Performance Evaluation of  Shahjalal Islami bank Ltd.

Executive Summary 

Shahjala Islami Bank of Bangladesh Limited, or the SJIBL Bank, for short, has earned a reputation across Bangladesh. Despite competition among banks operating in Bangladesh, both local and international, the bank has made remarkable progress in all areas of its activities. The title of the current study is Performance Evaluation of Shahjala Islami Bank”.

As a bank of 21 century, the SJIBL bank uncompromisingly adopts modern technology at all levels of its operations to improve efficiency and reduce cost per transaction. This report has used data both primary and secondary sources. Primary sources like asking question to branch manager and other employees of the branch and customer of SJIBL bank. As secondary source I used 2006 to 2009 annual reports, website of SJIBL bank, and various book articles regarding general banking functions, foreign exchange operations and credit policies and also, textbooks including Financial Institution Management, by Anthony Saunders and Marcia Millon Cornett and Bank Fund Management, by Peter S. Rose & A.R Khan. In this report I analyzed five sectors of risk analysis which are Credit risk, Interest risk, Market risk, liquidity risk and Capital risk.

First of all in performance evaluation of a bank, by applying CAMELS rating technique and Balanced Scorecard (BSC) Approach technique, then I did all type of risk analysis to evaluate performance of this bank. Then I also compare the risk of Al-Arafah Islami bank ltd and EXIM bank ltd and make analysis compared to SJIBL bank ltd. I also did general performance like deposit, investment, assets, etc from 2006 to 2009. I also calculate ROI, ROE, ROA, VEA, etc from 2006 to 2009 years.

In addition, in this report I tried to briefly explain the Bank’s last four years financial situation and based on their position gave recommendation. I find that some sector is facing some problem. In this digital time bank should concentrate on IT sector to compete with other bank. There employee should more knowledgeable or familiar with IT sector.




Performance measurement is a regular and traditional accounting and financial activity. To measure the output of any economic activity, different techniques of performance measurement are used. Different economic decisions are taken on the basis of performance of an organization.

So a continuous effort is going on to devise a flawless and dependable system of performance measurement. The need for a sound system of performance measurement for financial institutions cannot be over-emphasized. As these organizations are run by public money, their accountability is more than that of a general trading concern. So, special attention is required to be given to this aspect of financial institutions. In this context, an attempt is made here to measure the performance of a bank in a wider perspective. In Bangladesh, there are mainly four types of banks based on their ownership and they are scheduled commercial banks, joint-venture banks, foreign banks and private banks. The Government and private owners – domestic and foreign entrepreneurs, own them respectively. These banks are either incorporated under the special statute or under Bank Companies Act of Bangladesh, 1991. The foreign banks are generally incorporated abroad and have their branches in Bangladesh. Therefore, a large number of banks are now operating in Bangladesh in a healthy competitive environment. Bangladesh Bank as a guardian of all scheduled banks has been evaluating their performance by applying CAMEL rating technique each year based on only financial activities performed by the banks during that year where qualitative aspects of performance are being completely ignored. Balanced Scorecard, a new technique of performance measurement, includes both quantitative and qualitative factors of performances. As a matter of fact the authors attempted to highlight the Balanced Scorecard (BSC) as performance measurement technique so as to achieve the long-term benefit by the banking sector. But it would not be quite easy to implement and it would not be very simple one either.





Objective of the Study



The ultimate objective of the paper is to highlight a comprehensive measure of performance of banks from both quantitative and qualitative point of view rather than the traditional measure of performance by ROI, ROE, and EPS etc. To achieve this goal the following specific areas were identified for elaborate analysis: a) to elaborate the traditional financial measures and Balanced Score Card technique of performance measurement. b) To highlight the necessary improvements require to be made to the existing system of performance measurement for financial institutions under BSC approach.

Methodology of the Study


This study has been undertaken basically on theoretical ground and the market experience.

Different books and journals were consulted and some relevant information have been collected from the Annual Reports of Shahjalal Islami bank as well as from the financial statements of those banks published in the daily newspapers on several times. The collected information were arranged and analyzed systematically under sections A, B, C and D to achieve the objectives of the study. In section-A, traditional / existing system of performance measurement is presented. In section-B, an analytical presentation of Balanced Score Card technique is given. In section-C, a comparison of traditional measures of performance including CAMEL and BSC is presented and in section-D, consequence of BSC approach is highlighted by giving importance to the qualitative aspects of performance measurement of some commercial banks in Bangladesh.

Limitations of the study

It is actually very tough to some extent to learn and cover all the components of the financial management issues and analyze those within this short period of time. Generally, access to internal data sources of the company is prohibited to some extent.

Some major limitations are given bellow:

  • Lack of available sources of data to analysis.
  • Lack of knowledge about some important information into some employees.
  • Lack of information in website of this company.
  • There are some wrong in there prospectus.
  • Not available annual report.
  •  Lack of technological problem that cannot provide enough information to analyze something.

Shahjalal Islami Bank Limited (SJIBL) commenced its commercial operation in accordance with principle of Islamic Shariah on the 10th May 2001 under the Bank Companies Act, 1991. During last eight years SJIBL has diversified its service coverage by opening new branches at different strategically important locations across the country offering various service products both investment & deposit. Islamic Banking, in essence, is not only INTEREST-FREE banking business, it carries deal wise business product thereby generating real income and thus boosting GDP of the economy. Board of Directors enjoys high credential in the business arena of the country, Management Team is strong and supportive equipped with excellent professional knowledge under leadership of a veteran Banker Mr. Muhammad Ali.

Our Vision

To be the unique modern Islami Bank in Bangladesh and to make significant contribution to the national economy and enhance customers’ trust & wealth, quality investment, employees’ value and rapid growth in shareholders’ equity.

Our Mission

  To provide quality services to customers

  To set high standards of integrity

  To make quality investment

  To ensure sustainable growth in business

  To ensure maximization of Shareholders’ wealth

  To extend our customers innovative services acquiring state-of-the-art technology blended with Islamic principles.

