Internship Report

On
A Study on: Problem and Prospect of SME banking of
First Security Islami Bank Limited

FIRST SECURITY ISLAMI BANK LTD

Date of submission: 8th February, 2016

Internship Report

On
A Study on: Problem and Prospects of Bond Market
in Bangladesh

SUPERVISED BY
Noor Nahar Begum
Lecturer
Faculty of Business Studies (FBS)
Bangladesh University of Professionals

PREPARED BY
Mohiuddin Al Faruk
Program: MBA
Batch: 15th
Id No: M1415009
Major in Finance
Bangladesh University of Professionals

Date of submission: 8th February, 2016

Students Declaration

I, Mohiuddin Al Faruk, Bearing ID #M1415009, Student of MBA program, Bangladesh

University of Professionals, Major in Finance, do here by declare that the internship titled A
Study on: Problem and Prospects of Bond Market in Bangladesh is an original work, The
assigned work is done by me for partial fulfillment of my MBA degree, as a part of academic
curriculum, It has been submitted by me on the basis of my practical experience. I have tried my
level best to present all the information regarding my selected topic.

Mohiuddin Al Faruk Major in Finance

ID: M1415009
Faculty of Business Studies (FBS)
Bangladesh University of Professionals

CERTIFICATE OF THE SUPERVISOR

It is my pleasure to certify that Mohiuddin Al Faruk is going to complete his MBA program from
Bangladesh University of Professionals and he confidently completed the Internship report for
two months periods.
It is declared that he has been working hard in preparing this report for last two months and
finally has completed it successfully with an excellent performance under my supervision from
December 01, 2015 to 10th February, 2016.
I wish him a successful Life.

Noor Nahar Begum

Lecturer
Faculty of Business Studies (FBS)
Bangladesh University of Professionals

4thFebruary 2016
Noor Nahar Begum
Lecturer

Faculty of Business Studies (FBS)

Bangladesh University of Professionals
Subject: Application for the submission of Internship Report.
Dear Sir/Madam,
With due respect I beg to state that I am a student of MBA 15 th batch, Faculty of Business Studies ,
Bangladesh University of Professionals (BUP). I am submitting a copy of internship report for your kind
evaluation and appreciation.
I have given my best effort to prepare the report with relevant information that I have collected from
DSE, Bangladesh Bank and from other sources during my internship program from 01-12-2015 to 10-022016. I have immense pleasure to have the opportunity to study on A Study on: Problem and

Prospects of Bond Market in Bangladesh. There is no doubt that the knowledge I have gathered
during the study will help me in real life.
For your kind consideration I would like to mention that there might be some errors and mistakes due to
limitations of my knowledge. I expect that you will forgive me considering that I am still learner and in
the process of learning.
Sincerely yours,
-----------------------------

Mohiuddin Al Faruk MBA

Batch- 15th
Major in Finance
ID No- M1415009
Bangladesh University of Professionals (BUP)

Acknowledgement

It is my great pleasure to express my gratitude to Almighty Allah for giving me the opportunity to prepare
the report successfully. I would like to thanks and express my deep gratitude to my honorable supervisor
Mrs. Noor Nahar Begum for his excellent guidelines to prepare this internship report.

I would like to express my heartfelt thanks from the core of my heart to, Md Tahurul Haque SVP &
Manager, Md. Obaiedur Rahman FAVP & asst. manager, Md. Zahidul Hqoue Principle officer and in
charge of investment, Mr Shakhawat Hossain principle Officer and General Banking in charge of First
Security Islami Bank Ltd, Uttara Branch Dhaka for their all round support, which facilitated me to
complete my internship in the bank successfully.
I also wish to render my grateful thanks to all senior and junior officers of First Security Islami Bank Ltd,
Uttara Branch, who helped me during the time of my internship program at the bank.
I must mention the excellent working environment and the excellent group behavior of this bank, which
helped me tremendously to observe the banking activities, work with the staffs and stay for two months
without any obstacles and barriers.

Executive Summary

First Security Islami Bank Ltd (FSIBL) was incorporated in Bangladesh on 29August 1999 as
banking company under companies Act 1994 to carry on banking business. It obtained
permission from Bangladesh bank 22 September 1999 to commence its business. The bank are
carrying out banking business through its (152) branches in the country and (125) ATM Booths.
The commercial banking activities of the bank encompass a wide range of services including
accepting deposits, making loans discounting bills, conducting money transfer and foreign
exchange transactions and performing other related services such as safe keeping, collections and
issuing guarantees acceptance and letter of credit so on.
This report is originated as the course requirement of the MBA of Bangladesh

University of

Professionals Under this program students of department of FBS this faculty must go through an
internship program of two month duration. As practical orientation is an integral part of the MBA
degree requirement
The report will mainly focus on A Study on Problem and Prospect of SME banking of First
Security Islami Bank Limited which consist of chapter one-Introduction, chapter twoLiterature review, chapter-three organizational profile, chapter four- Analysis and findings,
Chapter five- recommendation , suggestion and conclusion, chapter six- Appendixes
The principal method of the study is sample survey. I used both primary & secondary data for
preparing this report.
Performance appraisals are essential for the effective management and evaluation of staff.
Appraisals help develop individuals, improve organizational performance, and feed into business
planning. Formal performance appraisals are generally conducted annually for all staff in the
organization. Their line manager appraises staff members. Directors are appraised by the
Chairman & Managing Director, who is appraised by the chairman or company owners,
depending on the size and structure of the organization.
Here I discuss about the organizational overview and prospect & Problem of SME banking of
First Security Islami Bank Limited uttara branch. To discuss

organizational overview and

prospect & Problem of SME banking of First Security Islami Bank Limited uttara branch also
give information about the vision, mission, objectives, goal, core values & all related information
of the First Security Islami Bank Limited.

By conducting a survey, I am able to know SME investment of First Security Islami Bank
Limited. That I find out common problems of bank & find proper suggestion to solve this
problem.
For the purpose of the Graduate in Finance and Banking this report on A study on Problem
and Prospect of SME banking of First Security Islami Bank Limited is prepared and
submitted.

