2010 2011

Cart-3

1.07%

0.23%0.49%

2.04%1.72%

0.19%-1.63%

-2.20%-1.91%

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

Up to Tk.0.20 M

0.20 M to 1.00 M

1 M to 2.50 M

2.50 Mto 5 M

5 M to 100 M

100 M to 500 M

500 M to 750 M

750 M to 1000 M

Above 1000 M

% C

hang

ed in

the

Por

t fol

io

Size wise Diversification up to 2012 over 2009

In respect of size wise investment, our diversification effort has shown an increase in all sizes up to Tk. 500 million and a decrease in all sizes above Tk. 500 million.

Up Tk.500 million 5.74% increased in the portfolio share whereas above Tk. 500 million 5.74% decreased in the portfolio share up to 2012 over 2009.

5.10. C.2. ECONOMIC PURPOSE-WISE INVESTMENT 5.10.C.2.1. ECONOMIC PURPOSE-WISE INVESTMENT IN COMPARISON WITH PLANTable-6 (Amount in Million

Taka)

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Amount % Amount % Amount % Amount % %

1 2 3 4 5 6 7 8 9 10 11

1Agriculture & Agro-based Industry

30,278 9.34% 42,770 11.75% 22,427 5.79% -7,851 -3.56% -25.93%

a. Agriculture 13,059 4.03% 20,020 5.50% 2,788 0.72% -10,271 -3.31% -78.65%

b. Agro-based Industry

17,219 5.31% 22,750 6.25% 19,638 5.07% 2,420 -0.25% 14.05%

2 Industry 142,164 43.86% 147,566 40.54% 191,409 49.38% 49,245 5.52% 34.64%

a. Industry: HPSM(Project)

74,423 22.96% 77,896 21.40% 73,244 18.90% -1,179 -4.07% -1.58%

b. Industry: Working Capital

67,741 20.90% 69,670 19.14% 118,165 30.48% 50,424 9.58% 74.44%

3 Trade 105,404 32.52% 116,480 32.00% 113,021 29.16% 7,617 -3.36% 7.23%

4 Real Estate 18,015 5.56% 23,660 6.50% 23,231 5.99% 5,216 0.43% 28.95%

5 Transport 6,856 2.12% 8,918 2.45% 6,887 1.78% 31 -0.34% 0.45%

6 RDS 7,072 2.18% 9,100 2.50% 10,393 2.68% 3,321 0.50% 46.96%

7 Other Sp. Schemes 4,589 1.42% 8,190 2.25% 4,764 1.23% 175 -0.19% 3.81%

8 Others 9,721 3.00% 7,316 2.01% 15,487 4.00% 5,766 1.00% 59.32%

Total 324,099 100% 364,000 100% 387,619 100% 63,520 0% 19.60%

Sl. No.

Economic Purpose

Position as on 31.12.2011


31.12.2012Changes in 2012 Growth

5.10. C.2.2. MONTH WISE COMPARATIVE POSITION OF EP WISE INVESTMENT

Jan.-12 Feb.-12 Mar.-12 Apr.-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12

1Agriculture & Agro Industry

2.64% -0.71% -0.94% -2.87% -2.71% -2.38% -2.14% -2.40% -0.78% -3.14% -3.01% -3.29% -3.56%

2 Industry -4.83% 0.43% 1.22% 1.78% 1.90% 1.30% 0.56% -0.95% -2.50% 2.10% 4.09% 4.62% 5.52%

3 Trade 2.19% 0.34% 0.01% 1.12% 1.52% 0.78% 1.11% 2.44% 2.33% -0.09% -2.55% -2.82% -3.36%

4 Real Estate 0.34% -0.01% -0.13% 0.03% 0.12% 0.17% 0.33% 0.29% 0.24% 0.25% 0.45% 0.50% 0.43%

5 Transport 0.37% -0.01% 0.01% 0.01% 0.01% -0.04% -0.05% -0.04% -0.12% -0.21% -0.23% -0.27% -0.34%

6 RDS 0.36% -0.01% 0.01% 0.05% 0.11% 0.15% 0.22% 0.23% 0.17% 0.21% 0.36% 0.40% 0.50%

7 Other Special Sch.

0.18% -0.03% -0.02% -0.08% -0.08% -0.09% -0.09% -0.09% -0.13% -0.16% -0.15% -0.16% -0.19%

