Banking Strategy and Job Experience at Islami Bank Bangladesh Limited
In the late seventies and early eighties, Muslim countries were awoken by the emergence of Islami Bank which provided interest free banking facilities. There are currently more than 614 interest free institutions all over the world. Today Islami Bank not only operates in almost all Muslim countries, but have extended their wings to the western world to serve both Muslim and non Muslim customers. In case of Islami Banking, the establishment of Mitghamar Local Savings Bank in 1963 is said to be a milestone for modern Islami Banking.
In 1974, Bangladesh signed the Charter of Islamic Development Bank and committed itself to reorganise its economic and financial system as per Islamic Shariah. In 1978, Bangladesh recommended in Islamic Foreign Minister Conference in Senegal towards systematic efforts to Islamic Banking. In 1980, Foreign Minister Conference in Pakistan where Bangladesh Foreign Minister Prof. Shamsul Hoq, proposed for taking steps for Islamic Banking. Further, Bangladesh Bank sent representation abroad to study Islamic Banking System.
In 1981, President of the Peoples Republic of Bangladesh addressed the 3rd Islamic Summit Conference held at Makkah and Taif suggested, ”The Islamic countries should develop a separate banking system of their own in order to facilitate their trade and commerce. ”In 1982, IDB visited Bangladesh for study. They found contributions done by Islamic Economics Research Bureau (IERB) and Bangladesh Islamic Bankers Association (BIBA); they mobilized the seminars, public opinion through symposia & workshop. Professional activities reinforced by Muslim Businessman Society (now reorganized as Industrialists and Businessman Association).
The body mobilized mainly equity capital for emerging Islamic Bank. Finally, in 1983 Islami Bank Bangladesh Limited (IBBL) came out to take the challenge of doing banking business. Islami Bank Bangladesh Limited (IBBL) is considered to be the first interest free bank in Southeast Asia. It was incorporated on 13-03-1983 as a Public Company with limited liability under the companies Act 1913. The bank began operations on March 30th, 1983, with major share by the foreign entrepreneurs. IBBL is a joint venture multinational Bank with 63.92% of equity being contributed by the Islamic Development Bank and financial institutions. The total number of branches in 2012 stood at 276. Now the authorized capital of the bank is Tk. 20,000 million and Paid op capital is Tk. 10007.71 million.
- To establish Islami banking through the introduction of a welfare oriented banking system.
- To ensure equity and justice in the field of all economic activities.
- To achieve balance growth and equitable development through diversified investment operations particularly in the priority sectors and less developed areas of the country.
- To encourage socio-economic uplift and financial services to the low-income community particularly in the rural area.
Vision of IBBL is always strived to achieve superior financial performance, be considered a leading
Islamic Bank by reputation and performance as well as-
- To establish and maintain the modern banking technologies, to ensure soundness and development of the financial system based on Islamic principles and to become the strong and efficient organization with highly motivated professionals, working for the benefit of the people, based upon accountability, transparency and integrity in order to ensure stability of financial system.
- To encourage savings in the form of direct investment.
- To encourage investment particularly in projects which are more likely lead to higher employment.
Objectives of Islamic Bank
The primary objective of establishing Islamic Bank all over the world is to promote, foster and develop the application of Islamic principles in the business sector. More specifically, the objectives of Islamic bank when viewed in the context of its role in the economy are listed as following:
- To offer contemporary financial services in conformity with Islamic Shariah;
- To contribute towards economic development and prosperity within the principles of Islamic justice
- Optimum allocation of scarce financial resources; and
- To help ensure equitable distribution of income.
- To ensure customers’ satisfaction.
- To ensure welfare oriented banking.
- To establish a set of managerial succession and adopting technological changes to ensure successful development of an Islamic Bank as a stable financial institution.
- To emerge as a healthier & stronger bank at the top of the banking sector and continue stable positions in ratings, based on the volume of quality assets.
- To ensure diversification by Sector, Size, Economic purpose & geographical location wise Investment and expansion need based Retail and SME/Women entrepreneur financing.
- To invest in the thrust and priority sectors of the economy.
- To strive hard to become an employer of choice and nurturing & developing talent in a performance-driven culture.
- To pay more importance in human resources as well as financial capital.
- To ensure lucrative career path, attractive facilities and excellent working environment.
- To ensure zero tolerance on negligence in compliance issues both Shariah and regulatory issues.
- To train & develop human resources continuously & provide adequate logistics to satisfy customers‟ need.
- To be excellent in serving the cause of least developed community and area.