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

Islamic Mode of Investment

Bai Mechanism:

Bai means purchase and sale of goods in cash or on credit or in advance at an agreed upon profit, which may or may not be disclosed to the client. Majority of investments of Islamic banks are extended through this mechanism. A good number of investment products have been designed to facilitate mainly working capital financing which goes as follows:

  • Bai-Murabaha

Murabaha LC(Sight/Deferred):

Through this mode of indirect facility, the bank facilitates import of goods of the client at fixed rate of service charge (LC commission) on invoice value. LC may be opened at 100% cash or at a different ratio.

Murabaha Post Import TR:

This is post import finance under the principle of “Bai”, extended to retire Shipping Documents under LC opened. We buy the imported goods and sell the same to the importer at a cost plus an agreed upon profit repayable today or on some date in the future in lumpsum or by installments. Usually payment is made by lumpsum from the sale proceeds of the consignment. Possession of goods remains with the client. Collateral security is usually obtained to secure the finance.

Murabaha Post Import Pledge:

As like as Murabaha Post Import TR with an exception to security. Goods remain under the control of the Bank. Collateral security may or may not be obtained.

  • Bai-Muajjal

Bai-Muajjal Commercial TR:

It is an agreement between bank and client whereby bank delivers goods to the client upon deferred payment, i.e. the client shall pay the price at some future date at a time, by lumpsum or by installment. Under this mode of investment, bank is not supposed to disclose cost price and profit separately. Goods are delivered on trust and Trust Receipt is obtained for legal implication.

Bai-Muajjal (Real Estate):

Mode of operation and principle of this product are alike Bai-Mujjal Commercial TR. Difference is with the purpose, i.e. the facility is only extended against construction or purchase of building, apartment etc.

Bai-Muajjal (WES Bill):

Investment facility under this Mode is extended to liquidate ABP liability at maturity, when the client cannot liquidate the liability as a result of non-repatriation of the related export proceeds.

Bai-Muajjal (Term):

Under this mode of investment, term facility is given to meet client’s requirement, which is repaid by a specific repayment schedule. Purpose is a bit different, such as to meet BG claim, etc.

  • Bai-Salam

Bai-Salam (PC):

This is export finance. Bai-Salam is a term used to define a sale in which the buyer makes advance payment, but the delivery is delayed until sometime in the future. Usually the seller is an individual or business and the buyer is the bank.

The Bai-Salam sales serve the interest of both parties:

a)      The seller- receives advance payment in exchange for the obligation to deliver the commodity at some later date. He benefits from the salam sale buy locking in a price for his commodity, thereby allowing him to cover his financial needs whether they are personal expenses, family expenses or business expenses.

b)      The purchaser benefits because he receives delivery of the commodity when it is needed to fulfill some other agreement, without incurring storage costs. Second, a Bai-Salam sale is usually less expensive than a cash sale. Finally a Bai-Salam agreement allows the purchase to lock in a price, thus protecting him price fluctuation.


Shahjalal Islami Bank Ltd. Offers New Deposit and Investment Products; Reports Earnings Results for the Year 2007, Shahjalal Islami Bank Ltd. announced that it offered new deposit and investment products to meet the demand of low income group of the society like small businessmen, service holders and self-employed persons. The bank introduced the five new deposit schemes and six new investment schemes at a launching ceremony at the bank’s head office. The `mudaraba’ deposit schemes were `Lakhpati Savings Deposit’ at an annual profit of 11.20%, `Marriage Savings Deposit’ at 11.45%, `Mohor Savings Deposit’ at 11.10%, `Education Savings Deposit’ at 11.45% and `Special Term Deposit’ having facility to get profit on the first day of opening account. The investment schemes were for education, marriage, CNG conversion, doctors, executives and overseas employment. Shahjalal Islami Bank reported earnings results for the Year 2007. For the year, net profit grew 56% to about BDT 650 million in the year 2007 from over BDT 460 million in the previous year.

Future outlook of the Bank

“Business policy and six years prospective plan” of the bank from 2007to 2012 has formulated to attention the financial strength, sustainable growth and operational efficiency. To protect the interest of the stockholders, bank has formulated the six years perspective plan for consolidation of the growth and profitability. During the period of perspective plan, bank has the main objective to attain the highest operational excellence and consolidation to run the bank into a dynamic Islamic bank in the country.

During the period from 2007 to 2012, the bank has the plan to regain its excellence in all the core areas of operations and business. Accordingly, a long-term perspective plan started from 2007and will continue up to 2012. During this period, new and potential avenues of business in all areas of operation to be explored and expended through the network of 51 branches and more new branches to be opened gradually during the plan period subject to permission of Bangladesh bank. The bank ensure optimum utilization of bank’s investment fund/deposit to be mobilized in future in an organized way to maximize banks profit consolidating the financial strength of the bank and to achieve the overall objective, mission and vision of the bank as a whole.

The financial position and position and overall achievement of the bank shall be reviewed and evaluated in the light of the annual budget and business plan on a quarterly basis in every year. Necessary change, adjustment, modification and re-allocation shall be made after periodical review keeping the real scenario in view. All out efforts shall be made for promotion and improvement of quality investment through effective supervision, control, follow-up and morning in order to to lessen the quantum of over dues, arrest futher over dues and to recover, regularized the over dues and to recover, regularize the over dues and classify the classified investments. Adequate care and caution to be exercised for compliance of 06 core risks as per Bangladesh bank’s policy/instructions during the planned period. Asset-liability of the bank shall be managed effectively through ALCO to avoid liquidity risk, operational risk and other risks.

Thus, Shahjalal Islami Bank Limited will be turned into a dynamic Islamic Bank in the country and will expand its banking business all over the country to provide the banking services to the groups including the deserving economic groups of the society who have no easy access to the banking channel. This will help for alleviation of the poverty, income generation, creation of employment opportunity, up-grading of standard of living of the lower of the economic groups, which will also contributed to the emancipation of national economy of the country. Shahjalal Islami Bank Limited is looking forward to see such a bright day in the years to come.

