overall banking activities of shahjalal islami bank limited

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Overall Banking Activities of Shahjalal Islami Bank Limited Chapter # 1 Introduction The Internship is a four-credit compulsory course for the business students graduating from Bangladesh University of Business & Technology (BUBT). The objective of this component is to provide a hands-on experience to a student graduating under different discipline of Bangladesh University of Business & Technology (BUBT). The Internship takes place in a firm/organization or an institution. After completing one hundred and twenty credit hours, a BBA student have to do an internship in any area of business specialization under the concentration like Marketing, Finance, Management, Human resource etc. (1.1) Background of the study: Knowledge and learning become perfect when it is associated with theory and practice. Theoretical knowledge gets its perfection with practical application. As our educational system predominantly text based, inclusion practical orientation program, as an academic component is as exception to the norm. As the parties; educational institution and the organization substantially benefit from such a program, it seems a “win-win situation”. It establishes contracts

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Page 1: Overall Banking Activities of Shahjalal Islami Bank Limited

Overall Banking Activities of Shahjalal Islami Bank Limited

Chapter # 1Introduction

The Internship is a four-credit compulsory course for the business students graduating from

Bangladesh University of Business & Technology (BUBT). The objective of this component is to

provide a hands-on experience to a student graduating under different discipline of Bangladesh

University of Business & Technology (BUBT). The Internship takes place in a firm/organization or an

institution. After completing one hundred and twenty credit hours, a BBA student have to do an

internship in any area of business specialization under the concentration like Marketing, Finance,

Management, Human resource etc.

(1.1) Background of the study:Knowledge and learning become perfect when it is associated with theory and practice. Theoretical

knowledge gets its perfection with practical application. As our educational system predominantly text

based, inclusion practical orientation program, as an academic component is as exception to the norm.

As the parties; educational institution and the organization substantially benefit from such a program,

it seems a “win-win situation”. It establishes contracts and networking contracts. Contracts may help

to get a job. That is, students can train and prepare themselves for the job market. A poor country like

Bangladesh has an overwhelming number of unemployed education graduates. As they have no

internship experience they have not been able to gain normal professional experience or establish

networking system, which is important in getting a job. So, practical orientation is a positive

development in professional area. Recognizing the importance of practical experience, School of

Management and Business Administration has introduced a three months practical exposure as a part

of the curriculum of Master of Business Administration program. In such state of affairs the present

aiming at analyzing the experience of practical orientation related to General Banking activities in the

Shahjalal Islami Bank Limited, Banani Branch.

(1.2) Origin of the report:

Page 2: Overall Banking Activities of Shahjalal Islami Bank Limited

Internship is a particular course of BBA program. The primary goal of the internship program is to

provide the intern with the job experience by orienting the intern with the organization and

opportunity for the intern to relate the theoretical conceptions in the real business environment. This

program is for three (3) months duration. The period for this program was form July 06 2008 to

October 06 2008. During this period I have worked closely with the employee & stuffs of the Bank. I

was assigned a topic “Overall Banking activities of Shahjalal Islami Bank Limited” by the

supervisor for the program.

(1.3) Scope of the report:The scope of the organizational part covers the organizational structure, background, objective,

function and department and business performance of SJIBL as a whole. The main part covers the

operational scenario of advance, foreign exchange, remittance of Banani branch as well as over all of

SJIBL. This refers that how the bank help the customers in exporting and importing the goods,

providing advance, and how it remits the money of the foreign clients, etc. all are in the project part of

the report.

(1.4) Objects of the report:The primary objective of this report is to achieve practical knowledge about banking to observe; what

are the basic services, but the specific objective of this report as follows:

a. To know about the general banking.

b. To know about loans and advances.

c. To know about Foreign Exchange.

d. To analyze the performance of over all Islami banking of SJIBL.

e. To know about the difference between conventional and Islami banking.

f. To identify Marketing mix of SJIBL

g. To identify an understand different product offering of SJIBL.

(1.5) Methodology: Methods followed to perform a job or conducting activities to complete a task is called methodology.

As I was conducted, I concentrate on issues that a directly or indirectly related with marketing

practice. Therefore, I have done both ‘qualitative’ and ‘quantitative’ data analysis. Generally the study

was ‘descriptive’ in nature.

1.5.1) Types of research: The research was descriptive in nature.

Page 3: Overall Banking Activities of Shahjalal Islami Bank Limited

1.5.2) Source of data Collection:

The data collection method of study consists of both of primary and secondary sources. But majority

of the information was collected from secondary courses.

A) Primary sources: The primary sources include interviewed with the bankers and my work

experience.

B) Secondary sources: The secondary sources are the annual reports of the SJIBL 2006-2007 and

other published prospects. Articles, newspaper, Relevant books, journals etc

1.5.3) Data collection procedure:

A) Primary data:

Observation, Focus group, In-depth interview, and survey method are used for primary data collection

B) Secondary data:

Secondary data collect from annual report, articles and Shahjalal Islami Bank Limited website.

1.5.4) Questionnaire design:

Researcher administrated type of well structure questionnaire was used for primary data collection.

Both open ended & close-ended questions were included. Average time for conducting individual

questionnaire survey was 20 minutes.

1.5.5) Sampling Plan:

A)Target Population: All the officials & clients of at Shahjalal Islami Bank Limited (SJIBL),

General Banking and Credit were target population of my study.

B) Sample Unit: For buyer questionnaire, survey sample unit was the individual officials & clients of

at Shahjalal Islami Bank Limited (SJIBL) Banani branch, Dhaka.

C) Sample size: Minimum 66 sample size I took. 30 for employee & 36 for customer.

D) Sampling Method: Non probability convenience sampling method (Mall intercept) & non

probability judgmental sampling method was used for survey officials & clients of at Shahjalal Islami

Bank Limited (SJIBL) Banani branch, Dhaka.

E) Sample Frame: Structured sample frames are follows:

Employee Surveyed Client Surveyed

Page 4: Overall Banking Activities of Shahjalal Islami Bank Limited

Target

Population

Sample Unit Sample

size

Shahjalal Islami

Bank Limited

(SJIBL) Banani

branch, Dhaka.

General

Banking(GB)

Credit

Foreign

Exchange (FE)

10

10

10

30

Target

Population

Sample Unit Sample

size

Shahjalal Islami

Bank Limited

(SJIBL) Banani

branch, Dhaka.

General

Banking(GB)

Credit

Foreign

Exchange (FE)

12

12

12

36

1.5.6) Data Analysis:

This is descriptive report mainly aiming to depict the Overall Banking Operation and Overview of

Shahjalal Islami Bank Ltd. In order to make the study effective and efficient, following tow sources of

data and information have been used widely. I have analyzed these reports and document in the light

of analytical review. I have used some statistical tools, graphical presentation, and table to find out the

different types of analytical result. Those are given the overall picture of the Shahjalal Islami Bank

Ltd.

(1.6) Limitations:There were several constraints while preparing this report; only 12 weeks were not sufficient to visit

all the desks of the branch. So some desks were remained unvisited. Moreover, some officers in some

desks were found non-cooperative. Such desks were remained unexposed. The branch also refuses to

provide data on its performance, especially in loans and advances. It is also not possible to go to the

depth of each activities of branch because of time limitation. Therefore, it was very difficult to carry

out the whole analysis.

Chapter # 2

Page 5: Overall Banking Activities of Shahjalal Islami Bank Limited

Profile of the Organization (2.1) Profile of the Organization: Shahjalal Bank Limited was established as a public limited company on April 01, 2001 under

company act, 1994. The bank commenced its commercial operation in accordance with Islamic

Shahriah on the 10th May 2001 under the ambit of the bank companies Act, 1991. The name of the

bank was changed to Shahjalal islami bank limited w.e.f 10th May 2004. During Last five years SJIBL

has increased its service coverage by opening new branches at different strategically important

locations across the country. In order to cover the shortfall in capital adequacy and fulfill other

requirements, the paid up capital has been increased to TK. 466.83 million by injecting TK. 236.20

million by the sponsors in 2004. the sponsors again injected additional TK. 469.00 million by 15 th

May 2005 to make the sponsors contribution to capital TK. 935.83 million. The bank has the plain to

go for initial public offerings (IPO) of share, which will assist the bank to raise its paid up capital to

TK. 1871.65 million. The bank was sponsored by the group of local businessmen having exposure in

RMG, insurance, electronics and education etc. Alhaj Sajjatuz Jumma is the present and founder

chairmen of the bank having business experiences of more than 26 years in the field of electronics,

food and education. SJIBL provides a wide range of sharia based commercial banking services.

Shariah Council of the Bank:

As per Article 30 of the Artic ales of Association of the Bank, Shariah Council for the Bank

has been constituted. The Shariah council of the Bank consists of prominent Ulama, Lower and

Economist to advice and guide on the implementation of Islamic Shariah in business activities. The

council enjoys a special status in the structure of the bank and playing a vital role to make the Bank as

shariah compliant. In the year 2007, the total number of meetings of the Shariah Council of the Bank

was 3 (three) and subcommittee meeting was 01 (one).

(2.2) Objective: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

Page 6: Overall Banking Activities of Shahjalal Islami Bank Limited

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 better in a

God-fearing society.

Other objectives of Shahjalal Islami Bank include:

To establish interest-free and welfare oriented banking system

To help in a poverty alleviation and employment generation

To contribution on sustainable economic growth of Bangladesh

(2.3) Vision:To be the unique modern Islami Bank in Bangladesh and to make significant contribution to the

national economy and enhance customers’ trust & wealth, quality investment, employees’ value and

rapid growth in shareholders’ equity.

(2.4) Mission: 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 extend customers innovative services acquiring state of the art technology blended with

Islamic principals

To ensure human resource development to meet the challenges of the time

(2.5) Strategies: To strive for customers best satisfaction & earn their confidence

To manage & operate the Bank in the most effective manner

To identify customers needs & monitor their perception towards meeting those requirements

To review & update policies, procedures & practices to enhance that ability to extend better

services to the customers

To train & develop all employees & provide them adequate resources so that the customers

needs are reasonably addressed

To promote organizational efficiency by communicating company plans, policies &

procedures openly to the employees in a timely fashion

To cultivate a congenial working environment

To diversify portfolio both the retail &wholesale markets

(2.6) Business environment:

Page 7: Overall Banking Activities of Shahjalal Islami Bank Limited

During 2007, Bangladesh witnessed higher inflation that affected life of common people, labor unrest

in garments sector- the highest contributor in export sector affected economic activities and business

operations.

Higher import cost of commodity prices, price hike in international oil market as well as money and

credit growth resulted in higher inflation. As a result, the economy of the country showed every sign

of recession. The efficient workforce of the Bank and the prudent management developed a seamless

teamwork which pushed the Bank through all the shadows of uncertainty towards the light of sources.

Despite numerous adversities, closed the balance sheet of the Bank with an enormous per-tax profit of

TK. 1216 million with excellent growth rate of 54.44%. while the whole financial sector faced a

slowdown. This credit worthy achievement has been possible due to our professional smoothness and

confidence.

(2.7) Management hierarchy:

Astatine Officer

Chairmen

Board of director

Managing director

Deputy managing director

Executive vice president

Senior vice president

Vice president

Senior assistant vice president

Assistant vice president

Senior Executive Officer

Executive Officer

Fist Executive Officer

Management trainee officer

Senior Officer

Page 8: Overall Banking Activities of Shahjalal Islami Bank Limited

Figure: 2-1

(2.8) Social Responsibility: As an Islamic bank, they are committed to serve the causes of humanities. In this course, they

expanded their helping hand to the flood affected; winter distressed and SIDR affected people of

various resigns of the country. They awarded scholarships to the poor meritorious students of their

country to carry forward their future education. they donated found to Chief Advisor’s Relief Fund to

help SIDR affected people as well as the employees of the Bank can avail themselves of the physical

aid at a minimum cost.

Having due regard to this, the Bank has already formed Shahjalal Islami Bank Foundation aiming at

serving Humanity through different welfare activities giving emphasis on Health, Habitat &

Education sector. the Bank has recently taken program to establish Shahjalal Islami Bank Hospital and

Shahjalal Islami Bank International School &College. It may further be mentioned here that the Bank

has declared Education Award for the students securing first, second & third position in the MBA

examination with Islamic Economic and Banking as one of the subjects under the department of

Banking of the University of Dhaka on a recurring basis. First two batches of such students having

been ceremonially honored with Cash Award, Crest and Certificate of Merit where the honorable Vice

Chancellor of the University of Dhaka Mr. S. M. Fayez was present as the chief guest. Beside, the

Bank has distributed scholarship in the year 200 to poor but meritorious students with outstanding

result in secondary school and higher secondary examinations to facilitate them for pursuing their

further studies without hindrance. The program of this education Award will be gradually undertaken

in future.

(2.9) Human Resource Development:Our policy on human resource management is proactive. We believe that investment in human

resource development is the key to maintaining sound health of the Bank. The employees of the bank

attended training program/ seminar, workshop both at home and abroad. The training center of the

Bank has been arranging various courses, workshops seminars on important aspects of Banking. We

invite experts of banking sector for imparting training to our employees to meet the above challenges.

To keep the employees motivated, incentives, performance reward, promotion and accelerated

promotion etc. are giving on a regular basis. Total number of manpower of Bank stood at 555 as on

31st December 2007 as against 377 of 31st December 2006. the Bank has introduced a good number of

Page 9: Overall Banking Activities of Shahjalal Islami Bank Limited

staff welfare scheme to be a part with the banking communities and improve the condition of its

employees such as contributory recognized provident fund, gratuity fund, benevolent fund etc.

(2.10) Information Technology: Main objective of the Bank is to take care of different economic groups of the society and meet their

all types of banking requirements stretching its services to the doorstep of the people with the help of

information technology gradually. We are providing customers’ service through online facilities.

Ultimate aim is to enable their respected and valued clients to shop under the same roof. In line with

that SJIBL VISA DEBIT CARD, SMS/ push pull services have already been introduced. Beside,

clients are also being facilitated by the service of REUTERS, SWIFT, western Union Money Transfer

etc.

(2.11) Marketing mix: The common strategy to market manufactured goods: marketers usually address four basic strategic

elements: Product, price, place (Distribution) and promotion (communication). Collectively these are

often referred to as the 4ps of the marketing mix.

To capture the distinctive nature of service performances, it requires to modify the terminology &

extending the mix by adding four elements associated with service delivery; Physical environment,

Process & People. As Shahjalal Islami Bank Limited is a service firm, the management is sharply

concern about all the 7Ps that represents a set of interrelated decision variables.

