Marketing Strategy of Islami Bank

The main objective of this report is to observe the Marketing strategy related activities for the Marketing Department of Islami Bank Bangladesh Limited. Other objectives are understand the different marketing strategy and familiarize with the various investment schemes. Other discussion are about corporate environment and investment policy of IBBL with other banks. Finally analysis there Brand value and how its improved.

Introduction

This paper highlights some of the existing marketing strategies adopted by Islamic banks in Bangladesh Theoretically; Islami bank in Bangladesh should not face any difficulties in gaining support from customers as Muslims constitute the majority of the country’s population. However, recent studies have indicated that religious no longer plays an important factor in bank patronage. Works of Rosly and Abu Bakar (2003) found that religious factor is not conclusive enough to drive Muslims to use Islamic banking facilities. In light of this revelation, Islamic banks have to better understand the needs, preferences and behavior of their target group customers in order to stay in the game. Hence, marketing strategy that is tailored to customer acquisition and retention should be properly addressed. This becomes increasingly crucial as foreign players enter the market and as products and services become more undifferentiated. Hence, Islamic banks have to be innovative and creative if they wish to establish a strong competitive position and gain competitive advantage. In the case of IBBL for example, as a market leader in the Islamic banking industry, this bank should take on the role of a barometer of the industry and thus, lead the way in setting price structure for the market making price and making other marketing changes. In reality, however, it is the other Islamic banking providers that are enjoying these competitive advantages over IBBL. In terms of product strategy, conventional banks currently aggressively are focusing its marketing efforts on e-banking services. The strategy towards e-banking as an alternative distribution or delivery channel for its customers is done with the long-term aim of saving cost on operating or opening new service outlets or branches. On the promotional strategy side, both Islamic banks are pursuing strategies to educate the public about Islamic banking products and services. As competition intensifies, Islamic banks have to design effective performance evaluation system and understand the changing needs of its customers. For example, in a recent work (2010), the authors reported that IBBL customers perceived compliance to Shariah as the most important factor when dealing with the bank. This means that customer is concerned s to whether Islamic bank is observing the Shariah principles in conducting its activities. From their findings, they further concluded that Islamic business ethics are perceived as an essential element that Islamic banks must conform to. In a different study, Tahir and Ismail (2010) reported that the service level of Islamic bank in Bangladesh unacceptable and less than satisfactory..

The main objective of this report is to observe the Marketing strategy related activities for the Marketing Department of Islami Bank Bangladesh Limited. Other objectives are understand the different marketing strategy and familiarize with the various investment schemes. Other discussion are about corporate environment and investment policy of IBBL with other banks. Finally analysis there Brand value and how its improved.

Marketing strategy

Marketing strategy is one the most important areas that needs to be carefully examined by the policy makers of Islamic banks. This stems from the need to improve the performance and ensure sustainable growth of Islamic banks as competition in the banking industry intensifies. A sound marketing strategy becomes imperative as Islamic banks not only operate in an environment where service quality and financial returns are perceived as the essential criteria from customers’ viewpoint, but they must also compete with conventional banks which are known to have better experience and expertise in the banking business. Religious element, which was once thought as the major factor that drives Muslims to use Islamic banking facilities offered by Islamic banks, has now become irrelevant to Muslim customers. Coupled with an increasing competitive environment from both Islamic and conventional banks and changes in customers’ perception; it is of paramount importance for Islamic banks to assess the effectiveness of their marketing strategy. This paper reviews the current marketing strategy of Islamic banks in Bangladesh. Among the topics highlighted are strategies related to product, pricing, promotion, distribution channel, and human resources. The study finds that the newest Islamic bank and Islamic banking department of conventional banks have more aggressive marketing objectives than the pioneering Islamic bank.

Objective of the STUDY:

The primary objective of this report is to observe the Marketing related activities for the Marketing Department of Islami Bank Bangladesh Ltd.

The other objectives include:

• To understand the different marketing strategy.
• With a view to familiarize with the various investment schemes.
• To get the practical exposure of the banking activities.
• To adapt with the corporate environment.
• To understand the investment policy of IBBL with other banks.
• Where IBBL are?
• And there Brand value and how its improved.

