Investment Mechanism

of
Islami Bank Bangladesh Limited

Chapter 1: INTRODUCTION
1.1 Introduction:

Banking system conquers an vital place in a nation’s economy. A banking institution is

indispensable in a modern society. It plays a pivotal role in the economic development of a
country and forms the core of the money market in an advanced country. In recent times the
banking segment over the world has been undertaking a lot of changes due to deregulation,
technological innovation, globalization etc. Bangladesh banking sector is lagging far behind in
adopting these changes. To thrive well in this changing environment, not only development of
appropriate set-up is necessary but also infusion of expertise in to banking service is essential.
The Banking sector is one of the highly planned sectors in our country. It is governed by the
rules and regulation of Central Bank of the country i.e. Bangladesh Bank and Security and
Exchange Commission. The bank companies are required to comply the best accounting
practices. It strictly follows International Accounting Standard (IAS) norms. It publishes the
financial statement every year getting it suitably audited by recognized audit firms. Every bank
of our country has a division named Financial Administration Division (FAD) which takes care
of the accounting issues of the Bank. Most of the personnel who lead these divisions are of
accounting background. Among the accounting based FAD staffs who know the banking
procedure better can subsidize more in the banks.

Islami bank Bangladesh Limited is an unconditional and specialized financial institution which is
first of its kind in South East Asia performs most of the standard banking service and investment
activities on the basis of profit-loss sharing system conforming to the principles of Islamic
Shariah. Islami Bank does not pay interest to depositor. Instead depositors participate in the
profitability of the bank. The Bank participates in financing long-term projects on the basis of
profit-loss sharing instead of granting credit facilities with interest. IBBL also executes many
social happiness activities through its subsidiary organ named Islami Bank Foundation (IBF).

Career in Banking has become very lucrative over the last few years considering the work
environment and remuneration package. As a student of BBA, I value to be a banker and that is
why I had chosen a banking organization for my internship. I chose IBBL because it has a good
reputation in the banking community.

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My internship program especially constructed on Islami Bank Bangladesh Limited and I need to
attention the conjunction in loaning (investment) performance between IBBL vs. other
conservative bank in Bangladesh. For my study purpose I choose National Bank Limited as an
example of conventional bank.

1.2 History behind the Report:

For Dissertation report each student has to prepare a report on their choice. According to this
requirement, I have already finalized my Dissertation report on the Investment Mechanisms of
Islami Bank Bangladesh Ltd., because I am a staff of Islami Bank Bangladesh Ltd. And as a
Muslim I should know the Islamic Banking system. For my reporting purpose a lot of time I
went IBTRA to collect necessary information. On the basis of my practical experience as well as
theoretical knowledge, I have completed the report regarding “Investment Mechanisms of Islami
Bank Bangladesh Ltd.” The main focus of my study is to evaluate the investment technique of
IBBL. Islami Bank does not lend money or issue securities with fixed interest. Instead it finance
in various patterns approved by Shariah Board to achieve its goal.

1.3 Objective of the Study:

The key objective of the study is to meet practical knowledge concerning banking system and
operation. This real orientation gives us a chance to Co-ordinate out theoretical knowledge with
the practical experience. The ensuing are of objective for this practical orientation in bank:

 To apply speculative knowledge in the practical field.

 To find out the global pictures of investments of IBBL.
 To identify strength and weakness of loaning and investments of whole banking system.
 To identify the difficulties related to investments handled by IBBL and other
conservative banks.
 To find out the goal why people go to IBBL.

1.4 Rationale of the Study:

There are three types of schedule commercial banks are in operation in our economy. They are
Nationalized Commercial Banks, Local Private Commercial Banks and Foreign Private
Commercial Banks. Islami Bank has discovered a new horizon in the field of banking area,
which offers different General Banking, Investments and Foreign Exchange banking system. So I
have decided to study on the topic “Investment Mechanisms of IBBL”. Because the
Dissertation report of the university is an integral part of the MBA program. So it is obligatory to
undertake such task by the students who desirous to complete and successfully end-up their
MBA degree. This also provides an opportunity to the students to minimize the gap between
theoretical and practical knowledge. During the Dissertation report the teachers of the
department are attached to actively and constantly guide the students. Students are required to
work on a specific topic based on their theoretical and practical knowledge acquired during the
period of the internship program and then submit it to the teacher. That is why we have prepared
this report.

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1.5 Methodology of the Study:

For smooth and correct study everyone have to monitor some rules & regulation. The study
attribute were collected from two sources:

(a) Primary sources

(i) Practical desk work

(ii) Face to face discussion with the officer

(iii) Direct explanations

(b) Secondary sources

(i) Yearly report of IBBL

(ii) Files & Folders

(iii) Memos & Circulars

(iv) Numerous publications on Bank,

(v) Websites,

(vi) Different circulars sent by Head Office and Bangladesh Bank.

1.6 Limitations of the Report:

There were some problems while I conducting the orientation program. A wholehearted effort
was applied to conduct the orientation program and to bring a reliable and fruitful result. In spite
of having the wholehearted effort, there exit some limitations, which acted as a barrier to conduct
the program. The limitations were —

 Sometimes I was assigned to do some jobs without explaining why this work is to be
done. This situation has created a lot of problems to understand why a specific function is
being performed.
 All the branches of the sample bank were not physically visited.
 All the concerned personnel of the bank have not been interviewed.
 Lack of in-depth knowledge and analytical ability for writing such report.
 Lack of experience.
 Learning all the banking functions about credit within just two and half months was
really tough.
 Another limitation of this report is Bank’s policy of not unveiling some data and
information for clear reason, which could be very much valuable.

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Chapter 2: An Overview Of Islami Bank Bangladesh
Limited
2.1 A Summary of Islami Bank Bangladesh Limited (IBBL):

We know the banking system based on interests and its mechanism well. At the time of
independence, Bangladesh inherited an interest-based banking system introduced by the British
government during the colonial period. Currently, four nationalized banks, five specialized
banks, sixteen foreign banks and some private banks operate in Bangladesh's financial market.
But the Islamic banking system in Bangladesh dates back to 1983, when the Islamic Bank
Bangladesh Limited (IBBL) was established with the aim of carrying out its banking activities
based on the principle of Islamic sharia. In 1987 the Eastern Bank (Al-Baraka Bank) Bangladesh
Limited, the other Islamic bank, was recognized. There are six Islamic banks in Bangladesh.
These are:
• Islami Bank Bangladesh Limited (1983)
• Social Invested Bank Limited (1995)
• The Oriental Bank Limited (1987),
• Al-Arafah Islamic Bank Limited (1995)
• Shahajalal Bank Ltd.
• Exim Bank Ltd.
Also Prime Bank Ltd. Dhaka Ltd., Southeast Bank Ltd., Premier Band Ltd. And some other
banks are considering opening Islamic branches.

2.2 Historical background of IBBL:

In August 1974, Bangladesh contracted the Grant of Islamic Development Bank and dedicated
itself to reorganizing its monetary and economic structure according to Islamic Sharia
In January 1981, the president of the People's Republic of Bangladesh, addressing the third
Islamic conference held in Mecca and Taif, suggested that "Islamic countries should develop
their banking system to facilitate trade and commerce".
This statement by the president indicated the favorable attitude of the Government of the
People's Republic of Bangladesh towards the establishment of Islamic banks and financial
institutions in the country.
In November 1980, the bank of Bangladesh, the central bank of the country, sent an evocative
message to study the operations of several Islamic banks abroad.
In November 1982 a delegation of IDB visited Bangladesh and showed great interest in
participating in the creation of an Islamic bank of joint ventures in the private sector. They
established that much work had already been done and that the Islamic banking system was
complete for immediate presentation. Two professional organizations from the Islami Economic

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Research Institute (IERB) and the Bangladesh Islami Bankers Association (BIBA) made a
significant contribution to the introduction of Islamic banks in the country.
It has emerged to provide training on Islamic banking to the most important bankers and
economists to fill the management gap of the next Islami bank in Bangladesh. They also
organized seminars, symposia and seminars on the economy and the banking system of the
Islami throughout the country to mobilize public opinion in favor of the banking sector of the
Islami.
His professional activities were protected by a number of Muslim businessmen who worked in
the premises of the Muslim Businessmen Society (now reorganized as the Association of
Industrialists and Entrepreneurs). The agency focused mainly on mobilizing social capital for the
nascent Islami bank.
Finally, the long struggle for the establishment of an Islami Bank in Bangladesh raises the truth
and Islami Bank Bangladesh Limited was recognized in March 1983 when 19 national
institutions, 4 Bangladeshi and 11 banks, economic organizations and government agencies from
the Middle East and 'Europe, including the IDB and two famous people from the kingdom of
Saudi Arabia have come together to realize the dream.
Later, other Islami banks, insurance companies and financial institutions of Islami were
established in the country. Some traditional banks have opened Islamic bank branches in some
major cities.

2.3 Mission and Vision of IBBL:

2.3.1 Mission of IBBL:

To establish Islami Banking through the introduction of a welfare oriented banking

system and also ensure equality and justice in the field of all economic activities, achieve
balanced growth and equitable development through diversified investment operations
particularly in the priority sectors and less development areas of the country to encourage
socio-economic upliftment and financial services to the low-income community
particularly in the rural areas.

2.3.2 Vision of IBBL:

Vision of IBBL is to always strive to achieve superior financial performance, be co

considered a leading Islami Bank by reputation and performance.

► Goal of IBBL is to establish and maintain the modern banking techniques, to

ensure the soundness and development if the financial system based on Islami principles
and to become the strong and efficient organization with highly motivated professionals,
working for the benefit of people, based upon accountability, transparency and integrity
in order to ensure the stability of financial system.

