Performance Analysis of Social Islami Bank Limited

Executive Summary

As a student of NATIONAL UNIVERSITY, Internship is an integrate part to accomplish the BBA degree. This report has been prepared on the basis of three month works experience in Mohammadpur Kaderia Tayebia Madrasha Branch of SIBL, with the instruction of Md. Kamruzzaman, In Charge of Department of BBA of Mohammadpur Kendriya College. Social Islami Bank Limited started its operation on 22^nd November, 1995 as a Second Generation Islami Bank in close co-operation and assistance of some renowned personalities of Islamic world. Targeting poverty, SIBL is indeed a concept of 21^st century participatory three sector banking model: Formal sector, Non formal sector, Voluntary sector.

The internship program has been completed in Social Islami Bank Limited at Mohammadpur Kaderia Tayebia Madrasha Branch. Internship functions have been performed in three departments (General banking, Foreign Exchange and Investment department). During the internship period in General Banking, several functions are performed like – Account opening, Remittance, Cash and clearing section. As a very few time has been spent in foreign exchange department. So the functions were not so vast.

Among the three departments of the bank, more emphasize has been given to General Banking activities, in order to prepare this report. Basically  report’s findings is cover two major areas, first- “Managing the need of General Banking customer”, SIBL fulfill General Banking customer need by offering the various types of Account like- Al wadia current and Saving accounts and different deposit scheme like- Lakhopoti deposit scheme, pension saving scheme etc and other functions like- Remittance, clearing, cash section function.  SIBL also follow some procedure to manage the need of General Banking customer.

Another major area of this report is “Performance Analysis of SIBL” and in this part some tools has been used to analyze the performance of the bank like- Financial statement analysis. In order to do this analysis, Common size Comparative Balance sheet & Income statement and Ratio analysis have been prepared. From the calculation, it is found that the Total asset, client deposit, owners equity are increased as both amount and percentage from the last year. The Income from investment, income from operating income and Net income are also increased from the last year.

Ratio analysis in one of the common method to analyze the bank performance, from the calculation it is observed that the Liquidity and Efficiency ratio are not good but the percentage of profitability and capital adequacy ratio are increase from the previous year. The above explanations indicate that the overall performance of the bank is satisfactory.

Origin  of the Report:

As a student of NationalUniversity, Internship is an integrate part to accomplish the BBA degree. At the time of internship program students are suppose to prepare a Report based on their observation of practical work.

This report has been prepared on the basis of three month works experience in Mohammadpur Kaderia Tayebia Madrasha Branch of SIBL, with the instruction of Md. Kamruzzaman, In Charge, MohammadpurKendriyaCollege. I tried my level best to prepare this report sincerely.

Scope of the Study:

In my internship period, the scope of the work was as vast as I was assigned to work in every departments of the bank in Mohammadpur Kaderia Tayebia Madrasha Branch, I have tried to observe and understand the all banking activities especially General banking activities and other day to day functions perform in this branch. I also tried to understand different topic from the bank personnel.

Objectives of the Report:

The board objective of this report is to complete my BBA program and to acquire knowledge of banking sector. To achieve the main objectives, I also try to understand some specific objectives. Those objectives are pointed out as follows:

• To gather knowledge about the functions and transactions of different departments of the bank.
• To get ideas on the activities of General banking.
• To get ideas of Foreign exchange department
• To understand the difference between previous and present banking system of SIBL.
• To find out the financial performance of the bank
• To know the difference between Islamic banking and conventional banking system.

Methodology:

Data collection method

This report has been prepared on the basis of the data that were collected during the internship period. I have conducted in depth interview with the different experience personnel of the bank. In order to make the report more meaningful and acceptable, I tried to collect data from two sources-

Primary source: Face to face conversation with the respective officer and staff of the bank.

Secondary sources: Annual report (2007, 2006), Printed material of SIBL, Internet and previous report.

Data analysis method

All the data that collected from primary & secondary sources have been analyzed by using the following methods to reach the Report’s Findings.