Capital Market Services Division

The capital market showed notable progress during 2009. The monthly average price index at the Dhaka Stock Exchange (DSE) showed an upward trend along with substantial improvement of turnover value. The monthly average of all share price index (DSI) DSEG, and DSE20 increased buy 55.1 percent, 49.6 percent, and 39.6 percent respectively in June 2008 over June 2007. The daily average turnover stood at Tk. 2.3 billion in the year 2008 against Tk. 0.7 billion in the year 2007 showing a healthy growth of 223.4 percent. The increased market turnover in 2009 was largely contributed by trading of shares of banks, insurance companies, mutual funds, and power sector companies. At the end of 2008, market capitalization at DSE was 17.8 percent of the country’s GDP compared with 16.1 percent in June 2007. However, volatility in the stock market seems to have magnified recently, which needs careful investigation and monitoring by the stock market regulators

Shahjalal Islami Bank commenced its Brokerage House operation in the year 2008 through a separate division named ‘Capital Market Service Division’ (CMSD). CMSD provides BO Account facility and margin facility to its customers to invest in the secondary markets. Diversified products with different category of investment ceiling and other value added services are also available for customers. The customers were also provided with assisted services facilities on the basis of published information and accounts. The division managed portfolio value of more than 4170 million under margin accounts. As a result, profitability of CMSD shown significant positive trend during 2009. Divisional contribution was 17.98% percent to total operating profit before Provision and taxes of the Bank. The Bank has established a well decorated and highly technology based trading facilities for the connivance of the customers. This year CMSD is also planning to open 10 (ten) more branches at potential places of the country.

Principle activity

The principle activities of the bank is to provide all kinds of commercial banking products and services to the customers including deposits taking, cash withdrawal, extending investments to corporate organization, retail and small and medium enterprises, trade financing, project finance, working capital finance, lease and hire financing, issuance of debit card. Its vision is to be the best private commercial bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management and profitability.

Measures of Performance

Section-A: Traditional Measures of Performance

Traditionally, some ratios are used to evaluate the performance. Among those ratios, the important ones are ROI, ROE, EPS, EVA, etc., which have been highlighted in this section.

ROI (Return on Investment): It is a very common and relatively very good measure of performance which is calculated by dividing net income by total assets invested in the business.

Table1: Table Showing the Ratios ROI of SJIBL

(2006)(2007)(2008) (2009)






ROE (Return on Equity): Another widely used measure of business performance is the return on equity ratio which is calculated by dividing net income by book value of shareholders equity. This measure of performance is sensitive to leverage.

Table2: Table Showing the Ratios ROE of SJIBL


ROE (2007)

ROE (2008)

ROE (2009)





EPS (Earning Per Share): It is another measure of performance. Here earnings of the company are divided by the number of shares in order to calculate EPS. The measures of performance can be magnified by issuing more debt for additional capital if the rate of return of the invested capital is just above the cost of debt. Further EPS will automatically rise if the company issues common stock at a very hefty premium, because EPS is based on the number of shares issued and does not include share premium. So, it is worse compared to ROI and ROE.

Table -3: Table Showing the Ratios EPS of SJIBL









CAMEL Rating

Recently a well-judged technique named CAMEL rating is widely used for evaluating performance of financial institutions, especially to banks. In Bangladesh, Bangladesh Bank as a regulatory body has been calculating this rating till now. The CAMEL covers five areas of performance measurement viz., ‘C’ for Capital Adequacy; ‘A’ for Asset Quality; ‘M’ for Management Capacity; ‘E’ for Earning Available and ‘L’ for Liquidity, This performance measurement technique is more equitable than the previous techniques measuring the management capacity in addition to the financial measurement of performance. Now the ratios covered by this system for different areas of performance measurement are given in the chart below:

Table -4: Table Showing the Different Ratios Covered by CAMEL Rating

Capital AdequacyAsset QualityManagement CapacityEarningsLiquidity
  1. Capital Adequacy ratio
  2. Leverage ratio
  3. Return on Equity
  4. Net Worth Protection
a)      Non-performing Loan to Total Loan (% of Classified Loan)a)       Cost per Employee

b)      Earnings per Employee

a)       Return on Asset

b)       Net Investment Margin

c)       Diversification ratio

a)       Investment Deposit ratio

b)      Liquid Asset to Total Deposits

 Capital Adequacy:

a)  Capital Adequacy ratio

Capital adequacy focuses on the total position of bank capital and protects the depositors from the potential shocks of losses that a bank might incur. It helps absorbing major financial risks like credit risk, market risk, foreign exchange risk, interest rate risk and risk involved in off-balance sheet operations. Banks in Bangladesh have to maintain a minimum Capital Adequacy Ratio (CAR) of not less than 10 percent of their risk-weighted assets (with at least 4.5 percent in core capital) or Taka 1.00 billion, whichever is higher.

Table 1 shows that as on 2006, 2007, 2008, 2009 the SJIBL maintained CAR, respectively 7.75%, 11.5%, 9.32% and 9.49% Provision shortfall and overburdened expenditure incurred from operation time to time.

Table 5: Table Showing the CAR ratio of SJIBL


CAR (2006)

CAR (2007)

CAR (2008)

CAR (2009)

risk weighted assets15,515,789,68320,616,605,3352946393000038832820000
10% capital or whichever higher1202955476238204215529463930003883282000
Percentage of CAR7.75%11.55%13.81%13.98%

Here all data taken from the balance sheet of SJIBL. Those data only shown is they maintain a minimum requirement of CAR. Above percentage are mentions only deviation on paid-up capital and Statutory Reserve with risk weighted assets.

Total equity of the bank as on 2008 was Tk. 40969.09 million and the total equity stood to Tk. 5429.97 million on 2009, which was 13.98% of risk weighted assets as against the requirement of  10.00%.

The core capital was 12.04% of risk weighted assets as on 2009 as against requirement of 5%

b. Leverage ratio

This Debt/Worth or Leverage Ratio indicates the extent to which the business is reliant on debt financing (creditor money versus owner’s equity):

Debt/Worth Ratio = Total Liabilities / Net Worth

Asset Quality

The asset composition of all commercial banks shows the concentration of loans and advances (64.1 percent) in total assets. The high concentration of loans and advances indicates vulnerability of assets to credit risk, especially since the portion of non-performing assets is significant. A huge infected loan portfolio has been the major predicament of banks particularly of the state-owned banks. In the total assets the share of loans and advances is followed by the investment in government securities and bills covering 10.5 percent.