2.11.1) Product and services of SJIBL

A. Deposit products

Cheque-based Account

Al-Wadish current Deposits

Mudaraba Saving Deposits

Mudaraba Short Notice Deposit

Non-cheque-based Account

Mudaraba Term Deposits

Mudaraba Double/Triple Benefit Scheme

Mudaraba Monthly Deposit Scheme ( 5, 8 , 10 years )

Mudaraba Millionaire Scheme (12, 15, 25, years terms)

Mudaraba Hajj Scheme ( 1 to 25 years terms )

Mudaraba Housing Deposit Scheme

Mudaraba Cash waqf Deposit Scheme

Monthly Income

Page 10: Overall Banking Activities of Shahjalal Islami Bank Limited

New product for 2007

Mudaraba marriage Scheme

Mudaraba Education scheme

Mudaraba mohor Scheme

Mudaraba Special term deposits

B. Investment Products

Profit applies monthly

Calculations based on simple method

Calculation mode on annuity method

Markup system

Total profit is unknown

Profit kept in profit Receivable A/C (Liability)

Profit realized from profit Receivable A/C (Liability)

Rebate allowed

Compensation may be changed

Profit may transfer to profit Suspense A/C

Different Modes

Musharaka

Mudaraba

Murabaha

Bi-Muzzal

HPSM

HPSM-HHD Scheme

HPSM- (staff)

Ijara

Bai-Salam

Istisnaa

Muqawala

Quard-e-Hasana

Inland Doc. Bills Purchased

2.11.2) Price: This component addresses management of all the outlays incurred by customers in

obtaining benefits from the service product. SJIBL is not limited to the traditional pricing tasks of

determining the selling price to customers, setting margins for any intermediaries and establishing

credit terms. SJIBL is trying hard to minimize the cost of taking services because everyone wants best

service in a reliable price.Shahjalal Islami bank offers very reasonable price to its customers. For this

Page 11: Overall Banking Activities of Shahjalal Islami Bank Limited

reason there are huge number of people are very loyal to them. There are plenty of services provided

by SJIBL and there are dynamic price list for different service.

Profit Rates (Price) of SJIBL in General Banking

Attractive and competitive interest rateSl# Types of Deposits Interest Rates1  STD (Short Term Deposit)  7.00%2  Savings Deposit: Urban/Rural  6%3 Savings Deposit: Non Chequing & No          withdrawal for 6(six)

months  6%*

4 Savings Deposit: Non Chequing & No  withdrawal for 1(one) year & above

 8.00%*

5  FDR for 1(One) month and above  8%6  FDR for 3(Three) months and above  11.25%  7  FDR for 6(Six) months and above  11.50% 8  FDR for 1(one) year and above  11.75%Note: The rate of interest offered earlier on FDR (s) shall remain unchanged till their next maturity

2.11.3) Place: Delivering product elements to customer involves decisions on the place and time of

delivery, as well as on the methods and channels used. IN Shahjalal Islami Bank – delivery of service

involves physical & electronic distribution depending on the nature of the service being provided.

Shahjalal Islami Bank is the largest private commercial bank in our country. It has 26 branches all

over the country. So they are very conscious about delivering service near to customer. The bank has

one or more branches in important & lucrative places so that the customer can easily reach to it.

Because Shahjalal Islami Bank knows – speed & convenience of place and time for the customer are

becoming important determinants in service delivery strategy. Some important location on Shahjalal

Islami Bank can represent their sense of place & timing –

2.11.4) Promotion: Effective marketing communication is very important for any kind of

organization. This component plays three vital roles: providing needed information & advice,

persuading target customers of the merits of a specific product, and encouraging them to take action at

specific times.

Integrated Marketing Communication/Promotion Mix of Shahjalal Islami Bank: SJIBL blended

its promotional tools as follow

1. Advertising: Advertising is any paid form of nonpersonal communication about an

organization, product, service, or idea by an identified sponsor. Shahjalal Islami Bank does

not go for massive advertising. This is one major lacking of the bank. Occasionally it

appears on television. While opening new branch SJIBL do advertising for letting more

people acknowledged.

Advertising platforms of SJIBL:

Page 12: Overall Banking Activities of Shahjalal Islami Bank Limited

i. Print & broadcast ads

ii. Brochures & booklets

iii. Directories

iv. Symbols & Logos

v. Billboards

2. Sales promotion: It involves extra value or incentives to the sales force or ultimate

customers and can stimulate immediate sales. Shahjalal Islami Bank often go for consumer

oriented sales promotion.

Sales promotion of SJIBL:

I. Premiums & gifts

II. Fairs & trade shows

III. Rebates

IV. Low-interest financing

V. Trade in allowance

3. Publicity/Public relations: Publicity usually comes in the form of a news story, editorial or

announcement about an organization or its product/service. Credibility is the advantage of

this medium. Public relation is the management function which evaluates public attitudes.

Shahjalal Islami Bank goes for both publicity & public relation.

I. Press kits

II. Seminars

III. Annual reports

IV. Charitable donations

V. Company magazine

VI. Publications

4.Interactive/Internet marketing: Shahjalal Islami Bank is now paying more concentration

on internet marketing. Because it has a he prospect. Interactive media allow for a back and

forth flow of information whereby users can participate in and modify the form and content

of the information they receive in real time. As internet service is not so much available

everywhere in the country the bank cannot spread their interactive marketing in the country.

But they can provide online services.

2.11.5) Physical Environment: The appearance of SJIBL’s building, landscaping, vehicles,

interior furnishing, equipment, staff members, signs, printed materials, and other visible cues all

provide tangible avidence of the banks service quality. Shahjalal Islami Bank manages its physical

evidence very carefully, as it can have a profound impact on customers’ impression. They have:

Page 13: Overall Banking Activities of Shahjalal Islami Bank Limited

1. Well decorated office space.

2. Prayer time & space.

3. Necessary furniture & electric equipment

4. Seating arrangement for customers

5. Car parking facility

6. Printed materials

7. Skilled manpower etc.

2.11.6) Process : Shahjalal Islami Bank creates and deliver product elements to customers require the

design and implementation by effective process. A process is the method and sequence of actions in

the service performance. Shahjalal Islami Bank designs its process in such a way that lead to fast,

dynamic and very effective service delivery and result in satisfied customers. As the process of the

bank is very well designed it helps a lot to the front line staffs to do their jobs well, resulting in high

productivity and decrease likelihood of service failure. In the bank most of the directions comes from

head office but there are different culture in different branch based on location but every where a

specific process is highly maintained.

2.11.7) People: Banking service usually depends on direct interaction between customers and a

firm’s employees. Shahjalal Islami Bank maintains a good relationship with its customers. Service

quality is often assessed based on customers’ interactions with front line staff and Shahjalal Islami

Bank Bangladesh Ltd, devotes significant effort to recruiting, training, and motivating these

employees. They placed a separate institute for making the staffs up to the mark. Because the bank

believes that employees represents the image of the bank in front of customers

(2.12) SWOT ANALYSIS:

Figure: 2-2SWOT analysis

STRENGTHS:

Good asset quality

Satisfactory business growth

STRENGTHS WEAKNESSES

OPPORTUNITY THREATS

SWOT

Page 14: Overall Banking Activities of Shahjalal Islami Bank Limited

Diversified product lines

Good profitability

Experienced top management

Good operating efficiency

WEAKNESS:

Negative related earnings

Dependent on fixed deposit

Moderate risk management system Limited delegation of power

MIS at primary stage

Weak in shariah compliance

Limited branch network

Limited Market share OPPORTUNITIES:

SME and Agro based business

Real time online banking

Credit card in dual currency

Basel-II compliance to tap advantage from RM system

THREATS:

Increased competition in the market

Market pressure for increasing the SLR

Market pressure for dollar crisis

Chapter # 3Theoretical Aspects

(3.1) Theoretical Background and Business Practice of Islamic Banking:From the viewpoint of Islamic Shariah, the banking system has to avoid interest. Consequently,

financial intermediation in Islamic banking between the bank and the client takes place as a partner

rather than a debtor-creditor. The financial activities of modern conventional banks are based on a

Page 15: Overall Banking Activities of Shahjalal Islami Bank Limited

creditor-debtor relationship between depositors and bank on the one hand and between the borrower

and the bank on the other. Interest is regarded by conventional banks as the price of credit reflecting

the opportunity cost of money. As interest is prohibited in Islam, commercial banking in an Islamic

framework could not be based on the creditor debtor relationship. The other aspect of the theoretical

basis of Islamic banking is that the interest free bank is not risk free. This principle is applicable to

two main factors of production, i.e. labor and capital. According to this principle, as no payment is

allowed to labor, unless it is applied to work, no reward for capital should be allowed, unless it is

exposed to business risk. From these two principles of the theoretical basis of Islamic banking, it may

be said that Islamic financial relationships are of a participatory nature (Ahmad, 1993). Based on the

theoretical background, business practices of Islamic bank, especially sources and uses of bank’s

funds, are characterized by the following modes or techniques.

(3.2) DEFINATION OF ISLAMIC BANKING:The General secretariat of the Organization of Islamic Conference ( OIC) defines an Islamic bank as a

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

principles of Islamic Sharish and to the banning of the receipt and payment of riba ( interest ) on any

of its operation. Islamic Banking Act of Malaysia (Act No.273a) has given the following definition.

Islamic banking means any company which carries on Islamic banking business and hold a valid

license; and all the offices and branches in Malaysia of such a bank shall be deemed to be one bank

Islamic banking business means banking business whose aims and operations do not involve any

element which is not approved by the Religion of Islam.

Therefore, if a bank by definition, avoids interest on its all transactions, but dose not keep itself away

from other Haram (forbidden) transactions, like investment to pork meat industry, alcoholic beverage

industry, gambling, etc. is not an Islamic, but all Islamic banks must be interest free.

Islamic bank, thus, can also be defined as a financial institution which dose not pay or receive interest

on any of its operations in any form and its all activities conform to the principles of Islamic Shariah.

(3.3) THE MAIN OBJECTTIVES OF ISLAMIC BANKING: Common objectives of all Islamic Banks are said to be as follows:

To abolish Riba

To establish Baiya (trad, commerce and industry)

To mobilize savings for productive purpose

Page 16: Overall Banking Activities of Shahjalal Islami Bank Limited

To earn reasonable profit through Halal (permissible) transactions

To establish Maruf (good) and Ihsan (kindness)

To create more employment opportunities by increasing economic activities

To distribute income and wealth equitably

Not to allow concentration of wealth

Generally to serve all classes of people, especially to favors the weaker sectors.

To establish a balanced and welfare society

The above objectives are also the objectives of Islamic economics, so, hundred percent of these

objectives cannot be achieved by Islamic banking operations alone. Islamic banking can play an

important role to achieve these objectives for the establishment of a welfare economy.

(3.4) Banking System of Bangladesh:The banking system of Bangladesh is composed of a variety of banks working as Nationalized

Commercial Banks (NCBs), Private Banks, Foreign Banks, Specialised Banks and Development

Banks. However, 28 out of 50 banks in Bangladesh are private, of which only 5, namely Islami Bank

Bangladesh Limited, Exim Bank Limited,

Al-rafah Islami Bank Limited, Social Investment Bank Limited, and The Oriental Bank Ltd have

been operating as Islamic banks. Besides these full-fledged Islamic banks, some conventional banks

in the private sector have opened full-fledged Islamic banking branches and Islamic Banking Counter

respectively to deal with the Islamic banking business parallel to their conventional operations.

(3.5) Banking Environment in Bangladesh:Bangladesh appeared as a new nation on the world map in the year 1971. After independence financial

institutions, especially banks played a vital role in re-constructing the war-torn economy of

Bangladesh. As reported by BSB (P. 29, 1993), “the banking system of Bangladesh is a mixed one

comprising nationalized, private and foreign commercial banks. Bangladesh Bank is the central bank

of the country and is in charge of monetary policies of the Government and controls all commercial

banks.” Immediately after independence the government of Bangladesh nationalized most of the

banking institutions, though, within a short period, due to the failure in administering them properly,

many of them were returned to their owners. The banking sector is one of the fast growing sectors of

economy in Bangladesh. At present there are 34 banks working in the financial market of the country,

including five Islamic banks and a number of foreign banks.

Page 17: Overall Banking Activities of Shahjalal Islami Bank Limited

Central Banks and the Islamic Banks and submitted a report in 1981 on the “Promotion, Regulation

and Supervision of Islamic Banks”. The report highlighted the need to provide for central bank

assistance to the Islamic banks on a basis compatible with the Shariah. The report also discussed

many monetary aspects such as liquidity requirements, reserve requirements, supervision of Islamic

banking activities, and fiscal treatment of income from participation, ownership, capital requirements,

and the maintenance of sound relationships between capital, reserves and total assets. The report

recommended the fostering of interest-free financial instruments to enable the Islamic banks to meet

the statutory liquidity requirements of the central banks. A study regarding “The Relationship between

Central Banks and Islamic Banks” prepared by IAIB was submitted to the third Expert Level Meeting

on Islamic Banking Studies (Dhaka, 1989).

(3.6) Role of Bangladesh Bank in Promoting Islamic Banking in Bangladesh:Though there is no complete Islamic Banking Act for controlling, guiding and supervising the Islamic

banks in Bangladesh, some Islamic banking provisions have already been incorporated in the

amended Banking Companies Act, 1991 (Act No. 14 of 1991). Bangladesh Bank did not set up any

separate Department at its Head Office to control, guide and supervise the operation of the Islamic

banks. Inspection and supervision of the Islamic banking operations are conducted by the Bangladesh

Bank as per the general guidelines framed for the conventional banks. So, ensuring implementation of

Shariah principles in the Islamic banks are being conducted by their own Shariah Councils. The role

of Bangladesh Bank in controlling, guiding and supervising the Islamic Banks in Bangladesh in

accordance with Islamic Shariah is very minimal. In observing the Shariah implementation status of

the Islamic banks, Bangladesh Bank examines only the report of the respective banks’ Shariah

Councils. However, the inspectors and supervisors of Bangladesh Bank are not equally familiar with

the technicalities of the different operational methodologies of the Islamic banking. This is because of

the fact that there is no separate Department to look into this important matter. A committee of experts

set up by the Governors of Central Banks and Monetary Authorities of the OIC countries examined

the whole range of relationships between the

(3.7) Difference between Islamic Banking and Conventional Banking: In Islamic Banking accounting the main difference with conventional Banking is that Islamic

Banking can not deal with interest transaction and also con not deal with Haram Business.

Point wise differences between Islamic Banking and conventional Banking Particularly in Accounting

Transactions are Summarized below:-

Islamic Banking Conventional Banking

Page 18: Overall Banking Activities of Shahjalal Islami Bank Limited

1. Islamic Banking are to follow Quaran, Sunnah,

Ijma and Kias i.e. Shariah in all the business

transactions including Accounting Entries.

2. They can not engage in any interest in the

transactions/ Haram(prohibited) business.

3. If any interest is including/ entered in the

operations of the banks it should be excluded from

the regular income if the bank.

4. If any income is earned violating Shariah

principles that cannot be included in the

distributable income of the bank.

5. in Musharaka investment, income cannot be

accounted for on accrual basis.

6. For delay of investment, in case of Bai-

Mudrabaha and Bai-Muazzal Investment further

amount of profit cannot be changed.

7. In case of overdue Investment compensation may

be charged if an independent committee like

Review committee decided to impose the

compensation.

8. Islamic Bank is to pay Zakat on its reserves.

9. Islamic Banks are to pay a certain agreed amount

of investment Income (agreed in percentage) to the

Mdaraba Depositors.

10. Mudaraba Depositors are to share the loss, if

any, incurred out of Investment market from

Mudaraba dejposits.