► IBBL will try to encourage saving in the form of direct investment.

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 ► IBBL will also try to encourage investment particularly in projects, which are more
likely to higher employment.

2.4 Shariah Council of IBBL:

2.4.1 Profile of Council Members:

The Shariah Council of Islamic Bank generally consists of experts from the following
four areas:

1. Fuqaha: Persons representing this group must be well versed in the Quran, Sunnah
and fully conversant with the opinion of all schools of islami thought and Islami law and
jurisprudence. They must view Islam as a total way of life and a living religion.

2. Banker: There must be a member who is fully conversant with banking law and
practices and has practical experiences in Banking business including foreign trade.

3. Economist: A member from this group need not necessarily be an Islami economist to
start with. But if he is an Islami Economist it is an added advantage. What is important is
that he must be really proficient in modern economies with an in depth study of the
community, which a bank is going to solve. He must have up to date knowledge in the
development of the contemporary world.

4. Lawyer: A member representing this group should be a successful practitioner lawyer.

He must be proficient in commercial law including company law. In consultation with the
Fuqaha and Economist members of the council, he should be able to draft such
innovating contracts, which will have the sanction of Islami principles and a banking law
of the land.

2.4.2 Objectives of Shariah Council:

The functions of the council are to offer views and opinions on matters related to the
bank from time to time. The council may require any paper document from the bank and
examine the same to see whether it is according to see whether it is according to Islamic
principles.

The shariah council assists the Board of Directors by advising them on matters related to
shariah.

The opinion of the majority of members is taken as the opinion of the council provided
that the said opinion is supported by at least three Muftis of the council.

The council maintains its secretariat and a well-equipped library as the Head Office of the
bank where it keeps proper records of all of its proceedings and decisions.

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 The council elects a chairman and a secretary from amongst them. The chairman will
normally preside over the meetings. In his absence the members present elect one of them
to preside over the meetings.

The council may whenever it thinks necessary, constitutes a subcommittee to help the
council.

The council issues Shariah Certificate in the Annual Report of the bank.

2.5 Features of IBBL:

The bank is committed to run all its activities as per Islami Shariah. IBBL through its steady
progress and continuous success has earned the reputation of being one of the leading private
sector banks of the country. The distinguishing feature s of IBBL is as follow:

* All its activities are conducted on interest-free banking system according to Islamic Shariah.

* Establishment of participatory banking instead of banking on debtor-creditor relationship.

* Investment is made through different modes permitted under Islami shariah

* Investment income of the Bank is shared with the Mudaraba depositors according to a ratio to
ensure a reasonable fair rate of return on their depositors.

* Its aims are to introduce a welfare-oriented banking system and also to establish equity and
justice in the field of all economic activities.

* It extends Socio-economic and financial services to the poor, helpless and low-income group
of the people for their economic up liftmen particularly in the rural areas.

* It plays a vital role in human resource development and employment generation particularly
for the unemployed youths.

* Its aim is to achieve balanced growth and equitable development of the country through
diversified investment operations particularly in the priority sectors and in the less developed
areas.

* It extends co-operation to the poor, the helpless and the low-income group for their economic
development.

2.6 Function of IBBL:

The operation of Islamic Bank Bangladesh limited can be divided into three (3) major
categories:

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2.6.1 General Banking: it includes: –

a. Mobilization of deposits

b. Receipts and payment of cash.

c. Handling transfer transaction.

d. Operations of clearing house

e. Maintenance of accounts with Bangladesh bank and other bank.

f. Collection of cheque and bill.

g. Issue and payment of Demand Draft, telegraphic transfer and payment Order.

h. Executing customers standing instructions.

i. Maintenance of safe deposit lockers.

j. Maintenance of internal accounts of the bank.

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

2.6.2 IBBL offers to open the following account to the depositors:

1. Al-Wadeeah Current Account.

2. Mudaraba Savings Account.
3. Mudaraba Term Deposit Account. (3 month / 6 month / 12 month / 36 months term)
4. Mudaraba Special Notice Account
5. Mudaraba Hajj Savings Account (1 year to 25 year term)
6. Mudaraba Special Savings (pension) Account (5 year to 10 year term)
7. Mudaraba Savings Bond Scheme (5 year & 8 year term)
8. Mudaraba Foreign Currency Deposit Account.
9. Mudaraba Monthly Profit Deposit Account.
10. Mudaraba Moharana Account.
11. Mudaraba Waqf Cash Deposit Account (MWCDA)

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2.6.3 Foreign Exchange Business:

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

a) Opening letter of credit (LC) against commission for importing industrial, agricultural and
other permissible items under Islamic Shariah and Import policy.

b) Opening letter of credit on the principle of Mudaraba sale, on the principle of Musharaka
sale and under wage earner scheme.

c) Handling of export/import document.

d) Negotiation of export / import document when discrepancy occurs.

e) Financing in import under MPI (Mudaraba Post Import)

f) Financing to export on profit or loss sharing.

g) Handling Inward and outward remittance.

2.7 Other activities:

The IBBL performs the following task for the welfare of the society:

 Income generating scheme for the unemployed youth of the nation.

 Monorom sale center for marketing homemade garments, handicrafts and other items.
 Education scheme for assisting poor scholar student to case and help them to continue
their study.
 Health scheme for fulfillment of health needs of rural people.
 Islamic bank hospital was established to extend first hand modern and contemporary
medical service to the people on non-profit business.
 Humanitarian assistance is being provided to the poor, families affected by river erosion
and for marriage of poor girls.
 Energy relief operations are provided to the people affected by natural calamities.
 Assistance to mosque for construction, repair and renovation.

2.8 Islami Bank Bangladesh Limited at a Glance:

Date of Incorporation : 13th March 1983

Inauguration of 1st Branch : 30th March 1983

(Local Office, Dhaka)

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Formal Inauguration : 12th August 1983
Share of Capital

Local Shareholders : 42.12%

Foreign Shareholders : 57.88%

Authorized Capital : Tk.5, 000.00 million

Paid-up Capital : Tk.3, 801.60 million

Deposit : Tk.166,637.00 million

Investment : Tk.174,068.00 million

Foreign Exchange Business : Tk.287,919.00 million

Number of Branches : 186

Number of Shareholders : 20,960

Manpower : 8426

Source: Islami Bank 25 years of progress 2008

2.9 Successful Achievements of IBBL:

IBBL is the pioneer institution for introduction of Islamic Banking in Bangladesh. The success
of IBBL has embedded other sponsors at home and abroad to establish Islamic Banking in
Bangladesh. Several existing and proposed traditional Banks have also expressed their intention
to introduced Islamic Banking. Achievements of IBBL can be given as under:

 IBBL has successfully mobilized deposits for a section of people hither to before do any
deposit with interest-based Banks.
 The Islamic Banking products, which are offered by IBBL through its 144 branches,
located at important centers all over the country and spontaneous acceptance of those
products by the people proves the superiority of Islamic Banking
 IBBL’s market share of deposit, investment and ancillary business is steadily
increasingly.
 IBBL, through still a tiny bank, handles more than 10 of country’s export and import.
 Among the contemporary commercial Banks IBBL’s position is first in respect of
mobilization of deposit, deployment of fund and earning profit.
 Investment in industrial sector occupies 25 of IBBL’s investment portfolio. This unique
example of industrial finance by a commercial Bank.

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  More than 115000 workers are employed in the industrial projects financed by IBBL.
IBBL has thus made significant contribution to solving unemployment problem of
country.
 IBBL has earned reputation in the country as a corruption free institution.
 IBBL has introduced several other welfare oriented investment schemes, such as small
transport investment scheme, household Durable investment scheme, Housing investment
scheme etc.
 IBBL launched a rural development scheme for overall development of the rural people.
 At the initiative of IBBL, several universities in Bangladesh have introduced course on
Islamic Banking and Finance.
 IBBL has been continuously persuasion the Government to allow formation of more
Islamic Insurance Company.
 Under the leadership of IBBL, Bangladesh Association of Banks (BAB) has been formed.
 This is platform to ventilate the standpoints on banking issues of the private sector banks.
 IBBL has taken initiative to form on Association of Islamic Banks in Bangladesh for
furtherance of the cause of Islamic Banking.

2.10 IBBL’s World Rating:

As per Banker’s Almanac (January 1999 edition) published by the Reed Business information,
Windsor Court, England, IBBL’s world rank is 1902 among 4500 banks selected by them.
IBBL’s country rank is 5 among 39 banks as per ratings, made by the above Almanac on the
basis of IBBL’s financial statements of the year 1997.

World ranking of IBBL amongst top 3000 International Banks:

Serial No. Year World rating

1. 1994 1447
2. 1995 2314
3. 1996 2303
4. 1997 2262
5. 1998 2119
6. 1999 2100
7. 2000 1999
8. 2001 1902
9. 2002 1771
10. 2003 1755
11. 2004 1581
12. 2005
13. 2006 1490
14. 2007 1591

Source: The Bankers Almanac: World Ranking Road Business Information, U.K.

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Chapter 3:Literature Review
3.1 INVESTMENT MACHANISAMS OF IBBL

One of the significant and revolutionary development in the banking area of the world during last
four decades is the emergence and extra ordinary development of Islamic Banking in different
countries of the world which has drawn the attention of the scholars and general public of the
Muslim and non-Muslim countries including the world bodies like International Monetary Fund,
World Bank etc.

3.2 Objectives and Principles:

The special feature of the investment policy of Islamic Banks is to invest based on profit-loss
sharing system in accordance with the tenets and principles of Islamic Sharia. Earning of the
profit is not the only motives and objectives of the Islamic Bank’s investment policy rather
emphasis is given in attaining social good and in creating employment opportunities.

