Investment Management of Islami Bank Bangladesh Limited

Investment Management of Islami Bank Bangladesh Limited


This is the bank, which is for all. Islami bank Bangladesh limited is doing mass banking activities in Bangladeshi banking arena. A billionaire can do banking transaction with islami bank Bangladesh limited, as well as its door is not close for the people who are in poverty. This bank is the combination of islam and modernization. Without being involved in interest-based activities a bank can achieve first position among all government and private banks islami bank is the perfect example of that. From any class any corner and any segment of the society a person can involve with this bank.

Islami bank Bangladesh limited has achieved outstanding success in every part of banking operations. In 2008 IBBL world rank is 1591 among 4500 banks selected by Windsor Court, England. IBBL is to do banking transaction with many interest based national and international bank, in that mean time IBBL cannot maintain shariah. For this reason earning from those transactions IBBL does not include in net profit. This profit goes to islami bank foundation, for doing well fare activities.

My report covers all most all the activities that Islami Bank Bangladesh Limited performs. My study also covers the history of Islami Bank Bangladesh Limited. Its tell about its objectives, mission and goal. The report says about the employees and their efficiency. It covers the general banking as well as foreign exchange activities. I have told about its total assets and investment in my report. There is also deposit performance present in it.




Bangladesh is one of the largest Muslim countries in the World. The people of this country are deeply committed to Islamic way of life as enshrined in the Holy Quran and the sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their economic lives in accordance with the precepts of Islam.

The establishment of Islami Bank Bangladesh Limited on March 13, 1983,  is the true reflection of this inner urge of its people, which started functioning with effect from March 30, 1983, .It is committed to conduct all banking and investment activities based on interest free and profit-loss sharing system. In doing so, it has unveiled a new horizon and ushered in a new silver lining of hope towards materializing a long cherished drams of the people of Bangladesh for doing their banking  transactions in line with prescribed by Islam. With the active co-operation and participation of Islam Development Bank (IDB) and some other Islamic bank, financial institutions, government bodies and eminent personalities of the Middle East and the Gulf countries, Islami Bank Bangladesh Limited (IBBL) has by now earned the unique position of a leading private commercial Bank in Bangladesh.

Origin of the Report:

Compliant with the rule of the BBA Program, it is mandatory for a student to intern in an organization, in order to be acquainted with the real practices. Banking business in today’s world is going rapidly. Bank deals with diversified work. Here, many things have to learn quickly which later helps to build career decision.  So, I had selected Islami Bank Bangladesh Limited for the internship. The topic of my study is “Investment Management of Islami Bank Bangladesh Limited.”

Scope of the Report:

BBA course curriculum necessitates for knowing the banking system of any bank. No economic standard can run without banking system or any other financial institutions. My study is “Investment Management of Islami Bank Bangladesh Limited.” is a relevant and core of Banking business. Without this concern bank cannot think of its business and existence. I have worked at Mirpir-10 Branch of IBBL. The report covers brief overview of IBBL, its products services; the report covers brief overview of IBBL, operating activities, financial position, performance analysis, different types of modes present situation, performance analysis and SWOT analysis of IBBL.

 Objectives of the Report:

The main objective of the report is to identify the investment management of Islami bank Bangladesh limited, which includes the following specific objectives

  • To identify the Islamic banking system of Bangladesh.
  • To identify the different modes of investment.
  • To identify the performance of investment management of Islami bank Bangladesh limited, Mirpir-10 Branch.
  • To identify some problems related to investment management of Islami Bank Bangladesh limited, Mirpir-10 Branch.
  • To recommend some suggestion to overcome the problems.

 Methodology of the Report:

This report has been prepared on the basis of experience gathered during the period of internship form 24/07/2011 to 05/09/2011. Within this period I visited three department namely General Banking, Investment and Foreign Exchange departments.



Working Day

General BankingFrom 24/07/2011 to 07/08/2011


InvestmentFrom 08/08/2011 to 22/08/2011


Foreign ExchangeFrom 23/08/2011 to 05/09/2011


 A. Sources of Data: The report is prepared by using both primary and secondary data.

i) Primary Sources: A lots of the required information came from primary sources. These sources are:



  Clients of IBBL

ii) Secondary sources: Most of the information used in this report has been collected from

  Documents from Investment Division of IBBL, Mirpur-10 Branch.