The most important indicator intended to identify problems with asset quality in the loan portfolio is the percentage of gross and net non -performing loans (NPLs) to total advances.

Table 7









 Management capacity

Sound management is the most important pre-requisite for the strength and growth of any financial institution. Since indicators of management quality are primarily specific to individual institution, these cannot be easily aggregated across the sector. In addition, it is difficult to draw any conclusion regarding management soundness on the basis of monetary indicators, as characteristics of a good management are rather qualitative in nature. Nevertheless, the total expenditure to total income, operating expenses to total expenses, earnings and operating expenses per employee, and interest rate spread are generally used to gauge management soundness. In particular, a high and increasing expenditure to income ratio indicates the operating inefficiency that could be due to flaws in management.

In SJIBL manage have capacity to expenditure to their employees. Some time they give extra expenditure for their employees. They give bonus to their employees. There have some income opportunity to their employees by giving extra income profit.


Strong earnings and profitability profile of a bank reflect its ability to support present and future operations. More specifically, this determines the capacity to absorb losses by building an adequate capital base, finance its expansion and pay adequate dividends to its shareholders. Although there are various measures of earning and profitability, the best and widely used indicator is returns on assets (ROA), which is supplemented by return on equity (ROE) and net interest margin (NIM). Earnings as measured by return on assets (ROA) and return on equity (ROE) vary largely within the industry. Table 8 shows ROA and ROE by type of banks and Figure 6 shows the aggregate position of these two indicators for bank. Analysis of these indicators reveals that the ROA of the SJIBL have been almost zero percent considering huge provision shortfall.

Table 8












Commercial bank’s deposits are at present subject to a statutory liquidity requirement (SLR) of 18 percent inclusive of average 5 percent (at least 4 percent in any day) cash reserve requirement (CRR) on bi-weekly basis. The CRR is to be kept with the Bangladesh Bank and the remainder as qualifying secure assets under the SLR, either in cash or in government securities. SLR for the banks operating under the Islamic Shariah is 10 percent and the specialized banks are exempt from maintaining the SLR. Liquidly indicators measured as percentage of demand and time liabilities (excluding inter-bank items) of the banks indicate that all the banks had excess liquidity.

Table 9 and Figure 8 show that the SJIBL are having the highest Deposit ratios followed by the PCBs. This situation of constant surplus of liquidity warrants creation of effective demand for credit at lower costs.

Table 9: Table shows that investment Deposit Ratio













 Section-B: Balanced Scorecard (BSC)

Currently many business executives believe that the traditional measurement criteria of performance are misleading in situations that require continuous improvement and innovation in a competitive environment. In such a situation, achievement of short-term financial soundness is not enough; rather emphasis should be given on the achievement of long-term strategy. It requires a set of measures that give top managers a vast but comprehensive view of the business. It includes financial measures that tell the results of actions taken and operational measure on customers’ satisfaction, the internal force and the organizational innovations and improvement activities, that is, the operational measures that are the drivers of future financial performance. Because BSC shows the cause and effect relationship 0between:

Learning and growth — internal business process — customer — financial performance

It is, therefore, clear that if an organization is able to improve on learning and growth then its internal business processes will be benefited and if the internal business processes are improved then it would be possible to serve the customer better. Better customer service would lead to satisfied customers, which again would have a positive impact on the performance of the organization. So it is important for executives to track not only financial measures that indicate the results of the past decisions, but also non-financial measures, which are leading indicators of future performance. In this situation Balanced Scorecard (BSC) may be an example of a performance measurement system. BSC is a tool for focusing the organization, improving communication, setting organizational objectives and providing feedback on strategy (Ahmed, 1993:8-9). It was developed originally for measuring performance of manufacturing enterprises, so its application for performance measurement in its original form to a bank will be inappropriate. But the concept of this technique can be used in banking business to ascertain long-term performance giving importance to the related areas as shown in the following exhibit.

Exhibit-1: Balanced Score Card 


Financial Perspective

How do we look to the shareholders?





To survive, succeed and prosper.

ROI, Cash flow,






Customers’ Perspective

Internal Business Perspective





To keep the existing

customers satisfied

and to attract new customers.

Better service with

lower cost, expanding

market share.

To ensure flaw-less

service by human

resources (Management efficiency)

All measures relating

to efficient delivery of

goods and services


How do customers see us?

What must we excel at?


Innovation and learning perspective

To update technologically and to

introduce new


% of revenue from

new product,

innovation of new poduct etc.


Can we continue to improve and to create value

The exhibited four questions can be answered if the goals of each area of performance measurement are elaborated. Now a brief description of each area is given as follows:

Financial Perspective

The performance measures from financial perspective are directed towards measurement of profitability and growth which in turn create value to shareholders. In BSC, the spelled out financial goals are not only to survive but it gives emphasis on success and prosperity. So quantitative aspects relating to these areas are included in the measurement. As financial measures are the carriers of the benefits of other measures like measures of customers’ satisfactions, internal business performance and innovations and improvements, measures of performance in these areas are very much essential to have an idea about the long-term growth and performance.

Customer Perspective

It is now accepted by all the successful companies that customers are the king. Satisfaction of their needs should be the main objective of a successful company. So to be number one in delivering value to the customers is a typical mission statement. The BSC demands that management should translate the above general mission statement on customer service into specific measures which reflect the factors that really matter to the customers. Customers concern tends to fall into four categories – time, quality, performance, services and cost.

Internal Business Perspective

This perspective of performance measurement is the logical extension of the customers’ perspective. Here measurement should be made of what the company must do internally to meet its customers’ expectation. Excellent customer performance derives from process, decisions and actions occurring throughout an organization. Managers need to focus on those critical internal operations that enable them to satisfy customer need. In this area of performance measurement, a company should identify and measure the company’s core competencies and the critical technologies needed to ensure continued market leadership. Companies should decide what process and competencies they must excel at and specify measures for each.