The objectives and principles of investment operations of the Bank are:

 To invest fund strictly in accordance with the principles of islamic shariah.

 To diversify its investment portfolio by size of investment portfolio by sectors (Public
&Private), by economic purpose, by securities and by geographical area including
industrial, commercial & agricultural.
 To ensure mutual benefit both for the bank and the investment client by professional
appraisal of investment proposals, judicious sanction of investment, close and constant
supervision and monitoring thereof.
 To make investment keeping the socio economic requirement of the country in view.
 To increase the number of potential investors by making participatory and productive
investment.
 To finance various development schemes for poverty alleviation, income and
employment generation with a view to accelerate sustainable socio-economic growth and
upliftment of the society.
 To invest in the form of goods and commodities rather than give out cash money to the
investment clients.
 To encourage social upliftment enterprises.
 To ensure avoid all the investment forbidden by the islami shariah.
 The bank extends investment under the principles of Bai-murabaha, Bai-Muazzal, Hire
Purchase Under Shirkatul Melk and Musharaka.

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3.3 Investment Policy of IBBL:

Investment policy of Islamic Bank and non-Islamic bank are fully different. The investment
policies of Islamic bank are

 Strict observance of Islamic shariah principles.

 Investment to national priority sectors.
 Diversified investment portfolio: Diversification by size, sector, geographical area,
economic purpose, securities and mode of investment.
 Preference to short-term Investments.
 Preference to investment of small size.
 To ensure safety & security of investments
 To look profitability of investments.
 To give support to government denationalization industrial program.
 Investment to trade and commerce sector.
 Investment to industrial sectors.
 Investment to Foreign Trade (import & export).
 Exploration of the possibility of investment in the existing Money & capital Market and
help organization of Islamic Money & Capital Market

3.4 Investment Strategy of IBBL:

Investment strategy of Islamic Bank and interest-based bank are contradictory. The investment
strategies of Islamic Bank are:

 To check exodus of investment clients.

 To induct new investment clients.
 To induct good investment clients of other Banks.
 To enhance existing limits of good investment clients.
 Extension of investment transport sector.
 Extension of investment to backward as well as forward linkage industries.
 Extension of investment to real Estate Sector.
 Extension of investment to Jute sector; particularly for trading and export purpose.
 Strengthening supervision, control and monitoring mechanism.
 Training and motivation of manpower to handle increased and diverse volume of
investment s.
 To give due consideration to high risk, high return and low risk, low return investment
proposals.
 Adaptation of modern technology

3.5 Growth of Investment:

The investment of the Bank demonstrated steady growth over the years. The total investment to
the Bank stood at TK.123950.40 million in 2006.It was TK.102144.51 million in 2005.

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3.6 Investment Instrument of IBBL:

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

1) Bai-Mechanism:

 Bai-Murabaha
 Bai-Muazzal
 Bai-Salam
 Istishana

2) Leasing, Ijara,Hire Purchase (HP) , Hire purchase under shirkatul Melk (HPSM)

3) Shirkat Meechanism:

 Musharaka
 Mudaraba

1. Bai-Mechanism (Trading mode):

Bai-Murabaha:

Bai- murabaha may be defined as a contract between a buyer and a seller under which the sells
certain specific goods (permissible under Islamic shariah and the law of the land) to the buyer at
a cost plus agreed profit payable in cash or on any fixed future data in lump sum or by
installments. The marked up profit may be fixed in lump sum or in percentage of the cost price
of the goods.

Important features:

¨ It is permissible for the client to offer an order to purchase by the bank particular goods
deciding its specification and committing him to buy same from the bank on murabaha, i.e. cost
plus agreed upon profit.

¨ It is permissible to make the promise binding upon the client to purchase from the bank, that is,
he is to satisfy the promise or to indemnify the damages caused by breaking the promise without
excuse.

¨ It is also permissible to take cash / collateral security to guarantee the implementation of the
promise or indemnify the damages.

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¨ Stock availability of goods is a basic condition for signing a Bai-murabaha agreement.
Therefore, the bank must purchase the goods as per specification of the client to acquire
ownership of the same before signing the Bai-Murabaha agreement with the Client.

¨ After purchase of goods the Bank must bear the risk of goods until those are actually sold and
delivered to the Client, i.e., after purchase of the goods by the Bank and before selling of those
on Bai-Murabaha to the Client buyer, the bank bear the consequences of any damages or defects,
unless there is an agreement with the Client releasing the bank of the defects, that means, if the
goods are damaged, bank is liable, if the goods are defective, (a defect that is not included in the
release) the Bank bears the responsibility.

¨ The Bank must deliver the specified Goods to the Client on specified date and at specified
place of delivery as per Contract.

¨ The bank shall the goods at a higher price (Cost + {profit) to earn profit. The cost of goods sold
and profit markup therewith shall separately and clearly be mentioned in the Bai-Murabaha
agreement. The profit Mark-up may be mentioned in lump sum or in percentage of the
purchase/cost price of the goods. But, under no circumstance, the percentage of the profit shall
have any relation with time or expressed in relation with time, such as per month, per annum etc.

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

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

Cost and Sale Price of the Goods:

A. Purchase Price/Landed Cost of the goods PLUS

B. Other expenditures incurred by the Bank in connection with the Purchase, Transportation
and Storage before sale of the Goods to the Client:

a. Conveyance – TA/DA of Bank Official or the Agent, if any.

b. Commission Paid to the Agent, if any.

c. Cost of Remittance of Fund.

d. Transportation Cost up to Bank’s Go down (if not sold just after purchase).

e. Transit Insurance and Incidental Charges.

f. Other Expenses, except interest incurred (if any). Interest element, if any, is to be paid
by the Client himself.

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 g. Godown Rent and Godown Staff Salary (if the Goods are kept in the
Bank’s Godown before sale to the Client).

C. Total Cost Price (A+B) Tk…………………………

D. Estimated Profit of the Bank Tk…………… (Percentage of Profit …………%)

E. Sale Price (C+D) Tk………………………. ( )

Bai-Muajjal:

Bai-Muajjal may be defined as a contract between a Buyer and a Seller under which the Seller
sells certain specific goods (permissible under Shariah and Law of the Country), to the Buyer at
an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period
by fixed instalments. The seller may also sell the goods purchased by him as per order and
specification of the Buyer.

In this Bank, Bai-Muajjal is treated as a contract between the Bank and the Client under which
the Bank sells to the Client certain specified goods, purchased as per order and specification of
the Client at an agreed price payable within a fixed future date in lump sum or by fixed
instalments.

IMPORTANT FEATURES

It is permissible for the Client to offer an order to purchase by the Bank particular goods
deciding its specification and committing him to buy the same from the Bank on Bai-Muajjal i.e.
deferred payment sale at fixed price.

01. It is permissible to make the promise binding upon the Client to purchase from the Bank,
that is, he is to either satisfy the promise or to indemnify the damages caused by breaking
the promise without excuse.
02. It is permissible to take cash/collateral security to guarantee the implementation of the
promise or to indemnify the damages.
03. It is also permissible to document the debt resulting from Bai-Muajjal by a Guarantor, or
a mortgage. Or both like any other debt. Mortgage / Guarantee / Cash security may be
obtained prior to the signing of the Agreement or at the time of signing the Agreement.
04. Stock and availability of goods is a basic condition for signing a Bai-Muajjal Agreement,
Therefore, the Bank must purchase the goods as per specification of the Client to acquire
ownership of the same before signing the Bai-Muajjal Agreement with the Client.
05. After purchase of goods the Bank must bear the risk of goods until those are actually
delivered to the Client.
06. The Bank must deliver the specified Goods to the Client on specified date and at
specified place of delivery as per Contract.
07. The Bank may sell the goods at a higher price than the purchase price to earn profit.
08. The price once fixed as per agreement and deferred cannot be further increased.

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 09. The Bank may sell the goods at one agreed price which will include both the cost price
and the profit. Unlike Bai-Murabaha, the Bank may not disclose the cost price and the
profit mark-up separately to the Client.

Cost and Sale Price of the Goods:

A. Purchase Price/ Landed cost of the goods

PLUS

B. Other expenditures in connection with the Purchase, Transportation and Storage of the
Goods incurred by the Bank before sale to the Client:

a. Conveyance – TA/DA of Bank Official or the Agent, if any.

b. Commission Paid to the Agent, if any.

c. Cost of Remittance of Fund.

d. Transportation Cost up to Bank’s Go down (if not sold just after purchase).

e. Transit Insurance and Incidental Expenses.

f. Other Expenses except interest incurred (if any). Interest element, if any, is to be paid by the
Client himself.

g. Go down Rent and Go down Staff Salary (if the Goods are kept in the Bank’s Godown before
sale to the Client).

C. Total Cost Price (A+B) Tk………………….

D. Estimated Profit of the Bank Tk…………. (Percentage of Profit ……….%)

E. Sale Price (C + D) Tk……………….. ( )

Chart No – 04: Investment Trend of IBBL in Bai Muajjal

Source: Branch Managers’ Conference Book 2008

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Bai-Salam:

Definition

Bai-Salam may be defined as a contract between a Buyer and a Seller under which the Seller
sells in advance the certain commodity(ies)/product(s) permissible under Islamic Shariah and the
law of the land to the Buyer at an agreed price payable on execution of the said contract and the
commodity(ies)/product(s) is/are delivered as per specification, size, quality, quantity at a future
time in a particular place.

In other words, Bai-Salam is a sale whereby the seller undertakes to supply some specific
Commodity(ies) /Product(s) to the buyer at a future time in exchange of an advanced price fully
paid on the spot. Here the price is paid in cash, but the delivery of the goods is deferred.