Islamic Banking System

Since its introduction, Islamic banking products have been well accepted by Bangladeshis. This is reflected by the increasing amounts of total deposits and total loans that are based on Islamic principles placed by Muslim and non-Muslim customers. In the case of BIMB for example, at the end of June 1984 (the first year of operation), the total deposits and total loans were RM241 million and RM162 million respectively. At the end of 1994 (the 10th year of its operations), total deposits increased to RM2, 548 million whilst total loans increased to RM977 million. The corresponding figures for the financial year 2004 were RM11, 269 million and RM7,640 respectively. Public support and acceptance towards the Islamic banking system is also high as reflected by the usage of Islamic banking products offered by the conventional financial institutions. In 1994, i.e. the first year of which selected commercial banks were allowed to introduce Islamic deposit facilities, a total of RM1,463 million deposits was collected from the customers. This figure comprises of deposits in current account (RM166 million), savings deposit  three types of deposits continue to receive full support from the public. At the end of 2004, total Islamic deposits placed by customers at commercial banks increased to RM53, 273.5 million. The figure for current account was RM12,886.9 million, whereas RM8,072.9 million and RM32,313 million for savings and investment accounts, respectively. Although figures for total deposits of BIMB and Islamic deposit facilities of commercial banks had increased significantly for the last five years, we cannot generally imply that public in Bangladesh is all receptive towards Islamic banking products. The comparative growth figures between Islamic and conventional deposits are good indicators for making few comments for further considerations. The growth for various types of deposit facilities in conventional and Islamic system of commercial banks is shown in Table 1. As indicated in Table 1, the yearly growth figures for Islamic deposits were greater, in most cases, than the figures for conventional deposits. Looking at individual figures, we can also see that in many

Aims & objectives of the Islamic Banking

• To conduct interest free banking.
• To establish participatory banking instead of banking on debtor creditor relationship.
• To invest through different modes permitted under Islamic Shariah
• To accept deposits on profit-loss sharing basis.
• To establish a welfare-oriented banking system.
• To extend co-operation to the poor, the helpless and the low-income group for economic uplift.
• To pay 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 country for achieving the ultimate goal of Islamic economic system.

Historical Background of Islami Bank Bangladesh Limited (IBBL)

Islami Bank Bangladesh Limited (IBBL) is the first Islamic bank in the “South East Asia”. It is a multinational joint venture public limited company engaged in banking business based on Islamic Shari’ah having largest branch network among the private sector banks in Bangladesh. The bank was incorporated on 13.3.1983 as a Public Company with limited liability under the Companies Act 1913. The established of this Bank ushered a new era in Bangladesh, the 3^rd largest Muslim country of the world. The bank is committed to run all its activities based on Islamic Shariah’s IBBL through its steady progress and continued success has, by now earned the reputation of being one of the leading private sector banks of the country.

IBBL as an Islami Bank:

In August 1974, Bangladesh signed the Charter of Islamic Development Bank and committed itself to reorganize it economic and financial system as per Islamic Shariah.

In November 1980, a delegation of IDB visited Bangladesh and showed keen interest to participate in establishing a joint venture Islamic Bank in the private sector. Two professional bodies Islamic research Bureaus (IERB) and Bangladesh Islamic Banker’s Association (BIBA) made significant contribution towards introduction of Islamic Banking in the country.

At last, the long drawn struggle to establish and Islamic bank in Bangladesh became a reality and Islamic bank Bangladesh was established in March 1983, in which 23 Bangladeshi National, 4 Bangladeshi institutions and 1 banks, financial institutions and Governments bodies of the middle East and Europe including IDB and two eminent personalities of the kingdoms of Saudi Arabia joined hands to make the dream into a reality.

Business philosophy of IBBL:

The philosophy of Islami Bank Bangladesh Limited is to the principles of Islamic Shariah. The organization of Islamic conference (OIC) defines an Islamic Bank as “a financial institution whose status, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banking of the receipt and payment of interest on any of its operations. The sponsor, perception is that IBBL should be quite different from other privately owned and managed commercial bank operating in Bangladesh, IBBL to grow as a leader in the industry rather than a follower. The leadership will be in the area of service, constant effort being made to add new dimensions so that clients can get “Additional” in the matter of services commensurate with the needs and requirement of the country growing society and developing economy.