Innovation and Learning Perspective

The targets for success do not remain static but they keep changing. Intensive global co petition requires that companies make continual improvements to their existing products and process and have the ability to introduce entirely new products with expanded capabilities. A company’s ability to improve and learn ties indirectly to its value. Value for customers can be created by launching new product. It can also be done by a company by improving operating efficiency. By that, a company can penetrate new markets and increase revenues and margins. From the above literature survey of ‘BSC’ technique of performance measurement, it is clear that this system is broad based and covers areas beyond the financial and management aspects of performance. Now a comparative picture of performance measurement between CAMEL rating system and BSC is shown below in Section-C.

Section-C: Comparison of Camel and Balanced Scorecard (BSC)

Quantitative factors (financial ratios) under CAMEL and both quantitative (financial ratios) and qualitative (customer, internal business and innovation and learning perspective) factors under BSC can be compared in the following way in order to comprehensive measure of performance of financial institutions like banks.

Section-D: Consequence of Balanced Scorecard (BSC) Approach

As described in the earlier section of the study, Balanced Scorecard intensifies the qualitative aspect of a financial institution as an important and unavoidable part of performance measurement. But the CAMEL rating system ignores this aspect of performance measurement. Banks have been being rated based on only their quantitative achievement under CAMEL rating, but it is not unlikely that their ratings might be changed if the qualitative perspectives like customers satisfaction, interal business policy, technological advancement capacity, new product design etc. would have been considered. Thus realizing the importance of the qualitative aspects of performance measurement in the long run, we have suggested considering this aspect that intensified in the concept of BSC in addition to the traditional measures under CAMEL. The qualitative aspect of performance measurement covers three most relevant but sensitive issues like Customers perspective, Internal Business perspective and Innovation and Learning perspective. In fact, no direct tools of performance measurement are applied in these areas yet. Thus some surrogate measures, as prescribed below, of performance in quality can be applied for rating the performance of a bank.

Customers’ Perspective

‘Customers are always right’ is the basic and linear formula in the banking business. In fact, the main job of a bank is to provide service to the customers. So customers’ satisfaction is the prerequisite to the success of a bank. To achieve this goal an opinion survey of the customers on the related variables can be made by a 5-point scale as explained below

Table 11





Time taken for encashing a chequeExcess

More than required


Less than expected


much prompt

Co-operation given by the bank in opening account, receiving and transferring remittance, depositing the money etc.Frustrating

Less than required

ExpectedMore than expectedExcellent
Evaluation time of loan applicationExcess


Hidden cost in loan grantingExcess

More than required

NegligibleLess than expected

Very much prompt

Time taken for issuance of bank guarantee, L/C etc.Frustrating

Less than expected

ExpectedMore than expected

Very much positive

Attitudes towards phone banking etc.Frustrating

Less than expected

ExpectedMore than expected

Very much keen

Willingness for confirming the A/Cs balance regularlyPestering

Less than expected

ExpectedMore than expected

On demand

Issuance of bank solvency certificateP e s t e r in g


ExpectedMore than expected 

 Customer’s reaction on bank’s activities can easily be evaluated by the above 5-point scale. Customer’s satisfaction can also be judged by asking whether the bank offers full range of banking services to its customers and clients. So, while ranking a bank based on its performance, it would be equitable to consider customer’s judgment on bank’s service as a qualitative performance which will lead the bank to achieve long term benefit.

Shahjalal Islami Bank Ltd is committed to cordial service to customers. The continuous improvement in delivery of products and services, diversification of products, reduction of turnaround time for investment processing, on line deposits, debit card, SMS push-pull, mobile banking and arrangement with western union for early remittance payment have been the key indicators of customers’ satisfaction. We firmly believe our profitability, growth and market share of business depend on our quality of customer service. We provide a full range of financial services to individuals, small and medium sized companies, entrepreneurs and corporate bodies.

Internal Business Perspective

Implementation of credit policy, management of fund, development of human resources and state of technology can be considered as some important aspects of qualitative performance of a bank under internal business perspective. Obviously these factors will have an important impact on overall performance of a bank.

  • Implementation of Credit Policy:

In quantitative measure of performance of a bank there is no option for taking the credit policy as a factor of measurement, rather total volume of credit/ loan is considered. Except few specialized banks, all are commonly used to utilize their loan able fund into trading business and consequently they have been suffering the pressure of huge non-performing loan.

The SME Sector has been declared by the Government as a priority sector. In our country, Small and Medium Enterprises (SMEs) play the pivotal role for employment generation, poverty alleviation and overall economic growth of the country. It has been observed that fund is the major constraint of this sector. Therefore, we need to inject more funds into this sector in a very planned manner to boost-up this sector for the sake of overall economic development of the country. Our country is lab our abundant and SMEs are typically labour intensive. So, the sector deserves more investment facility for smooth functioning of the existing enterprises and expansion of the same with a view to retain the workforce active as well as creating more employment opportunities. Further, investment in SMEs can be very effective in reducing poverty as well as ensuring long term economic growth.

Shahjalal Islami Bank Limited (SJIBL) is a modern commercial bank governed by the principles of Islamic Shariah, which is committed to implement and materialize the economic and financial principles of Islam in the banking sector. It has undertaken initiatives for investment in SME sector by introducing a number of SME products in the market gradually with a view to patronizing the trade, commerce and industrial entities with equity & justice and to make effective contribution for creating employment opportunities, which will ultimately help the nation for poverty alleviation from the society.

  • Development of human resources

In Shahjalal bank, their policy on human resource management is proactive. They believe that investment in human resources development is the key to maintain sound health of the bank. The employees of the bank attended training program/seminar, workshop both at home abroad. The training center of the bank arranged various courses, workshop and seminars on important aspects of banking throughout the year on regular interval.  They invite experts of banking sector for importing training to their employees to meet the above challenges. To keep the employees motivated, incentive, performance reward, promotion and acceleration promotion etc. are given on regular basis.