  Annual report (2009 & 2010) of lslami Bank Bangladesh Ltd.

  Islami Bank Training and Research Academy (IBTRA) Library.

  Collection data from websites.

iii) Data collection method:

  Personal Interview: Face-to-face conversation and in depth interview with the respective officers and clients of the branch.

  Personal observation: Observing the procedure of banking activities followed by Investment department.

  Practical work exposures of the branch.

B. Analysis of Data: Some arithmetic and graphical tools are used in this report for analyzing the collected data and interpret them clearly to identify the management system of the department.

Limitations of the Report:

  Islami banking system is different than the traditional banking system, so it is very difficult to analyze this issue without proper knowledge about Islamic banking and economy.

  As it is not conventional so it bears some complexity to understand.

  Some words are in Arabic terms that make it difficult.




Islam is a complete way of life, and Allah’s Guidance extends into all areas of our lives. Islam has given detailed regulations for our economic life, which is balanced and fair. Muslims are to recognize that wealth, earnings, and material goods are the property of Allah and we are merely his trustees. The principles of Islam aim at establishing a just society wherein everyone will behave responsively and honestly. The Quaranic concept is based upon sovereignty of Allah overall. He is the source of income for human beings. The Almighty provides whatever man possesses to him. Allah is the sustainer of human beings, animals and other beings. It is his desire to whom he gives more and to whom he gives less.

Definition of Islamic Economy:

(a) Islamic Economics is that branch of knowledge, which helps realize human well being through an allocation and distribution of scarce resource that is in conformity with Islamic teachings without unduly curbing individual freedom, or creating continued macro-economic and ecological imbalances- By Omar Chapra.

(b) Islamic Economics is the science of how man uses resources and means of production to study his worldly needs according to a predetermined code given by Allah in order to achieve the greatest equity- By Princes Muhammad Al-Faisal Saud.

 Islamic Banking:

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 then 300 interst free institutions all over the world. Islami Bank now a days not only operate in almost Muslim countries but have extended their wings to the Western world to serve both Muslim and non Muslim countries. In case of Islami Banking the establishment of Mitghamar Local Savings Bank in 1963 is said to be a milestone for modern Islami Banking can nevertheless be traced back to the birth of Isalm.

Definition of Islami Banking:

An Islami Bank is a financial institution whose statutes, rules and regulations expressly state its commitment to the principles of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operating. – According to OIC.

History of Islamic Banking:

During Sumerian, Babylonian and Mesopotamian civilization, temples gave loans to states and individuals and accumulated much wealth prompting various councils to issue decrees. City of Mecca was complex and heterogeneous place, where clan and tribal community were involved in interest based loans. Prophet and his companions were to introduce Arabs to Islam. There is evidence to indicate that the development of Islami Banking started from the time of Prophet. Four revelations of Al-Quran specifically dealing with interest are milestone which later shaped the operational aspects of the Islami Banking system. There are numerous Hadiths relevant to banking which clearly prohibits Muslim from accepting or paying riba. The only known organized financial institution originated during prophet was the Baitul Mal, which involved in state income, expenditure and development purpose. Evidence indicates that the two sons of Chaliph Umar were given loans from Baitul Mal which they used on their way back to Madina for trading and consequently earned profit. Caliph declared it as Mudaraba and taken half profit for Baitul Mal against involved capital.

 Goals & Objectives of Islami Banking:

(a) Establishment of an Interest frees financial system.

(b) Ensuring justice to both suppliers of fund and user of fund.

(c) Encouraging & patronizing entrepreneurship.

(d) Creating employment.

(e) Bridging up the gap between the surplus and deficit of fund.

(f) Development of a healthy capital and money market.

(g) Providing various services and utilities to the public.

(h) Development of standard of living.

(i) Maintaining justice and equity at all level of transaction.

(j) Swishing over to mass banking from class banking.

(k) Alleviating Poverty through Zakat & profit sharing micro-finance.

Essential Features of an Islamic Bank:

(a)   Prohibition of Interest:

The traditional capitalist banking system depends of interest for providing loans and pays interest for taking loans. The spread between these two interests is the source of its profit. But according to Islamic Shariah all types of interest is banned. So Islamic Bank does not carry on business of interest and it completely avoids the transaction of interest.