CHAPTER ONE

Introduction:
Generally by the word Bank we can easily understand that the financial institutions deal with
money. But there are different types of banks like; Central Banks, Commercial Banks, Savings
Banks, Investment Banks, industrial Banks, Cooperative Banks etc. But when use the term
Bank without any prefix, or qualification it refers to the commercial banks. Commercial
banks are the primary contributor to the economy of a country. So we can say commercial banks
are a profit making institution that holds the deposit of the individuals & business in checking &
savings account and then uses these funds to make loans. For these, people and government are
very much dependent on these banks. As banks are profit earning concern; they collect deposit at
the lowest possible cost and provide loans and advances at higher cost. The differences between
two are the profit for the bank.
Small and medium-sized enterprises (SMEs) are the backbone of the national economy in
Bangladesh. This sector is playing an important role to develop the economy of our country. The
role of SMEs sector is immense to alleviate the poverty from the country as well. Small and
Medium enterprises are particularly suitable for the densely populated countries like Bangladesh
where SME sector can provide huge employment opportunity with much lower investment. They
are expected to create jobs, reduce poverty, and drive a resilient national economy.
I have complete a study about Small and medium-sized enterprises (SMEs) to find out the
condition of Small and medium-sized enterprises (SMEs) in Bangladesh and its prospect and
problem. In the paper a questionnaire has been constructed This paper is, therefore, an attempt to
analyze various issues, prospects and challenges of financing this particular sector and find out
the ways to overcome these challenges.
Banking sector is expanding its hand in different events every day. At the same time the banking
process is becoming faster, easier and the banking area becoming wider. As the demand for better
services increases day by day, they are coming with different innovative ideas and products. In
order to survive in the competitive field of the banking sector, all banking organization are
looking for better service opportunities to provide their fellow clients. As a result, it has become
essential for every person to have some idea on the bank and banking procedure.

First Security Islami Bank Ltd is one among the best and most important bank for the Banking
system of Bangladesh. Like other Banks & Financial Intermediaries, they perform a critical
function of facilitating the flow of funds from surplus units to deficit units. Commercial banks
basically focused on commercial lending. From the end of 19th century they are providing
diversified services.

1.1 Background of the report:

I have tried to prepare the report in such a way that it reflects what I learn during the
orientation period. I tried to clarify my experience with practical knowledge on overall
banking & customer service activities.
My course instructor Mrs. Noor Nahar Begum has authorized me to prepare a report on
A study on: Problem and Prospect of SME banking of first security Islami bank limited.
1.2 Objectives of the Study

(a) Broad Objective

The broad objective of this report is to analysis about the problem and prospects of SME
banking of First Security Islami Bank Ltd. Uttara branch.

(b) Specific Objective

(i) Objective of the Study to identify the present scenario of SME sector in First Security
Bank Ltd. Uttara branch

(ii) To highlight the prospects of SME sector in Bangladesh.

(iii) To identify the problems of SME sector in Bangladesh and Recommend some
suggestions to overcome those problems.
(iv) To find out the banks reasons for reluctance to providing loans to the SMEs.

1.3 Statement of the Research Problem

As we use to see Bank as a financing agent, it is normal to think that one get a loan easily from
the bank. But the true story is far from this imagination. It is really a hard job to get a loan from
commercial bank from small business firm. The SME sector needs more government support and
loan facility from bank and other financial sector. There are different problem exist in the SME
loan has huge prospect in Bangladesh. This research main problem statement is;
To find out the problem and prospect of SME banking services, A Study on first security Islami
bank limited and provide some suggestion and recommendations about SME Banking on the
basis of findings

1.4 Methodology of the study

This is a descriptive research study to analyze the employee performance of the FSIBL. The
method which I have followed of the study is sample survey.
Source of data:
I have collected the data from the following sources, which has helped me to make this report.
The source divided into two parts:
Primary:
Interview was the basic technique that was employed to collect primary data from people within
the organization. I had interviewed FSIBL Officials for getting more information.
Secondary:
Secondary data was collected from the annual report, journal, FSIBL report, FSIBL employee
training, lecture sheet & the website of First Security Islami bank limited.
Relevant data for this report will be collected primarily by direct investigations of different
records, papers, documents, operational process and different personnel. The interviews were
administered by formal and informal discussion. Structured questionnaire has been used.
Information regarding office activities of the bank has been collected through consulting bank
records and discussion with bank personnel.

Data sources:

The information and data for this report have been collected from both the primary and
secondary sources.
The Primary sources are as follows:
I have collected primary information from the bank officials of first security Islami bank ltd.
Uttara branch. I have asked 20 questionnaires to the officials of the bank and they answered the
questionnaires according my questionnaires. I have talked some other bank officials to
experience about my study. Total questionnaires are based on problem and prospect of SME
banking.
1

Face-to-face conversation with the respective officers and stuffs of the branch and head
office.

Questionnaire.

The Secondary Sources of data and the information are:

a. Banks Annual report.
b. Banks website.
c. Different types of journals
d. Bangladesh bank website
e. Wikipedia
f. Journals of various researchers
g. Management science
h. Direct science
i. Different procedure manual published by FSIBL
j. Different circular sent by head office or FSIBL.
Sampling Deign
All of the branches of First Security Islami Bank Limited in Bangladesh are the population &
FSIBL Actually sample frame is very confidently for organization. So it is totally invisible to
introduce. For the purpose of this study 12 respondents personnel for collecting appropriate data
relevant with study objectives. Quantities techniques used to data processing, presentations
(percentile, control, dispersion, graphical prostrations, etc) & discussed in different times with
concerned authority are used to preparing the report and finally submitted to evaluate my report.

1.5 Rational of the study

From the sequence of our analysis it seems that for the economic development of Bangladesh
SMEs can play a vital role. Small and medium Enterprises act as the most cost-effective and
worthwhile means of providing employment and injecting dynamism into industrial growth, both
for poverty alleviation and for contribution to the GDP. At present SME sector is facing a lot of
problems. Bangladesh government is trying to develop the SME sector through different policy
measures even though the rate of development is not up to expectations. There is a huge prospect
to develop this sector.