Mission of the Bank

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 activity balanced growth and equity development through diversified investment operations particularly in the priority sectors and less development areas of the country.  To  encourage  socio-economic  uplift  and  financial  services to  the  low  income  community  particularly  in  the  rural  areas. Contrary to the strategy espoused by Islamic banks, conventional banks do not explicitly inform the public the vision and mission of their Islamic banking division. For example, Maybank Bhd. Only highlights the general statement of its aspiration to become an institution that plays an important role in the development and promotion of Islamic banking and takaful in Malaysia and afar. The Public Bank Islamic Banking Division also adopts similar approach. Based from the statement published in the bank’s website, it is clear to us that the Islamic banking products offered by this bank are just an alternative to their conventional products.

In the commercial banking side, this bank aims to establish a strong foothold in the trade finance and small and medium enterprises. As a leader, IBBL has continuously stated its aspiration of continuing its role in developing, promoting and expanding huge transactions in Islamic finance. In the case of Bangladesh Bank, it is evident from the 2009 annual report that the bank aspires to become a challenger to IBBL. As depicted in this report, Bangladesh Bank’s strategy to compete for a share of the Islamic customer base is to increase its consumer and retail financing at 60 percent level in the year 2005 as well as to increase fee-based income through investment banking division.

Vision of the Bank

The vision of IBBL is to always strive to achieve superior financial performance, be considered a leading Islamic Bank by reputation and performance. Besides,

To establish and maintain the modern banking technology, to ensure the soundness and development of the financial system based on Islamic principles and become the strong and efficient organization with highly motivated professionals, working for the benefit of people, based upon accountability, transparency and integrity in order to ensure stability of financial system.

• Try to encourage savings in the form of direct investment
• Try to economic investment particularly in projects, which are move likely to lead to higher employment.

In a Sentence -To be a Strong, Progressive and Modern Islamic Bank offering innovative, quality and competitive products and services.

Special Features of IBBL:

All activities are conducted on interest-free system in accordance with Islamic Shariah Principles.

• Investment is made through different modes as per Islamic Shariah.
• Investment-income of the Bank is shared with the Mudaraba depositors according to an agreed upon ratio ensuring a reasonably fair rate of return on their deposits.
• Aims to introduce a welfare-oriented system and also to establish equity and justice in the field of economic operators.
• Extends socio-economic and financial services to individuals of all economic background with strong commitment in rural advancement uplift.

Shareholdings

The IBBL holds a diverse shareholding pattern with foreign and domestic sponsor shareholders. The foreign investors hold 58.23% of total shares while the local investors hold the rest 41.77%. The sponsors other than Sponsor Directors (both local and foreign) hold 42.56% and the general public and the govt of Bangladesh were holding 57.44 %  of the total outstanding shares (61,776,000 ordinary shares) as on December 31, 2010.

 Corporate information (as on Dec 31, 2010)

General Marketing Strategy Practices

Marketing strategy is commonly defined as a strategy employed by a firm to attain its marketing objectives, which in turn is related to the achievement of the firm’s business objectives. In other words, marketing strategy refers to the marketing goals and action plans that address matters of product/ service price, distribution, communication, and the process of new product development. The adaptation of any strategy depends much on factors such as management style and experience of the top management, age of the institution, economic environment, and regulations. Generally, we can safely identify whether a particular bank is a market leader, challenger, follower and nicher by identifying its vision, mission, objectives, and marketing strategies. The market leader strategy is for those banks that occupy a dominating position in the market and have established their reputation as a leader. By virtue of having a leadership in the market, it is natural that the market share of the concerned bank is the biggest. Banks belonging to the challenger group are those occupying second, third and lower rank and are always formulating and pursuing strategies to expand their market share by targeting the territory of the market leader. Whereas, strategies adopted by the followers would normally be to maintain its current customers base and win a fair share of new customers by bringing distinctive advantageous to their target market. The market nicher is for the smaller banks, which have limited resources and generally focused on selected customers. Banks that falls under this category often concentrates on only one market segment of the market. Usually, only one marketing strategy, which is well, tailored to meet the needs of a specific target-market group, is developed.