(b)   Investment Based on Profit:

After departing from interest, the alternative ways of income for Islamic Bank are investment and profit. Thus Islamic Bank gives up any transaction of interest and makes investments based on profit. Bank distributes its profit to its depositors and shareholders.

(c)    Investing in Halal Business:

Islamic Shariah has banned the business of haram goods. For example Islam not only forbids the drinking of alcohol but also banned any business of alcohol. Therefore Islamic Bank does not get any haram business and only do halal business.

(d)   Halal Paths and Procedures:

Islamic Shariah also reject any haram path or process any case of a halal business. Therefore Islamic Banking system only allows the halal path procedures of Halal business.

Distinguishing Features of Islamic Banking against Commercial Banking:

(a) Risk Sharing:

  No predetermined rate of return.

  Sharing end result of the business.

  Mudaraba loss is entirely borne by the Shahib-al-Maal.

(b) Emphasis on productivity not on credit worthiness:

  Dominant consideration no on collaterals.

  Emphasis on soundness of the project.

(c) Moral Dimension:

  Islamic value oriented system.

  Full compliance of Shariah.

  No finance for wine/tobacco/casino/pork production or trading.

(d) Equity:

  Justice to all parties.

  Riba is unjust.

(e) Allocative efficiency:

  Productive of the project.

  Finance goes to high productive project even if credit worthiness is lower.

(f) Stability of the Banking System:

  Mudaraba & Musharaka Mechanism ensures stability.


  Promotes Innovation.

  Entrepreneurship Development.


Bangladesh is one of the largest Muslim countries in the world. The people of this country are deeply committed to Islamic way of life as enshrined in the Holy Quran and the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their economic lives in accordance with the precepts of Islam. The establishment of Islami Bank Bangladesh Limited on March 13, 1983, is the true reflection of this inner urge of its people, which started functioning with effect from March 30, 1983. This Bank is the first of its kind in Southeast Asia. It is committed to conduct all banking and investment activities on the basis of interest-free profit-loss sharing system. In doing so, it has unveiled a new horizon and ushered in a new silver lining of hope towards materializing a long cherished dream of the people of Bangladesh for doing their banking transactions in line with what is prescribed by Islam. With the active co-operation and participation of Islamic Development Bank (IDB) and some other Islamic banks, financial institutions, government bodies and eminent personalities of the Middle East and the Gulf countries, Islami Bank Bangladesh Limited has by now earned the unique position of a leading private commercial bank in Bangladesh.


To establish Islamic Banking through the introduction of a welfare oriented banking system and also ensure equity and justice in the field of all economic activities, achieve balanced growth and equitable development through diversified investment operations particularly in the priority sectors and less development areas of the country. To encourage socio-economic enlistment and financial services to the low income community particularly in the rural areas.


IBBL’s vision is to always strive to achieve superior financial performance, be considered a leading Islamic Bank by reputation and performance.v  The bank’s goal is to establish and maintain the modern banking techniques, to ensure the soundness and development of the financial system based on Islamic principles and to become the strong and efficient organization with highly motivated professionals, working for the benefit of people, based upon accountability, transparency and integrity in order to ensure the stability of financial systems.

  The bank will try to encourage savings in the form of direct investment.

  The bank will also try to encourage Investment particularly in projects which are more likely to lead to higher employment.

Aims and Objectives:

  To conduct interest-free banking.

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

  To invest on profit and risk sharing basis.

  To accept deposits on Mudaraba & Al-Wadeah basis.

  To establish a welfare-oriented banking system.

  To extend co-operation to the poor, the helpless and the low-income group for their economic enlistment. To play a vital role in human development and employment generation.

  To contribute towards balanced growth and development of the country through investment operations particularly in the less developed areas.

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

Functions of IBBL:

The IBBL’s has number of Functions, they are as follows:

 General banking

  Account Opening Section

  M.S.B, M.S.S, Hajji Section

  P.O, T.D.R, D.D, T.T Section

  Cash Section

  Clearing House Section

  Transaction Entry Section

 Foreign Exchange Section

  Activities for importer

  Activities for exporter

  Collecting and sending foreign remittance

 Investment Section

  Activities for importer

  Activities for exporter

  Collecting and sending foreign remittance

Corporate Information (As on June 30, 2011)

Date of Incorporation13th March 1983
Inauguration of 1st Branch
(Local office, Dhaka)
30th March 1983
Formal Inauguration12th August 1983