8 Others -1.24% 0.00% -0.16% -0.04% -0.88% 0.11% 0.05% 0.53% 0.78% 1.04% 1.05% 1.03% 1.00%

Sl.Changes over 31 Dec. 2011Changes on

2011 over 2010

Economic Purpose

Agric. & Agro Ind., 5.79%

Industry, 49.38%

Trade , 29.16%

Real Estate, 5.99%

Transport, 1.78%

RDS, 2.68%

Other Schemes, 1.23%

Others , 4.00%

Economic Purpose Wise Investment Position of IBBL

5.10. C.2.3. ECONOMIC PURPOSE WISE INVESTMENT: ACHIEVEMENT SINCE 2009Table-8 (Amount in Million

Taka)

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Achievement

Amount % Amount % Amount % Amount %

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1Agriculture & Agro Based Industry

6,850 3.01% 5.60% 18,761 6.70% 5.70% 30,278 9.34% 7.10% 22,427 5.79% 11.75% 2.78%

2 Industry 118,593 52.05% 49.80% 136,261 48.70% 47.30% 142,164 43.86% 45.10% 191,409 49.38% 40.54% -2.66%

3 Trade 75,354 33.07% 30.50% 84,883 30.34% 31.00% 105,404 32.52% 32.00% 113,021 29.16% 32.00% -3.91%

4 Real Estate 9,140 4.01% 6.00% 14,599 5.22% 7.00% 18,015 5.56% 6.00% 23,231 5.99% 6.50% 1.98%

5 Transport 3,717 1.63% 2.00% 4,872 1.74% 2.50% 6,856 2.12% 2.50% 6,887 1.78% 2.45% 0.15%

6 RDS 3,752 1.65% 1.60% 5,110 1.83% 1.60% 7,072 2.18% 2.00% 10,393 2.68% 2.50% 1.03%

7Other Special Schemes

2,414 1.06% 1.06% 3,468 1.24% 2.40% 4,589 1.42% 1.30% 4,764 1.23% 2.25% 0.17%

8 Others 8,042 3.53% 3.44% 11,861 4.24% 2.50% 9,721 3.00% 4.00% 15,487 4.00% 2.01% 0.47%

Total 227,863 100% 100% 279,815 100% 100% 324,099 100% 100% 387,619 100% 100% -

ActualPlan

Change up to 2012 over 2009

2009 2010 2011 2012

ActualPlan

ActualPlan

Size of Account ActualSl.Plan

Chart-4

2.78%

-2.66% -3.91%

1.98%

0.15%

1.03%

0.17% 0.47%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

Agriculture & Agro Based

Industry

Industry Trade Real Estate Transport RDS Other Special

Schemes

Others

Diversified up to 2012 Since 2009

Observations:i. Investment in Agriculture & Agro-based Industry increased by 2.78% from 3.01% in 2009 to

5.79% in 2012.ii.Industrial Investment decreased by 2.66% from 52.05% in 2009 to 49.38% in 2012.iii. Investment in Trade decreased by 3.91% from 33.07% in 2009 to 29.16% in 2012.iv. Investment in Real Estate increased by 1.98% from 4.01% in 2009 to 5.99% in 2012.v.Investment in Transport increased by 0.15% from 1.63% in 2009 to 1.78% in 2012.vi. Investment in RDS increased by 1.03% from 1.60% in 2009 to 2.68% in 2012.

5.10. C.3 AREA WISE INVESTMENT 5.10.C.3.1. AREA-WISE INVESTMENT IN COMPARISON WITH PLAN (Amount in Million Taka)

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Amount % Amount % Amount % Amount % Amount %

1 2 3 4 5 6 7 8 9 10 11 12

1 Rural Area 41,910 12.93% 52,780 14.50% 53,594 13.83% 11,684 0.90% 11,684 27.88%

2 Urban Area 282,189 87.07% 311,220 85.50% 334,025 86.17% 51,836 -0.90% 51,836 18.37%

324,099 100% 364,000 100% 387,619 100% 63,520 N/A 63,520 19.60%TOTAL

Sl. No

Area



31.12.2012

Change on 31.12.2012 over

31.12.2011Growth

Observation:Rural Investment Increased by 0.90% in 2012 over 2011 showing growth of 27.88% against overall growth of 19.60% of General Investment.

