Internship Report, F.ex Cor. Branch

Internship ReportOn

iBanking/Mobile banking,online banking & green banking system of Islami Bank Bangladesh Ltd.

Submitted To

Course-Coordinator (Training) SPO & Faculty Deputy Director (Training)ber, IBTRA

Submitted By:

Name

University

Tahmina Akter

University of Dhaka

Date of Submission: 10.03.2013

Letter ofTransmittal 10th March 2013 Course-Coordinator (Training) SPO & Deputy Director( Training), IBTRA Subject: Submission of report on “iBanking/Mobile banking,online banking & green banking of Islami Bank Bangladesh Ltd.” Honorable Sir, With due respect we do hereby submit our Internship Report “iBanking/Mobile banking,online banking & green banking of Islami Bank Bangladesh Ltd.”,which was assigned to us as an integral part of our course requirements in B.B.A program. As we have been working in IBBL, Jatrabari Branch, Dhaka, thus, it is a very good opportunity for us to prepare the report properly out of practical experiences & empirical data, as well as, application of theoretical knowledge. Preparing this report has been extremely challenging, interesting and rewarding experience. Now we are able to understand and utilize the key terms of Islamic Banking in banking sector. Now it is very easy for us to interpret any impact and its effect on bank. We would like to express our deepest gratitude to you for providing us with such an opportunity. We have tried our best to make this report as comprehensive and informative as possible within the time allowed for us. Due to various constraints, there may be some mistakes for which we beg your apology. Sincerely yours, Tahmina Akter University of Dhaka

Acknowledgement

First of all I remember Almighty Allah for making us successful to prepare this report. I are grateful to the Islami Bank Bangladesh Limited authority that has helped us by updating desired information at their website. At the very outset, I would like to thank to our Course-Coordinator, SPO & Deputy Director, IBTRA for giving me the opportunity to know about the Islamic Banking in Bangladesh, and his support and direction it would never be possible for me to make this report. I also express our heart full thanks to all the faculty members of Islami Bank Training and Research Academy (IBTRA) as Ill as the employees from top to bottom of IBTRA, who gave me necessary

information

and excellent guidance to prepare this internship report. I talked all the concerned officers of the Islami Bank Bangladesh Limited, Corporate branch of foreign exchange,

who

kindly provided

me the

information and other handouts.

The management of

this Branch had been extremely helpful in

providing necessary documents, annual report, statements, voucher etc. which helped me to prepare this Internship report. I express a deep debt of

appreciation & gratefulness to the employees of IBBL, corporate

branch of forign exchange Branch.

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Serial No.

Page TABLE OF CONTENTS Executive Summary

No. 7-8

Chapter 1

Introduction of the Report Rational of the study

9 11

Objective of Report 12

Method ology 13

Scope of the study 13

L i m i ta ti o n

13

Chapter 2

About the organization ObC jeocrtpivoeraotfeIsIn lafm ca Btaio nn ki n g orim

Vision of IBBL Ba s on peorf ties of Islamic Banking Micisp srio

24 7 25

8-10 26

I B BL Special feature of IslamiIcBBBaLnkM inagnIn a g em en t o f BaInBgB laLdesh Chapter 3 Chapter

11-13 2729

FinPart a ncia lP erformance of IB BL Analytical of IBBL

30-

E-banking of IBBL

38 16 39

4 18

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Ibanking/mobile banking, online banking & green

40-

banking of IBBL

91

Chapter

Difference between Conventional & Islamic

5

Banking

Chapter

Findings, Recommendation& Conclusion

4392-99 49

50100 53

6 Findings

101

Recommendatio

54-

ns Conclusion

107 56

Bibliography Appendix

108

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

ExecutiveSummary

Banking system plays a very important role in the economic life of the nation. The health of the economy is closely related to the soundness of its banking system. In a developing country like Bangladesh the banking systems as a whole play a vital role in the progress of economic development. Modern trade and commerce would almost be impossible without the availability of suitable banking services. Islamic Banking is an integral part of Islamic Economics and thereby an Islamic way of life. Islamic Banking is a special nature of financial intermediary which has not involve in any way with interest. The introduction of interest-free and equity-based financing by the Islamic banking system is based on the principles of Islamic economics. Here I provide information about Islamic Banks in Bangladesh.