Share of Capital

Local Shareholders41.77%
Foreign Shareholders58.23%
Authorized Capital Tk. 20,000.00 million
Paid-up CapitalTk. 10,007.71 million
DepositsTk. 321,925.00 million
(including Investment in Shares)
 Tk. 314,010.00 million
Foreign Exchange Business:
ImportTk. 139,017.00 million
ExportTk. 98,816.00 million
RemittanceTk. 115,122.00 million


Total number of Branches254
Number of AD Branches43
Number of Shareholders52164

 Organization Structure of Islami Bank Bangladesh Limited:

 Product and Service of IBBL:

The operation of Islamic Bank Bangladesh limited can be divided into three major categories:

General Banking:

a.      Mobilization of deposits
b.      Receipts and payment of cash.
c.       Handling transfer transaction.
d.      Operations of clearing house
e.       Maintenance of accounts with Bangladesh bank and other bank.
f.       Collection of cheque and bill.
g.      Issue and payment of Demand Draft (DD), telegraphic transfer (TT) and payment Order (PO).
h.      Maintenance of safe deposit lockers.
i.        Maintenance of internal accounts of the bank.

While doing all the above noted work IBBL issue cheques-book, Deposit account operating form, SS card, Ledgers, Cash book, Deposit account ledgers, preparation statement of accounts, Pass book, Balance of different accounts and calculates profits.

Islami Bank Bangladesh limited offers to open the following account to the depositors:

  1. Al-Wadeeah Current Account.
  2. Mudaraba Savings Account.
  3. Mudaraba term deposit Account. (3 month / 6 month / 12 month / 36 months term)
  4. Mudaraba Special notice Account
  5. Mudaraba Hajj Savings Account (1 year to 25 year term)
  6. Mudaraba Special savings (pension) Account (5 year to 10 year term)
  7. Mudaraba Savings bond Scheme (5 year & 8 year term)
  8. Mudaraba Foreign Currency Deposite Account.
  9. Mudaraba Monthly Deposite Account.
  10. Mudaraba Moharana Account.


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

  • Bai-Mechanism
  • Bai-Murabaha
  • Bai- Muzzal
  • Bai-Salam
  • Istishna
  • Leasing, Ijara,
  • Hire Purchase (HP),
  • Hire Purchase under shirkatul melk (HPSM)
  • Shirkat Mechanism(Share)
  • Musaraka

 Foreign Exchange Business:

Foreign Exchange Business plays a vital role in providing substantial revenue in the bank income pool. Like all modern Banks IBBL operates in the area of the foreign Exchange business. IBBL performs the following tasks:

  • Opening letter of credit (LC) against commission for importing industrial, agricultural and other permissible items under Islamic Shariah and Import policy.
  • Opening letter of credit on the principle of Mudaraba sale, on the principle of Musharaka sale and under wage earner scheme.
  • Handling of export/import document.
  • Negotiation of export / import document when discrepancy occurs.
  • Financing in import under MPI (Mudaraba Post Import)
  • Financing to export on profit or loss sharing.
  • Handling Inward and outward remittance.

Financial Performances IBBL:


As of  September  30, 2011





Cash in Hand





Balance with Other Banks & Financial Institutions



7 ,678,373,370

5 ,623,181,755

Placement with Banks & Other Financial Institutions

Investments in Shares & Securities










Fixed Assets including Premises



6 ,512,363,381


Other Assets





Non – Banking Assets

Total Assets







Placement from Banks & Other Financial Institutions

Deposits & Other Accounts





Mudaraba Perpetual Bond



3 ,000,000,000


Other Liabilities





Deferred Tax Liabilities /(Assets)





Total Liabilities





Capital/ Share-holders’ Equity




1 4,060,491,979

Total Liabilities & Shareholders’ Equity





Total Off – Balance Sheet Items including





Net Asset Value (NAV) Per Share





From the Profit & Loss Account:


As of September 30, 2011




Operating Income:

Net Investment Income


1 0,294,374,042



Total Operating Income


1 5,711,946,305



Operating Expenses:

Total Operating Expenses





Profit/ (Loss) before Provision





Total Provision





Total Profit/(Loss) before Taxes





Net Profit/ (Loss) after Tax





Profit available for Appropriation




2 ,674,796,768




3 ,403,551,874

2 ,674,796,768

Retained Earnings Attributable to:


2 ,616,599,969

1 ,853,280,000

1 ,425,600,000

Earnings Per Share (EPS)





From the Cash Flow Statement:


As of September 30, 2011




Cash Flows from Operating Activities

(i) Operating Profit before changes in Operating Assets





Changes in Operating Assets and Liabilities

(ii) Cash Flows from Operating Assets and Liabilities





Net Cash flows from Operating Activities (A)=(i-ii)





Net Cash flows from Investing Activities (B)





Net Cash flows from Financing Activities (c)


Net Increase/(Decrease) in Cash (A+B+C)





Add/(Less): Effects of Exchange Rate Changes on Cash & Cash Equivalent

Add: Cash & Cash Equivalents at beginning of the year





Cash & Cash Equivalents at the End of the Year





 From the Changes in Equity:


As of September 30, 2011



Paid-up Capital




Share Premium Account




Statutory Reserve




General/ Other Reserves




Assets Rev. Reserve


2 ,156,730,000

2 ,156,730,000

Revaluation Reserve of  Securities


3 10,500,000

5 39,000,000

Retained Earnings




Total Equity




 SWOT Analysis of IBBL:

SWOT Analysis is used to evaluate the Strengths, Weaknesses, Opportunities, and Threats in a business. It is a methodology used to aid strategic planning that gained popularity during the 80’s. It involves specifying the objective of the business or project and identifying the internal and external factors.


After analyzing the present market condition, IBBL got the following strengths, which will be favorable to us to launch our business.

Honest and reliable employees:

All of the employees of IBBL are honest and reliable. They are always devoted themselves to the works for better services.

Better Quality of Services:

The IBBL will run profitable business by providing first-rate banking services in a caring, upscale, professional environment.

More funds for investment:

For adequate financial ability they can provide loan to more investment clients.

Appropriate Organizational Structure:

IBBL has the appropriate organizational structure. Organizational structure will be developed by the local and foreign expertise.


The weaknesses of IBBL are as follows.

Inaduquate Human Resource:

IBBL does not have an adequate human resource management so that it has to encounter about their employees as well as recruitment. It does not develop HR department yet. So that it cannot properly train up to its employee and motivate its employees to give them reward.

The ignorance of time value of money:

According to Islami Shari’ah the interest should be prohibited. In another word Islami economy does not take the time value of money into consideration. So IBBL does not consider time value of money though our country does not follow Islami economy.

Slow velocity of investment:

The velocity of investment of IBBL is very slow compared to other banks. It takes in excess of time while investing in a project.


Looking at current marketing environment, the following opportunities of IBBL are being visible.

More Market Share:

As Islami banking is a growing type of business in Bangladesh, IBBL has a great opportunity to capture a large amount of market share. Many Islami banks are turning their faces towards conventional banking to capture market share, but IBBL will not compromise with its quality. It will maintain strictly Islami Shari’ah and will provide the best service to its clients to capture market share.

More Market Growth:

IBBL has the better HR than any other banks in Bangladesh. Their strategy making and implementing will ensuring to achieve a large amount of market growth.


The following factors may occur as unfavorable phenomena for IBBL.

Threat of New Entrants:

New entrants to an industry impose several threats to existing competitors. New competitors can reduce the market share of all participants by dividing the “pie” into more pieces. They also may bring new technology or greater resources not available to present competitors and achieve a high market share position quickly to the detriment of all existing participants. So if any new entrants will be big threat for IBBL.

Preference Diversity:

Client’s preferences can be the most acute threat to any company. It can change any times. If the consumers think that they should prefer any other services rather that for the ultimate comfort, it could be the worst danger to IBBL.

Political Unrest:

Now-a-days political unrest becomes common phenomenon in a nation as well as the whole world. World is place of intense political unrest. So, political unrest can be harmful for IBBL.

Financial Risk:

Financial risk is the part of every business. Banks can increase the interest rate; insurance company can demand more premium or competitor can offer services in lower price.

Economic Change:

Changes in economic circumstances can be harmful for the IBBL. Personal income, savings, employment, and price level trends can have dramatic effects on the attractiveness of a firm’s products or services in output markets not only final markets, but intermediate markets as well.