- To motivate team members to take the ownership of every job.
- To ensure development of devoted and satisfied human resources.
- To encourage sound and pro-active future generation.
- To achieve global standard.
- To strengthen corporate culture.
- To ensure Corporate Social Responsibilities (CSR) through all activities.
- To promote using solar energy and green banking culture and ecological balancing.
- Trust in Almighty Allah
- Strict observance of Islamic Shariah
- Highest standard of Honesty, Integrity & Morale
- Welfare Banking
- Equity and Justice
- Environmental Consciousness
- Personalized Service
- Adoption of Changed Technology
- Proper Delegation, Transparency & Accountability
Products and Services:
Under products and services Islami Bank Bangladesh Ltd. has below categories:
- DEPOSIT SCHEMES:
- Al-Wadiah Current Account (AWCA)
- Mudaraba Savings Account (MSA)
- Mudaraba Term Deposit Account (MTDR)
- Mudaraba Special Notice Account (MSNA)
- Mudaraba Hajj Savings Account (MHSA)
- Mudaraba Special Savings (Pension) Account (MSSA)
- Mudaraba Savings Bond (MSB)
- Mudaraba Monthly Profit Deposit Account (MMPDA)
- Mudaraba Mahr Savings Account (MMSA)
- Mudaraba Waqf Cash Deposit Account (MWCDA)
- Mudaraba NRB Savings Bond (MNSB) Account
- Mudaraba Foreign Currency Deposit Account (MFCD)
- Students Mudaraba Savings Account (SMSA)
- Mudaraba Farmers Savings Account (MFSA)
- Investment Modes:
- Bai Salam
- Hire Purchase under Shirkatul Meelk (HPSM)
Under this mode Bank may supply implements/ equipment/goods on rental basis. The ownership of the implements/equipment/goods will be with the Bank and the client jointly and the portion of the client will remain to the Bank as mortgage until the closure of the investment account, but the client will be authorized to possess the equipment for certain period. The client, after completion of the installments, will be the owner of the implements/ equipment/goods.
- INVESTMNET SCHEME
- Household Durables Scheme (HDS)
- Investment Scheme for Doctors (ISD)
- Transport Investment Scheme (TIS)
- Car Investment Scheme (CIS)
- Small Business Investment Scheme (SBIS)
- Micro Industries Investment Scheme (MIIS)
- Agricultural Implement Investment Scheme (AIIS)
- Real Estate Investment Program (REIP)
- Real Estate Investment (Commercial & Working Capital)
- Agricultural Investment of IBBL
- NRB (Non Resident Bangladeshi) Entrepreneurs Investment Scheme (NEIS)
- Women Entrepreneurs Investment Scheme (WEIS)
- RURAL DEVELPOMENT SCHEME
- FOREIGN EXCHANGE BUSINESS SERVICES
- Locker Services
- ATM Services
Objectives and Principles of Investment in Islami bank
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 the size of investment, by sectors (public & private), by economic purpose, by securities and by geographical area including industrial, commercial, and agriculture.
- 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 accelerating sustainable socio-economic growth and uplift of the society.
- To invest in the form of goods and commodities rather than give out cash money to the investment clients.
CSR Activities of IBBL
Islami Bank Bangladesh Ltd. a first generation private commercial bank of the country to set up with the noble objective of discharging social responsibility by creating employment opportunities and ensuring healthy working environment and financial securities. IBBL operates various welfare activities directly and through Islamic Bank Foundation (IBF). Besides, IBBL has devised several special deposit and investment products for the less fortunate segment of the country as part of its CSR activities.
Social responsibilities of Islami Bank foundation are income generation, service to the distressed, promotion of people oriented mass education system IBBL awards scholarships among the meritorious wards of the bank officials and the meritorious students of Banking & Finance Department of Dhaka University, Chittagong University and Manarat International University. , extension of health and Medicare facilities , development of culture , art literature, science, technology and sports assisting in research and propagation of Islamic ideology , creation of facilities for productive self employment through human resources Development, help to disaster, relief and rehabilitation Management.
Place of Internship
I have done my internship program in Islami Bank Bangladesh Ltd. at Panthapath Branch. My internship program duration was of total 55 days, which was decided by Islami Bank Training and Research Academy (IBTRA). First 10 days I have done theoretical class in IBTRA, where I got to learn about the difference between Profit & Interest, Islamic Shariah and difference between an Islamic bank and conventional banks. Then I went to the Panthapath Branch for practical experience with 45 days where I have learned about Islamic banking & financial system.