1.6 scope of the study

This Report will cover the topic Problem and Prospects of SME banking on first security Islami
bank ltd and its analysis on related issues. It also includes recommendations against the selected
issues. This report can be used as a secondary source for further purposes.

1.7 Limitation of the study

CHAPTER TWO

Literature review
Raihan (2001) observes that the 50.53 percent of SMEs have no access to formal source of
finance. Only 35.79 percent of SMEs enjoy unrestricted access to the formal credit. The rest

(13.68 percent) of them have restricted access to the formal credit. Bank credit is used by small
percentage of entrepreneurs and provides financing of generally less than 20 percent of their total
outlay. Majority of the SMEs (59.6 percent) seek finance for their working capital needs from
banks, although only a half-of them get loan from banks. Ahmed, (1999) pointed out that due to
the lack of national quality policy and adequate support system, and also due to the lack of
credibility of the quality certification authority, SMEs of Bangladesh have failed to ensure the
quality of products and services both in domestic and international markets. He also argues that
access to finance possess as one of the most important problems for the SMEs in Bangladesh.
Lack of investment or operating funds remains as one of the most prominent complains of the
SMEs in Bangladesh. Ahmed (2004) points out that due to the lack of national quality policy and
adequate support system, and also the lack of credibility of the quality certification authority,
SMEs of Bangladesh have failed to ensure the quality of products and services both in domestic
and international markets. He also argues that access to finance prevails as one of the most
important problems for the SMEs in Bangladesh. Lack of investing or operating funds remains as
one of the most prominent complains of almost all the SME in Bangladesh. Sulaiman, (2005)
observed that the 50.53 percent of SMEs had no access to formal source of finance. Only 35.79
percent of SMEs enjoy unrestricted access to the formal credit. Of the rest 13.68 percent have
restricted access to formal credit. Bank credit is used by small percentage of entrepreneurs and
provides financing of generally less than 20 percent of their total outlay. Majority of the SMEs
(59.6 percent) seek finance for their working capital needs from banks, although only a half-of
them get loan from banks. Rahman and Mahmood (2007) mentions that Small and Medium
Enterprises are the backbone of the economy in countries like Bangladesh. SMEs suffer from
common constraints such as lack of capital, difficulties in procuring raw materials, lack of access
to relevant business information, low technological capabilities, problems caused by
cumbersome and costly bureaucratic procedures, and policies and regulations that generate
market distortions. However, with proper domestic policy support from the government, and an
eye towards global market trends, SMEs can build capacity and reap the rewards of
globalization. Hasan and Islam (2008) identifies that banks usually do not express interest
towards SME financing. The reason behind this conservativeness is higher operational cost, less
return and high risk associated with the SME financing. Due to small loan size the operational
cost is higher and they require intensive monitoring and supervision. The main reason for higher

risk is that the small and medium entrepreneurs are highly unlikely to comply with the collateral
requirements as typically they do not have immovable properties. With the excuse of collateral
sometimes banks and non-bank financial institutions are reluctant to finance SMEs. Bangladesh
Bank Report (2008) says, the key reasons behind the SMEs are not entering into manufacturing
but are financial constrains, dismal state of utilities, technology and policy discriminations. On
the other hand, Bank and others financial institutions generally prefer large enterprise clients
because of lower transition costs, and greater availability of collateral. The SMEs also fall
outside the reach of micro finance schemes, and thus are compelled to depend on formal sources
of funds at much higher interest rates, the Bangladesh Bank report said. The BB report, however,
said that other interrelated problems like shortage of short and long term finance, lack of modern
technology and lack of promotional support services are major obstacles in the way of
development of the SMEs sector. Higher growth of the Small and Medium Enterprises (SMEs)
can help cut poverty to a satisfactory level by eliminating various prejudices against labour
intensive and creating jobs for the skilled manpower in the SME sector. Growth of SMEs in
developing countries is certainly a desirable goal in view of their perceived contribution to
decentralized job creation and generation of output (Chen, 2011). In developing economy like
Bangladesh, SMEs play a significant role in the development of the economy by creating
employment opportunities and producing useful machine substitutes and machinery parts saving
huge amount of foreign currency for our country (Chowdhury, 2008). About 6.0 million SMEs
are actively performing in Bangladesh which was contributing 25 per cent of the total GDP,
employing about 31 million people and providing 75 per cent of household income. Various
categories of SMEs together contribute between 80 to 85 per cent of industrial employment and
23 percent of total employment in Bangladesh (Chowdhury, 2008). Dr Khondaker Golam
Moazzem showed that in the Sixth Five Year Plan (6th FYP) acceleration of GDP growth (from
6.1 percent in FY 2010 to 8.0 per cent in FY2015) has been targeted through excelling the
performance of industrial sector, particularly of the manufacturing sector. The growth of the
manufacturing sector will have to be attained through improvement of existing enterprises and
also by creating new ones. However, an overwhelming number of these enterprises are micro
(having less than 10 workers), small (10-49 workers) and medium (50-99 workers) enterprises,
usually called MSMEs/SMEs (2008). S. M. Akterujjaman came into a conclusion that SMEs are
a fundamental part of the economic fabric in developing countries, and they play a crucial role in

furthering growth, innovation and prosperity. Unfortunately, they are strongly restricted in
accessing the capital that they require to grow and expand, with nearly half of SMEs in
developing countries rating access to finance as a major constraint (2010). S. M. Nasrul quadir
and DR. Mohammad Saleh Jahur argued that SMEs of Bangladesh have been vulnerable to
frequent policy changes of Government from time to time. Besides, they are facing severe
competition in and outside the country. As a result, the profitability of SMEs has got squeezed
and many of them have got financially distressed. Besides, Entrepreneurs of SMEs (2011).
Iftikhar Hussain, Zeeshan Farooq and Waheed Akhtar opined that Across the South Asia, the
contribution of SMEs to the overall economic growth and the GDP is high. It is estimated that
SMEs contribute 50% of Bangladeshs industrial GDP and provide employment to 82% of the
total industrial sector employment. In Nepal, SMEs constitute more than 98% of all
establishments and contribute 63% of the value-added segment. In India, SMEs' contribution to
GDP is 30 %.( 2012). Chowdhury ET. Al (2013) has made a study on Problems and Prospects
of SME Financing in Bangladesh. The study found that SMEs contributes significantly in
poverty reduction programs and potential contribution to the overall industrial and economic
growth and suggested Venture Capital, Bank Syndication Scheme, HRD in Financial institutions
and in Government offices, Training and Development etc as potential tools of eliminating the
constrains of SMEs financing.