• Observation Technique
• Financial statement analysis:
  • Ratio analysis
  • Common size financial statement analysis (Vertical)
  • Comparative financial statement analysis (Horizontal)
• SWOT analysis

After analyzing the data, I have been able to reach my findings that represent the “Managing the Need of General Banking customer & Performance analysis of SIBL”

Limitation

• Difficult to collect necessary data because the busyness of the bank personnel.
• Three months is not sufficient to know the overall banking functions.
• I carried out such a study for the first time, so inexperienced is one of the main constraints of the study.

Overview of SIBL

Social Islami Bank Limited(SIBL) was incorporated on 5^th July, 1995 as a result of dedicated effort of a group of established Bangladeshi entrepreneurs and internationally important personalities. The bank started commercial operation on 22^nd November, 1995 with a clear manifesto to demonstrate the operational meaning of particularly economy, banking and financial activities as an integrated part of Islamic code of life. Targeting poverty, SIBL is indeed a concept of 21^st Century participatory several sector banking mode.   The formal corporate sector, this Bank would, among others, offer the most up-to date banking services through opening of various types of deposit and investment accounts, financing trade, providing letters of guarantee, opening letters of credit, collection of bills effecting domestic and international transfer, leasing of equipment and consumer durables, hire purchase and installment sale for capital goods, investment in low-cost housing and management of real estates, participatory investment in various industrial, agricultural , transport, educational and health projects and so on. In the Non-formal non-corporate sector, it would, among others, involve in cash Waqf Certificate and development and management of WAQF and MOSQUE properties, and Trust funds.

Mission of SIBL

• High quality financial services the latest technology.
• Fast, Accurate and Satisfactory customer service.
• Balanced & sustainable growth strategy.
• Optimum return on shareholders’ equity.
• Introducing innovative Islamic Banking products.
• Attract and retain high quality human resources.
• Empowering real poor families and create local income opportunities.
• Providing support for social benefit organizations – by way of mobilizing funds and social services.

 Vision of SIBL

Social Investment Bank Ltd started its journey with the concept of 21^st Century Islamic participatory three sector banking model:

i)   Formal Sector- Commercial Banking with latest technology

ii)  Non-Formal Sector – Family Empowerment Micro-Credit & Micro-enterprise program

iii)  Voluntary Sector – Social Capital mobilization through CASH WAQF and others. Finally, “Reduction of Poverty Level” is our Vision, which is a prime object as stated in Memorandum of Association of the Bank with the commitment “Working Together for a Caring Society”.

 Management Hierarchy

Products & Service of SIBL:

As a commercial Bank, the SIBL provide all traditional banking services including a wide range of saving and investment scheme products, foreign exchange and ancillary services with the support of modern technology and professional management. The following table holding different product of respective departments of SIBL.

Need of General Banking Customer:

Need is the most basic fundamental thing. Without fulfilling the customer, need it’s impossible to achieve success. Every bank wants to fulfill their customer’s need by offering various types of Deposit scheme, Different type’s loan, and other types of activities

As the report’s one of the findings has been done on the basis of General Banking functions, so in this part I tried to explain, how SIBL fulfilling their customer needs. Based on the three months experience I observed, SIBL fulfill General Banking customer need by offering the various types of  Account & Deposit scheme and other necessary functions –

Types of deposit offer to meet the customer need

Types of Deposit and other account offered to meet customer need-

1. Al wadia Current Deposit
2. Mudaraba Saving Deposit
3. Mudaraba Term deposit
4. Mudaraba Scheme Deposit

• Mudaraba Lakhopoti Deposit Scheme
• Mudaraba Double Benefit Deposit Schem
•  Mudaraba Pension Saving Deposit
• Mudaraba Education Deposit
• Mudaraba Hajj Saving Deposit

 Al Wadiah Current Deposit

Alwadiah Deposit is accepted on Alwadia principles which mean al Amanah with permission to use. According to this principle Bank can use the fund of the account along with other funds as per Shariah at bank’s own risk. Account holder(s) will not share any profit/loss. Alwadiah Current Deposit A/C is opened on proper introduction with minimum initial deposit fixed by the Bank. Withdrawal can be made only through cheques issued by the bank.

Mudaraba Savings Deposit

Mudaraba i.e. Deposit of one party and on the basis of operation by another party this deposit is taken. By providing Introducer of the account as required by the bank and by depositing a minimum amount any depositor or multiple depositors can open single or joint account. Any educational institute, Club, Association or Social institutes can open this account. Amount can be withdrawn twice a week but highest 4 times a month.