IBBL is a third generation bank in the private sector banking of Bangladesh. IBBL is the private commercial bank that is a brain child of some successful local entrepreneurs. IBBL is a banking company registered under the Companies Act, 1913 (At present the companies Act, 1994) with its Head Office at 40, Dilkusha Commercial Area, Dhaka- 1000, Bangladesh. The bank started its historical operation on the 30th March 1983. Now it has as many as 276Branch throughout the country.

IBBL has already achieved tremendous progress within only 30 years. Now IBBL is offering about to all modern banking service with modern technology. Meanwhile, IBBL has already introduced on-line banking services. Islami Bank has discovered a new horizon in the field of banking area which offers different General Banking, Investments and Foreign Exchange banking system. IBBL has some special mission & vision to establish interest free Banking in the country. From the very beginning since inception the Bank it has been facing different kinds of problem due to lack of Islamic Banking Act, Islamic money market and also general people have no idea about Islamic mode of investment. I have prepared the internship report on “iBanking/Moblie banking, online banking & green banking system of Islami Bank Bangladesh Ltd.” as a partial fulfillment for the BBA program of the university based on primary & secondary data & information. For this specific

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

purpose I have collected data & information from various sources like published materials such as the annual report, articles, & IT related to Banking activities. We concentrated on arranging & putting the data in such a way that the report progressively anchors to a desired destination of understanding. In this report we have tried to show  To familiar the history of Islami Banking in Bangladesh.  To learn about the internet banking operations of IBBL.  To show about the processing of internet fund transfer.  To learn about the inter bank fund transfer through BEFTN  To learn about the ICT policy of IBBL.  To learn about green banking  To learn about automated cheque clearing through BACH system.  To show the differences with conventional banking regarding different aspects. To identify strength and weakness of IBBL. To find problems or lacking that IBBL is facing. overall activities & performance of Islami Bank Bangladesh Ltd. We have also shown the differences with conventional banking regarding different aspects as well as identified strength and weakness of IBBL & recommend actions that may be necessary to redesign functions of IBBL.

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

ChapterOne

Introduction of theReport

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Rationaleofstudy: Internship program of University is a partial requirement for the graduation of BBA/M.B.A students. Every B.B.A/M.B.A student is appointed to learn some practical knowledge within the pre-stipulated period by observing the organization day to day activities. In this regard our internship program started on 10th January at Islami Bank Bangladesh Limited. In the modern society commercial Banks occupy a position of economic importance. They play a significant role to meet the needs of the society such as capital formation, large-scale production, industrialization, growth of trade and economy etc.

Islamic banks are unconditional and specialized financial institutions that perform most of the standard banking services and investment activities on the basis of profit and loss sharing system conforming to the principles of Islamic Shari‟ah. Out of 50 banking institutions, 7 banks are backed by Islamic mechanism and worldwide accepted Islamic morality and established code of conduct. This paper, however attempts to appraise e b a n k i n g performance as well as increasing customers‟ loyalty of Islami Bank Bangladesh Limited performing beneath the umbrella of Islamic shari‟ah and approved welfare oriented principles.

Objectivesofreport

The first objective of writing the report is fulfilling the partial requirements of the BBA program. In this report, I have attempted to give an overview of internet banking system of Islami Bank Bangladesh Limited in general. The primary objective of this report is to observe the mo bile/ int er net banking, ibank ing and gr een bank ing syst em of Islami Bank Bangladesh Ltd.

The other objectives are:  To familiar the history of Islami Banking in Bangladesh.  To learn about the internet banking operations of IBBL. 11 | P a g e

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 To show about the processing of internet fund transfer.  To learn about the inter bank fund transfer through BEFTN  To learn about the ICT policy of IBBL.  To learn about green banking  To learn about automated cheque clearing through BACH system.  To show the differences with conventional banking regarding different aspects. To identify strength and weakness of IBBL. To find problems or lacking that IBBL is facing.