IMPORTANT FEATURES

1. Bai-Salam is a mode of investment allowed by Islamic Shariah in which

commodity(ies)/product(s) can be sold without having the said commodity(ies)/
product(s) either in existence or physical/constructive possession of the seller. If the
commodity(ies)/product(s) are ready for sale, Bai-Salam is not allowed in Shariah. Then
the sale may be done either in Bai-Murabaha or Bai-Muajjal mode of investment.
2. Generally, Industrial and Agricultural products are purchased/sold in advance under Bai-
Salam mode of Investment to infuse finance so that production is not hindered due to
shortage of fund/cash.
3. It is permissible to obtain collateral security from the seller client to secure the
investment from any hazards viz. non-supply/partial supply of
commodity(ies)/product(s), supply of low quality commodity(ies)/Product(s) etc.
4. It is also permissible to obtain Mortgage and/or Personal Guarantee from a third party as
security before the signing of the Agreement or at the time of signing the Agreement.
5. Bai-Salam on a particular commodity(ies)/product(s) or on a product of a particular field
or farm cannot be effected. [for Agricultural Product(s) only]
6. The seller (manufacturer) client may be made agent of the Bank to sell the goods
delivered to the Bank by him provided a separate agency agreement is executed between
the Bank and the Client (Agent).

Istishna’a:

DEFINITION

Istisna’a is a contract between a manufacturer/seller and a buyer under which the

manufacturer/seller sells specific product(s) after having manufactured, permissible under
Islamic Shariah and Law of the Country after having manufactured at an agreed price payable in
advance or by instalments within a fixed period or on/within a fixed future date on the basis of
the order placed by the buyer.

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In Istisna’a contract, the buyer is called ‘al-mustasni’, the seller ‘al-sani’ and the goods or the
subject matter of the contract ‘al-masnoo’.

PARALLEL ISTISNA’A

If the ultimate buyer does not stipulate in the contract that the seller will manufacture the
product(s) by himself, then the seller may enter into a second Istisna’a contract in order to fulfil
his contractual obligations in the first contract. This new contract is known as Parallel Istisna’a,
whereby the obligations of the seller in the first contract are carried out.

ISTISNA’A IN ISLAMI BANK

01 Islami Bank can utilise Istisna’a in the following ways:

1. Islami Bank may buy a commodity under Istisna’a contract and then sell it on cash or
deferred payment basis to a Client of the Bank without receiving prior order from the
Client.
2. Islami Bank in the capacity of a seller may receive order from a Client for manufacturing
and supplying certain specified goods under an Istisna’a contract and then enter into a
Parallel Istisna’a contract in the capacity of a buyer with a Manufacturer for having the
Product(s) manufactured by him i.e. the Islami Bank may obtain an order from a buyer to
supply goods under Istisna’a and by a Parallel Istisna’a contract may have the goods
made by a Manufacturer by an order.
3. Bank may pay the price to the Manufacturer of the Product(s) in advance or by
instalments or on deferred payment basis. They also may receive price of the Product(s)
from the ultimate buyer in advance or by instalments or on deferred payment basis.

02 The obligations of Islami Bank as a ‘Seller’ in the first contract and as a ‘Buyer’ in
parallel contract are as under:

a) The Islami Bank as a seller in the first contract will remain solely responsible for the
execution of its obligations as if the parallel contract is non-existent. Hence, Islami Bank in the
first contract would remain liable for any default, negligence or breach of contract ensuing from
the parallel contract.

b) In the parallel Istisna’a, the Manufacturer is accountable to Islami Bank in the way and
manner by which he performs his obligations. He has no direct legal relationship with the
ultimate buyer in the first contract.

c) The second Istisna’a is a parallel contract, but not a contingent transaction on the first
contract. Legally speaking they are different contracts with respect to rights and obligations.

d) The Islami Bank as a seller is liable to the ultimate Buyer with regard to any mal-execution of
the sub-contractor and any guarantees arising therefrom. It is this very liability that justifies the
validity of the Parallel Istisna’a and which also justifies the charging of profit by the Islami
Bank, if any.

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RULES AND CONDITIONS

1. There must be a contract between the Manufacturer and the Buyer, which shall be the
principal instrument to govern the advance selling and buying under Istisna’a.
2. The name, specification, brand, quantity, quality, size, etc. of the Product(s) must be
clearly specified in the Contract leaving no ambiguity.
3. Unit price and total price of the product(s) must be fixed and mentioned in the Contract.
4. The time and place of delivery should be mentioned in the contract.
5. Mode of transportation, transportation cost, storage charge/godown rent, insurance etc., if
any, should be specified in the Contract.
6. The name of party who will bear the cost of transportation, storage charge/godown rent,
insurance etc. also be mentioned in the contract.
7. The seller shall remain responsible for quantity, quality, and specification of the
product(s) till physical/constructive delivery of the same to the buyer.
8. Under Istisna’a transaction advance payment of price of the Product(s) under order is not
compulsory. The Buyer may pay the price of the goods in advance in full or part as
agreed upon, which should be clearly mentioned in the contract.
9. Remaining price, if any, may be paid after receipt of the Product(s) or at any future
date(s) or in instalments, if so agreed, and mentioned in the contract.
10. After taking delivery of the Product(s), the Buyer shall be the owner and shall bear all
risks till disposal / sale of the Product(s).
11. The Buyer has the right to obtain security, in any form, from the Manufacturer for

a) The total amount that he has paid.

b) The delivery of al-masnoo’ in accordance with the specifications and on due time.

1. The Manufacturer has also the right to obtain security, in any form, to guarantee that the
price is payable on due time.
2. It is permissible for the Buyer to insert a fine/penalty / compensation clause in the
contract against unfulfilment of obligations by the Manufacturer at a fixed rate per day as
mentioned in the contract.
3. If the Product(s) is/are the Product(s) not in conformity with specification, the Buyer has
the following options:

Reject or

a) Accept it without seeking damages.

15 The contract of Istisna’a may be terminated under the following conditions:

a) Normal fulfilment of obligations by both the parties.

b) Mutual consent of both the parties.

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c) Judicial rescission of the contract. This is if a reasonable cause arises to prevent the
execution of the contract or its completion, and each party may sue for its rescission.

IMPORTANT FEATURES OF ISTISNA’A

 Stisna’a is an exceptional mode of investment allowed by Islamic Shariah in which

product(s) can be sold without having the same in existence. If the product(s) are ready
for sale, Istisna’a is not allowed in Shariah. Then the sale may be done either in Bai-
Murabaha or Bai-Muajjal mode of investment. In this mode, deliveries of goods are
deferred and payment of price may also be deferred.
 It facilitates the manufacturer sometimes to get the price of the goods in advance, which
he may use as capital for producing the goods.
 It gives the buyer opportunity to pay the price in some future dates or by instalments.
 It is a binding contract and no party is allowed to cancel the Istisna’a contract after the
price is paid and received in full or in part or the manufacturer starts the work.
 Istisna’a is specially practised in Manufacturing and Industrial sectors. However, it can
be practised in agricultural and constructions sectors also.
 Leasing, Ijara, Hire Purchase (HP), Hire purchase under Shirkatul Melk
“HIRE PURCHASE UNDER SHIRKATUL MELK” (HPSM)

MEANING AND DEFINITION

Hire Purchase under Shirkatul Melk is a Special type of contract which has been developed
through practice. Actually, it is a synthesis of three contracts:

i) Shirkat
ii) Ijarah and
iii) Sale

These may be defined as follows:

SHIRKATUL MELK

Shirkat means partnership. Shirkatul Melk means share in ownership. When two or more persons
supply equity, purchase an asset, own the same jointly, and share the benefit as per agreement
and bear the loss in proportion to their respective equity, the contract is called Shirkatul Melk
contract.

IJARAH

The term Ijarah has been derived from the Arabic works. This means consideration, return,
wages or rent. This is really the exchange value or consideration, return, wages, rent of service of
an asset. Ijarah has been defined as a contract between two parties, the Hire and Hirer where the
Hirer enjoys or reaps a specific service or benefit against a specified consideration or rent from
the asset owned by the Hire. It is a hire agreement under which a certain asset is hired out by the
Hire to a Hirer against fixed rent or rentals for a specified period.

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RELATED TERMINOLOGIES OR ELEMENTS OF IJARAH

 According to the majority of Fuqaha, there are three general and six detailed elements of
Ijarah.
 The wording : This includes offer and acceptance.
 Contracting parties : This includes a Hire, the owner of the property, and a Hirer, the
party that benefits from the use of the property.
 Subject matter of the contract : This includes the rent and the benefit.
 The Hire (Muajjir)- The individual or organization hires/rents out the property of
service is called the Hire (muajjir).
 The Hirer (Mustajir)- The individual or organisation hires/takes the hire of the property
or service against the consideration rent / wages / remuneration is called the Hirer
(mustajir).
 The benefit / asset (Maajur) – The benefit which is hired / rented out is called the benefit
(maajur).

SALE

This is a sale contract between a buyer and a seller under which the ownership of certain goods
or asset is transferred by seller to the buyer against agreed upon price paid / to be paid by the
buyer.

Thus, in Hire Purchase under Shirkatul Melk mode both the Bank and the Client supply equity in
equal or unequal proportion for purchase of an asset like land, building, machinery, transports
etc. Purchase the asset with that equity money, own the same jointly, share the benefit as per
agreement and bear the loss in proportion to their respective equity. The share, part or portion of
the asset owned by the Bank is hired out to the Client partner for a fixed rent per unit of time for
a fixed period. Lastly the Bank sells and transfers the ownership of it’s share / part / portion to
the Client against payment of price fixed for that part either gradually part by part or in lump
sum within the hire period or after the expiry of the hire agreement.