11. Islamic banks are to follow Accounting, auditing

and Shariah standerds developed by Accounting and

Auditing Organization for Islamic financial

Institutions (AAOIFI) for in addition to

international Accounting Standards (IAS) and

international accounting standards of Auditing

(ISA) developed by international Federation of

Accountants.

1. Conventional Banking follows man made

practice and rules.

2. They conduct their Transactions on interest basis

and also engage in Haram (prohibited) business.

3. Interest is their main income.

4. They do not follow Sharia rule and regulation.

5. In conventional asking there is no practice of

Musharaka Investment.

6. No such Bai- Muraba and Bai- Muazzal

investment in conventional Banks. They charge

interest / penal interest for delay in payment.

7. They charge interest / penal interest on over due

investment.

8. They do not pay any Zakat on reserves.

9. They do not pay a certain amount to the depositor

from their Investment income, rather they pay fixed

rate of interest inrrespedtive of Investment Income.

10. Their depositors do not share any loss or profit.

11. they only follow International Accounting

Standards (IAS) and International Standards of

Auditing (ISA)

Page 19: Overall Banking Activities of Shahjalal Islami Bank Limited

(3.8) 7P’s of marketing mix :

7P’s is a framework which acts as a guideline for marketers to implement a marketing concept. It

consists of a set of major decision areas that a company needs to manage in order to at least satisfy

consumer needs.

The traditional marketing mix contains of four major elements, the "4-Ps of marketing". As defined by

Kotler et al. (1999):

1. Product : "Anything that can be offered to a market for attention, acquisition, use or

consumption that might satisfy a want or need. In includes physical ob-jects, services,

persons, places, organizations and ideas."

2. Price : "The amount of money charged for a product or service, or the sum of the values that

consumers exchange for the benefits of having or using the product or service."

3. Promotion : "Activities that communicate the product or service and its merits to target

customers and persuade them to buy."

4. Place : "All the company activities that make the product or service available to target

customers."

Four P’s Four C’s

Product Customer solution

Price Customer cost

Place Convenience

Promotion Communication

The set of controllable tactical marketing tools – product, price, place and promotion – that firm

blends to produce the response it wants in the target market.The four P’s are very crucial in the

decision making areas for goods oriented .

organizations. Because success depends on the proper implementation of these P’s along with their

associated variables. Thus it is for this reason that the marketers converted the four P’s into four C’s.

Consumer wants and needs (vs. Products)

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You can't develop products and then try to sell them to a mass market. You have to study consumer

wants and needs and then attract consumers one by one with something each one wants.

Cost to satisfy (vs. Price)

You have to realize that price - what you sell the product for - is only one part of the cost to satisfy. If

you sell meals, for example, you have to consider the cost of driving to your restaurant what if you

provided a delivery service? Pricing is one of the most difficult decisions to make - selling at the

lowest price is not always the best option. If you rely strictly on price to compete you are more

vulnerable to competition.

Convenience to buy (vs. Place)

You must think of convenience to buy instead of place. You have to know how each subset of the

market prefers to buy - on the Internet, from a catalogue, on the phone, using credit cards, etc.

Communication (vs. Promotion)

You have to consider communication instead of promotion. Promotion is manipulative - it’s a

statement from the seller. Communication requires a give and take between the buyer and seller - This

is much more subtle. Be creative and you can make any advertising "interactive". Use phone numbers,

your web site address, etc. to help here. "Orange Wednesday" is a good example.

Developing a brand takes into account these considerations. Developing a brand is developing a

promise. When you take into consideration the "4 C’s" noted above you begin the process of

developing a brand!

The marketing mix is probably the most famous phrase in marketing. The elements are the marketing

'tactics'. Also known as the 'four Ps', Marketing decisions generally fall into the following four

controllable categories:

Product

Price

Place (distribution)

Promotion

Figure-3.1

Page 21: Overall Banking Activities of Shahjalal Islami Bank Limited

Product: The product is the most important aspect of the marketing mix. The product can be a service

or even a holiday destination. Products have both tangible and intangible benefits. Tangible benefits

include benefits which can be measured such as the top speed of a car. Intangible benefits are benefits

that cannot be measured such as the enjoyment the customer will get from the product. It is important

that the product is changed as necessary to bring it up to date and prevent it from being overtaken by

competitors.

Figure: 3-2

Exactly what product or service are you going to sell to this market? Define it in terms of what it does

for your customer. How does it help your customer to achieve, avoid or preserve something?

You must be clear about the benefit you offer and how the customer's life or work will be improved if

he or she buys what you sell

The term "product" refers to tangible, physical products as well as services. Here are some examples

of the product decisions to be made:

Branding

Functionality

Quality level

Products line

Packaging

Repairs and Support

Quality level

ProQuality level line

Branding

Products line

Packaging

Repairs and Support

Securities

Product

Page 22: Overall Banking Activities of Shahjalal Islami Bank Limited

Securities

Price:

It is very important that the correct price is charged for a product. If the price is too high consumers

will avoid the product as they will believe it to be too expensive yet if the product is priced too low

they may believe that there is something wrong with the product for it to be so cheap. Also if the

company charges too low a price, it may not cover its costs. There are many different pricing

strategies that companies can use to decide on a price for their product including market and

psychological pricing methods.

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Exactly how much are you going to charge for your product or service, and on what basis? How are

you going to price it to sell at retail? How are you going to sell it at wholesale? How are you going to

charge for volume discounts? Is your price correct based on your costs and the prices of your

competitors?

Some examples of pricing decisions to be made include:

Pricing strategy (scheme, penetration, etc.)

Suggested retail price

Volume discounts and wholesale pricing

Cash and early payment discounts/ bonus

Seasonal pricing

X

Page 23: Overall Banking Activities of Shahjalal Islami Bank Limited

Bundling

Price flexibility

Price discrimination

Place:

The place is where you can expect to find your customer and consequently, where the sale is realized.

Knowing this place, you have to look for a distribution channel in order to reach your customer.

The place is not where is located your business but where our customers are. For a retailer it is the

same but for a boat producer located in Philippines the real place is the entire world. Do not confuse

positioning and place. Here place means the real physical position of the customer in a geographic

area or along a distribution channel.

Distribution is about getting the products to the customer. Some examples of distribution decisions

include:

Distribution channels

Market coverage (inclusive, selective, or exclusive distribution)

Specific channel members

Inventory management

Intermediaries

Distribution centers

Order processing

Transactions

Reverse logistics

Promotion:

In the context of the marketing mix, promotion represents the various aspects of marketing

communication, that is, the communication of information about the product with the goal of

generating a positive customer response. Marketing communication decisions include:

Promotional strategy (push, pull, etc.)

Advertising

Personal selling & sales force

Sales promotions

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Public relations & publicity

Marketing communications budget

However, the strategies for the four P’s require some modifications when applied to services. For

example, traditionally promotion is thought of as involving decisions related to sales, advertising,

sales promotions and publicity. In services these factors are also important, but because services are

produced and consumed simultaneously, service delivery people are involved in real-time promotion

of the service even if their jobs are typically defined in terms of the operational function they perform.

That is why, in case of service oriented organizations, marketers have to think and emphasize on three

additional P’s known as the extended three P’s. They are:

a) People

b) Process

c) Physical Evidence

People:

All human actors who play a part in service delivery and

thus influence the buyer’s perceptions: namely, the firm’s

personnel, the customer and other customers in the service

environment. Teamwork, training, recruiting and

motivating employees are the associated variables. How

people are dressed, their personal appearance, their

attitudes and behaviors all influence the customer’s

perceptions of the service. In many service situations,

customers themselves can also

influence service delivery, thus affecting service quality and their own satisfaction. For example, the

customer greatly affects the quality of service they receive when they either comply or don’t comply

with the service by the service provider.

Process:

The actual procedures, mechanisms and flow

of activities by which the service is

delivered. In other words, it is the service

delivery and operating system which also

give customers evidence on which to judge

the service. Customers can judge from a

Figure: 3-5

Figure: 3-4

Page 25: Overall Banking Activities of Shahjalal Islami Bank Limited

variety of standardized and customized as well as simple and complex processes of various service

organizations.The success of a service organization depends heavily on the nature of the service

which it provides. Thus the additional three P’s are extremely important. In our report we will

represent how a service organization can perform better than its competitors by utilizing the extended

three P’s. We will demonstrate MTBL rising up to the dominant position that it is in now by aligning

with the extended P’s and hence, strongly reinforcing its value image in the minds of its customers.

Physical Evidence:

The environment in which the service is delivered and

where the firm and customer interact and any tangible

representations that facilitate performance or

communication of the service such as brochures,

business cards, facility design and equipments. When

customers have little on which to judge the actual

quality of service they will rely on these cues, just as

they rely on the cues provided by the people and the

service process. Physical evidence cues provide

excellent opportunities for the firm to send consistent

and strong regarding the organization’s purpose, the intended market segments and the nature of the

service

Chapter # 4Analysis and Findings

(4.1) Types of Accounts of SJIBL:A bank is essentially an intermediary of short-term investment/funds. It can carry out extensive

lending/investment operations only when it can effectively mobilize the savings of the community. A

good banker is one who effectively mobilizes the savings of the community as well as makes such

use of savings by making it available to productive and priority sectors of the economy thereby

fostering the growth and development of the nations’ economy.

Accounts are opened under the following two modes:

1. Al-Wadeeah ( Current Account)

2. Al-Mudaraba (Deposit Account)

Figure: 3-6

Page 26: Overall Banking Activities of Shahjalal Islami Bank Limited

1. Al-Wadeeah (Current Account): The word ‘Al-Wadeeah’ has been derived from the Arabic

word ‘Wada’yn which means to keep/to deposit/to give up/Amanat. As per Shariah , Amanat means

to keep something (goods/money/others) to any reliable person/institution for safe and secured

preservation of the same keeping its ownership unchanged and which will be returned to the owner of

the fund on demand as it is/in original shape. In case of Amanat Bank/any other institution cannot

use, invest and amalgamate the funds without the prior permission of the owner of the Amanat.

The depositor can deposit any amount in this account

The depositor can withdraw any amount by cheque

No profit is allowed in this account

The depositor shall also not bear any loss

Cheques, bills etc collected in this account against commission

Govt. excise and incidental charge realize from this a/c as per rule.

2. Al-Mudaraba (Deposit Account): The word Mudaraba derived from the Arabic word

‘Darb/Darabun’. Literally it means movement to earn profit (munafa). It is a form of partnership

where one of the parties called the ‘Shahib-al-mal’ provides a specified amount of capital and acts

like a sleeping or dormant partner, while the other party called the Mudarib (entrepreneur), provides

the entrepreneurship and management for carrying on any venture, trade, industry or service with the

objective of earning profit. The Mudarib is required to work with honesty and sincerity and to exert

the maximum possible care and precaution in the exercise of the functions.

(4.2) Mudaraba Deposit Products:

Mudaraba Savings Account (MS)

Mudaraba MonthlyTerm Deposit Receipt (MTDR)

Mudaraba special Term Deposit Receipt (MTDR)

Mudaraba Doubl /Tripol Benefit Scheme

Mudaraba milliner Deposit Scheme

Mudaraba Monthly income Scheme

Mudaraba Mohor Deposit Scheme(new)

Mudaraba Waqf Cash Account (MWCA)

Mudaraba Hajj Deposit Scheme

Mudaraba Bibaho Deposit Scheme(new)

Mudaraba Lac potty Deposit Scheme(new)

(4.3) Different Types of Account Holders:

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Anyone can open an account with the banker if he is not incapable of entering into a valid contract

and the banker is satisfied of his bonafide and is willing to enter into the business relations with him.

There are certain types of accounts in regard to which the banker should take note of the relative laws

and exercise pre-cautions in order to safeguard its interest. Some types are:

A/c opened by minors

Joint (two or more persons)

Firms

Co-operative societies

Government

Public bodies

Agents

Executors

Administrators

Trustees

Liquidators

Receivers

Non-Resident

(4.4) Account opening: This section opens account. It receives account opening application from the interested

applicants, examines and scrutinizes the applications and then selects final customers. Selection of

customers is very much important as the success and failure of the bank is largely dependent on the

valued customers. If the customer is found to be fraudulent or create some sort of forgery, it will

ultimately destroy the goodwill of the company.

The following formalities must be maintained by the customer for opening of different types of

account.

4.4.1) Individual

i. Genuine & acceptable introduction

ii. Attested photograph of the account operator’s/A/c holder’s

iii. Certificate from the Chairman/ Commissioner/ Gazetted Officers or any responsible

person

iv. Verification of introducer’s signature

v. Admittance of the signature(s) of opener/ operator’s A/c

vi. Transaction profile

vii. Obtain KYC

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viii. Declaration/Undertaking

ix. Letter of Thanks

(a) It must be sent to the A/c holder and introducer

(b) Office copy to be affixed with the AOF

(c) It will have to be dispatched under registered courier

(d) Courier /Postal receipt must be affixed to the AOF

(e) This receipt must contain the A/c number against which the letter has been sent

(f) After receiving back of the acknowledgement, it must be affixed with concerned

AOF for easy location in case of need

(g) If the letter of thanks is returned back, without delivery for non-availability of

address or person, it must be marked on this letter and to be informed to the

computer department.

4.4.2) Joint Account

i. All item for individual account holder as stated above

ii. Two or more persons can open an account

iii. Authorized person can operate the account

iv. Authority is automatically revoked by death, insanity or bankruptcy

v. Stoppage of payment by any one of the account holders

vi. Special instruction regarding operation of the A/c in any of the following forms:

(a) By any of the Joint account holder singly

(b) By either or survivor singly

(c) By either singly

(d)By any two or more joint account holding jointly

(e) By all the survivors jointly

vii. Accounts mandate-regarding drawing, survivorship, power to overdraw and other

matter, i.e. for withdrawal of goods kept for safe custody, separate mandate from

surviving persons, closing of debit a/c, stopping operation of a/c after instantly of

any person, obtain receipt made by survivors and representatives of deceased

persons.

viii. Role of survivorship incase of joint-account by husband and wife:

If the account is opened for convenience of husband, then the balance cannot be

claimed by the window but to be sent to the estate of the deceased person. But, if the

account is opened for the provision for wife, then the widow can claim the balance in

full.

4.4.3) Sole Proprietorship

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In case of opening an account by a sole-proprietor of a firm, he/she should sign the account

opening form and furnish his specimen signature showing his representative character.

i. All items for individual account holder as stated above.

ii. Valid trade license or attested photocopy thereof issued by the competent authority

iii. Membership certificate from local business association/Chamber of Commerce

4.4.4) Partnership Firm

A banker should not open an account in the name of a partnership unless one or more of the

partners apply to him to do so. Except where the partner, making an application for the opening of an

Account in the firm’s name, is deprived of the power, which fact is known to the banker, there can be

no legal objection to a banker opening an account in the name of the firm at request. Failure,

however, to make proper enquiries by referring to the partnership agreement or any other record in

writing which maybe available before opening of account on behalf of a firm in a partner’s name may

lead a banker in trouble.

i. All items for individual account holder as stated above.

ii. Valid trade license or attested photocopy thereof issued by the competent authority

iii. Two or more person can form a partnership firm by partnership deed. (Registered

notarized)

iv. Clear mandate for operating the a/c from the partners regarding name of the persons

to draw cheques and borrow money, to overdraw, to mortgage or to sell properties

owned by the firm

v. In case of insolvency of the firm: Operation should be stopped after receiving

notice of insolvency of the firm

vi. Insolvency of the partner: If the balance is in debit, the a/c must be closed and the

debt should be proved to the receiver. If the a/c is in credit the other partners may

continue the account. Any cheque previously drawn by the partner’s maybe paid on

the confirmation of the partners.

vii. Death of a partner: If the account is in credit, then other partners may be allowed

to continue the same but the bank should take fresh mandate from other partner but if

the account is in debit then the account must be closed to determine the liability of

the deceased’s estate.