Islamic Bank does not invest in loans and fixed interest securities. It can invest in ordinary share only while interest based bank can invest in loans and different kinds of securities. Islami Bank establishes and participate projects with its client as a partner and bears the risk along with the client on a proportionate basis. Besides, other conventional banks sometimes finance projects but do not bear risk. Finally, the concept of Islamic Bank is to establish on egalitarian society based on principles of social justice and equity. Whereas traditional banks pay a fixed interest on savings, time deposit and grant loans with interest for any purpose. We have gathered the fact that investment management is the theme of IBBL. The bank takes deposits and invests the same based on the profit-loss sharing. Bank go for the investment mainly which are long term and profitable in nature. IBBL also give high concentration on the investment that will generate more employment. As investment is one of the most priority areas for the IBBL, so it needs to cautious in investment decision. To ensure proper investment IBBL always go with in-depth study before making the investment. So in the next phases we are going to demonstrate the way IBBL follow the manage investment.

Investment policy of IBBL:

Investment policy of Islamic Bank and non Islamic bank are fully different. The investment policies of Islami bank Bangladesh limited are given follows

  • To invest fund strictly in accordance with the principles of Islamic Shariah.
  • To diversify its investment portfolio by size of investment, by sectors (public & private), by economic purpose, by securities and by geographical area including industrial, commercial & agricultural.
  • To ensure mutual benefit both for the Bank and the investment-client by professional appraisal of investment proposals, judicious sanction of investment, close and constant supervision and monitoring 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 upliftment of the society.
  • To invest in the form of goods and commodities rather than give out cash money to the investment clients.
  • To encourage social upliftment enterprises.
  • To shun even highly profitable investment in fields forbidden under Islamic Shariah and are harmful for the society.
  • The Bank extends investments under the principles of Bai-Murabaha, Bai-Muazzal, Hire Purchase under Shirkatul Meelk and Musharaka. The Bank is making sincere efforts to go for investment under Mudaraba principle in near future.

 Investment Strategy of IBBL:

Most of the cases investment strategy of Islamic Bank and interest-based bank are contradictory. The investment strategies of Islami Bank Bangladesh limited are given below:

  To check exodus of investment clients.

  To induct new 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.

  Extension of investment to real Estate Sector.

  Extension of investment to Jute sector; particularly for trading and export purpose.

  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

Investment Modes of IBBL:

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. Bai-Mechanism (Trading mode):


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.

¨ 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. But, under no circumstance, the percentage of the profit shall have any relation with time or expressed in relation with time, such as per month, per annum etc.

¨ The price once fixed as per agreement and deferred cannot be further increased.

¨ It is permissible for the bank to authorize any third party to buy and receive the goods on Bank behalf. The authorization must be in a separated contract.


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:

  1.              I.      Bank is not bound to declare cost of goods and profit mark-up separately to the client.
  2.           II.      Spot delivery of the item and payment is deferred.
  3.        III.      The bank transfers ownership and possession of the goods to the client before receipt of sale price.
  4.        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.
  5.           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.
  6.        VI.      Cash /Collateral Security should be obtained to guarantee the implementation of the promise or to indemnify the damages.
  7.     VII.      Mortgage / Guarantee /Cash Security may be obtained before / at the time of signing the agreement.
  8.  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.
  9.        IX.      The Bank after purchase of good must bear the risk of goods until those are actually delivered to the client.
  10.           X.      The Bank must deliver the specified goods to client on the specified date and at specified place of delivery as per contract.
  11.        XI.      The Bank may sell the goods at one agreed price, which will include both the cost price and the profit.
  12.     XII.      The price once fixed as per agreement and deferred cannot be further in increased.


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.

  1.              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.
  2.           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.
  3.        III.      Bai-salam on a particular commodity (ies)/product(s) or on a product of a particular field or farm cannot be affected.
  4.        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 excuted between the bank and the client (agent).

B. Share mechanism:


It is a from partnership where one party provides the funds while the other provides the expertise, labor and necessary business activities.

The first party is called the Sahib-al Mall and the letter referred to at the Mudarib. Any profits accrued are shared between the two parties on a pre- agreed basis, while capital loss in exclusively born by the partner providing the capital.

Important features:

  1. Bank supplies capital as Sahib-Al-Mall and the client invest if in the business with his experience.
  2. Administration and management is maintained by the client,
  3. Profit is divided as per agreement.
  4. Bank bears the actual loss alone,
  5. Client can not take another investment for that specific business without the permission of the Bank.