CHAPTER THREE
ORGANIZATION
OVERVIEW

3.1 Background of First Security Islami Bank Limited

The First security Islami Bank Limited is the third generation private sector Bank in Bangladesh.
FSIBL is fully owned by Bangladeshi entrepreneurs. The bank was opened on August 29, 1999
but the first branch at 23, Dilkusha Commercial Area, Dhaka started commercial operation on
August 29, 1999. The 2nd Branch was opened on 11 November 1999 at Khatungonj, Chittagong.
At present, FSIBL has been carrying on business through its 152 branches and 125 ATM booth
spread all over the country. FSIBL was the first domestic bank to establish agency arrangement
with the world famous Western Union in order to facilitate quick and safe remittance of the
valuable foreign exchanges earned by the expatriate Bangladeshi nationals. FSIBL was also the
first among domestic banks to introduce international Master Card in Bangladesh. In the
meantime, FSIBL has also introduced the Visa Card and Power Card. The Bank has in its use the
latest information technology services of SWIFT and REUTERS. FSIBL has been continuing its
small credit program for disbursement of collateral free agricultural loans among the poor
farmers of Agrabad area in Chittagong district for improving their lot. Alongside banking
activities, FSIBL is actively involved in sports and games as well as in various Socio-Cultural
activities. It has four regional branches 1. Chittagong zone 2. Sylhet zone 3. Khulna zone 4.
Rajshahi zone

3.2 First security Islami bank at a glance

3.3 Our Mission

1. To contribute to the socio-economic development of the country.

2. To attain the highest level of satisfaction through the extension of services by
dedicated and motivated professionals.
3. To maintain continuous growth of market share by ensuring quality.
4. To ensure ethics and transparency in all levels.
5. To ensure sustainable growth and establish full value of the honorable shareholders

3.4 Our Vision

To be the premier financial institution in the country by providing high quality products and
services backed by latest technology and a team of highly motivated personnel to deliver
excellence in Banking.

3.5 Our Strategies

1

To achieve our customers best satisfaction & win their confidence.

To manage & operate the bank in the most effective manner.

To identify customers need & monitor their perception towards meeting those
requirements.

To review & update policies, procedures & practices to enhance the ability to extend
better customer services.

To train & develop all employees & provide them adequate resources so that customers
can need reasonably addressed.

3.6 Board of Director

1. Mohammad Saiful Alam
2. Alhaj mohammad Abdul Maleque
3. Ms farzana Parveen
4. Ms afiqun nesa
5. Md wahidul Alam sekh

6. Md ohidul alam
7. Shahidul islam
8. Mohammmad issaque
9. Mohammad qutub uodollah
10. Khurshid Jahan
11. Ahmed muktadir Arif ( Independent director)
12. Khandoker Ifftekher ahmed

3.7 Top Management

1. Mr. Syed Waseque Md. Ali
Managing Director
2. Mr. Quazi Osman Ali
Additional Managing Director
3. Mr. Syed Habib Hasnat
Additional Managing Director
4. Md. Abdul Aziz
Deputy Managing Director
5. Mr. Md. Mustafa Khair
Deputy Managing Director
6. Mr. Md. Saifur Rahman Patwary
Deputy Managing Director

3.8 Organizational Structure

Managing Director
Additional Managing Director
Deputy Managing Director
Senior Executive Vice President
Executive Vice President
Senior Vice President
Vice President
Senior Assistant Vice President
Assistant Vice President
First Assistant Vice President
Senior Principal Officer
Principal Officer
Officer

Junior Officer
Assistant Officer

3.9 Senior Management

FSIBL is functioning with a highly professional management team headed by the Managing Director Mr.
Syed Waseque Md. Ali. Among other senior executives, 02 AMDs, 03 DMDs, 01 Principal at Training
Institute, 10 EVPs, 11 SVPs, 13 VPs, 12 FVPs, 29 SAVPs, 27 AVPs and 100 FAVPs are discharging their
services for achieving organizational goals. Top management of the Bank is supported by highly qualified
and dedicated human resources numbering around 2072 officials in different grades.

3.10 Shariah Board

3.11 Details of Shareholding

Details of Shareholding as on November 30, 2015
Name of the Category
Sponsors & Directors
Institute
Foreign
Public

Total Shares
321730653
151920501
7905457
197317277

Percentage
47.3918
22.3783
1.1645
29.0654

Total

678,873,888

100.0000

3.12 Product & Service of FSIBL:

First Security Islami Bank Limited is providing modern banking facilities to the
customer. It is committed to fulfill every possible customer need with high efficiency and
satisfaction. Its team of dedicated professionals is committed to provide an unparalleled
service and to bring maximum benefits for the customers, the shareholders and the
society at large. Its a great pleasure of First Security Islami Bank limited to introduce
following services:
Deposit Product of FSIBL:
Al-Wadeah Saving Account
Mudaraba Saving Account
Mudaraba Short Term Deposit
Mudaraba Term DepositOne Month
Three Month
Six Month
One Year
Two Year
Three Year
11.Mudaraba Monthly Income Scheme
12.Mudaraba Monthly Savings Scheme
13.Mudaraba Super Savings Scheme
14.Mudaraba Multi plus Savings Scheme
15.Mudaraba Haji Scheme
16.Mudaraba Education Saving Scheme.
17.Mudaraba Waqf Cash Deposit
18.Mudaraba Special Savings (Pension)
19.Mudaraba Muhar Savings