STAGES OF HIRE PURCHASE UNDER SHIRKATUL MELK

Thus Hire Purchase under Shirkatul Melk Agreement has got three stages:

1. Purchase under joint ownership.

2. Hire and
3. Sale and /or transfer of ownership to the other partner Hirer.

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IMPORTANT FEATURES:

01 In case of Hire Purchase under Shirkatul Melk transaction the asset / property involved is
jointly purchased by the Hire (Bank) and the Hirer (Client) with specified equity participation
under a Shirkatul Melk Contract in which the amount of equity and share in ownership of the
asset of each partner (Hire Bank & Hirer Client) are clearly mentioned. Under this agreement,
the Hire and the Hirer become co-owner of the asset under transaction in proportion to their
respective equity participation.

02 In Hire Purchase under Shirkatul Melk Agreement, the exact ownership of both the Hire
(Bank) and Hirer (Client) must be recognised. However, if the partners agree and wish that the
asset purchased may be registered in the name of any one of them or in the name of any third
party, clearly mentioning the same in the Hire Purchase Shirkatul Melk Agreement. However, in
IBBL, no third party registration shall be allowed.

03 The share / part of the purchased asset owned by the Hire (Bank) is put at the disposal /
possession of the Hirer (Client) keeping the ownership with him (Bank) for a fixed period under
a hire agreement in which the amount of rent per unit of time and the benefit for which rent to
be paid along with all other agreed upon stipulations are also to be clearly stated. Under this
agreement, the Hirer (Client) becomes the owner of the benefit of the asset but not of the asset
itself, in accordance with the specific provisions of the contract which entitles the Hire (Bank) is
entitled for the rentals.

04 As the ownership of hired portion of the asset lies with the Hire (Bank) and rent is paid
by the Hirer (Client) against the specific benefit, the rent is not considered as price or part of
price of the asset.

05 In the Hire Purchase under Shirkatul Melk Agreement the Hire (Bank) does not sell or
the Hirer (Client) does not purchase the asset but the Hire (Bank) promise to sell the asset to the
Hirer (Client) part by part only, if the Hirer (Client) pays the cost price / equity / agreed price as
fixed for the asset as per stipulations within agreed upon period on which the Hirer also gives
undertakings.

06 The promise to transfer legal title by the Hire and undertakings given by the Hirer to
purchase ownership of the hired asset upon payment part by part as per stipulations are effected
only when it is actually done by a separate sale contract.

07 As soon as any part of Hire’s (Bank’s) ownership of the asset is transferred to the Hirer
(Client) that becomes the property of the Hirer and hire contract for that share / part and
entitlement for rent thereof lapses.

08 In Hire Purchase under Shirkatul Melk Agreement, the Shirkatul Melk contract is effected
from the day the equity of both parties deposited and the asset is purchased and continues upto
the day on which the full title of Hire (Bank) is transferred to the Hirer (Client).

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09 The hire contract becomes effective from the day on which the Hire transfers the
possession of the hired asset in good order and usable condition to the Hirer, so that the Hirer
may make use of the same as per provisions of the agreement.

10 Effectiveness of the sale contract depends on the actual sale and transfer of ownership of
the asset by the Hire to the Hirer. It is sold and transferred part by part, it will become effective
part by part and with the sale and transfer of ownership of every share / part. The hire contract
for that share / part will lapse and the rent will be reduced proportionately. At the end of the hire
period when the full title of the asset will be sold out and transferred to the Hirer (Client), the
Hirer will become the owner of both the benefit and the asset consequently the hire contract will
fully end.

11 Hire Purchase under Shirkatul Melk is a binding contract for the parties to it – the Bank
and the Client who are committed to fulfill / meet their undertakings / obligations in accordance
with the relevant agreement.

12 Under this agreement the Bank acts as a partner, as a Hire and at last as a seller ; on the
other hand the Client acts as a partner, as a Hirer and lastly as a purchaser.

13 Ownership risk is borne by both the Hire and Hirer in proportion to their retained
ownership / equity.

14 Under this agreement the role of Hirer is one that of a trustee, the hired asset being a trust
property in his hands; he will manage, maintain the asset in favour of the interest of the Hire at
his own cost as the exact subject of hirer except in cases of any accident due to any event entirely
beyond control of the hirer and natural calamity/disaster (acts of Allah) to be determined by the
Bank after proper investigation within the knowledge of the hirer.

15 The Hirer is responsible for keeping the hired asset(s) in good condition throughout the
whole period of hire and if the asset is damaged or destroyed due to mismanagement, corruption,
negligence, transgressions, default, etc. of the Hirer, he shall be responsible to compensate the
Hire (Bank) for that. Of course, such mismanagement, corruption, negligence, transgressions,
default, etc. of the hirer shall be determined by the Hire (Bank) after proper investigation within
the knowledge of the hirer.

16 The Hirer cannot, without obtaining prior written permission of the Hire (Bank) make
any changes in the exact item of the hire, and / or remove it from its place of installation and
transfer it to another location.

17 In a Hire Purchase under Shirkatul Melk agreement any stipulation may be made,
provided it is not against the nature and requirements of the contract itself, nor does it violate the
/this may be the last one devine laws of Islam and is also acceptable to both the parties.

18 Hire Purchase under Shirkatul Melk facilities may be for medium-term or long-term
period which may be utilised for the expansion of production and services, as well as housing
activities. The duration of Hire Purchase under Shirkatul Melk contract shall not exceed the

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useful life of the subject / asset of the transaction. The Bank should not normally enter a Hire
Purchase under Shirkatul Melk transaction for items with useful life of less than two years.

19 Hire Purchase under Shirkatul Melk transaction facilitates the Client (Hirer) to get benefit
from the hired asset in exchange of rental and also to become full owner of the asset by
purchasing it part by part.

20 If, for any reason, the hire contract is revoked prior to the transfer of full title of the asset
to the Hirer, then the title of the asset will be shared by both Hire and Hirer – the Hirer will share
that part of title which has been transferred to him against payment and the Hire will share the
remaining part.

21 The Hirer to secure the Bank (the Hire) will pledge / hypothecate / mortgage his portion /
part / share in the asset (acquired / to be acquired) and or any other asset / property of his own /
third party guarantor to the Bank to fulfill his all liabilities / commitments including the accrued
rental, if any.

RULES FOR HIRE PURCHASE UNDER SHIRKATUL MELK

It is a condition that the subject (benefit/service) of the contract and the asset
(object) should be known comprehensively.
It is a condition that the asset(s) to be hired must not be a fungible one (Perishable
or consumable) which cannot be used more than once or in other words, the
asset(s) must be a non-fungible one which can be utilized more than once or the
use/benefit/service of which can be separated from the asset(s) itself.
It is a condition that the subject (benefit/service) of the contract must actually and
legally be attainable/derivable. It is not permissible to hire something, the handing-
over of the possession of which is impossible. If the asset is a jointly owned
property, any partner, according to the majority of the jurists, may let his portion of
the asset(s) to co-owner(s) or the person(s) other than the co-owner(s). However, it
is also permissible for a partner to hire his share to the other partner(s).
It is a condition that the Hirer shall ensure that he will make use of the asset(s) as
per provisions of the Agreement or as per customs/norms/practice, if there is no
expressed provision.
The hire contract is permissible only when the asset(s) and the
benefit/service derived from it is within the category of ‘Halal’ or at least
‘Mobah’ as per Islamic Shariah.
The Hire is under obligation to enable the Hirer to the benefit from the asset(s) by
putting the possession of the asset(s) at his disposal in useable condition at the
commencement of the hire period.
In a hire contract, the period of hire and the rental to be paid per unit of time be
clearly stated.
Everything that is suitable to be considered a price, in a sale, can be suitable to be
considered as rental in a hire contract.

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 It is a condition that the rental falls due from the date of handing-over of the asset
to Hirer and not from the date of contract or use of the asset.
It is permissible to advance, defer or install the rental in accordance with the
Agreement.
It is permissible to review the hire period or the rental or the both, if the Hire and
the Hirer mutually agree to do so.
The hired asset is a trust in the hands of the Hirer. He will maintain the asset(s)
with due produce and shall not be held responsible for the damage or destruction of
the asset without transgression, default or negligence, otherwise he must be
responsible for the same.
The Hire/owner bears all the costs of legally binding basic repairs & maintenance
including the cost of replacement of durable parts on which the permanence and
suitability of the hired asset(s) depend or as per Contract.
It is permissible to make the Hirer to bear the cost of ordinary routine maintenance,
because this cost is normally known and can be considered as part of the rental.
It is permissible for the Hirer to let the asset to a third party during the hire period
whether for the same rental or more or less as long as the asset is not affected by
the change of user and not barred / restricted by the hire agreement/customs to do
so.
It is permissible to purchase an asset bearing a hire contract. The hire contract may
continue since the purchaser agrees to its continuity up to the end of the hire term.
All rights and liabilities emanating from the hire contract will transfer to the new
owner. But if the sale-contract is drawn and the purchaser is oblivious of the hire
contract, he has the right to rescind the purchase contract and the hire continues.
As soon as the hire period terminates, the Hirer is under obligation to return the
asset to the owner or if the Hire agrees he may enter a fresh hire contract or
purchase it from the Hire on payment of agreed upon price as per market rate.
The hire contract is binding and no one party shall unilaterally rescind except
reasons that abrogate binding contract such as damage or destruction.
If the hired asset is damaged or destructed by the act of Allah and if the Hire offers
a substitute with the same specifications agreed upon in the hire contract the
contract does not terminate.
It is also permissible to sell the hired asset by the Hire to the Hirer during the
tenure of the hire period either part by part or in full at a time. As soon as any part
or in full the asset is sold during the tenure of the hire agreement the hire contract
for that part or for the full asset as the case may be, be lapsed and the rental ceased
to apply accordingly.
It is permissible for the Hirer to promise or to give undertaking to purchase the
hired asset during the tenure of the hire period, either part by part or in full or at the
end of the hire period in full. It is also permissible for the Hire to give similar
promise to sell the asset.
The hire with promise to purchase and sale is different from the memorandum of
sale. The rent paid by the Hirer can not, in any way, be considered as part of the
price of the asset, rather it is the price of the service of that asset.
In a Hire Purchase under Shirkatul Melk contract, it is permissible to divide the

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 sale/cost price of the asset or ownership of the Hire to the asset into several parts
and to sell each part of ownership on payment of proportionate sale/cost price of
the Hire.
Under Hire Purchase under Shirkatul Melk Agreement, both the Hire and the Hirer
must pay their respective equity as agreed upon to purchase the demised asset
under joint ownership.
Ownership of the asset of both the Hire and the Hirer should be recognized as per
law of the land.