Product Strategy

As a service oriented business, image is a central factor in a bank’s effort to differentiate itself from competitors. Generally, the way products or services are made available to customers helps to create the image of the particular institution in the mind of the customers. This image is reflected in the customers’ perceptions and feelings about the products or services offered. This is important because customers experience with a particular product or services will affect their attitude towards the bank and other product and services as well even if they had never used the other products. Under product strategy, customer must also be able to link a specific image with a specific Since customers purchase products and services to satisfy their needs and wants, Islamic banks have to understand the nature of these needs and want in order to appreciate the kind benefits customers expect to receive. Among the different kinds of benefits that people expect to get when buying goods and services includes good value for money, novelty, availability, and ease of use. Benefits enter into the equation when a customer decides to use one product in preference to another. It is the benefits received, which makes a product or services attractive to a customer. In view of this, banks should give more attention to the benefits it creates for the users when marketing a product or a service. Relating this to Islamic banks, they have to be able to communicate these benefits convincingly to public, either directly or indirectly, in order to persuade the public to use the facilities and products being offered. Since Islamic banking is an alternative to conventional banking, Islamic banks needs to innovative in terms of products and services. Only through innovation in products and services can Islamic banks sustain their competitive advantage against other conventional or foreign banks that offer similar Shariah compliance facilities. Table below presents the list of products and services offered by IBBL—

The Products offered Under Mudaraba Mode are as follows:

• MSA-Mudaraba Savings Account
• MHSA-Mudaraba Hajj Savings Accounts
• MSB-Mudaraba Saving Bonds
• MSS-Mudaraba Special Scheme
• MTDR-Mudaraba Term Deposit receipt
• MMPDS –Mudaraba Monthly Profit distribution scheme
• MMS-Mudaraba Mohor Savings A/c
• MSNA-Mudaraba Short Notice A/c
• Mudaraba Waqf Cash Deposit Account

Trend of Deposits: 2005 to 2009

The amount of total deposits under various deposits products and deposit mix in 2009. Table-3

Mudaraba Accounts:

Mudaraba is a form of business contract where one party suplies money and the other manages the business by investing labor and time. Profits generated   form the venture are shared by both in a proportion agreed upon at the time of contract. However, in this arrangement, the financier is solely responsible for any loss that may be incurred. The financier of the business is known as Sahib al Mal, Rabbul Mal or owner of the capital and the manager of the business is called Mudarib or entrepreneur.

IBBL receive deposits in Mudaraba accounts that are invested into business ventures by the bank directly or through some other third party. Any profit earned form these investments is distributed among the Mudaraba depositors at a predetermined percentage and the bank retains the residual amont as its profit. In the event no profits are earned, the depositors receive nothing for their deposit. In addition, should a loss be incurred, the Mudaraba depositors are liable to share in the losses in the proportionate share of their deposits. However, if the loss incurred is due to the fault, negligence or non-adherence of bank rules on behalf of the bank or bank personnel, liability of loss is the banks sole responsibility.

Different product (continues)

Treasury Product

• Foreign Exchange
• Investment and trading in Islamic Securities

Electronic Banking

• ATM services
• Debit Card
• I Banking ( Internet Banking)
• On Line Banking(eIbs)

Other Services

• Lockers
• Protection

Electronic Integrated Banking System

IBBL has developed its own integrated banking system namely as eIBS (electronic Integrated Banking System) with the following objectives:

• To support True Islamic Banking System.
• To develop in-house software which encourage local talents to design & develop, maintain and enhance the banking system.
• To give an opportunity to the young, energetic fresh graduates to design, develop and maintain a complete banking solution of International Standard.

IBBL has taken the initiative to develop such large scale software to support the Islamic Banking solution in the year of 2001. A team of 20 fresh and experienced graduates from different reputed universities was formed under the supervision of a talented project manager and advisory and consultancy services of local and western reputed universities made the project a success history in Bangladesh.