I have worked 45 days out of 55 days in this branch according to office order provided by IBTRA. In this branch, there were 28 employees and three interns, including me. This branch is one of the busiest among other Branches. All of the employees were very cooperative with me. I was working under several sections of General Banking & Investment. My onsite supervisor was operational manager MD Gias Uddin and branch supervisor was VP Abul Hamid Miah I got a lot of information & gather experience about IBBL as well as interest free banking system.
Description of Job
In the Panthapath branch of the bank, I have to perform a variety in different departments. Though I have done my major in HR and minor in Marketing, I had to work in all sections of the bank.
Specific Responsibilities of the Job
Before joining in the branch:
Before joining in the branch, I had Ten days training in the Islami Bank Training and Research about Islami banking and functions of Islami Bank. All the interns had to give an exam there upon what we have learned.
After joining in the branch:
Later when I joined the branch, I had to perform the duties assigned by the Supervisor and the other officers according to the office order. First, I worked in different General Banking sections and then in the Investment department.
Functions of General Banking
The operations of General Banking are:
- Reception & Information Section
- Accounts Opening Section
- Cash Section
- Clearing Section
- Remittance Section
- Dispatch Section
- Issue and payment of DD, TT and PO
- Maintenance of safe deposit lockers
- Maintenance of internal accounts of the bank
- Reconciliation Section
During my 45 days in the branch under different sections, my work experiences are summarized here
Accounts opening and Information Section
I have worked three days in this section. This section is one of the busiest sections in this branch. First of all, we the interns got to know about the various types of accounts for instance- Student account, MSA account, Current account and the essentials to open an account. This is because, when a new client enters into the banking system, to opening new account, they need information. Lot of customers arrive and try to collect information for account opening as well as about the products and facilities offered by the bank.
Clients want to know the balance of their accounts by coming to this branch personally or by phone. They come to collect bank statement or to change- address, sign, want to transfer their account to another branch or sometimes to close their accounts. I provided information about the account opening requirements to the clients, like- they need to bring two copies passport size photo, National ID, introducer signature and nominee‟s photo to open an account. I also helped the clients to update their account information required by Bangladesh Bank. For the bank KYC of a client is very important.
While working in this section I became introducer to many student and MSA accounts. However, I did not get the opportunity to open current account, because of its complexity and I am not a current account holder. In this section, I got the chance to interact with the customers more and asked them question about the bank and the employees.
In this section I have also worked for three days. The main responsibility was to receive several cheques from clients. I also attached seal in the front and the back side of the cheque for clearing. My task was to ensure account number, account holder name, the accuracy of amount written in figures & words are properly stated in cheques and check if there was any over-writing anywhere in amount or date. After confirming these cheques were sent clearing. I was not responsible for the clearing entry into the computer & completing other tasks.
Herein, I also learned about the Inward & Outward clearing, Regular & High value cheque and terms such as- BEFTN, OBC, and CPS House.
Telegraphic Transfer (TT), Pay Order (PO) & Demand Draft (DD) Section
When I was in this section, I learned to write debit voucher. If any telegraphic transfer order came, I prepared debit voucher for it. In where I enter the name, account number, TT number and dates are correctly printed on the TT Voucher. Hence I make sure the signature of two officers and lastly send this voucher to the computer department. In this section, PO & DD leaf, where I ensured name of the organization, drawer branch, date & amount of money and signature of two officers.
Foreign Remittance Section
In this section, I have worked for two days. First, I got to know about of money transfer mediums, country code and PINs. Here I got to learn about how clients can withdraw money from the bank sometimes without having an account in the respected bank or deposit money coming from abroad. To receive money sent from abroad the clients need the original NID and a photocopy of the NID. Withdrawing money is not very difficult and it is very popular service provided by the bank.
I worked total 10 days in this section. IBBL is one of the most profitable banking organizations in Bangladesh since the last few years due to the unique investment process of the bank. I had the privilege to gain knowledge of the mechanisms of Islamic investment. What are the different modes of investment, why customers choose this particular bank for investment, how the bank selects their customers for investment, the documents and paper-works need to complete the procedure all these stuff I learned practically. The project part reflects the knowledge of my learning.
Different Aspects of Job Performance
I had to take ten days training and give examination before joining in the branch. After joining in the branch I have to perform different works according to the orders of the manager and the senior principal officer. I have to study different client‟s files and discuss different investment related issues like the process of taking and giving investments, choosing the targeted customers, calculating the portion of profit and installment amount, documents needed to execute the investment etc. with the supervisor. I have to help the clients to open account in account opening desk. I did the data entry and other computer related work. I took the requisition for ATM card and check books. However, I never got a change to work in the Cash section but I watched how they work.