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 word “Musharaka” and “Shirkat” means a partnership established between two or more partners for purpose of a commercial venture participated 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 at per capital/equity ratio.

In this case of Investment, “Musharaka” meaning a partnership between the Bank and the Client for a particular business in which both the Bank and the Client provide capital at an agreed upon ratio and manage the business jointly. Share the rent as per 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:

  • Bank and client both supply capital Unequally/equally
  • Profit is divided as per agreement and actual loss is divided as per equity.
  • Client will maintain all accounts properly bank or its agent may verify or audit it.
  • Banks can advice the client in such a business in respect of the business.
  • Investment client will normally run and manage the business.
  • The Bank shall take part in the policy and decision making as well as overseeing (supervision and monitoring) the operations of the business of the Client. The Bank may appoint suitable personal(s) to run the manage the business and to maintain books of accounts of the business property.
  • As the investment client shall manage the enterprise, the Bank may pay more share of profit to him than that of his proportionate capital contribution. Loss, if any, shall be shared on the basis of capital ratio.

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:

  1.                                                                                 i.            Shirkat
  2.                                                                               ii.            Ijarah and
  3.                                                                             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 f 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 client against payment of price fixed for the either gradually part by part or in lump sum within the hire period or after expire of the hire agreement.

 Mode wise investment:

 Mode wise investment performance of Mirpur-10 Branch, IBBL:

The mode wise investment performance of IBBL overall and the selected area is outlined below:

Purchase and Nego.1865.261801.332416.643179.814846.6211040

Percentage of the mode wise investment of Mirpur-10 Branch for the years:

                                                                                                              (In Tk %)

Purchase & Nego.

 Division wise investment of Mirpur-10 Branch, IBBL for the years:                            

                                                                                     (Amount in Tk)


 Mode wise investment performance of Mirpur-10 Branch, IBBL:

(In Tk)

Modes20072008200920102011 (up to july 31 )



From the above graph and table, we can see that HPSM has the highest investment than any other modes

Percentage of the mode wise investment of Mirpur-10 Branch for the years:

 (In Tk %)






2011(up to july 31 )



















































Sector-wise investment performance of Mirpur-10 Branch, IBBL:

                                                                                        (Amount in million Tk)


 From table and above graph we find that, the average investment in industrial sector is satisfactory. It is so much good for the company. So overall the commercial investment of the bank is satisfactory.

 Sector-wise investment performance of Mirpur-10 Branch, IBBL:

Amount in Lac TK





Real State



2011(up to july 31)486723620004196337907



Sector wise Analysis 0f Mirpur-10 Branch, IBBL:

i) Analysis of investment under Commercial Sector:

Graphical representation of investment under Commercial Sector is as follows:



















From table and above graph we find that, the average investment in commercial sector is satisfactory. In 2007, 2008 total investment under commercial sector was too much favorable. It is so much good for the company but at 2009 and 2010 it has decreased.

ii) Analysis of investment under Real Estate Sector:

Graphical representation of investment under Real Estate Sector is as follows:

yearAmount in tk

 From table and above graph we find that, the average investment under Real Estate Sector is Satisfactory. It is so much good for the bank. So overall the Real Estate investment of the bank is satisfactory.

iii) Analysis of investment under Transport Sector:

Investment under Transport Sector is as follows:

 Year Amount











 From table we find that, the average investment in transport sector is not satisfactory up to 2006 to 2009. It has declined in recent years but increased in 2010.

iv) Analysis of investment under Industrial Sector:

Investment under the Industrial Sector is as follows:



















From table we find that, the average investment in industrial sector is increasing. In recent years the investment situation under this sector is decreasing.

v) Analysis of investment under Others Sector:

Investment under Others Sector is as follows:











2011(up to July,11)





 From table we find that, the average investment in others sector is the most satisfactory.  The most satisfactory level is in 2010.

ii) Analysis of investment under Real Estate Sector:

Graphical representation of investment under Real Estate Sector is as follows:

From table and above graph we find that, the average investment under Real Estate Sector is Satisfactory.. It is so much good for the bank. So overall the Real Estate investment of the bank is satisfactory.

ix)  Distribution of Investment by Sectors (Public & Private):

(M= Million Taka)

YearIFPublic SectorPrivate SectorTotal

That investment distribution in private and public sector both are more effective for any country. But the Islami bank distributes the maximum investment in private sector because it earned comparatively more profit from private sector.