Investment Product of FSIBL

1. Izara Bill Baia (General)
2. Izara Bill Baia (HB)
3. Izara Bill Baia (Staff HB)
4. Bai-Muajjal (BAIM)
5. Izara (LF)
6. House Hold Durable Scheme (HDS)
7. Baia-Muazzal (General/FO)
8. Baia-Muazzal (WO)
9. Baia-Muazzal (Export)
10. Murabaha Import Bills (MIB)
11. Murabaha Post Import (MPI)
12. Trust Receipt (TR)
13. IBP
14. Musharaka Pre-Shipment (ECC)
15. Musharaka Pre-Shipment (PC)
16. Local Documentary Bill Purchase (LDBP).
3.12.1 Deposits service of FSIBL
Mudaraba Monthly Income Scheme
Bangladesh is a developing country. But in our country opportunity of is very low. People of our
country always try to save their excess money and they are looking for where they can deposit
the money. According to their demand FSIBL started this monthly income scheme.
Highlights of the Scheme:
1

Minimum deposit Tk. 25000/

Higher monthly income for higher deposits.

The scheme is for a 5 years period.

Monthly income will be credited to the depositors account on 5th of each month.
Deposit Account
Tk. 25,000

Income
Tk. 250

Tk. 50, 000

Tk. 500
Tk. 1,00,000
Tk. 1000
Tk. 2,00,000
Tk. 2000
Tk. 5,00,000
Tk. 5000
Tk. 10,00,000
Tk. 10,000
Fig: Monthly income to deposit amount
Objective of the scheme:
1

An account is to be opened by filling up a form.

The bank will provide to the customer a deposit receipt after opening the account. This
receipt is non-transferable.

If the deposit is withdrawn before a 5 years term, the saving interest rate will be
applicable and paid to the depositor, however, no interest will be paid if the deposit
withdrawn within 1 years of paid to the customer will be adjusted from the principal
amount.

A depositor can avail loan up to 80% of the deposit amount under this scheme. In this
case, interest will be charge against the loan as per banks prevailing rate. During the
tenure of the loan, the monthly account until liquidation of the loan amount inclusive of
profit.

Mudaraba Super Savings Scheme

Saving helps to build up capital and is the prime source of business investment in a country.
Investment takes the country towards industrialization, which eventually creates wealth. That is
why savings is treated as the very foundation of development. To save, FSIBL offers Super
Saving Scheme.
Terms and Conditions of the scheme:
1

Any individual, company, educational institution, government organization, NGO, trust,

society etc may invest their savings under this scheme.

The deposit can be made in multiples of Tk. 10,000/=

The period of deposit is for six years.

Any customer can open more than one account in a branch in his name or in joint names.
A deposit receipt will be issued at the name of opening the account.

If the deposit is withdrawn before six years terms, then savings interest rate +10% will be
applied before payment is made. However, no interest will be paid if the deposit is
withdrawn within 1st year.

Some examples are given in the table below. Any amount can be deposited in multiples of Tk.
10,000/=
Deposit
Terms
10,000/=
6.5 Years
20,000/=
6.5 Years
50,000/=
6.5 Years
1,00,000/=
6.5 Years
2,00,000/=
6.5 Years
5,00,000/=
6.5 Years
Mudaraba Multiplus Savings Scheme

Payable at maturity
Double
Double
Double
Double
Double
Double

Payable Amount
20,000/=
40,000/=
1,00,000/=
2,00,000/=
4,00,000/=
10,00,000/=

Saving helps to build up capital and capital is the prime source of business investment in a
country. Investment takes the country towards industrialization that eventually crates wealth.
That is why savings is treated as the very foundation of development. To create, more awareness
and motivate people to save, FSIBL offers Multi Plus Savings Scheme.
Terms and Conditions of the Scheme
1

Any individual, company, educational institution, government organization, NGO, trust,

society etc may invest their savings under this scheme.

The deposit can be made in multiples of Tk. 10,000/=

The period of deposit is for 10 years. But he deposit can be withdrawn at any year with
profit. As an example of 1 year but before 2 years then deposit with interest with paid for
1 year only. The same rule will apply for other years. If deposit is withdrawn before 1 st
year then no interest will be paid.

Any customer can open more than one account in a branch in his name or in joint names. A

deposit receipt will be issued at the name of opening the account.

Some examples are given in the table below. Any amount can be deposited in multiples of Tk.
10,000/=
Amount
Year
01
02
03
04
05
06
07
08
09

10,000/=
20,000/=
Year wise payable to customer
10,910/=
21,820/=
12,012/=
24,024/=
13,346/=
26,693/=
14,952/=
29,904/=
16,714/=
33,429/=
18,765/=
37,530/=
21,499/=
42,998/=
25,116/=
50,231/=
28,270/=
56,540/=

50,000/=

1,00,000/=

54,550/=
60,061/=
66,731/=
74,761/=
83,572/=
93,824/=
1,07,496/=
1,25,578/=
1,41,351/=

1,09,100/=
120,122/=
1,33,463/=
1,49,522/=
1,67,144/=
1,87,649/=
2,14,992/=
2,51,156/=
2,82,702/=

10
31,782/=
63,744/=
Mudaraba Monthly Savings Scheme

1,59,361/=

3,18,721/=

The savings amount is to be deposited within the 10 th of every month. In case of holidays the
deposit amount is to be on the following day. The deposit may also be made in advance.
The depositor can have a separate account in the bank from which a standing instruction can be
given to transfer the deposit in the schemes account.
In case the depositor fail to make the monthly installment in time, then 5% on overdue
installment amount will be charged. The charge will be added with the following month(s)
installment and the lowest charge will be Tk. 10/=.
Rules
A form has to be filled at the time of opening the account. No introduction is attested
photographs are advised.
1

The depositor can select any of the installment amounts, which cannot be subsequently
changed.

In case of minors the guardians may open and supervise the account in this favor.

A single person can open more than one account for saving under several interest rates.