Mudaraba Term Deposit

Mudaraba Term Deposits are opened by the bank with a sum of Tk. 5000 or above any amount from individuals (single and joint), firms (proprietorship/partnership), limited companies etc. This deposit is accepted by the period of 1, 3, 6, 12, 24 months. This account holder will share the profit of investment with Social Investment Bank Ltd, at the rate declared by the bank from time to time. The Bank reserves the right to invest the funds received in mudaraba term deposit accounts, in its sole judgment, in any interest-free “Halal” business it deems fit. If the profit amount is not withdrawn it will automatically be added to the principal amount annually and the entire amount will earn profit/loss.

Mudaraba Scheme Deposit

A large number of scheme deposits are available in SIBL, the bank tried to meet customer need by using the following scheme-

a) Mudaraba Lakhopoti Deposit Scheme

Any person can open this account by selecting a monthly saving amount of Tk. 470/-, 1280/-, 2380/-, 3830/-. The duration of this scheme is 2, 3, 5, 10 years. The instrument cannot be en cashed before maturity. In case of emergency if the depositor wants to en cash before maturity then the profit will be given as per rules of Mudaraba Saving account but no profit will be given in case of closing the account before 6 (six) months. After successful continuation of the scheme for 1 year the depositor may take up to 80% loan of the deposited amount.

b) Mudaraba Double Benefit Deposit Scheme

The bank open this scheme by taking Tk. 10,000 or any multiple amounts from any person or depositor, this scheme will be accounted under Islamic shariah based Mudaraba rules. The instrument cannot be encashed before maturity. The instrument cannot be en cashed before maturity. In case of closing the account before maturity profit will be given as per rules of Mudaraba Saving account but no profit will be given in case of closing the account before One year.

c) Mudaraba Pension Saving Deposit

Any Bangladeshi person aged above 18 yrs and having sound mental condition can may open this scheme by selecting a monthly saving rate such- Tk. 100/-, Tk. 200/-, Tk. 300/-, Tk. 400/-, Tk. 500/-, Tk. 1000/- . Under this scheme any person can deposit a fixed amount monthly and after maturity the depositor will get a handsome amount with increased profit. The depositor may encash the total amount at a time or can take as monthly pension until a stipulated time.

d) Mudaraba Education Deposit

The bank can open this scheme by taking Tk. 25000 or multiple amounts from any peroson or depositors. Duration of this account is 7,10,15,20 years. After the maturity of this scheme the amount can be en cashed at a time or can be taken for the next 6 (Six) years of maturity. The instrument cannot be en cashed before maturity. In case of emergency if the depositor wants to en cash before maturity then the client need to follow some rules & regulation such if the scheme closed before seven years no profit will be given but after seven years the profit will be given as per rules Mudaraba Saving A/C.

e) Mudaraba Hajj Saving Deposit

This scheme will be accounted under Mudaraba rules. The Bank as Mudarib and the account holder will be treated as Sahib-e-Mal. The duration of this scheme will be 1 to 20 years. An introducer must be there to open an account. Any installment size can be chosen during the opening of the account In case of closing the account before maturity profit will be given as per rules of Alwadiah Current account. No profit will be given in case of closing the account before 6 (Six) months.

Other functions to meet the customer need

Remittance sections Functions

Remittance section is one of the most important sections in GB. This section helps to remit funds from one place to another place on behalf of its customer through a network of branches. SIBL has its branches in major cities of the country and therefore, it serves as one of the best medium for remittance of funds from one place to another place.

Cash Sections Functions

The cash section of a bank or any branch of a bank plays an very important role in general banking department because it deals with most liquid assets.

Clearing sections Functions

The main function of this section is to collect instrument on behalf of the client through Bangladesh Bank clearinghouse, Outward bill collection (OBC) and Inward bill collections (IBC).

Process to manage the need of General Banking customer:

Based on the above discussion, it is cleared that how SIBL fulfill the customers need. This section will deals with how the bank used to manage those need. In this section, I tried to explain the process to manage different types of A/C and other General Banking functions.

Process to manage different types of account

Before opening of Al Wadia current account, the following formalities must be completed by the customer.