To recommend actions that may be necessary to redesign the investments of IBBL

Methodology

In order to carry out the report, I have collected the required data from both primary and secondary sources. I focused on taking the interviews of the personnel involved in the different departments, Manager and Senior Level Employees, Business Clients and Account Holders and specially IT department. After collecting, the data were used to analyze information, Graphical tools were used to get clear picture of the situation.

a)Nature ofthe study: Exploratory

b) Sources of information:

Both

primary

and

secondary

sources were used to complete this report.

Primary sources of data:

Direct interview process in IT

department,marketing department and clearing department employees.

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information

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Secondary sources of data: Manuals provided by Islami Bank Training & Research

Academy,

Published financial statement & Website of Islami bank

Bangladesh Limited.

Analytical Review:

PEST Analysis SWOT Analysis Graphical Analysis

Scopeof the Study

Islami Bank is the pioneer of welfare driven economy and promoter of balanced growth in a country like Bangladesh which has a poverty stricken contemporary economic background. To address the ongoing condition of IB and their bright prospects is a vital issue to be explored.

Limitations

During preparing this report I have faced these following limitations:  Inadequate published information about bank  Financial constraints to collect information 

Insufficient information in websites of bank

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 Confused definition about products and services of Islamic bank  Unsound database about Islamic banks in Bangladesh Bank  Busy working environment  Lack of sufficient well informed officials  Data could not been collected for confidentiality or secrecy of management

ObjectivesofIslamicBanking

The primary objective of establishing Islamic banks all over the world is to promote, foster and develop the application of Islamic principles in the business sector. More specifically, the objectives of Islamic banking when viewed in the context of its role in the economy are listed as following: 

To offer contemporary financial services in conformity with Islamic Shari‟ah;



To contribute towards economic development and prosperity within the principles of Islamic justice;



Optimum allocation of scarce financial resources; and to help ensure equitable distribution of income.

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These objectives are discussed below:

Offer FinancialServices:

Interest-based banking, which is considered a practice

of

Riba

in

financial

transactions, is unanimously identified as anti-Islamic. That means all transactions made under conventional banking are unlawful according to Islamic Shari‟ah. Thus, the emergence of Islamic banking is clearly intended to provide for Shari‟ah approved financial transactions.

IslamicBankingfor Development:

Islamic

banking

is

claimed

to

be

more

development-

oriented

than

its

conventional counterpart. The concept of profit sharing is a built-in development promoter

since

it establishes a direct relationship between the bank‟s return on

investment and the successful operation of the business by the entrepreneurs.

OptimumAllocationofResources:

Another important objective of Islamic banking is the optimum allocation of scarce resources. The foundation of the Islamic banking system is that it promotes the investment of financial resources into those projects that are considered to be the most profitable and beneficial to the economy.

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IslamicBankingforEquitableDistribution ofResources:

Perhaps the must important objective of Islamic banking is to ensure equitable distribution of income and resources among the participating parties: the bank, the depositors and the entrepreneurs.

BasicPropertiesofIslamicBanking

Islamic banking is emerging in an era when the world is settling down to a free market economy and

when phenomenal changes are taking place in the global

economy. A free- market economy visualizes three essential features - free trade, open capital market and minimum governmental intervention. The vagaries of protectionism

and

regionalism

are transforming the economy to free trade and

globalize. The changes could provide ample scope for the Islamic banking to grow and work in competitive environment. Islamic banking, being an integral part of an Islamic economic system can be practiced more effectively in an environment, which conforms to the doctrine of Islam. Thus there are some essential requirements for a successful Islamic banking, such as:

Supportive Legal Framework and Swift Judicial System:

An effective legal framework ensuring speedy justice is essential for a good society, it is more so for the success of Islamic banking, because its investment risk is more than that of a conventional interest-based bank as its dealings are on profit and loss basis.