The depositor should notify the bank immediately on any change of address.

The government tax will be deducted from the interest accumulated in this scheme.

Term

Monthly

Monthly

Monthly

Monthly

Installment

Installment

Installment

Installment

(Tk.)
500

(Tk.)
1000

(Tk.)
2000

(Tk.)
5000

5 years

39041

78082

156164

390411

8 Years

74202

148808

2946809

742024

10 Years

105095

210190

420380

1050952

12 Years

144461

288923

577847

1444618

Total Benefit

Mudaraba Hajj Scheme

Ninety percent of people in our country are Muslim. Hajj is mandatory of every rich and
physically fit Muslim people. As a Islami Bank FSIBL offer Hajj Scheme to the customer to
fulfill the desire of religious minded people.
One can open this type of scheme in different maturity by paying monthly installment.
Education Saving Scheme
The most gratifying experience for parents are proper education of their children. Educational
expense is rapidly increasing and therefore appropriate planning needs to be done by all parents.
FSIBL offers you Education Saving Scheme to assist in financial planning well ahead in for
their childrens higher education.
Terms and Conditions of the Scheme:
1

Deposit of Tk. 2, 50,000/= and multiples thereof at a time will be accepted under the
scheme.

The instrument shall be issued for 7 years, 10 years, 15 years or 20 years term.

The deposit payable at maturity with benefit either in lump sum or on monthly basis as
education allowance for 6 years starting after the completion of respective term.

(a) If withdrawn is made before seven years, interest will be calculated and paid as per prevailing
saving rate.
(b) If withdrawn is made at any time after seven years, the total amount payable at maturity of
the immediate preceding terms will be paid along with interest for the fractional period at
prevailing saving rate.
1
2

The depositor can avail loan up to 80% loan under the scheme.

In case of issuing duplicate receipt the rules of issuing duplicate receipt of terms deposit will

be applicable.
Example Table
Term

Initial Deposit (Tk)

Amount payable at Education

7 Years
10 Years
15 Years
20 Years
Debit Card

25,000/=
25,000/=
25,000/=
25,000/=

maturity
55,000/=
77,000/=
1,36,000/=
2,40,000/=

Allowance P/M
1,000/=
1,500/=
2,500/=
4,500/=

The Bank has launched Master card among its customers in joint collaboration with DBBL Bank
Ltd.

FSIBLs card is accepted at more than 5000 outlets spread around the country; this card can be
used in purchase of everyday necessities to luxurious goods and services. This wide range of
merchants include hotels, restaurants, airlines, travel agents, departmental stores, hospitals,
clinics & diagnostic centers, jewelry shops, electronic shops, health clubs any many more.
Numbers of outlets are increasing day by day to cater to growing needs.
FSIBL card provides cash withdrawal facility up to 50% of your credit limit; this may be availed
from ATM or from any branches of FSIBL Ltd.

3.12.2 Investment service of FSIBL Ltd.

Izara Bill Baia (General)
Short term, medium term & long term investments allowed to individual/ firm/industries for a
specific purpose but for a definite period and generally repayable by installments fall under this
head. These types of lending are mainly allowed to accommodate financing under the categories.
I. Large & Medium Scale Industry and
II.

Small & Cottage Industry.

Very Often Terms Financing for

I. Agriculture &
II. Others are also included here.
Features:
1

The Islamic Shariah principle of investment under Izara Bill Bia is Musharaka
Mutanakasha, which means the rent, shall be devisable as per equity involved, unpaid
rent if any shall not be treated as equity and the asset shall be acquired on participation
ownership.

Possession of the asset shall be passed on to the client for use as per practicability.

Bank shall retain the ownership till payment of equity portion of the bank along with
rental.

The ownership of the asset shall gradually pass on to the client upon payment of banks
equity involved and on the reverse upon increase of clients equity.

Izara Bill Baia (HB)

Investment allowed to individual/enterprises for construction of house commercial fall under this
type of investment. The amount is repayable by monthly installment with a specified period.
Such investment is known as Izara Bill Bia (HIB). No investment for construction of residential

house building shall be accommodated to the banks customer where is no other business
consideration.
Izara Bill Baia (Staff HB)
Investment allowed to our bank employees for purchase/construction of house shall be known as
investment (Staff HB).
Bai-Muajjal (BAIM)
It is a mode of investment under which the bank at the instance of the client procures certain
goods permissible under Islamic Shariah and the law of the country and sells those to the client
at a price payable at a fixed future date in lump sum or in fixed installments and the goods are
delivered in advance and the fixed price is paid later or as agreed by the parties.
Important Features
1

Goods are to be purchased from a third party excluding sister concern(s) of the client.

Ownership of bank on the goods be established at least for a single moment before selling
the same to client.

Like Murabaha, bank is not bound to declare cost of goods and profit mark up separately.

Murabaha
Financial accommodation to individual/firm for trading as well as for wholesale or to industries
as working capital against pledge of goods as primary security fall under this head of investment.
It is also a continuous investment and like the above allowed under the categories.
I. Commercial Lending
II. Working Capital
Bai-Murabaha Investment
Bai-Murabaha may be defined as a contract between a buyer and seller under which the seller
certain specific goods permissible under Islamic Shariah and the law of the land to the buyer at a
cost plus agreed profit payable in cash or an any fixed future date in lump sum or by
installments. The profit marked-up may be fixed in lump sum or any percentage of the cost price
of the goods. .
Features
1

There must be three parties in order to perform buying a selling under Murabaha (a) Bank
(b) Seller of Goods (c) Purchaser of Goods. Goods however must not be purchased from
client of from any of its sister concern. Goods must also be halal as per Shariah.

A commodity in the true sense of the term must be involved in buying and selling.

There must be an agreement between the bank and the client. Cost of the goods sold and
the amount of profit added there with should be separately and clearly mentioned in the
Murabaha Agreement.