• Application on the prescribed form
• Furnishing photograph
• Introduction by an account holder
• Putting specimen signatures in the specimen card
• Mandate if necessary

In case of Partnership Account:

• Partnership Letter Duly signed by all partners
• Registration
• Rubber stamp
• Updated Trade License
• Identity (copy of passport).

Process to manage Mudaraba Saving Account

• Application on the prescribed form
• Furnishing photograph
• Introduction by an account holder
• Putting specimen signatures in the specimen card
• Mandate if necessary
• Nominee.

Process to manage Mudaraba Term Deposit

• Application on the prescribed form
• Furnishing photograph
• Putting specimen signatures in the specimen card.

Process to manage all types of Mudaraba Deposit Scheme

• Application on the prescribed form
• Furnishing photograph
• Putting specimen signatures in the specimen card.
• Nominee.

From the above explain we see that the opening procedures of different types of A/C almost similar.

Following are the contents of the application form opening of different types of A/C:

• Types of the account; individuals/ joint/ proprietorship/ partnership/ limited company/ club/ society/ co-operatives.
• Name of the applicant (s)
• Father’s / husband’s name
• Present address
• Permanent address
• Number date of issue, date of expiry and place of issue of passport ( if any)
• Date of birth
• Nationality
• Occupation
• Nominee (s)
• Specimen signatures (s) of the applicants
• Introducer’s information (name, account no, signature)
• KYC ( know your customer) form
• Initial deposit

Process to manage other functions

Process to manage Remittance sections functions

Payment Order (P.O)

It is the process of money transfer form payer to the payer to the payee within a certain clearing area through banking channel. A person can purchase payment order in different modes such as pay order by cash, pay order by cheque. . For issuing a P.O the customer has to fill up a prescribed P.O form containing date, name and address of the applicant, applicant signature, name of the payee with the branch name to be drawn P.O number and amount of money to be pay order. It is more secure than cheque.

Demand Draft (DD)

It’s an instrument containing an unconditional order of one bank office to pay a certain amount of money to the named person or order the amount therein on demand. It may occur between the two different banks. DD issues and receives is a regular task of the bank

Telegraphic Transfer (TT)

A Telegraphic Transfer is an instrument for transferring money by a telephonic message or telex from one branch to another branch of different location of the same bank. TT is quicker process than mail transfer.

Process to manage Cash Section functions

Receiving Cash

Any people who want to deposit money will fill up the deposit slip and give the form along with the money to the cash officer over the counter. The cash officer counts the cash and compares with the figure written in the deposit slip. Then he put is signature on the slip along with the “Cash Received” seal and records in the cash receives register book against account no. At the end of the procedure, the cash officer passes the deposit slip to the counter section for posting purpose and delivers duplicate slip to the client.

Disbursing Cash

The drawer who wants to receive money against cheque comes to the payment counter and presents his or her cheque to the officer. He verifies the following information:

• Date of the cheque
• Signature of the account holder
• Whether the cheque is crossed or not
• Whether the amount in figure and inward correspondent or not

After checking every thing, if all are Ok, the cash officer gives the amount to the holder and records in the paid register.

Process to manage Clearing Section functions

Inward Bill Collection (IBC)

Inward Cheque are those ones drawn on the respective branch which have been presented on other banks and will be cleared/ honored the clearing house of Bangladesh Bank.

Outward Bill Collection (OBC)

By OBC, means that those cheques drawn on other banks which are not within the same clearing house. Officer gives OBC seal on this type of cheque and later send letter to the manager of the branch of the same bank located in the branch on which cheque has been drawn. After collection of that bill branch advices the concerned branch in which cheque has been presented to credit the customer account through IBCA (Inter branch credit advice).

Observation of All types of Accounts and Deposit scheme in Mohammadpur Kaderia Tayebia Madrasha Branch:

Al wadia current Deposit

Based on my three months work experience I observed Al wadia current deposit is most suitable for traders, and businessman, who require frequent transaction with the bank account. I also tried to show the last four months trend of Mohammadpur Kaderia Tayebia Madrasha Branch of this A/C.