5.10.C.3.2. TREND OF RURAL INVESTMENT OF IBBL SINCE 2008

7.70% 8.20%10.71%

12.93% 13.83%

0.00%

3.00%

6.00%

9.00%

12.00%

15.00%

2008 2009 2010 2011 2012

% T

o G

en

. In

ve

stm

en

t

Trend of Rural Investment

Observation:In the investment portfolio our Rural Investment is 13.83% whereas urban Investment is 86.17%. The given bar chart has shown an increasing trend of our rural Investment from 7.70% in 2008 to 13.83% in 2012 conversely our urban Investment has been decreasing from 92.30% in 2008 to 86.17% in 2012.5.10.C.3.3. RURAL INVESTMENT: IBBL’S ACHIEVEMENT

2010 2011 2012up to 2012 since 2009

1 2 3 4 5 6=(3-2) 7=(4-3) 8=(5-4) 9=(5-2)

Plan 9.00% 10.00% 12.00% 14.50% 1.00% 2.00% 2.50% 5.50%

Actual 8.20% 10.71% 12.93% 13.83% 2.51% 2.22% 0.90% 5.63%

ChangeRural

Investment2009 2010 2011 2012

9.00%10.00%

12.00%

14.50%

8.20%

10.71%

12.93%

13.83%

7%

9%

11%

13%

15%

17%

2009 2010 2011 2012

Rural Investment: IBBL

Plan

Actual

Rural Investment: As per plan we were supposed to stay at 14.50% by 2012, actually we are staying at 1%. Our Rural Investment has shown an increase of 5.05% up to September 2012 over 2009.

5.10.C.3.4. AREA WISE INVESTMENT: BANKING SECTOR as on 30.06.2012

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SL. Area All Banks SOBs SBs FBs PCBs IBs IBBL(31.12.12)

1 2 3 4 5 6 7 8 9

1 Rural 7.72% 9.47% 41.45% 0% 4.40% 4.04% 13.83%

2 Urban 92.28% 90.53% 58.55% 100.00% 95.60% 95.96% 86.17%

Total 100% 100% 100% 100% 100% 100% 100%7.

72%

9.47

%

41.45%

0% 4.40%

4.04

% 13.83

%

0%10%20%30%40%50%

All Banks SOBs SBs FBs PCBs IBs IBBL…

Rural Investment: Banking Sector

Observations:1. All Banks Investment/Advances are concentrated by 92.28% in the urban area whereas

only 7.72% is in the Rural Area.2. State Owned Banks Investment/Advances are concentrated by 90.53% in the urban area

whereas only 9.47% is in the Rural Area.3. Specialised Banks Investment/Advances are concentrated by 58.55% in the urban area

whereas only 41.45% is in the Rural Area.4. Foreign Banks Investment/Advances are concentrated by 100% in the urban area.5. Private Commercial Banks Investment/Advances are concentrated by 95.60% in the

urban area whereas only 4.40% is in the Rural Area.

5.10. C.4. MODE-WISE INVESTMENT

5.10.C.4.1. MODE-WISE INVESTMENT IN COMPARISON WITH PLAN (Amount in Million Taka)

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Growth

Amount % Amount % Amount % Amount % %

1 2 3 4 5 6 7 8 9 10= (10-4) 11

1 Bai-Mode 207,171 63.92% 220,890 61.24% 254,653 65.70% 47,482 1.77% 22.92%

2Ijara Mode (HPSM)