4.4.5) Private Limited Company

A company registered under the Companies Act, 1913 has a legal entity apart from its

shareholder. Private Company means a company which by its articles:

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Restricts the right to transfer the shares if any;

Limits the number of its members 2 to 50

Prohibits any invitation to the public to subscribe for the shares, if any or debentures of the

company.

When a current account is to be opened for a private limited company the banker will have to obtain

the following requirements:

i. All terms for individual account holder as stated above

ii. Copy of memorandum and articles of association duly certified by the

Secretary/Director of the company

iii. Certificate of incorporation

iv. Certified copy of resolution of the board of Directors regarding opening of a/c, the

execution of papers and conduct of the account.

v. List of Directors under the signature of the Chairman

vi. Copies of latest financial statement/ Transaction profile.

4.4.6) Public Limited Company

Any seven or more persons associated for any lawful purpose, any subscribing their names to

a memorandum of association and otherwise complying with the requirements of the Act (13A) in

respect of registration, from an incorporated company. When an account is to be opened in the name

of a Public limited Company the following formalities are to be observed:

i. All terms for individual account holder as stated above

ii. Certified copies of memorandum and article of association are to be submitted

iii. Certificate of incorporation

iv. Certified copy of commencement of business for inspection and return in case of a

newly floated company

v. List of Directors under the signature of the Chairman to be furnished

vi. Certified copy of a resolution of the Board or Directors regarding opening of the

bank a/c execution of the papers and conduct of the account to be furnished

4.4.7) Trust Account:

A trustee is a person entrusted with the work of the management of a property under a trust

created by the owner thereof for the benefit of another or of another and the owner section 3 of the

Trust Act 1882 defines “ trust” & a trustee as, “ A trust is an obligation annexed to the ownership of

property and arising out of confidence reposed in and accepted by the owner, or declared and

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accepted by the owner or declared and accepted by him, for the benefit or another or of another and

the owner, the persons who reposes or declares the confidence is called the trustee.”

i. All terms for individual account holder as stated above.

ii. Trustee is a person entrusted with the work of a management of a property under a

trust deed.

iii. Discharges his duties as per trust deed

iv. Attested photo is required

(4.5) Mudaraba Savings A/c (MS A/c):

i. Nationality certificate from Ward Commissioner/ UP Chairman or Passport

(photocopy) of every signatories of the A/c

ii. KYC form for individual

iii. Introduction of any current account/ Savings account holder

iv. Two copies attested photographs of a/c operators

(4.6) Mudaraba Special Savings (Pension) MSS A/c:

i. KYC Form for individual

ii. Introduction of any current account/ Savings account holder.

iii. Two copies attested photographs of a/c operators.

Types of Deposit & Their Corresponding Provisional ProfitParticular of Deposit Provisional Profit

1. Mudaraba Hajj Savings

From 11 to 25 years 11.47%

From 1 to10 years 10.47%

2. Mudaraba Waqf Cash Deposit 0%

3. Mudaraba Term Deposit (MTD)

Mudaraba Term Deposit Provisional Rate

i) 1 Month 08.00%

ii) 2 Month 08.50%

Page 32: Overall Banking Activities of Shahjalal Islami Bank Limited

iii) 3 Month 11.25%

iv) 6 Month 11.50%

v) 1 Year General 11.75%

5. Double the Money Scheme

4. Mudaraba Muhor Savings A/c

For 3 years 12.00%

For 5 years 12.00

For 8 years 12.00%

6. Mudaraba Monthly Profit Deposit Scheme 12%

7.Monthly Deposit Scheme: Amount payable at maturity (Provisional 5/11.00 – 8/11.10 –

10/11.20 %)

Period

Installment Amount in Taka

100 250 500 1,000 2,000 5,000 10,000 25,000 50,000

5 Years 8,025 20,065 40,125 80,250 1,60,500 4,01,250 8,02,500 20,06,250 40,12,500

8 Years 15,500 38,750 77,500 1,55,000 3,10,000 7,75,000 15,50,000 38,75,000 77,50,000

10 Years 22,200 55,500 1,11,000 2,22,000 4,44,000 11,10,000 22,20,000 55,50,000 1,11,00,000

8. Mudaraba Savings Account 5.5%

9. Mudaraba Millionaire Scheme (MMS) Amount payable at maturity (Provisional)

Period Installment Per Month Amount Payable At Maturity

12 Years TK.3,280.00

TK. 10,00,000.0015 Years TK.2,120.00

20 Years TK.1,080.00

25 Years TK. 575.00

(4.7) Closing Of an Account:It could be closed either by a banker or by the customer itself.

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Banker: If the customer does not have transaction with the bank for more than a year it may

categorized as irregular. And if the customer does not have transaction for 10 years, the customer

will be sent a letter.

Customer: If the customer intentionally wants to close the account he/she has to write an

application forwarding the Manager with reasons behind the closure of the account.

(4.8) Cash Section:

A banker’s transactions are mainly of three types. They include:

Cash

Transfer &

Clearing

The cash section of any bank plays very significant role in general banking department because, it

deals with most liquid assets. Basically cash department is the most vital and sensitive department of

the branch which deals with all kinds of transaction in cash. All cash receipts and payments are made

through this department. The IBBL (ge Branch) is equipped with electronic machinery with fully

computerized system which delivers quick service to its valued customers. This section receives cash

from depositors and pay cash against cheques, draft, Pay order (PO), etc over the counter. This

section accepts cheques from the depositors for payment in cash. The drawer who wants to receive

money against cheque comes to the payment counter and presents the cheque to the officer. He

verifies the following information:

I. Date of the cheque

II. Signature of the account holder

III. Material alteration

IV. Whether the cheque is crossed or not

V. Whether the cheque is endorsed or not

VI. Whether the amount in figure and in word corresponds with each one

CASH

Receiving Cash Disbursing Cash

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Then the officer checks the cheque from the computer for further verification. Here is the following

information that is checked.

I. Whether there is sufficient balance or not

II. Whether there is stop payment instruction or not

III. Whether there is any legal obstruction or not

The cash section deals with all type of negotiable instruments. It also includes the Vault which is

used as the store of the cash instruments. The vault is insured up to a certain amount, which is called

the vault limit; the excess cash is then transferred to Bangladesh Bank. The SJIBL, Uttara Branch

Vault limit is 1 crore. When the excess cash is transferred, the cash officer issues IBDA. The vault

counter is around 35 lacs.

Any client who wants to deposit money will fill up the deposit slip and give the form along with the

money to the cash officer over the counter. The cash officer counts the cash and compares with the

figure written in the deposit slip. He then puts his signature on the slip along with the ‘cash received’

seal and records in the cash receive register and also in the computer against the account holder.

(4.8) Bills & Clearing Section:A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable

otherwise than on demand. [Section-6, Negotiable Instrument Act, 1881]

A cheque may be an open cheque (which can be presented for payment by the holder) or a crossed

cheque (which can be paid only through a collecting banker.)

The picture below (Fig.1) shows a typical cheque issued by banks.

Cheques of its

customers are

received for

collection from other banks. In case of receiving cheques, following points should be checked very

carefully:

Page 35: Overall Banking Activities of Shahjalal Islami Bank Limited

The cheques should not carry a date older than the receiving date for more than 6

months. In that case it will be a stale cheque and it will not be allowed for collection.

The amount in figure and words in both sides of the pay-in-slip should be same.

The name mentioned in the cheque should be same in both side of the pay-in-slip and

it should be the same with the name mentioned in the cheque

The cheque must be crossed

The place where banks meet and settle their dues is the clearing house. The clearing house of the

IBBL, Gulshan Branch, and 42 Motijheel is the local office.

(4.9) Types of cheque: Inward clearing cheques: Inward cheques are those ones drawn on the respective branch

which have been presented on other banks and will be cleared/honored through the clearing

house. For example, the cheque drawn on SJIBL, Head Office.

Outward Cheques: These cheques are received on the counter from other banks. There are

3 types:

1. Drawn on another branch of SJIBL. These are called Outward Bills for Collection (OBC).

2. Drawn on another bank, which is situated in the clearing house area. This cheques are called

clearing cheque.

3. Drawn on another bank, which is situated outside the clearing area. This cheques are also

called as OBC.

In the first case, these cheques are directly sent to the respective branch and requests them to send

IBCA (Inter Bank Credit Advice) by which a branch credits the account of another branch. No

clearing house formalities are necessary here. When IBCA comes, then customer’s accounts are

credited of the amount for the cheque.

In the second case, the cheques are sent to the clearing house. When the drawee bank honors the

cheque then the account of the depositor against the cheque is credited.

In the third case, two procedures exist. First way, if the bank exists within the clearing house area of

the drawer bank, then we send the cheque to that branch of our bank and that branch collects the

proceeds through clearing house formalities and sends an IBCA to us. In the second case if there is

Page 36: Overall Banking Activities of Shahjalal Islami Bank Limited

no branch of our bank, then we directly send the cheque to the drawee bank and request them to send

the cheque to the proceeds by TT, DD or by other means.

4. 9.1) Outward Bills for Collection (OBC)

OBC are those cheques drawn on other banks which are not within the same clearing house. An

officer gives OBC seal on this type of cheques and later sends a letter to the manager of the branch of

the same bank located in the branch on which cheque has been drawn. After collection of that bill,

branch advice the concerned branch in which cheque has been presented to credit the customer

account through IBCA. In absence of the branch, officer sends a letter to the manager of the bank on

which the cheque is drawn. That bank will send pay order in the name of the branch. This is the

procedure of OBC mechanism.

4.9.2) Inward Bills for Collection (IBC)

All clearing cheques are not received on the counter. Some cheques are received from other

source for collection. These cheques are received from other branch of IBBL. These cheques are

settled by sending IBCA.

(4.10) Remittance:

Error: Reference source not found

Remittance means transmission/transfer of money from one place to another. Local remittance

represents remittance that takes place within the territory of a country.

Banks have a wide network of branches all over the country and offer various types of remittance

facilities to the public/customer/client etc.

Virtually there are three types of remittances as under:

DD- Demand Draft

TT – Telegraphic Transfer

PO - Payment Order

X

Page 37: Overall Banking Activities of Shahjalal Islami Bank Limited

(4.11) Demand Draft:According to Section85 (A) of the negotiable instruments Act, a demand draft is “an order to

pay money drawn by one office of the bank upon other office of the same bank for a sum of money

payable to order on demand.”

The followings are essential features of a demand draft issued by the bank:

1. It is a negotiable instrument

2. It is drawn by one office of a bank upon another office of the same bank

3. It is payable on demand.

4. Its payment is to be made to the person whose name is mentioned in the instrument or

according to order. In other words, it cannot be made payable to the bearer.

4.11.1) Issuance of DD

1. A prescribed Application Form bearing No (F20). The following columns should be filled in

properly.

(a) Name & address of the applicant

(b) Telephone No

(c) Date

(d) Signature of the applicant

(e) Name of the payee

(f) Drawee branch

(g) Amount in words and figure

2. Commission to be realized/charged as per Head Office circular, at present @0.1 % but

min TK.10/-

3. Total amount should be deposited by the party in cash or cheque as per arrangement.

4. Printed DD block/leaf to be filled in by a bank official as per request of the purchase i.e.

(a) Name of the issuing branch

(b) Date

(c) A/c payee rubber stamp

(d) Payee’s name

(e) Amount in words and figure

(f) Drawee branch

5. DD should be signed by two authorized officials

Page 38: Overall Banking Activities of Shahjalal Islami Bank Limited

6. Test Number should be given for DD of TK. 25000/- and above

7. Amount should be written by a cheque written in red ink.

8.Particulars of DD should be entered in DD issue registered B-44 under

supervision of a authorized official.

9.Telegram/Telex should be sent for amount exceeding Tk.1.00 lac Telex/Telegram charge should

be realized from the customers.

10. If the DD issued for cash payment A/c payee rubber stamp should be cancelled and a letter

requesting the drawee branch to pay the DD in cash should be issued under sealed cover and

signature of the payee should be attested.

11. DD Advice should be sent on the same day.

4.11.2) Accounting entries for issuance of DD

Debit…………..Cash/party’s A/c

Credit………….IBGA

Credit………….Commission

4.11.3) Payment of Drafts

1. When the draft is presented to the drawee branch for payment, the particulars of the draft are

checked with the advice and signature(s) therein verified.

2. Payment of the DD has not been stopped is to be ensured

3. Verification of Test no. is to be done.

4. In case the advice is not received when the draft is presented, the bank will pay the draft,

after satisfying itself that the instrument is in order. However, on payment of a draft in the

absence of the relative advice the drawee branch should inform the issuing branch and obtain

confirmation about the payment.

5. The drawee branch should ensure that the payment of the instrument is made in due course.

6. As the demand drat is payable to order it is duty of the paying branch to obtain identification

of the payee if payment is desired over the counter.

7. If the DD is presented through a bank, the endorsement appearing on the instrument should

be prima-facie in order of certified by the collecting banker.

8. Though there is no time limit for presentation, the paying bank should put an enquiry if a

draft is presented after a reasonable period say 6 months. Such draft may be paid if the

collecting banker certifies that amount has been credited to the payee’s A/c in absence of

such a certificate, it would be advisable to return the draft for revalidation before payment.

(4.12) Telegraphic Transfer (TT):

Page 39: Overall Banking Activities of Shahjalal Islami Bank Limited

Telegraphic Transfer is by far the quickest method of transferring funds from one place to another.

Sometimes, the remitter of the funds requires the money to be available to the payee immediately. In

that case the banker is requested by the remitter to remit the funds telegraphically. It is an instruction

conveyed by telegraph/telex/telephone to the drawee branch for paying certain amount of money to a

specified person.

4.12.1) Accounting entries for issuance of TT

Debit…………..Cash/Remitter’s A/c

Credit………….IBGA

Credit………….Commission

Credit………….Telex/Telephone Charges A/c

4.12.2) Accounting entries for payment of TT

Debit …………. IBGA A/c

Credit…………. TT Payable A/c

Debit………….. TT Payable A/c

Credit…………. Client’s A/c

(4.13) Payment Order:Payment order is meant for making payment of the banker’s own or of the customers dues locally and

not for effecting any remittance to an out station. In a sense, the payment order is used for making a

remittance to the local creditors.

4.13.1) Issuance & Payment of PO

1. F-19 form should be filled properly

2. Total amount should be deposited through cheque/cash.

3. Commission to be realized as per bank’s circular

4. Printed payment order leaf should be filled in as per F-19 and signed by two authorized

officers.