Table 4.1: Four months trend of Al wadia current account of Mohammadpur Kaderia Tayebia Madrasha Branch-

Amount in Taka                                                                                                            

Mudaraba Saving Deposit

Based on my three months work experience I observed Mudaraba Saving deposit is suitable for the small scale saver, who are not required frequent transaction with the bank account. I also tried to show the last four months trend of Mohammadpur Kaderia Tayebia Madrasha Branch of this A/C

Table 4.2: Four months trends of Mudraba Saving Deposit in Mohammadpur Kaderia Tayebia Madrasha Branch-

Amount in Taka  

Mudaraba Term Deposit

The Term deposit allows the customer to save their money for a specific short period and earned a higher percentage profit than any other type of account. Based on my three months work experience I observed the bank increase the profit rate when they face liquidity problem. I have show the last four months trend of Mohammadpur Kaderia Tayebia Madrasha Branch of this A/C.

Table 4.3:  Four months trend of Mudaraba Term Deposit in Mohammadpur Kaderia Tayebia Madrasha Branch-

Amount in Taka  

Mudaraba Double Benefit Deposit Scheme

I observed Mud. Double Benefit Deposit Scheme is offered for all classes of people, specially for the middle class people, where the depositor is allowed to deposit a fixed amount for 6 (six) years and at the end of the maturity the deposit received at more than double of his deposit amount. I have show the last four months trend of Mohammadpur Kaderia Tayebia Madrasha Branch of this account-

Table 4.5:  Four months trend of Mud. Double Benefit Deposit Sch. in principal

Amount in Taka  

Strength, Weakness, Opportunity and Threat (SWOT) Analysis

Strength of SIBL-

• Pioneer amongst the Islamic banks to introduce On-line banking
• Fast, accurate and satisfactory customer service
• Large number of Deposit mix
• It has Debit card facilities for the client of the bank
• SIBL has ATM service
• With the approved policy and guidelines of the management of SIBL is able to provide quality service to its client and society
• SIBL has diversified product to penetrate the potential Islamic minded customer
• SIBL has established approved policies covering major risk areas.

Weakness of SIBL-

• Lack of capital to meet Bank requirement.
• Limited number of branches
• Number of manpower is fewer than the volume of works that create problem for providing efficient service to the client
• SIBL has insufficient number of ATM booths

Opportunity of SIBL:

• Scope to  increase number of branches
• Scope to  establish ATM booths
• Scope to involve in shariah based Islamic banking; it can easily increase its number of client.
• Developing new product for the customer
• Scope to  introduce credit card facilities for their client
• Integrate all the function of the bank under the Automation system

Threat of SIBL-

• Increasing competition from other banks ( Government owned, Local & Foreign banks)
• Change of Government rules and regulation
• SIBL might face the challenges of local currency devaluation and inflationary pressure of the economy.
• Inadequate political situation

Internship Learning Points & Findings of the Study:

This chapter deals with two parts, first, I tried to explain my major learning points from various departments of the branch according to my position and duties. Second I described the findings of my study.

Learning from General Banking:

As I prepared my report based on this department functions. So I gave much more concentration in this department. I learned a lot of banking works from this department. Among those I have mentioned some of my learning points that I acquired from this department-

Account opening section

The main function of this section is to open different types of account on the request of client. In this section I learnt how to open different type account like Al wadia current account & different type of scheme. I also learned how to issue cheque book and how to close an account.

Remittance Section

This section is one of the most important sections of General Banking department in Mohammadpur Kaderia Tayebia Madrasha Branch of SIBL. From this section I learnt a details idea about Payment order, Demand Draft and Telegraphic Transfer; I also learnt how to issue those things.

Cash Section

I worked three days in this section, at that time I learnt a lot of things, basically I learnt how to receive cash from the client & Cash payment procedure. When I received cash from the client, I count the cash and compares with the figure written in the deposit slip. I put signature on the slip along with the “Cash Received” seal and records in the cash receives register book against account no. I also worked in payment section, at that time I collect cheque from the client and verify some information like- date of the cheque, signature of account holder.

Clearing Section

Clearing section is very important sections in General Banking, almost every section of different departments are linked in this section. There are many types of works I  did in this section, at first I gave entry the previous days cheque in the outward bill and inward bill cleaning book , then I collect cheque book from the customer.