94,574 29.18% 111,262 30.85% 99,408 25.65% 4,834 -3.53% 5.11%

3 Share Mode 1,019 0.31% 3,401 0.94% 2,142 0.55% 1,124 0.24% 110.33%

4Purchase & Negotiation

15,721 4.85% 17,989 4.99% 22,502 5.81% 6,781 0.95% 43.14%

5 Quard 5,614 1.73% 7,133 1.98% 8,913 2.30% 3,299 0.57% 58.76%

324,099 100% 360,675 100% 387,619 100% 63,520 N/A 19.60%

Change on 31.12.2012 over

31.12.2011

Total

Sl. No

Area



31.12.2012

Bai-Mode Ijara Mode (HPSM) Share Mode Purchase &

Negotiation Quard

Position 65.70% 25.65% 0.55% 5.81% 2.30%Plan 61.24% 30.85% 0.94% 4.99% 1.98%

65.7

0%

25.6

5%

0.55

%

5.81

%

2.30

%

61.2

4%

30.8

5%

0.94

%

4.99

%

1.98

%

0%10%20%30%40%50%60%70%

% to

Tota

l Inv

estm

ent

Mode-wise Investment

Mode wise investment of IBBL constituted by Bi-Mode 65.70%, Ijara Mode (HPSM) 25.65%, Share Mode 0.55% and others 8.10%. Up to 31.12.2012 over 31.12.2011 our Investment in Bai & Share Mode increased by 1.77% & 0.24% and Ijara mode decreased by 3.53% showing growth of 22.92%, 110.33% & 5.11% respectively.

Investment in Share Mode increased due to increase in Mudaraba Foreign Currency Investment and Musharaka General Investment.

Observations

As per 5-Years Perspective Investment Plan 2012-2016 we were supposed to stay at

Tk.364000 million in our General Investment. By the end of the year 2012 we have been able

to exceed the yearly target and stood at Tk.387619 million showing a growth rate of 19.60%

over 2011. In the perspective plan our Investment ceiling for 2013 is Tk.425,000 million.

However considering our excellent performance, we have taken the plan of Tk.450,000

million in 2013.

D. RATING OF CORPORATE INVESTMENT CLIENTS

Background

To comply with the International best practices under Basel-II as well as with Bangladesh Bank’s instructions and

to minimize the Risk Weighted Assets (RWA) for maximizing the Capital Adequacy Ratio (CAR), we are to get

of 48


our corporate investment clients rated. Ratings are the opinion of rating agencies on the creditworthiness of

issuers or issues in terms of their/ its ability and willingness of discharging its obligations in timely manner. In the

year 2012, we have a great achievement in investment clients’ rating which will help us to maintain our Capital

Adequacy Ratio (CAR) in expected level Insha-Allah.

Rating Position in the year 2011

Total 522 rating completed in the year 2011. Out of which 374 were

fresh rating and 148 were surveillance rating. Total outstanding

against 522 clients was Tk.182,122 million which was 77% of

corporate investment and 84% of rate able investment.

0100200300400

Fresh SurveillanceNo. of Clients 374 148

374

148

No

. o

f C

lie

nts

Rating Position in 2011

Target of rating for 2012

Total rateable clients are 912 out of which 390 clients (Twenty million

and above having good performance) are selected for fresh rating and

522 clients are for surveillance rating. Total outstanding of the 912

clients is Tk.2,08,772 million which is 91% of corporate investment

and 93% of rateable investment. It is mentionable that in the last

quarter of the year the clients having outstanding at least taka ten

million are included in the list for rating.

0%25%

50%75%

100%


No

. of

Clie

nts

Target of Rating -2012

Performance of the year 2012

Total rated clients stand at 928 of which fresh rated clients are 406 and

491 are surveillance rated clients. Total outstanding against there 928

clients are Tk.208,780 million which is 92% of corporate investment

and 96% of rateable investment. It is mentionable that rating of 80

fresh investment clients having liability of Tk.7000 million is under

process in addition to the above fresh clients.

0

200

400

600


No

. of

clie

nts

Performance of the Year-2012

Comparative Performance

Rating of investment client was started in since 2009. Only 5 clients

were rated in 2009 while 143 fresh clients as well as 5 surveillance

rating were completed in 2010 and 374 fresh clients and 148

surveillance clients in 2011. In the year 2012 rating of 406 fresh

investment clients and 491 surveillance rating have been completed.