Share Mechanism:

Mudaraba: Definition

Mudaraba is a partnership in profit whereby one party arrange for capital and the other party
offers skill and labour. The provider of capital is called “Shahib al-maal” while the provider of
skill and labour is called “Mudarib”.

So, Mudaraba may be defined as a contract of partnership where the Shahib al-maal provides
capital to the Mudarib for investing it in a commercial enterprise by applying his labour and
endeavor. Both the parties share the profit as per agreed upon ratio and the losses, if any, being
borne by the provider of funds i.e. Shahib al-maal except if it is due to breach of trust i.e.
misconduct, negligence or violation of the conditions agreed upon by the Mudarib. If there is any
loss experienced due to the causes stated above, the Mudarib becomes responsible for that.

TYPES OF MUDARABA

Mudaraba Contracts may be divided into 2 types:

Restricted Mudaraba (Al Mudaraba Al Muqayyadah)

A restricted Mudaraba (Al Mudaraba Al Muqayyadah) is a contract in which the Shahib al-maal
impose any restrictions on the actions of the Mudarib but not in a manner that would unduly
constrain the Mudarib in his operations.

Restricted Mudaraba may further be divided into three types:

1. Restriction in respect of time or period:

2. In this type of Mudaraba, the Mudaraba contract include a clause on duration of the
business. After expiry of such period, the Mudaraba shall become void.
3. Restriction in respect of place or location:
4. In this type of Mudaraba, the Mudaraba contract include a clause on place or location of
the business. The Mudarib shall guaranteed to do the business within the region of such
place or location.
5. Restriction in respect of business:
6. In this type of Mudaraba, the Shahib al-maal restricts the actions of the Mudarib to a
particular type of business as he (Shahib al-maal) considers appropriate.

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Unrestricted Mudaraba (Al Mudaraba Al Mutlaqah)

An unrestricted Mudaraba (Al Mudaraba Al Mutlaqah) is an agreement in which Shahib al-maal

authorizations the Mudarib to manage the Mudaraba capital without any limitations. In this case,
the Mudarib has a wide range of trade or business freedom on the basis of trust and the business
expertise he has acquired. Such unrestricted business freedom must be exercised only in
accordance with the interests of the parties and the objectives of the Mudaraba contract.

But, if Mudarib wants to have an extraordinary work, which is beyond the normal course of
business, he cannot do so without express permission from Shahib al-maal. He is also not
authorized to:

 Keep another Mudarib or a partner

 Mix his own capital in that particular Mudaraba without the consent of the Shahib al-
maal.

Shariah Rules for Mudaraba

Rules relating to Mudaraba Contract

1. There are two contracting part+-ies in Mudaraba Contract :

The provider of the capital i.e. ‘Shahib al-maal’ and the Mudarib. Both parties should possess the
legal capacity to appoint agents and accept agency.

1. The general principle is that a Mudaraba contract is not binding, i.e. each of the
contracting parties may terminate it unilaterally except in two cases:
1. When the Mudarib has already commenced the business, in which case the
Mudaraba contract becomes binding up to the date of actual or constructive
liquidation.
2. When the contracting parties agree to determine a duration for which the contract
will remain in operation. In this case, the contract cannot be terminated prior to
the end of the specified duration, except by mutual consent of the contracting
parties.
3. A Mudaraba contract is one of the trust based contracts. Therefore, the Mudarib
invests Mudaraba capital on trust basis in which case the Mudarib is not liable for
losses except in case of breach of trust, such as misconduct, negligence and
breach of the terms of Mudaraba contract. In committing any of the above,
Mudarib becomes liable for the Mudaraba capital.

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Rules relating to Offer and Acceptance

The wording-“Offer and Acceptance” – by which both the contracting parties express their
willingness to conclude a contract and must conform to the following:

1. The wording should explicitly or implicitly indicate the purpose of the contract.
2. Acceptance of the offer is contingent (NUbvPµRvZ) on its taking place during the time
which both the parties are negotiating agreement to the contract. However, acceptance is
not valid if one party refuses the terms of the offer or leaves the place where the
negotiation of the contract is being made before the deal is concluded.

Contract is permissible by verbal utterance or in writing and signing it. It is also permissible
through correspondence or by the use of modern communication means, e.g., Telex, Fax, E-mail
or Internet.

Definition of Musharaka

Musharaka may be well-defined as a bond of corporation between two or more individuals in

which all the associates contribute capital, contribute in the administration, share the profit in
percentage to their capital or as per pre-agreed

In Islami Bank Bangladesh Limited (IBBL), the Bank takes part in a business with its Client(s),
where both the Client(s) and the Bank deliver capital in fixed quantities, take part in the
administration of business and share the profit in percentage to their respective capital ratio or at
pre-agreed ratio and bear the loss, if any, in percentage to their respective capital/equity ratio.

Important Features:

 The investment client will normally run manage the business.

 The bank shall take part in the policy and decision making as well as overseeing
(supervision and monitoring) the operation s of the business of the client. The bank may
appoint suitable personal(s) to run the manage business and to maintain books of
accounts of the business property.
 As the investment client shall be able to the enterprise, the bank may more share of profit
to him than that of his percentage capital involvement.
 Loss, if any, shall be shared on the basis of capital ratio.

ratio and bear the loss, if any, in percentage to their capital/equity ratio.

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3.7 Mode Wise Investment:

Mode wise distribution of investment as on 31st December 2003 vis-à-vis corresponding period
of last year is given below:

Mode Wise Investment of IBBL

(Million in Taka)
Mode 2005 % of Total Difference 2006 % of Total
Investment Investment
Bai-Murabaha 51,822.28 55.34% 7,642.81 59,465.09 52.36%
HPSM 30046.89 32.09% 9,352.30 39,399.19 34.69%
Bai-Muajjal 5917.18 6.32% 1,004.22 6921.4 6.09%
Purchase &
3179.81 3.40% 1,666.81 4846.62 4.27%
Negotiation
Quard 1966.13 2.10% 8.07 1974.2 1.74%
Bai-Salam 641.44 0.68% 264.18 905.62 0.80%
Mudaraba 50 0.05% 0.00 50 0.04%
Musharaka 20.42 0.02% -7.47 12.95 0.01%
Total 93644.15 100.00% 19,930.92 113575.07 100.00%
Source: Islami Bank 25 Years progress 2008

Investment Sectors:

Investment Sectors of IBBL

(Amount in Million)
Sector Taka USD Percentage
Industrial 54486.49 789.66 45.25%

Commercial 44473.48 644.54 36.93%

Real estate 7719.36 111.87 6.41%

Transport 2720.42 39.43 2.26%

Agriculture 3412.88 49.46 2.83%

Others 7589.05 109.99 6.30%

Total 120401.68 1744.95 100%

Source: Islami Bank 25 Years progress 2008

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3.8 Special Investment Scheme Of IBBL:
Name of Maximum invested Clients Period of Mode of
Eligibility
Scheme money equity investment investment
Household Govt. , semi govt, autonomous
durables official, teachers, doctors, engineers 500000 25% 2 years Bai muazzal
scheme etc.
Housing Govt. , semi govt, autonomous
Investment official, universities teachers, 3000000 50% 15 years HPSM
Scheme doctors, engineers etc.
Govt. , semi govt, autonomous
official, universities teachers,
Transport 2000000 30% 3 years HPSM
doctors, engineers, business man,
etc.
Govt. , semi govt, autonomous
official, universities teachers,
Car 350000 30% 4 years HPSM
doctors, engineers, business man,
etc.
Investment for New, experienced, specialized HPSM, Bai-
1000000 20-30% 5 years
Doctors doctors muazzal
HPSM, Bai-
Small Business Fishery, livestock, manufacturing. 100000 0-20% 1-2 years
muazzal
Agriculture
Farmer, half educated rural youth 200000 20% 2 years HPSM
Implements
Micro Diploma, skilled & semi-skilled HPSM, Bai-
200000 Nil 5 years
Industries youth muazzal
Source: Islami Bank 25 Years progress 2008

3.9 Sector wise Industrial Position of IBBL from 2004 to 2007

The investment in the industrial sector as on 31.12.2007 is Tk.78, 788.15 million
(approximately), which signifies the commitment of the Bank towards rapid growth of the
economy and to increase the per capita income of the people by creating employment
opportunities and greater contribution to the national economy.