  • Technology

Main objective of the bank is to take care of difference economic groups of the society and meet their all types of banking requirements to disseminate services to develop of the people gradually which are being done with the help of information technology very smoothly. They are providing customers Services through on line facilities. Their ultimate aim is to enable their respected and valued clients to shop under the same roof. In line with that SJIBL VISA DEBIT CARD SMS/push pull services have already been introduced. Besides, clients are also facilitated by the services of REUTERS, SWIFT, on line banking; SMS push pull, western union, money transfer etc. banking set to adept core banking software for ensuring more transparency, accountability and responsibility of individual working hand in all types of transaction and it’s expected that by mid 2011 migration will be completed and the bank will be on full range anytime any branch online banking.

General overview Progress of SJIBL

 Review of operational performance

During the year under review, the bank maintained the progress of business through fifty-one branches. The operating profit before provision and tax registered an impressive growth of 12.78 percent during the year. The operating profit before tax stood at tk. 1795 million. Strong profit performance was attributable to its sustained deposits and investments growth, maintaining the good asset quality, enhancing productivity and performance of brokerages house and investment in shears in booking capacity gain.  Net profit attributable to shearholders reached to tk. 17071 million, return on average equity remained at 25.10 percent and earing per shear (EPS) stood at 39.07. non performing investments (NPL) ratio is 0.94 percent Which is much below the industry average. Capital adequacy of the bank is 13.98 percent, which is above the stipulated rate of 10 percent. Out of the deposit of tk.47459 million, the bank has deployed tk. 43958 million in investment as on 31.12.2009. The bank handled total Foreign exchange business of TK. 79450 million in the year 2009.

Equity of the Bank

The banks equity is divided into two parts i.e. tier-I and tier-II capital. Tier-I includes paid- up capital, statutory reserve and retained earnings. Tier-II includes General provision on unclassified investments and contra assets, assets revaluation Reserves and exchange equalization account.

The Authorized Capital of the Bank is TK. 4,000 million and paid-up capital of the Bank is TK. 2740.10 million as on 31.12.2009. Total equity was TK. 5429.97 million as on 31.12.2009.. Comparative position of Equity for the year 2006, 2007, 2008& 2009 is given below:-

Table 12: Tier-I (Core Capital) & Tire-II (Supplementary)

Paid-up capital2,740,095,6002,245,980,0001,871,650,000935,825,000
Statutory Reserve1182,585039823552175510,392,155267,130,476
Retained Earnings753,328,328535,908,499405,688,9861,957,974
Sub Total4676008967









General  Provision









Exchange Equalization125310000
Sub total753960000463650000  
Total Equity54299700004069090000  

 Deposit of the Bank:

Total deposit of Shahajalal Islami Bank stood at TK. 47,459,231,493 as on 2009 as against TK. 34,279,739,993 of 2008 registering an increase of TK.13179491500, i.e. 33.45% growth. This is possible due to superior customer service delivery at the branch level, expansion of branches network to rural areas where foreign remittance flow is significant. expansion of our branches at rural areas has provided the lower income group an access to modern banking system and prompt   Deposit is the ‘life-blood’ of a bank has given utmost importance in mobilization of deposits introducing a few popular and innovative schemes. The bank always tried to give highest return on the deposits of the customers. The mobilized deposits were ploughed back in economic activities through profitable and safe investments:

The Deposit-mix of the Bank as on 31.12.2009 was as bellow:-

Table 13


Nature of Deposit

Taka in million

Percentage of Total Deposit


Al-Wadia Current Deposit




Mudaraba Savings Deposit




Mudaraba short notice Deposits




Mudaraba Term Deposit



Mudaraba Schemes  Deposit



Other Deposits







Total investment of the Bank stood at TK. 43,958,260,711 as on 2009 as against TK. 32,918,773,668 of 2008 registering an increase of TK.11039487023, i.e. 33.54% growth. The Bank is careful in development of the fund.

Total Bank entertains good investment-clients having credit-worthiness and good track record. The Bank has got a few investment Schemes to provide financial assistance to comparatively less advantaged group of people; which are:-

Table1 5


Mode of Investments

Taka in million

Percentage of Total Investment







3Hire-purchase &Ijara



4Investment against L/C



5Bill purchased &discounted



6Investment against scheme deposits






8Other Investments








  • Investment Income

Total Investment Income of the Bank as at 31st December 2009 was TK. 5939.90 million as against TK. 4424.89 million of the preceding year regarding 34.12% growth over last year, which was 83.46% of the total income against 83.80 of 2008.

  • Non-Investment Income

Total Non-Investment Income of the Bank as at 31st December 2009 was TK. 1177.14 million  as against TK. 856.49 million of the preceding year registering 37.44% growth over last year, which was 16.54% of the total income compared to 16.20% of 2008.


  • Profit paid on Deposit

Bank distributed profit of TK. 4200.28 million among the Mudaraba Depositors in the year 2009 against TK. 2962.40 million in the year 2008 which is 70.71% of the Investment income earned from deployment Fund of which was 66.89% in 2008. Deposit expenses were 82.75% of total Expenditure in 2009 as against 85.23% of 2008.

  • Operating Expenses

Total operating expenses as on 31.12.2009 was TK. 875.60 million as against TK. 513.19 million of 2008, which was 17.25% of the total expenditure of the year 2009against 14.77% of 2008.

  •  Operating Profit

During the year 2009, the Bank earned an amount of TK. 7117.04 million and spent an amount of TK. 5075.88 million, resulting a total Operating Profit of TK. 2041.16 million which increased by TK. 231.36 million i.e.12.78over 2008. From the operating profit TK.205.00 million provisions kept as provision for investment TK. 400 million provisions was kept for off Balance Sheets, TK 1.00 million provision for other assets and then profit before tax stood at TK. 1795.16 million and deducting income taxes of TK.72460 million, Net profit after taxation stood at TK. 1070.56 million, net profit of 2009 increased by TK. 252.86 million, i.e. 30.92% from TK. 817.71 million of 2008. As appropriation of net profit TK. 359.03 million was transferred to statutory reserve as per Bank Company Act.1991 and Remaining TK. 711.53 million transfer to retained earnings. A summary of operating result of the bank as on December 2009 vis-à-vis the position of December, 2008 if show below:-

Table 17 Table Shows the Operating Profit (Amount in million TK)