The total outstanding liability of the total rated 928 clients is Tk.

208,780 million which covers 92% of total corporate clients. It is

mentionable that a handsome fresh rating will be completed very soon

in addition to 394 clients.

0

100

200

300

400

500

2009 2010 2011 2012Fresh 5 143 374 406Surveillance 0 5 148 491

No

. of

Cli

en

ts

Year Wise Rating Position

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Capital Adequacy Ratio

As per Bangladesh Bank’s BRPD Circular No. 10 dated 10.03.2010

we have to maintain Minimum Capital Requirement (MCR) equal to

10% to Risk Weighted Assets from 01.07.2011 onwards. As a result of

clients rating, our Capital Adequacy Ratio stood at 11.05% in 2010,

13.13% in 2011 and 13.10% as on 30.09.2012.

11.05% 13.13%

13.10%

10.00%

11.00%

12.00%

13.00%

14.00%

31.12.2010 31.12.2011 30.09.2012

Capital Adequacy Ratio

Risk Weighted Asset Lessened through Rating

Total rated clients are 928 having outstanding liability of Tk.208,780

million. The total risk weighted asset of the said rated clients stand at

Tk. 110,790 million i.e. we have saved risk weighted asset by Tk.

150,185 million which is great achievement.

Rated Clients

Rated Clients

Outstanding

Risk Weigheted

Assets

Risk Weigheted

Assets saved

928

208780

110790

150185

RWA of Rated Clients

Plan for Rating in 2013

In the year 2013, ten million and above (regular and fresh) investment clients shall be taken

into consideration for rating. As a result more coverage of rating of corporate investment will

be achieved as well as our Capital Adequacy Ratio (CAR) would be in a more satisfactory

level.

CONCLUSION

Islami Bank Bangladesh Limited is the dominant player in the success history of around three

decades of Islamic banking operation in Bangladesh. The Bank, by the grace of almighty

Allah and the concerted efforts of all concerned, could prove itself as the most modern,

dynamic and popular bank of the country. The policy makers and workforce of the Bank, by

their strong commitment and tireless effort, has been able to continue its success in every

sphere of banking operations and services. Now it is the time to uphold the flag of the

beloved institution. Let us strive for the same. May Allah help us all.

of 48


Recommendations

The year-2013 may be a challenging year for the Banking Industry due to world economic crisis and political turmoil before National Election. As a result, there is a possibility of increasing non-performing investment of the Bank during the current year. To overcome the probable adverse situation following steps/measures should be taken by the Zone/Branch incumbents from the very beginning of the year-2013.1. To keep in touch with the client to ensure that invested fund is not diverted in any way.

2. Sharia’h lapses to be checked while making any disbursement against the sanction.3. To review the yearly Business Plan approved by the Head Office on weekly basis to overcome the

short comings.4. To orient/motivate the employees of the Branch to achieve the target of Business Plan set by the

Head Office/Zonal Office/Branch.5. To maintain regular contact with the NPI clients to ensure early recovery of the same.6. Branches & Zonal Offices Task Forces to be kept vigilant to reduce the non performing

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Investment of the Bank.7. To communicate with the investment clients before due date of investment and visit their business

establishment frequently to ensure timely recovery.8. To issue a reminder letter to the investment clients at least 03(three) months ahead of due dates

for adjustment within due date invariably.9. To give emphasis on persuasion/amicable settlement for recovery of non-performing investment

rather than litigation process particularly of suit value below Tk.50,000/-.10. To meet with NPI clients physically in their residence before/after office hour and talk with their

wife, children and other relatives.11. To ensure that no investment account is time barred for negligence of any Officer in the light of

Artha Rin Adalat Ain’2003.12. To pursue court cases filed against the clients through panel lawyer as well as branch official(s).

13. Execution of mortgaged after physical scrutiny/verification of documents in accordance with Head Office Instruction Circular No. LAW/2692 dated 17.04.2007.

14. Attending the Court timely, Persuasion of the lawyers, Periodical meeting with the lawyers, Negotiation with the clients.