5. Entry should be given in B-22 register under supervision of authorized official

6. The instrument should be handed over to the purchaser

7. PO is required to be discharged by the beneficiary where applicable on revenue stamp of

appropriate value against in cash or through account.

Remarks: No Test is required for PO

4.13.2) Accounting entries for issuance of PO

Dr………. Cash/ Party’s A/c

Page 40: Overall Banking Activities of Shahjalal Islami Bank Limited

Cr………. PO A/c

Cr………. Commission A/c

4.13.3) Accounting entries for payment of PO

Dr………. PO A/c

Cr………. Cash/Party’s A/c

(4.14) Investment: The special feature of the investment policy of Islamic Banks is to invest based on profit-loss sharing

system in accordance with the tenets and principles of Islamic Shariah. Earning of the profit is not the

only motives and objectives of the Islamic Bank’s investment policy rather emphasis is given in

attaining social goals and in creating employment opportunities.

Investment Mechanism of SJIBL

Figure- 4-1

4.14.1) Objectives and principles

The objectives and principles of investment operations of the Bank are:

To invest fund strictly in accordance with the principles of Islamic Shariah.

To diversify its investment portfolio by size of investment portfolio by sectors (Public

&Private), by economic purpose, by securities and by geographical area including

industrial, commercial & agricultural.

a) Bai-Mudaraba

b) Bai-Musharaka

a) Bai-Murabahab) Bai-Muajjalc) Bai-Salamd) Istishna’a

a) Hire Purchaseb) Hire Purchase Under shirkatul Melk

Profit & LossSharing Mode

Bai Mode (Buying & Selling Mode)(Buying & Selling0 Selling)

Rent Sharing Mode

Page 41: Overall Banking Activities of Shahjalal Islami Bank Limited

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 thereof.

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 development schemes for poverty alleviation, income and

employment generation with a view to accelerate sustainable socio-economic growth

and enlistment of the society.

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

the investment clients.

(4.15) Investment policy of SJIBL:Investment policy of Islamic Bank and non Islamic bank are fully different. The investment policies

of Islamic bank are

Strict observance of Islamic Shariah principles.

Investment to national priority sectors.

Diversified investment portfolio: Diversification by size, sector, geographical

area, economic purpose, securities and mode of investment.

Preference to short-term Investments.

Preference to investment of small size.

To ensure safety & security of investments

To look profitability of investments.

To give support to government denationalization industrial program.

Page 42: Overall Banking Activities of Shahjalal Islami Bank Limited

(4.16) Investment Strategy of SJIBL:

Investment strategy of Islamic Bank and interest-based bank are contradictory. The investment

strategies of Islamic Bank are:

To check exodus of investment clients.

To induct good investment clients of other Banks.

To enhance existing limits of good investment clients.

Extension of investment transport sector.

Extension of investment to backward as well as forward linkage industries.

Strengthening supervision, control and monitoring mechanism.

Training and motivation of manpower to handle increased and diverse volume of

investment s.

To give due consideration to high risk, high return and low risk, low return

investment proposals.

Adaptation of modern technology

(4.17) Growth of investment:The investment of the Bank demonstrated steady growth over the years. The total investment to the

Bank stood at TK.20616.60 million in 2007.It was TK.15515.79 million in 2007.

Total Investment (Including share investment)

Year Investment (TK in million)

2002 1999.98

2003 4269.32

2004 7148.68

2005 10790.28

2006 15515.79

2007 20616.60

Table-7 Source: Annual Report 2006&2007

Page 43: Overall Banking Activities of Shahjalal Islami Bank Limited

Figure: 4-2 Trend of total investment (2002-2007)

From the above figure we can see that the increasing trend of overall investment of SJIBL Investment

is increasing due to expansion of branches. Every year SJIBL authority imposes an investment target

to the concern branch. So manager try to achieve the target .Islami Bank Foundation activities,

advertisement, profit sharing mode investment opportunity, people who want to do business Islami

Shariah they come to the bank for investment. These reasons people come Islami bank's financing.

(4.18) Investment Instrument of SJIBL: IBBL invests its money in various sectors of the economy through different modes permitted by

Shariah and approved by the Bangladesh Band. The modes of investment are as follows:

A. Profit &Loss Sharing Mode:

** Musharaka

**Mudaraba

B.Bai Mode (Buying &Selling):

**Bai-Murabaha

**Bai- Muajjal

**Bai-Salam

**Bai- Istishna etc

C. Rent Sharing Mode:

** Ijarah (Lease)

** Ijarah wa Iqtina (Hire Purchase)

** Hire Purchase under shirkatul melk (HPSM)

A. Profit & Loss Sharing Mode

1.Mudaraba: It is a form of partnership where one party provides the fund while the other provide

the expertise, labor and the letter referred to at the Mudaraba any profits accrued are shared between

Page 44: Overall Banking Activities of Shahjalal Islami Bank Limited

the two parties on a pre –agreed basis, while capital loss in exclusively born by the partner providing

the capital.

Importance Features:

Bank supplies capital as Sahib- al –Mall and client invest if in the business with his

experience.

The client maintains administration and management.

Profit is divided as per agreement.

Bank bears the actual loss alone.

2. Musharakah: The term Shirkat and Musharaka have been derived from Arabic words “Shairkah”

and “Sharika.” The word shirkah means a partnership between

more than one partner. Thus the ward “Musharaka” and “Shirkat” means a partnership established

between two or more partners for purpose of a commercial venture

participate both in the capital and management where the profit may be shared between the partners as

per agreed upon ratio and the loss. If any incurred, is to be borne by the partners as per capital ratio. In

case of investment “Musharaka” meaning a partnership between the bank and the client for a

particular business in which both the bank and client provide capital at an agreed upon ratio and bear

the loss, if any in proportion to their respective equity. Bank may move itself with the selected client

for conducting any Shariah permissible business under Musharaka mode.

Important Features:

The investment client will normally run manage the business..

As the investment client shall manage the enterprise, the bank may more share of profit to

him than that of his proportion capital contribution.

Loss, if any, shall be shared on the basis of capital ratio.

B. Bai Mode

Bai-Murabaha: Bai- murabaha may be defined as a contract between a buyer and a seller under

which the sells certain specific goods (permissible under Islamic Shariah and the law of the land) to

the buyer at a cost plus agreed profit payable in cash or on any fixed future data in lump sum or by

installments. The marked up profit may be fixed in lump sum or in percentage of the cost price of the

goods.

Important features:

¨ It is permissible for the client to offer an order to purchase by the bank particular goods deciding its

specification and committing him to buy same from the bank on murabaha, i.e. cost plus agreed

upon profit.

Page 45: Overall Banking Activities of Shahjalal Islami Bank Limited

¨ It is permissible to make the promise binding upon the client to purchase from the bank, that is, he

is to satisfy the promise or to indemnify the damages caused by breaking the promise without

excuse.

¨ It is also permissible to take cash / collateral security to guarantee the implementation of the

promise or indemnify the damages.

¨ Stock availability of goods is a basic condition for signing a Bai-murabaha agreement. Therefore,

the bank must purchase the goods as per specification of the client to acquire ownership of the

same before signing the Bai-Murabaha agreement with the Client.

¨ After purchase of goods the Bank must bear the risk of goods until those are actually sold and

delivered to the Client, i.e., after purchase of the goods by the Bank and before selling of those on

Bai-Murabaha to the Client buyer, the bank bear the consequences of any damages or defects,

unless there is an agreement with the Client releasing the bank of the defects, that means, if the

goods are damaged, bank is liable, if the goods are defective, (a defect that is not included in the

release) the Bank bears the responsibility.

¨ The Bank must deliver the specified Goods to the Client on specified date and at specified place of

delivery as per Contract.

¨ The bank shall the goods at a higher price (Cost + {profit) to earn profit. The cost of goods sold and

profit markup therewith shall separately and clearly be mentioned in the Bai-Murabaha

agreement. The profit Mark-up may be mentioned in lump sum or in percentage of the

purchase/cost price of the goods.

Bai-Muajjal: Bai-Muajjal may be defined as a contract between a buyer and seller under which the

seller sells certain specific goods permissible under Islamic Shariah and law of the country to the

buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed

period by him as per order and specification of the buyer.

Important feature:

i) Bank is not bound to declare cost of goods and profit mark-up separately to the client.

ii) Spot delivery of the item and payment is deferred.

iii) The bank transfers ownership and possession of the goods to the client before receipt of sale price.

iv) Client may offer an order to purchase by the bank any specified goods and committing himself to

buy the same from the Bank on Bai-Muajjal mode.

v) It is permissible to make the promise binding upon the client to purchase from the bank. That is, he

is either to satisfy the promise or to indemnify damage caused by breaking the promised.

vi) Cash /Collateral Security should be obtained to guarantee the implementation of the promise or to

indemnify the damages.

Page 46: Overall Banking Activities of Shahjalal Islami Bank Limited

vii) Mortgage / Guarantee /Cash Security may be obtained before / at the time of signing the

agreement.

viii) Stock and availability of goods is a pre- condition for Bai- Muajjal agreement. The responsibility

of the bank is to purchase the desired goods at the disposal of the client to acquire ownership of

the same before singing the Bai-Muajjal agreement with the client.

Bai-Salam: Bai-Salam may be defined as a contract between a buyer and a seller under which the

seller in advance in the certain commodity/products permissible under Islamic Shariah and the law of

the land to the Buyer at an agreed price payable on execution of the said contract and the commodity

products to the buyer at a future time in exchange of an advance price fully paid on the spot

Importance Features:

Bai-salam is mode of investment allowed by Islamic Shariah in which commodity/product can be sold

without having the said commodity (ies)/product(s) either in existence or physical/constructive

possession of the seller. If the commodity /product are ready for sale, Bai-Salam is not allowed in

Shariah. Then sale may be done either in Bai-Muajjal mode of investment.Generally, Industrial and

agricultural products are purchased /sold in advance under Bai-Salam mode of investment to infuse

finance so that product is not hindered due to shortage of fund/cash.

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

from any hazards vis non-supply of supply of commodity (ies)/product, supply of low quality

commodity (ies)/ product(s) etc.

II. It is also permissible to obtain mortgage and /or personal guarantee from a third party as

security before the signing of the agreement or at the time of signing the agreement.

III. Bai-salam on a particular commodity (ies)/product(s) or on a product of a particular field or

farm cannot be affected.

IV. The seller (manufacture) client may be made agent of the bank to sell the goods delivered to

the bank by him provided a separated agency agreement is executed between the bank and the

client (agent).

C. Rent Sharing Mode:

A) Ijarah (Lease): The term Ijarah has been derived from the Arabic words Ajr and Ujrat, which

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

wages font of service of an asset. Ijarah has been defined as a contract between two parties, the Hiree

and Hirer where the Hirer enjoys or reaps a specific service or benefit against specified consideration

or rent from the asset owned by the Hiree .to a Hirer against fixed rent or rentals hires out a certain

asset for a specified period.

Page 47: Overall Banking Activities of Shahjalal Islami Bank Limited

B) Ijarah wa Iqtina (Hire Purchase): This term refers to a mode of financing adopted by Islami

banks. It is a contract under which the Islami Bank Finance equipment, building, or other facility for

the client against an agreed rental together with an undertaking from the client to purchase the

equipment or the facility. The rental as well as the purchase price is fixed in such a manner that the

bank gets back its principal sum along with some profit which is usually determined in advance.

C) Hire Purchase under Shirkatul Melk: Hire Purchase under Shirkatul Melk is a Special type of

contract that has been developed through practice. Actually, it is a synthesis of three contacts:

i. Shirkat

ii. Ijarah and

iii. Sale

These may be defined as follows:

i) Shirkatul 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

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

Melk contract.

ii) Ijarah: The term Ijarah has been derived from the Arabic words (Air) 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 Hirer enjoys or reaps a specific service or benefit against a specified consideration or

rent from the asset owned by the Hiree. It is a hire agreement under which the Hiree to a Hirer against

fixed rent or rentals hires out a certain asset for a specified period.

iii) Sale: This is a sale contract between a buyer and a seller under which the ownership of certain

goods or asset 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, and

machinery, transport etc. Purchase the asset with that quit money, own the same jointly, share the

benefit as per agreement and bear the loss in proportion their respective equity. The share, part of

portion 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 transfers the ownership of its share/part/portion to the

Page 48: Overall Banking Activities of Shahjalal Islami Bank Limited

client against payment of price fixed for the either gradually part by part or in lump sum within the

hire period or after the expire of the hire agreement.

Importance Features:

◙ In case of Hire Purchase under Shirkatul melk transaction the assets / property involved is jointly

purchased by the Hiree (Bank) and the Hirer (client) with specified equity participation under

Shirkatul Melk contract in which the amount of equity and share in ownership of the asset of each

partner (Hiree Bank and Hirer Client) Are clearly mentioned. Under this agreement, the Hiree and

the become co-owner of the asset under transaction in proportion of their respective equity

participation.

◙ In Hire Purchase under Shirkatul Melk agreement, the exact ownership of both Hiree (Bank) and

Hirer (Client) must be recognized. However, if the partners agree and wish that the asset

purchased may be registered in the name of any of them or in the name of any third party, clearly

mentioning the same in the Hire purchase Shirkatul melk agreement.

◙ The share /part of the purchase asset owned by the Hiree (Bank) is put at the disposal / possession

of the Hirer (client) keeping the ownership with him for a fixed period under a hire agreement in

which the amount of rent per unit of time and the benefit for which rent to be paid along with all

other agreed upon stipulation are also to be clearly stated. Under this agreement, the Hirer (client)

becomes the owner of the benefit of the asset but not of the asset itself, in accordance with the

specific provision of the contract which entitles the Hiree (Bank) is entitled for the rentals.

4.18.1) Mode wise investment of SJIBL:Total investment of the Bank stood at Tk. 2061661 million as on 31. 12. 2006 registering an increase

of Tk. 510082 million, i.e. 32.88% growth. The Bank is careful in development of the fund. Mode

wise investments portfolio as on 31.12.2007 is given below:

SL.NO Mode of Investments Taka in

million

Percentage of Total Investment

1 Murabaha 5,844.81 28.35%

2 Bi-muajjal 8,882.60 43.08%

3 Haire-purchase & Ijara 3,581.92 17.37%

4 Investments against L/C 19.15 0.09%

5 Bill purchased/ discounted 1,588.00 7.70%

6 Investment against Scheme Deposits 17.25 0.08%

7 Quard 29.65 0.14%

8 Others 653.23 3.17%

Page 49: Overall Banking Activities of Shahjalal Islami Bank Limited

Total 20,616.61 100.00%

Table-8

Total Bank entertains good investment-clients having credit-worthiness and good track record. The

Bank has got a few investment Schemes to provide financial assistance to comparatively less

advantaged group of people; which are:-

Household Durable Scheme.

Small Business investment Scheme.

Small Entrepreneur Investment Program.

Medium Entrepreneur Investment Program.

Housing Investment Scheme.

Rural investment Scheme.

Car Investment Scheme.

Woman Entrepreneur Investment Scheme.