Pricing Strategy

The second element in the marketing mix is pricing. Pricing strategy is another marketing technique that can be used to improve a bank’s overall competitiveness. The key to success is to have a well planned strategy, to establish policies and to constantly monitor prices and operating costs to ensure profits. An important part of the pricing strategy is determining how product or service is priced. It has been proven in many previous research that majority of customers do not use religion as the main factor when establishing a relationship with Islamic banks. In the case of corporate customers for example, they believe that it is the cost and benefit element that is the most important factor when selecting financial institution (Ahmad and Haron, 2002). Most customers still seek the highest return and low est charges imposed when deciding which bank to place a deposit or obtain funding from. Generally, marketing textbooks recommend three types of pricing strategies: skimming, penetration, and competitive pricing strategy.

Distribution Pricing

This component of the marketing mix is related to the distribution of services to the ultimate customers. Services that require the customer to go to the producer must be as accessible as possible. Hence, an important consideration in the distribution strategy for banks is location of their branches. The task before the management is to select the place where the actual sale is to take place and this should be in the face of conveniences an comforts to the customers. To the extent it is possible, they should reach to the doorsteps of the customers. Thus it is pertinent that the branches are located at a suitable point. However, a study conducted on Bangladeshi customers by Haron et al. (1994) found otherwise. For example, the authors reported that the top five factors that are considered as important by Bangladeshi Muslim when selecting their banks are:

1. Fast and efficient services
2. Speed of transactions
3. Friendliness of bank personnel
4. Confidentiality of bank
5. Knowledgeable about the needs of customers

Non-Muslim customers ranked the following as important when selecting their banks :

1. Friendliness of bank personnel
2. Fast and efficient services
3. Reputation and image of bank
4. Speed of transactions
5. Confidentiality of bank

Although Bangladeshi customers do not perceive location as one of the top priorities, nevertheless policy in ensuring the accessibility of banking services to customers is regarded an important distribution strategy by most banks. Table 6 (see page 14) presents the number of branches and Islamic Banking Scheme (IBS) counters for the year-end 1999 to 2003. Since sales and market share are contingent upon distribution (i.e. market coverage and distribution intensity), products and services must be made easily accessible to the end-users. Para 2.11 clearly shows that conventional banks offering Islamic windows place more importance on their distribution strategy than their Islamic counterparts. With 248 branches opened by Islamic banks, conventional banks have a strong channel network that is deemed as a crucial way to gain competitive advantage since distribution channel provides access to market targets. Recognising the importance of distribution strategy as one of the key to successful and effective marketing strategy, Islamic banks had recently introduced the concept of mini-branch and kiosk to their customers in which basic banking facilities are provided

through this new distribution channels. These mini branches and kiosks are strategically located at departmental stores and shopping complexes so as they are accessible to the general public.

Promotion Strategy

Promotion is the function of informing, persuading, and influencing the customer’s decision process. Usually the bank’s marketing manager will respond to the goals and objectives of the bank by formulating various elements of the promotional strategy i.e. personal selling, advertising, sales promotion, publicity and public relations. Promotional strategy is closely related to the process of communication. A standard definition of communication is the transmission of a message from a sender to a receiver. Marketing communication, then are those messages that deal with buyer-seller relationships. Marketing communication is a broader concept than promotional strategy, because it includes word-of-mouth advertising and other forms of unsystematic communication. A planned promotional strategy, however, is certainly the most important part of any marketing communications. Table highlights the existing promotional strategies adopted by selected Islamic banks and conventional Bank in Bangladesh.