15. Mediation and Solenamah through the Court.

16. To take appropriate steps for timely disposal of pledged goods, selling out of mortgaged property and if needed waiver facility/rescheduling of liability may be considered with Head Office approval.

17. Investments to be made ensuring proper control of stock and sufficient collateral security with valid title.

18. Investment to be made within the manageable capacity of the branch / branch incumbent.

19. Clients who are reluctant with the Islami Banking system should not be inducted.20. Opening of big L/cs. to be controlled and branch / clients are to be encouraged to open small &

medium sized L/cs.21. New profitable avenue / sector to be explored for making quality investment.

22. Sitting with big defaulter clients may be arranged at branch / Zonal Office / Head office levels to find out the ways of recovery / regularization.

Conclusion

Banks play a very vital role in the economic development of the country. The popularity of banks is increasing day by day which leads to increase competition as well. Currently 57 Banks are operated in Bangladesh. All the Commercial banks are offering almost the same products and services. But the way they provide the services are different from each other. So

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people choose their bank according to their satisfaction and need. On the other hand, Banks innovate new products and services to attract their desired customer. Islami Bank Bangladesh Ltd. is one of the fast growing banks in Bangladesh because of its rapid customers’ satisfaction. The bank is committed to run all its activities as per Islamic Shari’ah. IBBL through its steady process and continued success has, by now, earned the reputation of being one of the leading private sector banks of the country. Islami Bank Bangladesh Ltd. is also playing an important role in establishing Islamic Economics by combing the economic values with social and moral values. By following the novelty of Islamic Economics the bank is trying to make a balance development between spiritual and material life. Still now hear about 301 Islamic banking and financial institutions in about 49 countries of Asia, Africa, Europe, America and countries like Pakistan, U.K., U.S.A., Germany, Argentina, Denmark, Luxembourg, Switzerland and India have been established. The banking system of Pakistan and Iran was totally remodeled on the basis of Islamic Shari’ah services. IBBL will be more effective in our economy by launching new financial products to attract deposit as Consumer Credit Scheme, Pension Scheme, and Child Education Scheme and contribute more to develop the living standard of middle class people.

Bibliography

1. Financial Administration Division of IBBL.2. Annual Managers Conference-2013.3. Islamic Banking

-Habibur Rahman4. Annual Reports of Islami Bank- 2005-20125. www.islamibankbd.com6. Handout provided by IBTRA

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7. Sina, M. Abu, The Modes of Investment of Islamic Banks and Nationalized Commercial banks: A Comparative Study, Ph.D thesis, Islamic University, Kushtia.

8. Babikir O.Ahmed, The Contribution of Islamic Banking to Economic Development: the case of the Sudan.Ph.d Thesis, University of Durham.U.K. In Abstracts of the Journal of Islamic Social Science, Vol.8, No.1, 1991

9. Nasruddin Ahmed, (1999), Working of an Islamic Bank:A Case Study of Islami Bank Bangladesh a paper presented at the seminar on “Islamic economics finance, Held in U.K. in May 1999 Jointly Organized by the Islamic Foundation, U.K: The Islamic Development Bank and Loughborough University, Mark filed conference center, U.K.

10. Hamid, M.A (1999), Islamic Banking in Bangladesh: Expectations and realities, A Paper Presented at the International conferences on Islamic Economics in The 21 st

Century held in Malaysia from 09 to 12 August 1999, Organized Jointly by International Islamic University Malaysia (IIUM) and Islamic Research and Training Institute (IRTI) of IDB, Malaysia.

11. Ahsan, A.S.M. Fakrul (1988), Islam and Modern Banking System. Thoughts on Economics, Vol.ix, No 1&2 Dhaka: Islamic Economics Research Bureau (IERB)

12. Hossain M. Musharaf, “Measurement of Effectiveness of Islami Bank Bangladesh Ltd.”The Islamic University Studies, Vol.ii, no. 2 Kustia,:Islamic University

13. Chakma, Pradanendu Bikash, Islam Md. Serajul and Karmaker Shyam Sundar. Managerial performance of Islamic banking: A Critical Review, Journal of Business Studies, Vol. xvi (2) Dhaka University.pp.85-102

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ibbl investment portfolio of

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