Learning from Foreign Exchange Department

Foreign Exchange is one of the most important departments, I worked only one week in this department, it is not enough time to learn every things but I tried to learn as much as possible. Basically I learnt a details idea about export & import and the procedure & required paper or document that is necessary to open Letter of credit.

Learning from Investment Department

I worked only one week in this department in Mohammadpur Kaderia Tayebia Madrasha Branch of SIBL. I learnt a lot of investment activities within this short period. Basically I have learnt a details idea about different types of investment modes that the bank used to meet their customer need, major modes of investment are-  Mudaraba, Murabaha, Bai-muazzal, etc.

Findings of the Study

Among the three departments of the bank, I gave more emphasize on General Banking activities, in order to prepare my report. Basically my report’s findings are cover two major areas, first- “Managing the need of General Banking customers”, where I  described how SIBL is fulfill their General Customers’ need by offering different types of accounts and deposit schemes. I also find the trend of different schemes and accounts that I described based on my three months observations.

I observed the client deposit of different types of account and schemes are increased. The deposited amount of Al wadia current account is TK. 127,849,141 in September and Tk. 135,446,726 in October. It indicates that Al wadia current account increased 6% from the previous months. The Mud. Saving deposit is also increase TK. 128,188,730 from the last month (September to October). The deposited amounts of other types of scheme are also increased.

Another major area of my finding is “Performance Analysis of SIBL”.  I have used some methods to analyze the performance of SIBL, one of this is Financial statement analysis (Common size and comparative Financial statement analysis), From the calculation I have observed the amount of total asset, investment, client deposit, owners equity and all other balance sheet items are increase from the previous year (2006 to 2007). The income statement items like income from investment, net profit after tax and all other major items are increased as both amount and percentage from the previous year.

Another major common tool to analyze the performance of the bank is Ratio analysis. From my calculation of different types of ratio I observed that the overall position of Liquidity and Efficiency ratio are not good but the percentage of profitability and capital adequacy  ratio are increase from the previous year.

So the above explanations indicate that the overall performance and financial position of the bank is satisfactory.

Conclusion:

Social Islami Bank Limitedis one of the leading Islamic shariah based commercial bank in Bangladesh. It was incorporated on 5^th July, 1995 as a result of dedicated effort of a group of established Bangladeshi entrepreneurs and internationally important personalities. Internship functions have been performed in three departments (General banking, Foreign Exchange and Investment department). The main finding of the report is how SIBL meet their General banking customer need. To meet customer need the bank offer different types of account, such- Al wadia current account, saving, and different types of deposit scheme like- Lakhopoti deposit scheme, pension saving scheme etc. Some others important section in General Banking are- Remittance, cash and clearing section, the bank also provide different types of service from those department like Payment order, Demand Draft, and Telegraphic transfer etc. From the three months internship period it is observed that the deposited amount of different types of accounts and scheme are increased in every month.  Another major part of the report is performance analysis of the SIBL. Some major method is used to analyze the performance. From the calculation it is observed that the every items of Balance sheet and Income statement are increased from the last year. Ratio analysis in one of the common method to analyze the bank performance, from the calculation it is observed that the Liquidity and Efficiency ratio are not good but the percentage of profitability and capital adequacy ratio are increase from the previous year. From the above explanation indicate that the overall performances of the bank are satisfied.

Recommendations:

My three months experience in SIBL in various departments, lead me to recommend on the following issues-

• Different types of product and service are available in SIBL but clients are not concerned about that, so advertisement and promotional activities should be increased.
• In General banking department it is necessary to implement modern banking process instead of traditional system.
• The personnel of different section of General Banking is not sufficient to provide efficient service for the client, so it necessary to increase number of personnel
• SIBL should try to reduce the rate of commission charge for different service
• The banks try to make flexible to account opening procedure.
• Financial performance is not satisfied in some sector, so the bank needs to take appropriate action to develop financial position.
• SIBL should try to increase the investment amount.
• SIBL should introduce more innovative & modern product and service for their product.
• SIBL should try to provide a computer for every personnel; especially for the personnel of cash section.
• Now a day, the on line banking is very much popular in all over the world, so the bank should try to develop is this side.
• SIBL should increase Debit card and ATM service
• SIBL should try to introduce Credit card facilities for their client