Izara Bill Baia (HP)

Izara Bill Baia (HP) is a type of installment investment under which the purchaser agrees to take
the goods on hire at a stated rental, which is inclusive of the repayment of principal as well as
profit for adjustment of the investment within a specified period.
Izara (LF)
Izara (LF) is one of the most convenient sources of acquiring capital machinery and equipment
whereby a client is given the opportunity to have an exclusive right to use an asset usually for an
agreed period of time against payment of rent. It is a term financing repayable by installment.
House Hold Durable Scheme (HDS)
It is a special investment scheme of the bank to finance purchase pf consumer durable to the
fixed income group to raise their standard to living. The customers allow the investments on soft
terms against personal guarantee and deposit of specified percentage of equity. The investment is
repayable by month installment within a fixed period.
Bai-Muazzal (General/FO)
Investment

allowed

to

individual/firms

against

financial

obligation

(i.e

lien

of

MTDR/PSP/BSP/Insurance Policy/Share etc.) This may not be a continuous investment.

Bai-Muazzal (WO)
Investment allowed against assignment of work order for execution of contractual work falls
under this head. This investment is generally allowed for a definite period and specific purpose
i.e. it is not a continuous investment.
Bai-Muazzal (Export)
Investment allowed for purchasing foreign currency for payment against L/Cs (Back to Back)
where the exports do not materialize before the date of import payment. This is also investment
for temporary period, which is known as export finance and falls under the category
Commercial Lending.
Murabaha Import Bills (MIB)

Payment made by the bank against lodgment of shipping documents of goods imported through
L/C falls under this head. It is an interim investment connected with import and is generally
liquidated against payment usually made by the party for retirement of the documents for release
of imported goods from the customs authority. It falls under the category Commercial
Lending.
Murabaha Post Import (MPI)
Investment allowed for retirement of shipping documents and release of goods imported through
L/C taking effective control over the goods by pledge in godown under banks lock & key fall
under this type of investment. This is also a temporary investment connected with import is
known as post import finance and falls under the category Commercial Lending

3.13 Foreign Remittance

1. Western Union a fast, reliable and convenient way to send a money transfer. Western
Union Financial Services Inc. USA is the number one and reliable money transfer
company in the world. This modern Electronic Technology based money transfer
company has earned worldwide reputation in transferring money from one country to
another country within the shortest possible time. Millions of people have confidence on
Western Union for sending money to their friends and family. Through Western Union
Money Transfer Service, Bangladeshi Wage Earners can send money quickly from over
280,000 Western Union Agent locations in over 200 countries and territories worldwide
the worlds largest network of its kind.
2. The MoneyGram brand is recognized throughout the world as a leading global
payment services company. The diverse array of products and services we offer enables
consumer and businesses to make payments and transfer money around the world. From
New York to Russia or London to India in more than 192 countries MoneyGrams
money transfer service moves money quickly and easily around the world. First Security
Islami Bank has remittance drawing arrangement with the MoneyGram, one of the global
leaders in money transfer service. Under the agreement Bangladeshi expatriates living in
different parts of the world now send their money safely and quickly to the beneficiaries

in Bangladesh. First Security Islami Bank has the arrangement for the Products: Instant
Cash
3. The Xpress Money is recognized throughout the world as a leading global money
transfer service provider. Xpress Moneys agent network is spread across 125 countries in
5 different continents with over 135,000 agent locations. Xpress Money is also one of the
few non-banking entities with a SWIFT membership which gives them the credibility and
reach that is unparalleled across the globe. First Security Islami Bank has remittance
drawing arrangement with the Xpress Money, one of the global leaders in money transfer
service. Under the agreement Bangladeshi expatriates living in different parts of the
world now send their money safely and quickly to the beneficiaries in Bangladesh. First
Security Islami Bank has the arrangement for the Products: Instant Cash

3.14 Utility Bill Payment

Branch
Mohakhali,
Dhaka
Topkhana,
Dhaka
Gulshan
Dhaka

Bill Type

Branch

DESCO

Shafipur , Gazipur

Under process (Electric

bill)
,

Titas Gas

Keranihat, Chittagong
Biswanath , Sylhet

Bill Type
Dhaka Pally Biddut
Shumitty
Pally

Biddut

Shumitty
Pally

Biddut

Shumitty

CHAPTER FOUR

STUDY AND ANALYSIS ON

PROSPECTS & PROBLEM
OF SME BANKING

4.1 INTRODUCTION
Small and medium-sized enterprises (SMEs) are the backbone of the national economy in
Bangladesh. This sector is playing an important role to develop the economy of our country. The
role of SMEs sector is immense to alleviate the poverty from the country as well. Small and
Medium enterprises are particularly suitable for the densely populated countries like Bangladesh
where SME sector can provide huge employment opportunity with much lower investment. They
are expected to create jobs, reduce poverty, and drive a resilient national economy. This paper is,
therefore, an attempt to analyze various issues, prospects and challenges of financing this
particular sector and find out the ways to overcome these challenges. Bangladesh is an
agricultural based country, where around 85% people are living at village with activities of

agriculture, in this perspective Bangladesh can achieve industrialization through agriculture

based small and cottage industry to start aggressively. Small and medium enterprises (SMEs)
make up the largest portion of the employment base in many developing countries and, indeed,
are often the foundation of the local private sector. Now the SMEs are not only concentrated to
low-tech, traditional, and agro-based economic activities; these are spread over other nontraditional manufacturing and service sector as well. In fact, the SMEs are recognized as engines
of economic growth worldwide. To achieve high and sustained economic growth, a triggering
force is mandatory to exit from endemic poverty and socio economic deprivation. The
entrepreneurs behind could and should play a much larger role in development, but too often are
held back by a lack of ready access to financing from local formal sector financial institutions.
He relies the scope of commercial banks to offer banking facilities to this missing middle by
offering different products that are specially featured for this segment. On a long-term
perspective these commercial banks expect to gradually develop the creation of an
entrepreneurial class across Bangladesh through proper financing and training. Commercial
banks are also developing their procedure and operational guideline supported by structured
recruitment process and subsequent training with a view to mitigating credit risks and other risks
for a smooth flow of SME financing. Most businesses in Bangladesh are in need of small shortterm loans to help finance their working capital needs or purchase of fixed assets.