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Sector wise Industrial Position of IBBL from 2004 to 2007

(Figure in Million Taka)

% to total % to total % to total % to total

Name of the Indus. Indus. Indus. Indus.
2004 2005 2006 2007
sector Investmen Investmen Investmen Investmen
t t t t
Textile Mills 12897 36 17409 38 24338 39 35415 45
Steel, Re-rolling
7127 20 6836 15 7680 12 7706 10
& Engineering
Agro based
4759 13 5490 12 7337 12 9421 12
Industry
Garments
4065 11 3959 9 5019 8 8694 11
Industry
Food & Beverage 1683 5 2742 6 3788 6 5027 6
Cement Industry 1288 4 1657 4 1489 2 1562 2
Pharmaceuticals 727 2 589 1 1171 2 1531 2
Poultry, Poultry
517 1 574 1 767 1 468 1
Feed & Hatchery
Sanitary Wares 330 1 409 1 432 1 588 1
Chemicals,
Toiletries & 260 1 177 0 243 0 882 1
Petroleum
Printing &
242 1 596 1 498 1 708 1
Packaging
Power
217 1 546 1 359 1 609 1
(Electricity)
Ceramic & Bricks 210 1 320 1 552 1 747 1
Health Care 113 0 216 0 294 0 691 1
(Hospital &
Others)
Plastic Industry 109 0 528 1 598 1 302 0
Petrol-Pump & 66 0 114 0 127 0 310 0
CNG Filling
Station
Information 56 0 9 0 10 0 22 0
Technology
Hotel & 4 0 4 0 9 0 138 0
Restourant
Other Industries 923 3 3891 8 7931 13 3967 5
Total 35593 100 46064 100 62642 100 78788 100

Source: Islami Bank 25 Years progress 2008

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3.10 Shari’ah Compliance in IBBL

Alhamdulillah, by the grace of Almighty Allah, Islami Bank Bangladesh Limited is proceeding
towards nonstop progress and achievement with due commitment for submission of Islamic
Shari’ah Values. Since very inception of IBBL, Shari’ah Council was formed to provide
necessary counsel and guideline to the management for effective Shari’ah Compliance in the
Bank. Through the period January–December, 2007, the Muraqibs of Shari’ah Council had
showed Shari’ah check at 176 branches. During the period the doubtful income was detected by
the Muraqibs of the Shari’ah Council Secretariat to the tune of Tk. 6,08,14,190/- out of total
inspected amount of Tk. 67,80,60,471/- and percentage of doubtful income is 8.97%.

3.11 Investment Plan for 2008-2012

Currently a “5 year perspective Investment Plan” has been porposed for the year 2008-2012 in
continuation of 7 years Plan from 1996-2002 and 5 Years Plan from 2003-2007. The plan has
been formulated keeping in view of the national economic priorities and aiming at diversification
of the investment portfolio by size, sector, geographical area, economic purpose and securities to
bring in phases all sectors of the economy and all types of economic activities and different
economic strata of the society within the fold of Bank’s investment operations.

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Chapter – 04: Analysis and Findings
Investment is a word related senses in commercial administration, finance and economics,
connected to saving or deferring consumption. An asset is usually purchased, or equivalently a
deposit is made in a bank, in hopes of getting a future return or interest from it. The word invents
in the Latin “vest’s”, sense garment, and refers to the act of laying things (money or other rights
to resources) into others’ pockets. The basic meaning of the term being an asset held to have
some recurring or capital gains. It is an asset that is expected to give returns without any work on
the asset parse.

Investment is a term, which can be used in a number of contexts. Meaning investment or the
meanings of investment are closely connected according to different theories. Investment means
savings or savings made through delayed consumption.

According to economics, investment is referred as the utilization of resources in order to increase

income or production output in the future.

An amount is deposited into a bank or machinery is purchased in the anticipation that this will
yield some income in the long run or more money can be made with the help of these
investments. The word investment carries dissimilar minds to different commercial areas.

According to economists, investment denotes to every physical or touchable asset, for example, a
building, machinery and equipment. On the other hand, finance professionals define investment
as money utilized for buying financial assets, for example stocks, bonds, bullion, real properties,
and precious items. People get involved in this type of investment in the expectation that it will
generate cash flows in the future.

According to finance, investment refers to the buying of a financial product or any valued item
with anticipation that positive returns will be received in the future.

The best significant feature of financial investments is that they convey great market liquidity.
The method used for evaluating the value of a financial investment is known as valuation.

According to business theories, investment is that activity in which a manufacturer buys a

physical asset, for example stock or production equipment in expectation that this will support
the business to prosper in the long run

Investment is a word, which is often used in the arena of economics, business managing, finance
and it means savings through overdue consumption. Investment can be divided into different
types according to various theories and principles.

A particular amount of money is invested in the bank or an asset is bought in the anticipation that
some return will be received from the investment in the future.

There can be a number of definitions of Investment. While dealing with the various options of
investment, the definitional variations of investment need to be kept in mind.

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4.1 What is investment in terms of Economics?

According to economic concepts, investment is distinct as the per unit production of goods,
which have not been consumed, however, will be used for future production. Examples of this
type of investments are tangible goods like construction of a factory or bridge and intangible
goods like 6 months of on-job training. In terms of national production and income, Gross
Domestic

4.2 What is investment in terms of Business Management?

According to business management theories, investment refers to tangible assets like machinery
and equipments and buildings and intangible assets like copyrights or patents and goodwill. The
decision for investment is also recognized as capital budgeting decision, which is observed as
one of the crucial decisions.

4.3 What is investment in terms of Finance?

In finance, investment refers to purchasing securities or any other financial assets from the
capital market or money market or purchasing real properties with high market liquidity for
example, gold, silver, real properties, and precious items. Financial investments are investment
in stocks, bonds, and many other types of security investments. Indirect financial investments
can also be done with the help of mediators or third parties, such as pension funds, mutual funds,
commercial banks, and insurance companies.

4.4 Personal Finance:

According to personal finance theories, an investment is the implementation of money for buying
shares or mutual funds or purchasing an asset with the involvement of the factor of capital risk.

4.5 Real Estate:

As real estate theories, investment is denoted to money used for purchasing property for the
purpose of possession or leasing. Also in this case, the factor of capital risk is involved.

Investment Meaning refers to the definition of investment or how investment can be defined.
Investment can be well-defined in numerous ways according to dissimilar theories and
philosophies. In overall purview, investment is the claim of money for producing more money.

4.6 Investment bank:

Investment banks are those financial bodies that help the governments and big enterprises to
raise money by issuing and selling the securities in the primary market. The main objective of
investment banks is to assist the public and private corporations to raise capital.

The investment banking firms generally act as the underwriter or agent while acting as an
intermediary between the issuer of securities and the investors. The investment bankers take care

35 | P a g e
and handle the distribution of previously issued financial securities and at the same time maintain
the market for the securities that are already distributed. The investment banks also provide the
private and public corporations with strategic advices on acquisitions, mergers and other types of
financial transactions.

The Investment Banking Division in an investment bank, which handles the raising of funds for
the corporations both in debt and equity. There are very few banking firms that only offer this
service as most of the investment banks are now providing other additional financial services to
the clients like fixed income, trading of derivatives, equity securities, commodities and foreign
exchange.

Edna Carew in his The Language of Money define Investment Bank as “A financial intermediary
which operates at the ‘wholesale end’ of the financial markets; the ‘middleman’ between
companies issuing securities to raise funds and the investors who buy the paper. Investment
banks derive their income chiefly from fee-based activities or profits from trading securities
rather than from a margin between borrowing and lending costs. Investment banks support their
consumers by guaranteeing and allocating securities and devising innovative finance packages
(in return for fees). Investment banking skills rely on market knowledge and expertise rather than
on the strength of the bank’s balance sheet”.

Sharpe, Alexander and Bailey in his Investment define investment as “the sacrifice of certain
present value for possibly uncertain future value”.

Sharpe, Alexander and Bailey in his Investment define investment policy as “a component of the
investment process that involves determining an investor’s objectives, particularly as regards his
or her attitude toward the tradeoff between expected return and risk”.

36 | P a g e
4.7 Sector wise investment

Sector wise investment Sector wise investment

in 2013 in 2012

3% Industrial
4% Industrial
Commercial
Commercial
28% Real Estate
30% Real Estate
Agriculture
43% Agriculture 47%
9% Transport
9% Transport
SME
SME 6%
2% 5% Other
7% Other
2% 5%

Figure 4(1): Sector wise investment in 2012 & 2013

Source: Annual report (2012-2013)

Interpretation: The sector wise investment of IBBL is stable to some sectors and fluctuating to
others. In SME sector, the percentage of investment was 47% in 2012 where it decreased to 43%
in 2013. Again, in industrial sector, the percentage was 28% in 2012 where it increased to 30%
in 2013. In other sectors such as transport, agriculture, real estate, the investment rate was almost
same in 2012 and 2013.

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4.8 Scheme Wise Investment

In Million
TK

Year 2009 2010 2011 2012 2013

Rural Development 3752 5110 7072 10390 13731
Scheme(RDS)
House hold Durable Scheme 686 962 1070 955 1048
Invest Scheme for Doctors 17 15 14 32 37
Transport Investment Scheme 3630 4732 6707 6887 7057
Car Investment Scheme 54 139 152 113 75
Small Business Investment 1160 1703 2348 2774 3202
Scheme (SBIS)
Micro-Industries Investment 50 47 38 36 29
Scheme
Agricultural Implements 77 127 210 278 337
Investment Scheme
Housing Investment Scheme 453 419 367 316 261
Real Estate Investment Program 7933 10155 12485 15660 15903
(REIP)
PGHBN 358 903 1483 2059
Sub Total 17812 23767 31366 38924 43739
Total Investment 214616 263225 305841 372921 406805
% of total investment 8.3 9.03 10.26 10.72 10.75
Table 4(1): Scheme Wise Investment
Source: Annual report (2009-2013)

Interpretation: IBBL invested 8.3% in 2009 of their total investment in their various types of
schemes. The percentage increased year by year. The maximum rate of investment was in 2013
by 10.75% which shows the satisfactory growth of the bank.