Figure: 4-3 Investment Portfolios of 2007 of SJIBL

Page 50: Overall Banking Activities of Shahjalal Islami Bank Limited

Figure: 4-4: Investment from 2003 to 2007 of SJIBL

Figure: 4-6 Deposit & Investment Position of SJIBL

4.18.2) Sector wise Classification of investment:

Sector As at 31 December 2007 As at 31 December 2006

Amount Composition Amount composition

Agriculture& Fishing 249460925 1.21% 280835793 1.81%

Cotton & Textile 3383184935 16.41% 1502696876 16.13%

Garments 1781274701 8.64% 1636915812 10.55%

Cement 383468859 1.86% 538397902 3.47%

Pharmaceuticals& Chemicals 1276167870 6.19% 260665267 1.68%

Real Estate 1309154439 6.35% 1498825283 9.66%

Transport 461811960 2.24% 501160007 3.23%

Information Technology 63911477 0.31% 522882112 3.37%

Non Banking Financial Institutions 1855494480 9.00% 1714494760 11.05%

Page 51: Overall Banking Activities of Shahjalal Islami Bank Limited

Steel & Engineering 1791583004 8.69% 847162117 5.46%

Paper& Paper products 311310741 1.51% 408065269 2.63%

Others 7749781945 37.59% 4803688485 30.96%

Total 20616605335 100% 15515789683 100%

Table- 9

Figure: 4-7 Sector wise Investment of SJIBL

4.18.3) Geographical Location-wise Investment:

Division As at 31 December 2007 As at 31 December 2006

Amount Composition Amount Composition

Dhaka 17213935665 83.50% 12886513305 83.05%

Chittagong 3123875971 15.15% 1489468962 16.05%

Sylhet 278793699 1.35% 139807416 0.09%

Total 20616605335 100% 15515789683 100%

Table-10

Figure: 4-8 Geographical Location r wise Investment of SJIBL Sources: Annual Report

Page 52: Overall Banking Activities of Shahjalal Islami Bank Limited

(4.19) Operational Procedures of Investment of SJIBL:

Induction of client

Application

Categorization

Processing and appraisal

Sanction

Documentation

Purchase of goods by the Bank

Taking delivery of goods by the Bank

Sales and delivery of goods to the client

4.19.1) Induction of client

Hole preliminary discussion with the prospective client regarding his investment

needs, business experience, viability of the project and Shariah permissibility of the asset the

business and the uses of the asset.

Brief him on the salient features of Hire Purchase under Shirkatul Milk mode of

Investment. Apprise, in particular, the usual terms and conditions under which the Bank made

such investment. Discuss about Client’s equity participation and its immediate availability.

Look to the past performance of the Client, Check-up Head Office Current

Investment Policy and Branch’s track record of Hire purchase under Shirdatul Melk

Investment of the item(s).

If the Proposal is found permissible under Islamic principles and suitable, advise the

Client to submit formal Application. If not found suitable, regret politely.

Request potential Client to open an Al-Wadeeah Current account. Let him maintain

the Current account. Let him maintain the current Account satisfactorily for a reasonable

period. (This will generally mean six month).

4.19.2) Application:

Obtain application in triplicate from the client of F-167A and record the same in the

Investment Proposal Received and Disposal Register (B-53).

Page 53: Overall Banking Activities of Shahjalal Islami Bank Limited

Obtain and affix attested photograph(s) of the Proprietor /Partner/Directors/ Trustee/

Administrator on the top right hand corner of the application.

Scrutinize the application of the Client to see that-

(a) All columns are properly field in;

(b) Particulars and information given therein are complete and correct in all

respects;

(c)All required Documents/papers as listed in the footnote for the application is

submitted;

(d) It is signed by the client as per specimen signature with the bank and duly verified

by the authorized official of the bank.

4.19.3) Categorization:

Categories the proposal as under:

Hire Purchase under Shirkatul Melk Commercial:

Investment on hire purchase under Shirkatul Melk mode to individual /firm/company

/society for commercial purpose shall be termed as hire purchase under Shirkatul Melk

Commercial.

Hire Purchase under Shirkatul Melk Industrial:

Hire Purchase under Shirkatul Melk investment to industrial undertaking in the form of

land, building, machineries, equipment, transport, etc shall be termed as Hire Purchase

under Shirkatul Melk Industrial

Hire Purchase under Shirkatul Melk Agriculture:

Hire Purchase under Shirkatul Melk investment to agriculture sector in the form of

Agriculture equipments, machineries, shallow Tube–well, Tractor, trailers, Transport etc.

shall be termed as Hire Purchase under Shirkatul Melk agriculture.

Hire Purchase under Shirkatul Melk Transport:

Hire Purchase under Shirkatul Melk Industrial in the form of transport –Bus, truck, car,

taxi, lunch, steamer, cargo vessel, air transport etc. shall be termed as Hire Purchase under

Shirkatul Melk transport.

Hire Purchase under Shirkatul Melk Real Estate:

Hire Purchase under Shirkatul Melk Industrial in the form of land building, market,

apartments, for use /rental shall be termed as Hire Purchase under Shirkatul Melk Real

Estate.

4.19.4) Processing and Appraisal:

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Enter the Application in the “Investment Proposal Received and Disposal Register (B-53) and allot a

Serial Number to it.

Examine Shariah permissibility of the goods. Reject the proposal outright, if not

permitted by Islamic Shariah.

Check-up Credit Restriction Schedule of Bangladesh Bank and Head Office Current

Investment Policy Guidelines.

Visit the Business establishment of the Client. Talk to the business and important

personalities of the locality to ascertain the Honesty, Integrity and Business dealings of

the Client.

Request for confidential report of the client from local Bank Branches. Confident Report

from Credit Information Bureau (CIB) of Bangladesh Bank through Head Office

Investment Division as per Instruction Circular of Head Office in this Regard.

Obtain Financial Statement/Balance Sheet of the Client for the last three consecutive

years for Investment Proposals of Tk. 50.00 lacs or above as per Head Office Instruction.

Inspect Land, Building, other Assets and Properties proposed to be Mortgaged or

Hypothecated.

Forward Documents, Title Deeds and other relevant Papers to approve Lawyer of the

Bank for examination and furnishing his opinion.

Obtain Lawyer’s Opinion as per clause No. 8.02.

Please study the following carefully and note down the actual findings in the Appraisal

Form against each item :

Effective demand, price of the goods, short or long-term duration, quality and other

specifications of the goods, availability, etc. of the said or projected goods.

Where sale price of the goods is payable by the client at specified future date in lump sum

or installments as per proposal.

Page 55: Overall Banking Activities of Shahjalal Islami Bank Limited

For Bai-Murabaha Commercial and Bai Murabaha Industrial Investment, prepare

Appraisal Report on F-167B. For appraisal Bai-Murabaha agriculture and For Bai-

Murabaha Import use special Appraisal Form devised for each of those, if any,

Otherwise F-167B providing the available/required supplementary information. In course

of preparation of the appraisal report please ensure incorporation of all information of all

information, particulars figures and statistics in Appraisal Form correctly with special

attention to the following: Contact primarily with the producers/sellers/suppliers of the

goods in the market, study the market price and work out the purchase and sale prices of

the goods as per guidelines.

4.19.5) Sanction:

On completion of Appraisal as provided herein above, of the Proposal is found viable,

issue Sanction Advice (F-188) if it is within the business power of the Branch mentioning

all the terms and condition is duplicate to the Client and endorse copies to Zonal and

Head Offices retaining one copy in the Client’s file duly accepted by the Client.

If the proposal is not within the Discretionary Power of the Branch, the Branch shall with

Appraisal Report on F-167A and F-167B to Zonal Office/Head Office.

If the proposal is within the Business Power of the Zonal Office, Zonal Office shall

accord Approval /Regret the Proposal.

If the proposal is not within the Business of the Zonal Office shall forward the proposal to

Head Office with their views and recommendations.

On receiving the proposal and the Appraisal Report along with supporting papers Head

Office will either approve or Regret.

If the Branch/the Zonal Office /Head Office, the branch will issue the Sanction advice (F-

188) with a copy to ZO/HO duly recorded in /Facility Sanctioned Register (B-119) with

authority to the investment Client for the limit.

Page 56: Overall Banking Activities of Shahjalal Islami Bank Limited

If the client duly accepts the sanction terms and conditions enter the particulars of the

sanctioned proposal in the limit Register (B-117) allotting a Fixed Serial number for each

Client as per Limit Register which shall remain permanent irrespective of the mode(s) so

long the Client continues business with the Bank.

Open file Client-wise, affixing the Fixed Number allotted to him as per Limit Register

(B-117) and Client’s name, address, telephone number be recorded prominently in the

inner side of the investment File for easy tracing in case of need.

In case of investment to the existing Client, obtain required papers, document with the

past performance and outstanding liabilities of the Client, if any and process of sanction

the proposal as per instruction laid down here-in-above after due evaluation or study.

4.19.6) Documentation:

► Before purchasing the asset/property by the Bank, obtain sufficient collateral securities as

mentioned in the sanction advice along with the following charge documents properly executed

i.e. duly filled in, signed, stamped, verified and witnessed where necessary:

I. Hire Purchase under Shirkatul Melk Sanction Advice deal-wise duly accepted by the

client.

II. Hire Purchase under Shirkatul Melk Agreement (Deal-wise).

III. Letter of Pledge (Deal-wise)/Mortgage Deed.

IV. Single party D.P. Not, if there is no guarantor.

V. Double party D.P. Not, if there is guarantor (s) to be made by the Client in favor of the

guarantor and endorsed by the later to the Bank.

VI. D.P. Not Delivery letter.

VII. Letter of Hypothecation for the asset(s) and Client’s stock in Trade/work- in-process.

VIII. Letter of Disclaimer, (if stored in Client’s/Party’s own/hired Godown.

IX. Insurance policy (If stored in Client’s/Party’s Godown/yard under Bank’s effective

control) duly recorded in insurance register.

X. Letter of guarantee.

XI. Balance confirmation letter.

XII. Letter of installments.

XIII. Letter of Disbursement.

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► If the investment is made collaterally secured by Mortgage of property, obtain the following

documents:

a) In case equitable mortgage, Memorandum of Deposit of Title Deep (MDTD) signed by the

owner of the property.

b) In case of Legal Mortgage, Registered Mortgage Deed should be obtained.

c) Personal Guarantee of the owners of the property on.

d) Original Title Deeds with CS, RS, SA, Mutation Parcha, DCR of the property and Mutation

record.

e) Up-to-date Rent Receipt.

f) Non-encumbrance Certificate along with Search Fee Paid Receipt of the concerned

Registry/Sub-Registry office.

g) Site plan (Map/Naksha) of the Mortgaged property.

h) Valuation Certificate (issued by a competent civil engineer and physically verified by the

Branch Officials) countersigned by the Manager certifying the Market value and the Forced

sale value. Value of the land and value of the construction to be shown separately taking the

depreciated value of the construction/building into consideration as per standard norms. (The

valuation Certificate should be self contained one giving full particulars of the land, i.e. Deg

Number, Khatian Number, Plot Number, Holding Number, Mouza Number and name of the

Mouza, Schedule (Chowhaddi), mentioning the name of the owners of the Land/Building

along with a site plan duly signed by the owners of the property, the Client and attested by a

civil Engineer and the Branch Manager).

i) Lawyer’s certification about verification of the Title Deed which should be in clear terms that

the property covered by the Title Deeds is free from all encumbrances and the mortgagor(s)

have clear valued Title to the property and the same can be accepted as collateral security

against the Investment/Facility. Legal opinion should be self-contained, without any

ambiguity and clean in all respects.

j) An Affidavit be sworn in before a 1st Class Magistrate by the owner of the property to the

effect that the property offered for mortgage as security is of his own and free from all

encumbrances and the owners is/are lawful owners in possession and he/they will not

Encumber/Transfer/sale and/or charge the property in any manner whatsoever to other during

the continuance of Bank’s Investment without prior clearance of the Bank.

► In case of investment to Private or public Limited Company, obtain the following additional

document:

Page 58: Overall Banking Activities of Shahjalal Islami Bank Limited

I. Obtain certified copy of the Memorandum and Articles of Association of the company to ensure

that the company has necessary power to borrow/avail investment from any Bank.

II. Resolution of the board Directors of the Company to avail Investment/Facility/Borrow, do

Business with IBBL and authorizing the office bearers to execute necessary Documents.

III. Personal Guarantee of the Directors of the Company.

IV. If the investment is allowed on Hypothecation of assets, in addition to other charge documents,

1st charge under relevant section of the Company’s Act-1994 shall be created in Bank’s favor in

respect of Company’s assets prescribed as security. This charge shall be created with the

registrar of Joint Stock Companies within 21 days from the date of execution of relative Change

Documents.

V. Certificate issued by the registrar of Joint Stock Companies under section 114 of The

Companies Act-1994 in respect of creation of charges.

VI. Copies of Memorandum and Articles of Association with the latest amendments, if any, duly

certified by the registrar of joint stock companies and attested by the managing director on

every page with official seal of the company and duly verified by the Incumbent-In-Charge of

the Branch.

VII. A copy of the Certificate of Incorporation duly attested by the Incumbent-In-Charge of the

Branch.

VIII. A copy of the certificate of commencement of Business (incase of publish Limited company)

duly attested by the Incumbent-In-Charge of the Branch.

►In case of investment to a trust organization obtains the following Document in addition to

other charges Documents:

I. Copy of trust deed duly attested by a 1st class Gazette officer and verified by the incumbent-

in-charge of the branch with the original copy. The Trust Deed must contain a clause

authorizing the Trustees to do Business with banks and to avail investment facilities /borrow

from banks.

II. Resolution of the Board of Trustees to do business with IBBL and avail investment/borrow

from IBBL.

III. The charge documents and all other agreements shall be signed /executed by persons

authorized by all the members of the board of Trustees, in Trustees are authorized to delegate

their powers by the trust Deed; otherwise all the Trustees must sign/execute the charge

documents and all other agreements.

IV. Personal guarantee of all the members of the board of trustees must be obtained.

►In case of investment to co-operative security, obtain the following documents also:

Page 59: Overall Banking Activities of Shahjalal Islami Bank Limited

I. Clearance from the register of co-operative societies for doing business and avail faculties /

investment from IBBL within the annual borrowing limit of the society.

II. Litter to be issued to; the concerned registrar of co-operative societies under registered A/D

Mail informing about allowing investment /facility to the concerned society by the bank as

per clearance accorded by him.

III. Personal guarantee of the office Bearers of the society if their personal capacity.

IV. A copy of the byelaws of the society duly certified by the registrar of the co-operative

societies.

Signature of the Client:

After completion of Document, enter Document in Documents Execution Register

(B-103) Movement of Document, if any, should be duly recorded in the Document Ex-custody

Register duly singed by the Custodians.

(4.20)MODES OF ADVANCE OF THE CONVENTIONAL BANKS:Conventional banks engage in the following types of financing arrangements:       

Loans The most obvious form of financing by a conventional bank is the loan arrangement. The bank

advances (loans) a lump sum to an individual (the borrower) for a set length of time at either a fixed

or viable rate of interest. The borrower repays the loan with equal installments over the prescribed

term or in one lump sum at the end of the term.  There are no checks issued in this type of

relationship.  