Total Income





Less: Total Expenditure





Net Profit before Provision &Taxation





Less: Provision for Investment, off Balance sheet & others





Net Profit before Taxation





Less: Provision for Taxation





Net Profit





Statutory Reserve





Retained earnings





 Credit Rating Report on SJIBL


Long Term

Short Term

Surveillance Rating-2009



Surveillance Rating-2008





Date of Rating

April 10, 2010



Credit Rating Information and Services Limited (CRISL) up grades the rating of shahjalal Islami Bank Limited (SJIBL) to AA (pronounced as double A) from AA- (pronounced as double A minus) in the long term and reaffirms short term rating to ST-2. The above rating has been arrived at on the basis of strong fundamentals of the bank in the areas of asset quality, capital adequacy, financial performance, increasing trend in market shear, performance in non funded business, explanation of branches network etc. on However, the above are moderated, to some extent by declining trend of profit margin, high funding cast,  investment concentration risk, limited ATM network etc. the long term rating implies that banks rated in this category are adjudged to be of high quality, offer higher safety and have high credit quality. This level of rating indicates a corporate entity with a sound credit profile and without significant problems. Risks are modest and may vary slightly from time to time because of economic conditions. The short term rating indicates high certainty of timely payment of financial obligations. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small.

 Risk Analysis of SJIBL Bank Ltd

Credit risk

Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms.[6] In other words we can say that credit risk is the risk of loss due to a debtor’s non-payment of a loan or other line of credit (either the principal or interest (coupon) or both): The probability that some of a bank’s assets, especially its loans, will decline in value and perhaps become worthless is known as credit risk. Because banks hold little owners capital relative to the aggregate value of their assets, only a relatively small percentage of total loans needs to turn bad in order to push any bank to the brink of failure.

Bank and other financial institutions are involved in credit risk management. The goal of credit risk management is to maximize a bank’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Banks need to manage the credit risk inherent in the entire portfolio as well as the risk in individual credits or transactions. Banks should also consider the relationships between credit risk and other risks. The effective management of credit risk is a critical component of a comprehensive approach to risk management and essential to the long-term success of any banking organization.

 The following are four of the most widely used indicators of bank credit risk:

1         The ratio of nonperforming assets to total loans and leases.

2        The ratio if net charge-offs of loans to total loans and leases.

3        The ratio of the annual provision for loan losses to total loans and leases or to total equity capital.

4        The ratio of allowance for loan losses to total loans and leases or to total equity capital.

If we look at below we can easily understand the how credit risk was during the year from 2006 to 2009


Provision for

Loan losses /Total loan

Provision for                    Loan  losses/Equity capital


Credit Risk Analysis: We know there are various methods to measure credit risk. Here we use two methods:

  1. Provision for loan losses/

Total loans

  1. Provision for loan losses/Equity capital

From the above chart exhibit-1 we can see that in 2006 Provision for loan losses/ Total loan = 0.37% In 2007 the percentage is 0.478%here the risk is decrease slightly, that’s mean FI take less risky project than 2006. But in 2008 the percentage 0.74%and 2008 is 0.559%

So, in fine we can say that the credit risk of SJIBL bank is highly volatile that means the credit risk of the bank increase and decrease throughout year 2006 to 2009.

Measured by = Provision for loan losses/Equity capital.

From the above also chart exhibit-1 we can see that in 2006 the percentage is 4.21%and in 2007 the percentage is 3.2% So the bank faces less credit risk in 2007 than 2006. Because from the equation we say that if provision for loan loss lower than equity capital than the credit risk decrease and if provision for loan losses higher than equity capital than the bank face more credit risk.

In 2008 the percentage is 6% and in 2009 is 4%. Here credit risk is again low in 2008 but in 2009 the bank takes more risky project. As a result risk is again high. So the credit risk is very higher than 2006 and 2009. In 2007 and 2008 the risk is more stable.

Liquidity Risk

In finance liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit).in other words The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss. Liquidity risk is financial risk due to uncertain liquidity. An institution might lose liquidity if its credit rating falls, it

Experiences sudden unexpected cash outflows or some other event causes counterparties to avoid trading with or lending to the institution.

A firm is also exposed to liquidity risk if markets on which it depends are subject to loss of liquidity. Bankers are also very concerned about the danger of not having sufficient cash and borrowing capacity to meet deposit withdrawals net long demand and other cash needs. Faced with liquidity risk, a bank may be forced to borrow emergency funds at excessive cost to cover its immediate cash needs, reducing its earnings.

Liquidity risk tends to compound other risks. If a trading organization has a position in an illiquid asset, its limited ability to liquidate that position at short notice will compound its market risk. Suppose a firm has offsetting cash flows with two different counterparties on a given day. If the counterparty that owes it a payment defaults, the firm will have to raise cash from other sources to make its payment. Here, liquidity risk is compounding credit risk.

Market risk

Market risk means the day-to-day potential for an investor to experience losses from fluctuations in securities prices. This risk cannot be diversified away. In other words market risk is the risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices. The associated market risks are:

  • Equity risk, the risk that stock prices and/or the implied volatility will change.
  • Interest rate risk, the risk that interest rates and/or the implied volatility will change.
  • Currency risk, the risk that foreign exchange rates and/or the implied volatility will change.
  • Commodity risk, the risk that commodity prices (e.g. corn, copper, crude oil) and/or implied volatility will change.

Market risk is the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions such as market movements. This risk is inherent in the financial instruments associated with our operations and/or activities including loans, deposits, securities, short-term borrowings, long-term debt, trading account assets and liabilities, and derivatives. Interest rate is one of the major factor to increase market risk. Volatile changes in interest rates have created have for manager of bank asset portfolios, particularly for those responsible for bank investments in government bonds and other marketable securities. When interest rates catapulted to record levels a few years ago, the market value of bank-held bonds plummeted, forcing many banking firms to accept substantial losses on any securities that had to be sold- a potent example of what financial analysts call market risk. If interest rates increase, the market value of –income securities (such as bonds) and fixed-rate loans will fall. A bank faced with the need to sell these assets in a rising-rate market will take losses. Falling interest rates, in contrast will increase the value of fixed-income securities and fixed-rate loans, resulting in capital gains when they are sold.