Important Features

• In case of Hire Purchase under Shirkatul Melk transaction the asset/property involved is jointly purchased by the lessor (bank) and the lessee (client) with specified equity participation under a Shirkatul Melk contract in which the amount of equity and share in ownership of the asset of each partner (lessor bank and lessee client) are clearly mentioned. Under this agreement the lessor and the lessee become co-owners of the asset under transaction in proportion to their respective equity.
• In Hire Purchase under Shirkatul Melk Agreement the exact ownership of both the lessor (bank) and lessee (client) must be recognized.  However, if the partners wish and agree the asset purchased may be registered in the name of any one 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 purchased asset owned by the lessor (bank) is put at the disposal possession of the lessee (clients) 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 stipulations are clearly stated. Under this agreement the lessee (client) becomes the owner of the benefit of the asset not of the asset itself, in accordance with the specific provisions of the contract that entitles the lessor (bank) the rentals.
• As the ownership of leased portion of asset lies with the lessor (bank) and rent is paid by the lessee against the specific benefit, the rent is not considered as price or part of price of the asset.
• In the Hire Purchase under Shirkatul Melk agreement the Lessor (bank) does not sell or the lessee (client) does not purchase the asset but the lessor (bank) promise to sell the asset to the lessee only if the lessee only if the lessee pays the cost price/equity price of the asset as fixed and as per stipulations on which the lessee also gives undertakings.
• The promise to transfer legal title by the lessor and undertakings given by the lessee to purchase the ownership of leased asset upon payment part by part as per stipulations are affected only when it is actually done by a separate sale contract.
• As soon as any part of lesssor’s (bank’s) ownership of asset is transferred to the lessee (client), that becomes the property of the lessee and hire contract for that share/part and entitlement for rent thereof lapses.
• The hire contract becomes effective from the day on which the lessor transfers the possession of the leased asset in good order and usable condition, so that the lessee may make use of the same as per provisions of the agreement.
• Effectiveness of the sale contract depends on the actual sale and transfer of ownership of the asset by the lessor to the lessee.

Some of Promotional Activities of IBBL

Training services:

1. International; Training to Foreigners on Islamic Banking
2. National: Training to others on Islamic Banking
3. Islamic Banking Diploma.

Corporate Social Responsibilities of IBBL:

Islam Bank Bangladesh Limited being one of the most important corporate citizens of the country has been discharging its responsibilities to the society in general, both directly through its mainstream operations as well as indirectly through its fully owned subsidiary ‘Islami Bank Foundation’ since inception.

Social Services provided through Islami Bank Foundation are as follows:

Health Care Services:

• Islami Bank Hospitals
• Islami Bank Community Hospitals
• Low Cost Eye Treatment Project
• Circumcision Camp
• Charitable Dispensaries
• Islami Bank Homeopathy Clinic

Health Care Education:

• Islami Bank Medical College
• Islami Bank Nursing Training Institute
• Islami Bank Health Technology Institute
• Midwifery Training Institute

Technical Education:

• Islami Bank institute of Technology

General Education:

• Islami Bank International School and College
• Islami Bank Model School and College
• Islami Bank Mohila Mrdrasha
• Scholarship Program
• Model Forquania Maktab

Other Programs:

• Bangladesh Sangskritic Kendra
• Islami Bank Women Rehabilitation Centre
• Islami Bank Service Centre
• Monorom-Islami Bank Crafts and Fashions

Achievement & Recognition

As recognition of good performance IBBL. Won the following awards:

• The global Finance, a reputed U.S.A based quarterly financial magazine, awarded IBBL as the Best Islamic Financial Institution of the country for the year 2009.
• The Institute of Cost and Management Accountants of Bangladesh (ICMAB) awarder IBBL as the ICMAB National Best Corporate Award -2007 & ICMAB Best Corporate Performance Award-2008.
• Credit Rating In formation & Service LTD. (CRISL) rated IBBL AA (High Safety) for long term for the year 2004, 2005,2006, 2007, and 2008.
• The Institute of Chartered Accountants of Bangladesh (ICAB) awarded IBBL with the Certificate of Appreciation in the best published accounts and reports for the year 2001 and Certificate of Merit for the year 2008.
• Bankers Forum awarded IBBL as the Best Bank for Corporate Social Responsibility for 2008.
• IBBL got Best Banking Stall Award in the banking fair organized by Sheraton Hotel, Dhaka in 2009.