OverdraftsThe extension of financing through overdrafts can only occur when there is an existing demand

deposit account. An overdraft occurs when the amount of a check presented for payment to the bank

exceeds the clients deposit balance. The banks may choose to pay on the item, thereby causing a

negative balance in the client’s account.  This negative balance is effectively an extension of

financing and can be a prior arrangement with the bank. In addition, overdraft facilities may be

extended against deposit certificates and/or government promissory notes.

Cash credits

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Cash credit is a popular mode of borrowing by traders, industrialists and agriculturalists. It is a

separate account by itself and does not require having any other account with the bank. It resembles

the use of overdrafts on a checking account. It is an arrangement whereby the borrower may

withdraw funds borrower may not exceed a predetermined limit and must deposit cash back into the

account as funds become available from daily operations. Interest is charged on the daily balance in

the account.  

 Medium term loans This type of loan is advanced to industries and agriculture for fixed capital requirements. These

loans are also granted to traders for purchase of fixed assets, to transport operators for purchase of

vehicles, and to self-employed persons for purchase of equipment. These loans are usually extended

for a term of 3 to 7 years and in special cases up to 10 years and are generally repayable by

installments. Since it will take a year or two to derive the full benefits of expansion or renovation,

installments for repayment may commence after one or two years of the disbursement of the loan.

Interest is charged on annual basis.  

Hire-purchase advances Under this arrangement, conventional banks grant advances to its clients engaged in hire-purchase

business relating to transports, refrigerators, and televisions, for example. This type of financing is

usually repaid with installments including principal and interest. The bank generally requires

immovable property as collateral against this type of financing.   

Bills purchased/discounted Export-Import businesses are performed through opening of L/Cs with Bank. The client, while

opening the L/C, comes to an agreement with the bank that the latter will repay the bill received on

the farmer's behalf on a certain date onward in exchange for a specific rate of interest determined at

the time of agreement. If the bill happens to reach well ahead of the date mentioned, the bank may

purchase the bill, if requested, with a discount. In this case, the bank makes the return twice: first, by

charging interest and then by discounting the bill.  

(4.21) Foreign Exchange:Foreign Exchange Department is a very important department of IBBL, which deals with import,

export and foreign remittances. Foreign Exchange department is an international department of the

bank. It facilitates international trade through its various modes of services. It bridges between

importers and exporters. If the branch is an authorized dealer in foreign exchange market, it can

Page 61: Overall Banking Activities of Shahjalal Islami Bank Limited

remit foreign exchange from local country to foreign country. This department mainly deals in

foreign currency, that’s why it is called foreign exchange department.

Bank branch should be authorized dealer, with due approval from Bangladesh Bank to run foreign

exchange transactions. According to the Bangladesh Law, the payment must be received within 120

days.

This department is playing an important role in enhancing export earning, which aids economic

growth and in turn it helps for the economic development. On the other hand, it also helps to meet

those goods and service which are more demandable and not adequate in our country.

Foreign Exchange Department is dividend in to 3 sections.

Import Export Remittance

(4.22) Mode of Foreign Exchange Business:1. Import

2. Export

3. Remittance

A. Inward Remittance

B. Outward Remittance

4.22.1) IMPORT:IMPORT:

Meaning of Import: Meaning of Import:

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

will be occurred according to the Government law.

Import Policy Order:Import Policy Order:

Based on the needs of commodity and availability of finance, Government declares policy.

For import of goods for a particular period having approval from the National Assembly is

defined as Import policy order. Import policy is a guideline of a set of rules envisaged by

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Government Authority i.e. the Ministry of Trade and commerce for the registered importer

for import of goods inside the country.

Duration:

Earlier import policy has been formulated the five years. But present import policy order has

been formulated for 3 (three) years, Effect from the 14th June 2003 to 30th June 2006 and valid

till announce of new import policy order. If require Government can revise the policy in each

every years.

General Rules in connection with import:General Rules in connection with import:

Restriction of Import:

a) Negative list of Merchandises.

b) Restricted list.

c) Footnote under Restricted List

d) Freely importable items.

ITC number is compulsory (H.S code 6 digit) to be mentioned in the L/C and LCAF to

identification the item to be imported.

1. Requirement Right of Refusal (ROR) for public sector agency from Ministry of

Industry or respective Ministry/department of both to Import item under Restricted

List.

2. Import cannot be Israel.

3. Pre-shipment inspection (PSI) for private sector normally PSI is not mandatory.

4. Shipment to be made through Bangladeshi ship some exemption

a) Single importer maximum 20 MT grow importer highest 100 MT

b) General waiver from department of shipping otherwise certificate of

Waive is to be obtained to ship through Foreign Cargo

c) Import of Raw materials export oriented Industries to be made on

Competitive rate.

Import L/C (Letter of Credit):Import L/C (Letter of Credit):

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Letter of Credit is a credit contract where the Opening/Issuing Bank is committed to place an

agreed amount of money at the beneficiary’s disposal under some agreed conditions. In other

words letters of credit is a letter from the importer Bankers to the exporter that the bills if

drawn as per terms & conditions complied with will be honored on presentation.

4.22.2) EXPORT:

Meaning of Export:Meaning of Export:

Export means lawful carrying out of anything from one country to another country for sale.

Definition of Exporter:Definition of Exporter:

The importers and exports trade of the country is regulated by the Imports Exports Control

Act 1950. No person /firm is allowed to export any thing from Bangladesh unless he is

registered with CCI and E under the registration order (Importer and Exporter) 1952. To

become an exporter an ERC (export Registration Certificate) must be obtained from the

office of CCI & E.

Procedure for obtaining Export Registration Certificate (ERC):Procedure for obtaining Export Registration Certificate (ERC):

For obtaining Export Registration Certificate (ERC), intending Bangladesh Exporters are

required to apply to the CCI & E authority in the prescribed from along with the following

documents:

a) Nationality Certificate.

b) Copy of valid Trade License.

c) Income Tax Certificate.

d) Bank Certificate.

e) Copy of rent receipt of the business firm.

f) Registered Partnership Deed in case of partnership concerns.

g) Memorandum of Articles & Association and Incorporation certificate in

Case of Limited Company.

On satisfaction of the CCI & E the potential exporter is advised to deposit export registration

fee of Tk. 1,000/- through Treasury Chelan to Bangladesh Bank/ Sonali Bank for enabling them

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to issue ERC. The ERC may be renewed every year on payment of renewal fee of Tk. 1,000/-

through Treasury Chelan as started.

Export Documents Checking:Export Documents Checking:

After submissions of export documents by the exporter, Bank must check, whether the entire

required document submitted or not. Bank must examine all documents stipulated in the

credit with reasonable care to ascertain whether or not they appear, on their face to be in

compliance with the terms and conditions of the credit. The Banks will not examine

documents not stipulated in the credit. To examine documents Bank must follow the L.C

terms and international standard banking practice. Automated or computerized carbon copies

to be treated as original documents if it is marked ‘original’ Copy documents need not be

signed. Multiple documents means one original and remaining copies, Signature, Mark,

Stamp or label is sufficient for authentication of document. Bank will accept a prohibited in

the L/C.

422.3) REMITTANCE:

Meaning of Remittance:Meaning of Remittance:

The word “Remittance” originates from the word “remit” which means to transmit money/

fund. In banking terminology the word “remittance means transfer of fund one place to

another. When money transferred from one country to another is called “Foreign Remittance”

Types of RemittanceTypes of Remittance::Foreign remittance may be classified into.

Inward Foreign Remittance.

Outward Foreign Remittance.

Inward Foreign Remittance:

Inward Foreign Remittance means Remittance received from foreign countries from abroad.

In other words remittance coming into our country from other countries by the remitter by

way of permissible banking channel through freely convertible Foreign Currencies is called

‘Inward Foreign Remittance’ i.e. payless point of view it is inward foreign remittance. On the

other hand remitter’s point of view it is called outward Foreign Remittance. During The year

1995-1996 Bangladesh received and amount of US$ 1217.062 Mil as Foreign remittance. The

above process of Remittance may be presented diagrammatically as under:

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Outward Remittance:

Outward remittance of funds be made by means of T.T., D.D.T.T. etc. the remitter has to

deposit money along with the application contains name and address of the payee name of the

currency etc. All outward remittances must cover the transactions approved by the

Bangladesh Bank. Which are usually for importers travel & educational expenses.

(4.23) Equity of the Bank:

The Authorized Capital of the Bank is TK. 2,000 million and paid-up capital of the Bank is TK.

1872 million as on 31.12.2007. Total equity was TK. 3,041 million as on 31.12.2007. the Bank has

raised its paid-up capital of TK. 936 million through Initial Public offering (IPO) in the month

January-February 2007. Comparative position of Equity for the year 2007& 2006 is given below:-

SL. NO Particulars 2007 2006

a) Paid-up capital 1,871.65 935.83

b) Statutory Reserve 510.39 267.13

c) Retained Earnings 405.69 1.96

d) General Provision 252.98 157.48

e) Exchange Equalization 0.17 0.17

Total 3,040.88 1,362.57

Table-1

Figur-4-9

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Figur-4-10

Deposit of the Bank:

Total deposit of Shahajalal Islami Bank stood at TK. 22,618.19 million as on 31.12.2007 as against

TK.18,090.65 million of 31.12.006 registering an increase of TK. 4,527.54 million, i.e. 25.03%

growth. Deposit is the ‘life-blood’ of a bank has given utmost importance in mobilization of deposits

introducing a few popular and innovative schemes. The mobilized deposits were ploughed back in

economic activities through profitable and safe investments:

a) Mudaraba monthly Income Scheme

b) Mudaraba Double/Triple Benefit Scheme

c) Mudaraba Monthly Deposit Scheme

d) Mudaraba Millionaire Scheme

e) Mudaraba Hajj Scheme

f) Mudaraba Housing Deposit Scheme

g) Mudaraba Cash waqf Deposit Scheme

The Deposit-mix of the Bank as on 31.12.2007 was as bellow:-

SL.NO Nature of Deposit Taka in million Percentage of Total

Deposit

1 Al-Wadia Current Deposit 734.71 3.25%

2 Mudaraba Savings Deposit 1,832.75 8.10%

3 Mudaraba Short Notice Deposit 608.75 2.69%

4 Mudaraba Term Deposit 11,341.51 50.14%

5 Mudaraba Schemes Deposit 6,869.13 30.37%

6 Other Deposit 1,231.35 5.44%

Total 22,618.19 100.00%

Table-2

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Investment:

Total investment of the Bank stood at TK. 20,616.61 million as on 31.12.2007 as against

TK.15,515.79 million of 31.12.2006 registering an increase of TK. 5,100.82 million, i.e. 32.88%

growth. The Bank is careful in development of the fund. Mode wise investments portfolio as on

31.12.2007 is given below:

SL.NO Mode of Investments Taka in

million

Percentage of Total Investment

1 Murabaha 5,844.81 28.35%

2 Bi-muajjal 8,882.60 43.08%

3 Haire-purchase & Ijara 3,581.92 17.37%

4 Investments against L/C 19.15 0.09%

5 Bill purchased/ discounted 1,588.00 7.70%

6 Investment against Scheme Deposits 17.25 0.08%

7 Quard 29.65 0.14%

8 Others 653.23 3.17%

Total 20,616.61 100.00%

Table-3

Total Bank entertains good investment-clients having credit-worthiness and good track record. The

Bank has got a few investment Schemes to provide financial assistance to comparatively less

advantaged group of people; which are:-

Household Durable Scheme.

Small Business investment Scheme.

Small Entrepreneur Investment Program.

Medium Entrepreneur Investment Program.

Housing Investment Scheme.

Rural investment Scheme.

Car Investment Scheme.

Woman Entrepreneur Investment Scheme.

Page 68: Overall Banking Activities of Shahjalal Islami Bank Limited

Figur-4-11

Figur-4-12

Fi

gur-4-13

Foreign Exchange Business

Total Foreign Exchange Business handled during the year 2007 was TK. 44868.60 million as against

TK. 1137.64 million, i.e. 33.93% growth. The particulars of Foreign Exchange Business are given

below:-

Particulars Amount in Million Taka Percentage of Total

Import 2549.10 56.81%

Export 15084.00 33.62%

Page 69: Overall Banking Activities of Shahjalal Islami Bank Limited

Foreign Remittance 4294.50 9.57%

Total 44868.60 100.00%

Table-4

Figur-4-14

During the year 2007 this Bank Branches opened 7104 Import Letter of Credit as against 5613 of

2006 and handled 8027 Export bills in 2007 against 6336 of 2006.

(4.24) PERFORMANCE EVALUATION:

4.24.1) Foreign Exchange Performance of SJIBL

Shahajalal Islami Bank Limited has glorious history in mobilizing Foreign Exchange Business. Over

the years the bank’s Foreign Exchange Business was a record high amount among all banks in

Bangladesh.

The Bank has a wide Network of Authorized Dealers throughout the year. Well- equipped and

international network with skilled manpower, the bank is confident of running Foreign Exchange

business efficiently to the satisfactory of importers, exporters and Bangladeshi Expatriates working

abroad.

SJIBL has a good network of correspondent banks around the world for its Foreign Exchange

Business. The performances are given in the following pages.

4.24.2) FOREIGN EXCHANGE BUSINESS OF SJIBL:

Amount in Tk.Million

Particulars Amount in Million Taka Percentage of Total

Import 25490.10 56.81%

Export 15084.00 33.62%

Foreign Remittance 4294.50 9.57%

Page 70: Overall Banking Activities of Shahjalal Islami Bank Limited

Total 44868.60 100%

Table-12 Source: International Wing, SJIBL

As the above table shows that, the overall Import, Export and Remittance business of SJIBL .From

this table we can compare ,which business perform more ,also gather the idea about the turnover of

the foreign exchange business. For better look, the following graph shows the foreign exchange

business for the years 2007.

Figure: 4-15 Total F.EX businesses for 2007

The Graph snows that the foreign exchange business by SJIBL is stable and the growth rate is nearly

sustain. From above we saw that import is more growth and the growth also high rather than the two

type of business.

4.24.3) YEARLY NUMBER OF IMPORT L/C ISSUED

YEAR No of L/C Issued

2006 5613

2007 7104

Total 12717

Table-13

As the Above table shows that the total import L/C opened by the bank from 2006&2007.

In the year 2007 the opened Total L/C is 7104 and the next year it reached 10,000.In the year 2006

Total the amount was 5613. As in April 30, 2008, import business volume of the bank stood at Tk

1284 crore with the growth rate of 50 per cent.

Page 71: Overall Banking Activities of Shahjalal Islami Bank Limited

Figure: 4-15 no. of L/C opened from 2006-2007

Chapter # 5Survey Result

(5.1) Find out, how many General Banking services provided by SJIBL:This question was aimed at finding out the General Banking services provided by Shahjalal Islami Bank Limited at present. This identification will help in developing the subsequent part of the research. Total Respondents: 36 Client of Shahjalal Islami Bank Limited (Banani Branch).

Figure: 5-1

Interpretation:

The above figure shows 55.55% of the total customer are maintaining CD A/c with Shahjalal Islami Bank Limited issuing procedure. Some Client also maintains, 25% SB A/c, 52 .77% loan A/c, 11.11% MSS A/c, 8.3% STD A/c, 16.6% FDR A/c.