Interest rate risk

The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates. This risk can be reduced by diversifying the durations of the fixed-income investments that are held at a given time. In other words the risk that an investment’s value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship. Such changes usually affect securities inversely and can be reduced by diversifying (investing in fixed-income securities with different durations) or hedging (e.g. through an interest rate swap).

Interest rate risk affects the value of bonds more directly than stocks, and it is a major risk to all bondholders. As interest rates rise, bond prices fall and vice versa. The rationale is that as interest rates increase, the opportunity cost of holding a bond decreases since investors are able to realize greater yields by switching to other investments that reflect the higher interest rate. For example, a 5% bond is worth more if interest rates decrease since the bondholder receives a fixed rate of return relative to the market, which is offering a lower rate of return as a result of the decrease in rates.

Movements in market interest rates can also have potent effects on a bank’s margin of revenues over operating costs. For example, rising interest rates can lower a bank’s margin of profit if the structure of the institution’s assets and liabilities is such that interest expenses on borrowed money increase more rapidly than interest revenues on loans and security investments. However, if the bank has an excess of flexible-rate assets (especially loans) over flexible-rate liabilities (especially rate-sensitive CDs and money market borrowings), falling interest rates will erode the bank’s profit margin. In this case, asset revenue will drop faster than borrowing costs.

The impact of changing interest rates on a bank’s margin of profit is usually called interest rate risk. Among the most widely used measures of bank interest-rate risk exposures are:

  1. The ratio of interest-sensitive assets to interest liabilities when interest-sensitive assets exceed interest-sensitive liabilities in a particular maturity range, a bank is a vulnerable to losses from falling interest rates. In contrast, when rate-sensitive liabilities exceed rate-sensitive assets in volume, losses are likely to be incurred if market interest rates rise.
  2. The ratio of uninsured deposits to total deposits, where uninsured deposits are usually government and corporate deposits that exceed the amount covered by insurance and are usually so highly sensitive to changing interest rates that they will be withdrawn if yields offered by competitors rise even slightly higher.


Despite changing macro- economic condition and volatile money market &foreign exchange market, SJIBL   was successfully in achieving much higher than national growth in deposit, investment (loan), export & remittance business. As on 31st December 2009 total deposit of the bank stood at TK. 47459 million showing a growth rate of 38.45%, total amount of investment of the bank stood at TK. 43958 million with a growth rate of 33.54%. During the year import volume stood at TK. 39543 million as against 42551 million of 2008. The growth of the export business has been increased by 3087 million it stood at TK. 29434 million as of December 31, 2009 against 26347 million of the previous year which indicate 11.72% growth over previous year. Foreign remittance of the bank stood at TK.10473 million as of December 31, 2009 as against TK. 9498 million of 2008 with a growth of 10.26% over previous year. The ratio of no financing investment ratio remain below 1% indicated that the strategy of quality growth by adhering to compliance in all spheres of operations is working well.

Bank started with a initial paid up capital of TK.205 million subscribed by the sponsors in the year 2001. The capital and reserve of the bank as on 31st December 2009 stood at TK. 5430million including paid up capital of TK. 2740 million. The capital adequacy ratio as of 31st December 2009 stood at 13.98% that was well above minimum requirement of 10% by Bangladesh bank

Capital management framework is designed to ensure that bank maintains sufficient capital consistent with the bank’s risk profile, all application regulatory requirement and credit rating considerations. The capital management process is consistently review by the senior management of the bank. It is frequently reviewed by the board also and appropriate decisions are being adopted time to time to strengthen capital.

As an Islamic bank, it are committed to serve the courses of humanities. In this course, they expanded helping hand to the natural calamity affected people of various regions of the country. Not only that they stood beside the bereaved family for the loss of their beloved and nearest one in the carnage at BDR darbar hall in 2009. Each year, they are awarding scholarship to the poor and meritoris students for their brilliant result in the level of S.S.C & H.S.C to forward their future education smoothly. There is a plan to establish a hospital and an educational institution where the common people as well as the employees of the bank can avail the high standard of physical aid and education at a minimal cast.

The social spectrum under which we operate desires that we can carry on our business responsibly and contribute positively to the society and the environment. They are committed to responsible business practice and to a policy of continuous improvement in applying sound environment and social standard in dealing with all stakeholders of this bank.


Shahjalal ISlami Bank Limited have great achieved in year 2009 from the previous year. This bank increase their deposit, investment, equity etc. in this repot there have only better performance are mention there. There have no bad common about SJIBL. Though they are performing well they have some lacking. There product should be strategic benefit that customer can easily cope. Bank should more concentrate on micro credit. In case of SME sector, should be more

Investment to this sector, branch should in increase according to low of Bangladesh Bank, as soon as possible to give more facility to the customer. Human recherché department should be more care full about their employees. In banking sector bank should hair only bank related student that can easily understand banking problem and find out there solutions. In case of IT sector bank should strong concentration on IT sector to compete with other bank. In compute based world, Bank should take strong step to increase their IT sector. In this bank there have not enough information available in website that anyone can analyze their bank proper way. In overall performance, this bank become strong or A class bank. Any organization’s ultimate goal is share holders wealth, so bank should strong concentration to share market and take strategic planning to increase share holders wealth. 


In the preceding analysis, it has been seen that the performance measurement of a ban under traditional measures including CAMEL rating technique covers only the financial ratios (quantitative factors) but under BSC technique it covers both quantitative (financial ratios) and qualitative (customer, internal business and innovation and learning aspects) factors. Customers’ satisfaction, implementation of credit policy, fund management, human resource development, technological involvement, product diversification etc. are equally important with the financial activities to measure the performance of a bank. So the concept of CAMEL rating for performance evaluation of a bank can be widened by incorporating the long-term perspective of performance evaluation of Balanced Scorecard. This will provide a broader view of performance of a financial institution like bank.

Over all thinking banks performance much better than previous year.  The Capital, Asset, Management, Earning, Liquidity and Sensitivity (CAMELS) rating of different commercial banks in 2008 were done recently by the regulatory authority. SJIBL become Strong or A-class bank.