x) Distribution of Investments by Areas (Rural & Urban):

                                                                                               (Amount in Taka)


From the above table it is found that Islami bank invested the maximum money in urban area. Because maximum entrepreneur and business man stay in urban place. However maximum organization established in urban area.

xiii) Distribution of country wise Investments of IBBL:

YearWithin BangladeshForeign countryTotal


 Household Durable Investment Scheme

 Housing Investment Scheme

 Real Estate investment Program

 Transport investment Program

 Car Investment Scheme

 Investment Scheme for doctors

 Small Business Investment Scheme

 Agriculture Implements Investment Scheme

 Micro Industries Investment Scheme

 Rural development Scheme




I have identified some problems and limitations in Islami Bank Bangladesh Limited while working in Mirpur-10 branch. For these problems IBBL cannot provide best services to its customers as well as customers are not getting ultimate service from IBBL. These problems are given follows:

  1. IBBL, Mirpur-10 Branch cannot invest in Shariah prohibited sector, so its investment scope is narrow in Bangladesh.
  2. Most of the times entrepreneurs have no clear concept about Shariah and investment mode. As a result, they do not want to make investment easily.
  3. There is a lack of sufficient investment scope of IBBL, Mirpur-10 Branch. So, a large amount of money is being idle, as a result, target for profit is not fulfilled accordingly.
  4. Due to the lack of sufficient & skilled manpower IBBL, Mirpur-10 Branch cannot invest their asset in proper portfolio.
  5. It is observed that major Investment of Mirpur-10 Branch is on commercial and Industrial sectors and minimum amount of investment is on agricultural sector.
  6. Maximum amount of investment of this branch occurs at Dhaka division.
  7. Clients are not fully satisfied with the services provided by mirpur-10 Branch.
  8. Office space for the investment department is not satisfactory. Clients some time do not feel comfortable during the time of meet with officers.


Islami Bank Bangladesh Limited has achieved outstanding success during last twenty six years, but competition is being increased simultaneously. Lots of banks are being opened and many banks are opening Islami banking division. To survive as number one position IBBL has to do lots of things. Some of these are suggested below:

  1. IBBL, Mirpur-10 Branch should concentrate on minimizing the disbursement time of investment schemes to provide better services.
  2. IBBL, Mirpur-10 Branch should create new investment mode by research & study which will help them to increase their profit.
  3. By arranging various seminars, it can be possible to communicate with people about Halal, Haram & Shariah and influence them to go for Halal business.
  4. The management of disburse the investment should be easier for the clients.
  5. IBBL, Mirpur-10 Branch should appoint women Interpreter, who will deal with women customer and aware of them about their activities.
  6. IBBL should increase investment in agricultural sector because Bangladesh is an agricultural country.
  7. The branch should improve the customer services.
  8. A large office space should immediately be allocated for this branch as well as for the dept.


Once upon a time, most of the people didn’t understand interest-free banking system.  They never thought that it is possible to provide banking facilities without interest but in passage of time, now it is clear that in Islam there as a banking procedure though profit / less sharing basis. In course of time problems have reduced but not delaminated. This bank is trying to operate their activities according to Islami Shariah. If the Govt. becomes conscious to solve these problems and the banker become cordial and cooperative, the problems may be reduced to a greater extent

The Gradual and successful globalization of Islami Banking coupled with growing awareness of the people about its financial and social benefits makes it clear that the next century is going to be the century of Islami Banking.

It would be very difficult for them to survive as a number one position, if their service qualities remain constant. Big clients are switching to other bank for this reason bank is losing huge market share.

They should pay more attention to big clients. It is also true that maintain Sheridan and pay special attention to particular person is very difficult.

Innovative product should be launched by Islami bank Bangladesh limited such as credit card, investment in education sector to cope with present situation. This project will help IBBL to get advantage over others. Special training should be given to employees to develop their behavior.


 Investment Manual, published by IBBL.

 Annual Report – 2010 of IBBL.

 Modern Islami banking by Abdur Rakib

 Marketing research by Naresh Kumar Malhotra

 Rahman, A. A. M. Habibur , “Islamic Banking,” Dhaka.

 Jeff Madura (2009) “Financial Markets And Institution” 7th edition.

 Web Sites: www.islamibankbd,com

Islami Bank Bangladesh Limited