Last but not the least, based on our theoretical exam and performance at the branch IBTRA did an evaluation. We also had to submit a report to them, about what we have learned and gave a presentation. According to the evaluation they awarded the interns in different categories. Fortunately, my group and I got the best report award.
SWOT ANALYSIS OF IBBL:
SWOT Analysis is an important tool for evaluating the company‟s Strengths, Weaknesses, Opportunities and Threats. It helps the organisation to identify how to evaluate its performance and scan the macro environment, which in turn would help the organisation to navigate in the turbulent ocean of competition. The SOWT analysis of IBBL is presented here:
- Adequate finance: Islami Bank Bangladesh Ltd. has adequate finance. That‟s why they need not to borrow money from Bangladesh Bank or any other financial institution.
- More funds for investment: For adequate financial ability, they can provide more investment to the clients.
- Honest and Reliable Employees: All most every employee of Islami Bank is honest and reliable. They are always devoted themselves to the works for better customer service. They have minimum corruption report. The turnover rate of the employees‟ is less than other organization and they are very dedicated towards the organization.
- IBBL has vast years of experience since its establishment.
- The bank has already achieved a good will among the clients.
- HR: IBBL have lacks well-trained human resource in some area.
- Marketing: IBBL have lacks aggressive advertising
- Supervising Projects: The procedure of credit facility is less supervises comparing to other banks.
- Employee Management: Employees are not posted in the right at the right time in some areas.
- Absence of structured marketing and credit policy
- Emergence of i-banking will open more scope for IBBL.
- IBBL can introduce more innovative and modern customer service.
- Many branches can be open in remote location.
- IBBL can recruit experienced, efficient and knowledgeable work force as it offers good working environment.
- High chances to collaborate with the foreign/ international banks.
- The worldwide trend of mergers and acquisition in financial institutions can cause problems.
- Frequent taka devaluation and foreign exchange rate fluctuation is problem.
- Many new banks are coming in the scenario with new service.
- Local competitors can capture huge market share by offering similar products.
- The rules and regulations of Bangladesh are not favorable for Islami Bank. Therefore, they have to face various problems to operate their activities according to Islami Shariah.
Critical Observations and Recommendations
While working in the bank, I noticed that the customers are satisfied with the overall bank‟s service and facilities. They are also getting new products and services like student account, Internet-banking. Although, I have some recommendations, according to my observation are-
- First of all, the bank does not have a strong database system to store customers‟ information. They should build up a stronger backup system. As it is a financial institution, missing of data caused by backup failure may turn out a huge loss.
- The bank can make clear picture of the difference between interest and profit to the customers practicing different religion.
- They can use more easy and understandable words instead of different Islamic terms that they are using in their bank currently; especially for the non-Muslim customers.
- Panthapath branch does not provide SME banking service. There was always confusion among the customers if it‟s a SME bank or not. They authority should pay heed to this matter.
- As an intern, I felt that we should get more opportunity to learn about different software and calculating investment related stuffs, like- Risk analysis. In my opinion we lagged behind in this fact.
.Finally, I want to say that, I got a real life experience while working the bank. I also understood the necessity of the Islami banking system in our country. It was a pleasure working there.
Islam is a complete code of life where the detailed regulation for maintaining a proper economic life is given. Therefore Islami Bank Bangladesh Ltd. (IBBL) is trying to establish the maximum welfare of the society by maintaining the principles of Islamic Shariah which is based on Quran and Sunnah. Both Islam and Bangladesh bank discouraged luxurious lifestyle. Therefore, in terms of consumer investment IBBL also discourages luxurious lifestyle, and always tries to give investment only to those consumers who really need it. As a result, at a time it reduces the extensive usage of luxurious products and also upgrades the lifestyle of society by serving the deserved people. Islami Bank Bangladesh Ltd. is the pioneer of the welfare activities in Bangladesh. It is emphasize equally in developing the rural areas of the country. The special feature of the Investment Policy of the Bank is to invest on the basis of profit-loss sharing system in accordance with the tenets and principles of Islamic Shariah. Earning of profit is not the only motive and objective of the Bank’s Investment Policy rather emphasis is given in attaining social goal and objective in creating employment opportunities.
Having been considered the pro-efficiency character of Islamic banking and its beneficial impacts on the economy, government policy in Muslim countries should be in favor of transforming conventional banking system into Islamic banking.