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4.9 Mode Wise Investment

In Million
TK

Year 2009 2010 2011 2012 2013

Bai-murabaha 117180 146135 177,136 221632 225876
HPSM 73871 80093 89,070 96056 95481
Bai Muajjal 7318 12393 15,912 18295 24053
Bai- as-Sarf 11289 5141 2,744 9531 29686
Quard 2833 2095 5,614 9156 13670
Bai- Salam 2082 3624 3,528 4532 4200
Mudaraba 0 1500 2,266 0 0
Musharaka 43 12244 9,571 13719 13838
Total 214616 263225 305,841 372921 406805
Table 4(2): Mode Wise Investment
Source: Annual report (2009-2013)

Mode Wise Investment

500000
400000
In Million TK

300000 406805
372921
200000 305,841
214616 263225
100000
0
2009 2010 2011 2012 2013
YEAR

Figure 4(2): Mode wise investment

Source: Annual report (2009-2013)

Interpretation: In the year 2009, the total mode wise investment was 214616 million tk. and the
maximum investment was in bai-murabaha mode. The amount has increased year by year and
the maximum rate of investment was in 2013 by 406805 million tk.

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4.10 Income from investment

In Million TK

Year 2009 2010 2011 2012 2013

Investment 214616 263225 305,841 372921 406805
Income from investment 21370.53 24766.26 32019.53 43672.23 48145.46
% of income from 10% 9% 10% 12% 12%
mode wise investment
Table 4(3): Income from investment
Source: Annual report (2009-2013)

% of income from mode wise investment

14%
12% 12%
10% 12%
10% 10%
8% 9%
6% % of income
4%
2%
0%
2009 2010 2011 2012 2013

Figure 4(3): Income from Investment

Source: Annual report (2009-2013)

Interpretation: The Graph shows that there is an increasing trend of income from Mode-wise
investment. The income from Mode-wise investment was 214616 million tk. which was 10% of
total investment. The rate of investment slightly down to 9% in the year of 2010 but it again
gained its’ position in 2011 by 10%. The maximum rate of investment was in 2012 & 2013 by
12%.

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4.11 Comparative Analysis

Deposit of IBBL and Total National Deposit In Million TK

Year 2009 2010 2011 2012

Total National Deposit 3037800 3721900 4509700 5396000
Total Deposit of IBBL 244292 291935 341854 417844
% of deposit of IBBL 8.04% 7.84% 7.58% 7.74%
in TND
Table : Deposit of IBBL and Total National Deposit
Source: Annual report of IBBL and Bangladesh Bank

% of deposit of IBBL in TND

8.20%

8.00% 8.04%

7.80% 7.84%
7.74% % of deposit of IBBL in
7.60% 7.58% TND
7.40%

7.20%
2009 2010 2011 2012

Figure: Deposit of IBBL as a Percentage of Total National Deposit

Source: Annual report of IBBL and Bangladesh Bank

Interpretation: The graph shows that over the period of three years, comparative deposit
performance of IBBL has not increased. The deposit of IBBL as percentage of total national
deposit has fluctuated over the years.

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4.12 Investment of IBBL as a Percentage of Total National Investment
In Million TK
Year 2009 2010 2011 2012
Total investment of IBBL 214616 263225 305841 372921
Total National Investment 2439800 3297500 3842600 4238500
% of IBBL investment in TNI 8.80% 7.98% 7.96% 8.80%
Table: Investment of IBBL as a Percentage of Total National Investment
Source: Annual report of IBBL and Bangladesh Bank

% of IBBL investment in TNI

9.00%
8.80% 8.80%
8.50%
% of IBBL investment in
8.00% 7.96% TNI
7.98%
7.50%
2009 2010 2011 2012

Figure: Investment of IBBL as a Percentage of Total National Investment

Source: Annual report of IBBL and Bangladesh Bank

Interpretation: The graph shows that the percentage of IBBL’s investment in total national
investment has decreased from 8.80% in 2009 to 7.98% in 2010 after 2010 increased in 2012
8.80%. This indicates that comprative investment of IBBL has increased over the years.
NPL of national and IBBL

Year 2009 2010 2011 2012

% of national NPL 9.20% 7.30% 6.10% 10.03%
% of IBBL NPL 2.36% 1.77% 2.71% 3.81%
Table : NPL of national and IBBL
Source: Annual report of IBBL and Bangladesh Bank

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 12.00%

10.00% 9.20% 10.03%

8.00%
7.30% % of national NPL
6.00%
6.10%
% of IBBL NPL
4.00%
2.71% 3.81%
1.77%
2.00%
2.36%
0.00%
2009 2010 2011 2012

Figure: Comparison of Toal NPL of IBBL & Total NPL of National

Source: Annual report of IBBL and Bangladesh Bank

Interpretation: The graph shows that NPL percentage of IBBL is lower than indusry average in
each year of analysis. This indicates that the credit recovery performance of IBBL better than
that of most other firm in the industry.

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Chapter – 05: Recommendation regarding Investment
IBBL
Despite various problems and shortcomings, the Islamic Banks have the potentiality to grow and
expand its area of activities to bring good to the humanities. Some suggestive measures are appended
below:
i. Educational institutions may introduce ‘Islamic Finance & Banking’ & other
related courses to supply need based manpower for Islamic Banks.
ii. Scope for training, motivation & orientation programs for Islamic Bankers be
widened & strengthened.
iii. Training Needs Assessment should be made to cover three different forms of
training aspects of an Islamic banker. These include a) ideological and it is
related to the Quran and Sunnah b) theoretical which covers the technical aspects
of banking in equipping an employee with knowledge about Islamic values and
way of life and c) Practical.
iv. Group discussions, case study on Islamic economics, banking and finance may be
introduced for the officials at different level of operations on regular basis.
v. A common web portal may be developed to facilitate clients in providing tips
regarding Islamic banking, finance and economics.
vi. Introduction of Islamic Banking Diploma Course be introduced for all Islamic
bankers.
vii. The clients of the Islamic Banks be equipped with knowledge of Islamic banking
through discussions, seminars, symposia etc.
viii. Islamic banks can change common Shariah Manual or procedures for day-to-day
consultation and clientele motivation.
ix. The research and development (R & D) for Islamic Economics, Banking and
Finance be geared up.
x. Islamic Banks in Bangladesh may expand their network in the rural areas.
xi. Investment of the Islamic bank portfolio be diversified and extended for long
term financing under Musharaka and Mudaraba.
xii. Co-operation among Islamic banks be extended at national level and throughout
the world.
xiii. The central banks of the Muslim countries can help creation of environment for
Islamic Banking with more responsibilities.
xiv. Uniform accounting systems and standards already developed by the Accounting
& Auditing Organization for Islamic Financial Institutions for providing
consistency in accounting treatment of various operations and products of Islamic
banks may be introduced by all concerned.
xv. New and ‘innovative’ products be designed for financing under Profit and Loss
sharing basis.
xvi. Muslim countries, which have established Islamic banks, if involve themselves
with international trade on Islamic principles, could contribute to grow
international transactions under interest-free system. This will further help
developing an Islamic Common Market.

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Conclusion:
Banks play a very vital role in the economic development of the country. The popularity of
banks is increasing day by day which leads to increase competition as well. Currently 48
Scheduled Banks are operating in Bangladesh. All the Commercial banks are offering almost the
same products and services and almost same their operation system. But the ways they provide
the services are different from each other. So people choose their Bank according to their
satisfaction and need. And they will prefer the bank of which service is easily accessible and
understandable. One the other hand, Bank innovate new products and services to attract their
desired customers. In conservative banking structure loan is granted on the basis of interest,
which is fixed. In Islami banking method investment is going on with profit-loss distribution
method. In this system no fluctuation comes between growth of economy as well as growth of
IBBL. In Islami banking method it is potential to create stability between money supply and the
making of goods. On the other hand, conventional banking system creates inflationary problem.
In conventional banking system, investment does not ensure employment opportunity besides
Islamic banking system directly work with unemployment problem. At the time of increasing
interest rate, investment decreases and at the same time unemployment also increases. In
conventional banking system interest rate always fluctuates and events unrest in economy.
Besides Islami bank always helps economic growth. In Islami banking system the collection of
invested money is easier that the conventional banking because Islami bank concerns with the
purpose of investment not with only the invested money. I also consider that there is positive
future waiting for the Islami banking in Bangladesh. And IBBL is in a position to go as a catalyst
for this development in the banking sector in Bangladesh.

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Bibliography
* Islami Bank Bangladesh Annual Report 2006.

* Brochures Of Islami Bank Bangladesh

* Economic Trends published by Bangladesh Bank

* Branch Managers’ Conference Book 2008

* Islami Bank 25 Years of Progress, 2007

* Islami Bank 24 Years of Progress, 2007

* Chapra, M. Umar (2000) “Review of Islami Economics” Pakistan.

* Zvi Bodie, Alex Kane, Marcus, Alan J., (1989) “Investments” 6th edition, published by Tata
Mc Graw – Hill, USA.

* Edna, Carew, (1996) “The language of Money”, published by Allen Cunwin, Australia.

* Sharpe, William F., Alexander, Gordon J., Bailey, Jeffery V. (1978), “Investments” 6th edition,
published by Prentice Hall India, USA.

* Islami Bank Bangladesh Limited Website- http://www.islamibankbd.com

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