Definition of Small Enterprise

Small Enterprise refers to the firm/business which is not a public limited company and complies
the following criteria:

Definition of Medium Enterprise

Medium Enterprise refers to the establishment/firm which is not a public limited company and
complies the following criteria:

4.2 Present scenario of SME Banking in Bangladesh

The Industry sector plays an important role in the socio-economic development of Bangladesh.
According to BBS estimates (base year: 2005-06), the contribution of the broad industry sector
to real GDP stood at 29 percent in FY 2012-13, which increased to29.61 percent in FY 2013-14.
Among the fifteen sectors of GDP, the broad industry sector includes four sectors namely mining
and quarrying; manufacturing; electricity and gas and water supply; and construction. The
Contribution of the manufacturing sector is the highest in GDP. In FY 2012-13, the contribution
of manufacturing sector in GDP was 19 percent which reached to 19.45 percent in FY 2013-14.
The volume and growth performance of the manufacturing sector from FY 2006-07 to FY 201314 is shown in Table1 according to the base year 2005-06:

Production of Manufacturing Industries

The Quantum Index of Production (QIP) is an important tool for measuring the production
Performance of manufacturing industries. Data available QIP (2005-06=100), representing
medium to large scale industries, rose to 195.19 in FY 2012-13 from108.76 in FY 2006-07. In
FY 2013-14, the QIP average index stood at 211.29. Table 8.2 shows the index during FY 200607 to FY 2013-14.

Table 3: The total amount of financing and the total amount of SME financing based on the
nature of the banks.

(In Crore)

SL

Bank

State owned banks

Specialized banks

29612

7950

26.85%

Private
Commercial Banks
Foreign Commercial banks

295835

73788

24.94%

23346
439020

2403
9743

10.20%
22.22%

4
Total

Position as on
2015
Total Financing
SME Financing
90224
13350

Percentage
14.80%

The following table shows amount of SME financing based on service, trading and
manufacturing sector
Table 4: Amount of SME financing in different sector
Sector

(In Corer)

SME Amount

Growth

2013

2014

Service

1638

2209

34.85%

Trading

2053

27769

37.7%

Manufacturing

10463

11869

13.44%

Source: Bangladesh Bank

4.3 SCOPES OF SMES

The structural arrangements of Bangladeshs industries show that jute, textiles, paper, steel and
engineering, cement, chemical, fertilizer and pharmaceutical industries are under the big and
medium scale industries. On the
other hand, specialized textile industries (including garments),backward linkage industries, handoperated welding, food processing and food linkage industries, leather, ceramics, light
engineering including automobiles, basic metal engineering, small scale chemical engineering,
rubber industries, paper printing and publishing industries, small fabrication industries, nonmetal mineral products, batteries, electrical, electronics, handicrafts, agro-based industries,
multilateral jute goods, silk industries, fruit processing, poultry farming, fisheries, tea gardening
and processing, vegetable seed farming, floriculture and agro-forestry, and printing industries,
ginning and baling, construction industries, transportation (including automobiles), cinema and
photography, pathological laboratories, cold storage, furniture, computer industries, Electronics
and Electrical, Software Development, Light Engineering and Metal Works, Agro
processing/Agri-business/plantation agriculture/specialist farming/tissue-culture and related
business, leather-making and leather goods, Knitwear and ready-made garments, Plastics and
other synthetics, Healthcare and diagnostics, Pharmaceuticals/ Cosmetics/Toiletries and Fashionrich personal effects, wear and consumption goods.

4.4 IMPORTANCE OF SMES

It is said internationally that Small and medium Enterprises (SMEs) account for about 50 percent
of GDP and 60 Percent of employment. SMEs are estimated to contribute between 25 and 35
percent of world manufactured exports. In terms of industrialization, Japan drew special attention
to the professionals and policymakers in the international arena. Statistics show that Japan has
achieved its industrial development heavily based on SMEs. Some of the worlds best
performing economies, notably Taiwan and Hong Kong, are heavily based on small enterprises.
In much of the developing world, the private sector economy almost entirely comprises of SMEs.
Contribution of SMEs in some selected countries shows that it has provided very significant
proportion of GDP and employment in their national economy Table 5: Contribution of SMEs in
some selected countries

Entrepreneurs form Hong Kong, Japan and Korea has taken advantage of Bangladeshs cheap
and easily trainable lab our and its infrastructure facilities to manufacture products for the export
market. The Industrial Revolution of 1760-1850 represents a good testimony of the inherent
innovative spirit of SMEs, which are increasingly challenged in the present century particularly
after winds of economic change cum technological innovations and industrial liberalization ,
have swept various economies of the world. These challenges notwithstanding, SMEs have
remained as much important and relevant economic catalysts in industrialized countries as they
are in the developing world. In many developed countries, more than 90% of all enterprises are
within the SME sub-sector while 80% of the total industrial labor force in Japan, 50% in
Germany and 46% in USA small business contribute nearly 39% of the countrys national
income. Comparable figures in many other developed countries are even higher. In many
developing countries including Bangladesh, manpower is relatively abundant. It is, therefore,
imperative that their full and effective utilization should become focal point of socio-economic
policies. Emphasis has to be laid on SME sector to absorb the surplus manpower in these
countries. In fact, developing of SME sector has been requires less capital outlay and at the same

time it provides more employment than the large-scale sector. Second, a SME unit does not
require highly sophisticated technology. It can, therefore, be useful in backward areas where the
people have yet to be trained to meet the challenge of sophisticate technology. Bangladesh is
highly resourceful with so many seasonal fruits and also lots of agricultural products. Pineapple
and mango are best used to produce jam/jelly/juice etc under SME. Tomato sauce and potato
chips are popularly used all over the world. SME is most suited for processing the items. If we
can add more quality to the products and ensure proper marketing, tremendous demand will be
created in domestic and export market.

4.3 History of SME banking in Bangladesh

Problems of SME Banking
Prospect Of SME Banking
SME banking activities of FSIBL
ANALYSIS AND FINDINGS