Market Leader in Shariah Based Banking

Islamic Banking in Bangladesh was started in the year 1983 with the establishment of Islamic Bank Bangladesh Limited as the first Islamic Bank. There were 452 branches of 7(seven) Islamic bank in Bangladesh out of which Islami Bank Bangladesh Limited had 248 branches as on 31st December, 2010. Over the last 25 years, Islami Bank Bangladesh Limited has been providing shariah based Islamic Banking services across the country through introducing a lot of Islamic banking.

These findings suggest that Islamic bank have to give increasing attention to measuring marketing’s effectiveness and customer satisfaction.

Foreign Exchange and Foreign Trade

As the requirement of the report first we need to know about foreign exchange and foreign trade. Foreign exchange means foreign currency includes any instrument drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank order 1972, all the deposits, credits and balances payable in any foreign currency and draft check, letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign currencies.

On the other hand foreign trade includes the spectrum of goods services, investment, technology transfer etc.

In today’s modern world the banking sector is uprising and playing a vital role in our economic development. It is also playing a significant role in expanding foreign exchange business of the country. Islami Bank Bangladesh Ltd. is one of the largest commercial bank and Islamic financial institution of the country. It operates all its activities under the obligation of Islamic Shariah including Foreign Exchange Business and playing a significant role in foreign exchange business of the country from the beginning. As an Islamic Bank IBBL has some differences in foreign exchange business operations along with regular activities. It has some unique products & services in financing foreign exchange business. Such as Bai-Murabaha, Musaraka, HPSM, Bai Salam, Bai-Asraf etc.

According to the principle of Islamic Shariah, interest is strictly prohibited. So Islami Bank Bangladesh Ltd. is conducted based on profit & loss sharing approach rather than interest basis. So, to operate the foreign exchange business on the basis of “Profit & Loss Sharing Approach” IBBL considers foreign trade financing investment under different Islamic modes and executes “Buy & Sell” operation with the clients.

By following this unique system IBBL try to avoid the interest beneath modern foreign exchange business and provide various services helpful for the importers & exporters.

As it is shown in the report that the foreign exchange business IBBL has grown rapidly there are some problems IBBL needs to deal with. So in my report I try to find out the Islamic ideas regarding Foreign Exchange Business, Procedures maintained by IBBL & some concurrent problems.

Concluding Remarks

This paper highlights some of the existing marketing strategies adopted by Islamic banks in Bangladesh Theoretically; Islami bank in Bangladesh should not face any difficulties in gaining support from customers as Muslims constitute the majority of the country’s population. However, recent studies have indicated that religious no longer plays an important factor in bank patronage. Works of Rosly and Abu Bakar (2003) found that religious factor is not conclusive enough to drive Muslims to use Islamic banking facilities. In light of this revelation, Islamic banks have to better understand the needs, preferences and behavior of their target group customers in order to stay in the game. Hence, marketing strategy that is tailored to customer acquisition and retention should be properly addressed. This becomes increasingly crucial as foreign players enter the market and as products and services become more undifferentiated. Hence, Islamic banks have to be innovative and creative if they wish to establish a strong competitive position and gain competitive advantage. In the case of IBBL for example, as a market leader in the Islamic banking industry, this bank should take on the role of a barometer of the industry and thus, lead the way in setting price structure for the market making price and making other marketing changes. In reality, however, it is the other Islamic banking providers that are enjoying these competitive advantages over IBBL. In terms of product strategy, conventional banks currently aggressively are focusing its marketing efforts on e-banking services. The strategy towards e-banking as an alternative distribution or delivery channel for its customers is done with the long-term aim of saving cost on operating or opening new service outlets or branches. On the promotional strategy side, both Islamic banks are pursuing strategies to educate the public about Islamic banking products and services. As competition intensifies, Islamic banks have to design effective performance evaluation system and understand the changing needs of its customers. For example, in a recent work (2010), the authors reported that IBBL customers perceived compliance to Shariah as the most important factor when dealing with the bank. This means that customer is concerned s to whether Islamic bank is observing the Shariah principles in conducting its activities. From their findings, they further concluded that Islamic business ethics are perceived as an essential element that Islamic banks must conform to. In a different study, Tahir and Ismail (2010) reported that the service level of Islamic bank in Bangladesh unacceptable and less than satisfactory..