(5.2) Number of A/c holder:

Objective of the Question: The objective of Question 2 was to find out the number of 24(Twenty Four) A/c maintain in the other bank. Total Respondents: 36 Client of Shahjalal Islami Bank Limited (Banani Branch).

Number of A/C Holder

33%

17%

50%YES

NO

TOTAL

Page 72: Overall Banking Activities of Shahjalal Islami Bank Limited

Figure: 5-2

Interpretation:

Majority percent number of the clients, 8.3% go to Sonali Bank , 2.7%Islami Bank, 2.7% Basic Bank, 8.3% Prime Bank , 2.7% Al-Arapha Bank , 5.5% HSBC Bank, 8.3% Brack Bank, 2.7% Mercantile Bank, 5.5% Agrani Bank, 11.11% Janata Bank, 2.7% Bank Asia,5.5% National Bank. The above figure shows that 33.34% has no A/c any other bank.

(5.3) A/c opening procedure:

Objective of the Question: The objective of Question 3 was to find out the level of satisfaction regarding A/c opening procedure of Shahjalal Islami Bank Limited.Total Respondents: 36 Client of Shahjalal Islami Bank Limited (Banani Branch).

Figure: 5-3

Interpretation:

Majority percent of clients 36.11% expressed that A/c opening procedure excellent where as 58.34% Said Good Service 5.55% said moderate service. Therefore, in general it can be said that customer are satisfied A/c opening procedure of Shahjalal Islami Bank.

(5.4) Cheque Book Issuance procedure of Shahjalal Islami Bank Limited:Objective of the Question: The objective of Question 4 was to find out the level of satisfaction regarding Cheque issuing procedure Of Shahjalal Islami Bank Limited. Total Respondents: 36 Credit Client of Shahjalal Islami Bank Limited (Banani Branch).

Page 73: Overall Banking Activities of Shahjalal Islami Bank Limited

Figure: 5-4

Interpretation:

The above figure shows 75% of the total customer are said Shahjalal Islami Bank’s Cheque Book Issuance procedure are excellent that is they are fully satisfied regarding the Cheque Book issuing procedure of Shahjalal Islami Bank Limited, 25% are said good. Therefore, in general it can be said that customers are satisfied regarding Cheque Book Issuance procedure of Shahjalal Islami Bank Limited.

(5.5) Loan Issuance Procedure of Shahjalal Islami Bank Limited :

Objective of the Question: The objective of Question 5 was to find out the level of satisfaction regarding loan-issuing procedure of Shahjalal Islami Bank Limited. Total Respondents: 36 Credit Client of Shahjalal Islami Bank Limited (Banani Branch).

Figure: 5-5

Interpretation:

The above figure shows 8.34% of the total customer are said Bank ’s loan issuing procedure are excellent that is they are fully satisfied regarding the loan issuing procedure of Shahjalal Islami Bank Limited, 63.88% are said good on their loan issuing procedure. Therefore, in general it can be said

Page 74: Overall Banking Activities of Shahjalal Islami Bank Limited

that the credit customers are satisfied regarding loan issuing procedure of Shahjalal Islami Bank Limited.

(5.6) Interest Rate Charged by Shahjalal Islami Bank on different lone: Objective of the Question: The objective of Question 6 was to find out the level of satisfaction regarding Credit Pricing (Interest Rate) Of Shahjalal Islami Bank Limited. Total Respondents: 36 Credit Client of Shahjalal Islami Bank Limited (Foreign Exchange Branch).

Figure: 5-6

Interpretation:

The above figure shows nuns of the customer are fully satisfied regarding interest rate charged by Shahjalal Islami Bank Limited on their different Credit Scheme. 47% are said good that is they are satisfied, 19.47% are said moderate that is they are moderately satisfy, and only 08.33% are said excellent and 25% are not totally satisfied on their credit price. Therefore, in general it can be said that the credit customers are not satisfied regarding interest rate charged by Shahjalal Islami Bank Limited on their different Credit Scheme.(5.7) The Bank’s Attitudes on Issuing Loan:

Objective of the Question: The objective of Question 7 was to find out the level of satisfaction regarding the Bank’s Attitudes on Issuing Loan. Total Respondents: 36 Credit Client of Shahjalal Islami Bank Limited (Banani Branch).

Figure: 5-7

Interpretation:

The above figure shows 11.11% of the total customer are said that the bank’s attitudes on issuing loan are excellent that is they are fully satisfied regarding the bank’s attitudes on issuing loan, 58.33% are

Page 75: Overall Banking Activities of Shahjalal Islami Bank Limited

said good that is they are satisfied, 5.55% are said moderate that is they are moderately satisfy, and only 25% are not totally satisfied on their attitudes on issuing loan. Therefore, in general it can be said that the credit customers are satisfied regarding the bank’s attitudes on issuing loan.

(5.8) Opinion about the online Banking System:

Objective of the Question: The objective of Question 8 was to find out the Opinion about the online banking system of Shahjalal Islami Bank Limited. Total Respondents: 36 Credit Client of Shahjalal Islami Bank Limited (Banani Branch).

Figure: 5-8

Interpretation:

The above figure shows 100% of the total customers are strongly agreed about the Online banking System could be helpful.

(5.9) Opinion about banking teansaction is more reliable at Shahjalal Islami Bank than others:Objective of the Question: The objective of Question 9 was to find out the level of satisfaction of Shahjalal Islami Bank Limited. Total Respondents: 36 of Shahjalal Islami Bank Limited (Banani Branch).

Figure: 5-9

Interpretation:

38.8

61.11

0 10 20 30 40 50 60 70

Strongly Agree

Agree

Disagree

Strongly Disagree

Page 76: Overall Banking Activities of Shahjalal Islami Bank Limited

The above figure shows 38.8% of the total customer are Strongly Agreed about the Banking with Shahjalal Islami Bank Limited Is better then other, 61.11% are agreed about the opinion.

(5.10) Opinion about Services charge of money transfer is reasonable:

Objective of the Question: The objective of Question 5 was to find out the level of satisfaction about the service charge of money transfer of Shahjalal Islami Bank Limited. Total Respondents: 36 Client of Shahjalal Islami Bank Limited (Banani Branch).

Figure: 5-10

Data Collected:

Responses Frequency Percent

Strongly Agree 06 16.6%Agree 23 63.8%Disagree 05 13.8%Strongly Disagree 01 2.77%Total 36 100%

Interpretation:

The above figure shows 16.6% of total customer are strongly agreed with the opinion about services

charge are reasonable, 63.8% are agreed with the opinion,13.88% customer are disagreed, 2.77%

customer are strongly disagree with the opinion. Therefore, in general it can be said that customer are

not satisfied with the services charge of money transfer.

SUMMARY OF FINDINGS

At 55% customers are maintaining CD A/c with Shahjalal Islami Bank issuing procedure. Some

clients also maintain, 25% SB A/c, 52.77% loan A/c, 8.33% loan A/c 11.11% MSS A/c, 16.16% STD

A/c.

Majority of the clients, 11.11% go to Janata Bank ,8.3% Brac Bank ,2.7% Islami Bank, 2.7% Basic

Bank 5.5% Prime Bank , 5.5% HSBC , 2.7% Al – Arafa Bank , 5.5% National Bank , 5.5% Agrani

Bank, 8.3 Sonali Bank , 2.7% Mercantile Bank,2.7% Bank Asia, & the above figure shows that 33.5%

has no A/c any other bank.

Majority of the clients about 36.11% expressed that A/c opening procedure excellent whereas

58.34% said Good Service 5.55percentage said moderate service. Therefore, in general it can be said

that customer are satisfied A/c opening procedure of Shahjalal Islami Bank Limited.

At 75% of the total customers are said Shahjalal Islami Bank ’s Cheque Book Issuance procedure

are excellent that is they are fully satisfied regarding the Cheque Book issuing procedure of Shahjalal

Islami Bank Limited, 25% are said good .Therefore, in general it can be said that customers are

satisfied regarding Cheque Book Issuance procedure of Shahjalal Islami Bank Limited .

0

20

40

60

80

StronglyAgree

Agree Disagree StronglyDisagree

Page 77: Overall Banking Activities of Shahjalal Islami Bank Limited

At 8.34% of the total customers are said Shahjalal Islami Bank’s loan issuing procedure are

excellent that is they are fully satisfied regarding the loan issuing procedure of Shahjalal Islami Bank

Limited, 63.88% are said good, 2.78% are said moderate that is they are moderately satisfy, and on

20% are not totally satisfied on their loan issuing procedure., and on20% are not totally satisfied on

their loan issuing Shahjalal Islami Bank Limited.

No of the customer is fully satisfied regarding interest rate charged by Shahjalal Islami Bank Limited

on their different Credit Scheme. 47.22% are said good that is they are satisfied, 19.41% are said

moderate that is they are moderately satisfy, and only 25% are not totally satisfied on their credit

price. Therefore, in general it can be said that the credit customers are not satisfied regarding interest

rate charged by Shahjalal Islami Bank Limited on their different Credit Scheme.

At 8.33% of the total customers are said Shahjalal Islami Bank’s procedure of repayment installment

are excellent that is they are fully satisfied regarding the time taken by Shahjalal Islami Bank to

Issuing Loan, 58.33% are said good that is they are satisfied, 5.55% are said moderate that is they are

moderately satisfy, and only 27.77% are not totally satisfied on procedure of repayment installment.

So, in general it can be said that the credit customers are satisfied regarding Procedure of Repayment

Installment of Shahjalal Islami Bank.

At 11.11% of the total customers are said that the bank’s attitudes on issuing loan are excellent

that is they are fully satisfied regarding the bank’s attitudes on issuing loan, 58.33% are said good that

is they are satisfied, 5.55% are said moderate that is they are moderately satisfy, and only 27.77% are

not totally satisfied on their attitudes on issuing loan. Therefore, in general it can be said that the

credit customers are satisfied regarding the bank’s attitudes on issuing loan

At 27.7% of the total customers are said Bank credit monitoring system are excellent that is they

are fully satisfied regarding the credit monitoring system , 41.6% are said good that is they are

satisfied, 5.55% are said moderate that is they are moderately satisfy, and only 25% are not totally

satisfied on their credit monitoring system. Therefore, in general it can be said that the credit

customers are satisfied regarding credit monitoring system

At 5.55% of the total customers are said Shahjalal Islami Bank’s loan disbursement timing are

excellent that is they are fully satisfied regarding time taken by Shahjalal Islami Bank to disbursement

of Loan, 50% are said good that is they are satisfied, 19.4% are said moderate that is they are

moderately satisfy, and only 25% are not totally satisfied on their loan disbursement timing.

Therefore, in general it can be said that the credit customers are satisfied regarding time taken by

Bank to disbursement of Loan.

The above shows that 94.44% of customers aware of loan scheme is available in Shahjalal Islami

Bank Limited, 5.56% are not aware about this.

At 100% of the total customer are strongly agree about the Online banking System could be helpful.

Page 78: Overall Banking Activities of Shahjalal Islami Bank Limited

Chapter # 6Major Findings & Recommendation

(6.1) Major Findings:After completing the observation I observed some major finding or problem those are follows:

Status and recognition of Shariah Council

No adequate disclosure in the Balance sheet

No separate computer software

Non- existence of separate Books and forms

Follow common guides and circulars

Uses of surplus and deficit funds

Lack of Trading and motivation

Lack of Maintenance of SLR and CRR

No separate product / Service

Service personnel are working under pressure because they have to deal with large number of

customer every day.

Customers need to wait for long time.

Office Hour not Flexible.

Branch premises is not large enough for the customer

(6.2) Recommendation:Although this branch is making a huge amount of profit and generating a large volume of deposit, a

number of problem have been dictated while I working this branch. Based on my work experience at

SJIBL, Banani branch, I would like to put my some recommendations:

Bank need to increase its quality of customer service and it should Separate form other

banking activity.

Branch should be innovative and diversified in its service and well behave with their

customer.

Need modern technology, without using modern technology no bank can even think of

remaining in the business in near future. So the bank must decide right now how it equip its

branches with modern technology.

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Information system should be developed. Bank should be using internet not only for local but

also international correspondence.

Chain of doing job in the branch should be made clear. In the branch chain of completing a

work is not clearly, one employee sometimes performs same duty and in another time

different employee performs it, So no employee can be held liable for defective work or for

delay in work.

Need to speed up processing of investment proposal to send in investment division that they

result early.

They’re being no restriction customers clients are found to move hither and thither inside the

bank premises. This hinders the smooth functioning and amount to security of the bank office

should more careful about this.

Computer division need to be up date and extensive for the greater welfare of the branch.

Bank should be increase their branch all over the Bangladesh as soon as possible

Bank should more invest in agricultural sector. Should give Micro credit for small

entrepreneurs

Bank should emphasize on marketing division through media.

Bank should take officer who are subject related that can understand Banking with in a short

time they can progress a banking activity rather than other officer.

Bank should more concentrate on foreign exchange.

Conclusion:Interest free banking system is no more a concept. It is now a Reality, a dynamic system, embodying

a set of superior banking mechanism. More than 300 Islamic bank and financial institutions are

operating in different Countries throughout the world with a marked success from this inception in

our country in 1983. Shahjalal Islami Bank Limited has been operating with real and confidence in

corporation with other conventional banks. Bringing a new concept in such business sector, which is

growing to rapidly in the world, is rally bold step. As a large Islamic commercial bank, Islamic bank

took various steps to create employment and socio-economic development for the poor through

Islamic shariah. During the three months internship program at Banani, Branch all the desks have

been observed mire or less. Gaining knowledge of practical banking and to compare this practical

knowledge with theoretical knowledge. Though all departments and sections are covered in the

internship program, it is not possible to go to the dept of each activities of branch because of time

limitation. So, objective of this internship program have not been fulfilled with complete satisfaction.

However, highest effort has been given to achieve the objective the internship program. During the

internship, it is found that the branch provides all the type of banking services as well as some

specialized financing activities to the economy. They train me as their colic and willingly. At there

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have not enough large scale customer but there have many small type of customer who deposit their

money. In this branch minimum 150 small scale customer open account daily. In this branch there

have also low scope of investment. In this branch deposit investment has balance position. In foreign

Exchange desk daily two L/C opened. Overall I can say that this branch increasing their activity and

fulfill their target that given from Head office.

Bibliography

(A) Reference Books:

Principles of Marketing (11th Edition), by Philip Kotler & Gary Armstrong.

New Jersey, Person prentice Hall, 2006

Advertising & Promotion (6th Edition) by George E. Belch & Michael A. Belch.

New Delhi, Tata Mc Graw-Hill Publishing Company, 2006

Business Research Methods (9th Edition) by Donald R. Cooper/Pamela S. Schindler.

New York, Mc Graw-Hill, 2006

(B) Reports:

1. Annual Report of SJIBL, 2006-200

2. Confidential Report of IBBL, 2006

3. Shariah Islami Banking subject 7th training course

4. Economic Trends published by Bangladesh Bank

(C) Others:

Magazine

Library of BUBT

(D) Website:

www.shahjalalbank.com.bd

www.google.com