Disciplined Entrepreneurship:

It would minimize cases of malfeasance and mismanagement. Besides, a banker 16 | P a g e

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must extend from being merely a financier to a role-player in business. Although a Murabaha transaction in Islamic banking does provide an opportunity to a banker to share in business, the Islamic banks generally limit themselves to being inactive partners for their credit risk only. The real entrepreneurial role of an Islamic bank needs, therefore, to be increased.

Conceptual Changefrom Credit Risk to Overall RiskManagement:

While it is difficult to predict, with any degree of certainty, the operating results of an enterprise and the magnitudes of profit and loss, all the same, it seems unjust if the party providing the capital is guaranteed a fixed and predetermined rate of return, and the other party undertaking the enterprise is made to bear the uncertainty alone. Under the circumstances, an Islamic banker has not only to focus on credit risk but also to view all the business risks of the enterprises in which he has invested the bank money.

Strong Ethical Values:

The Islamic economic system offers a balance between the two extremes of public or social and private or individual ownership of property. The success of Islamic banking in a society is related to the extent of acceptability of the doctrine of trusteeship and transformation of the self-interested and profit-oriented behavior of people into an altruistic and value-oriented behavior.

Supreme Shari‟ah Council:

The function of Shariah Council in maintaining Islamic banking activities in a country within the orbit of Islamic injunctions is dependent on its legal status and the extent of implementation of its opinion.

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The opinions of Shari‟ah Councils of different countries may not necessarily be uniform. There is, therefore, a need for a Supreme Shari‟ah Council representing Muslim community all over the world to decide about various issues con fronted by Islamic banks. A beginning has been made in this direction by establishing the Council of the Islamic Fiqh Academy at Jeddah, Saudi Arabia under the auspices of the Organization of Islamic Conference (OIC) but its role has to be augmented.

Uniform Accounting Standards:

There is need for harmonization of financial reporting of Islamic banks in respect, particularly, of the following; 

The significant accounting policies on which the statements are based should be fully and clearly declared,



The methods of translating foreign currency transactions would be appropriately disclosed,



Appropriate and sufficient disclosures regarding the quality of banks assets is of much concern to the depositors,



Additional disclosure of the nature of the financial contingencies and commitments of the banks in their financial statements.

Committed Management:

If the management of a bank is determined to step into the business of Islamic banking, it can easily evolve a strategy for the same, formulate a plan for a specific time - frame and implement it accordingly.

Progressive and Modern outlook:

In order to ensure successful management in Islamic banks, there is need to apply all the 18 | P a g e

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available modern tools of managing corporate business, including management of human assets, offices, information resources, marketing etc.

Body to Evaluate Islamic Financial Institutions: In order to ensure quality and standard in management of Islamic financial institutions and to build confidence of the general public in Islamic banking, there is need to establish some professional body responsible to define professional standards and ethics and other aspects of Islamic financial institutions. It may also certify the level of financial health of such institutions.

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Treatment in case of Loan default: In time of loan default these banks don‟t take any penalty for default which is one of the major differences between Islamic & conventional banks.

Participatory financing:

Islamic banks believe in participatory financing. They do the investment through profit & loss sharing. Their investment modes depend on mudaraba & murabaha principles which require participatory financing of both the parties.

Lending and investing:

In Islam, there is a clear difference between lending and investing lending can be done only on the basis of zero interest and capital guarantee, and investing only on the basis of Mudaraba (profit-and-loss-sharing).

IslamicBankinginBangladesh

Islamic Banking has experienced a phenomenal growth and expansion in Bangladesh in the backdrop of strong public demand and support for the system along with its gradually increasing popularity across the world. As a result, a number of full-fledged Islamic Banks has been established, while a good number of conventional banks have come forward to offer services compliant with Islamic Shari‟ah through opening of Islamic branches along with conventional ones. There is also a trend of conversion of conventional banks into Islamic bank.

It has, therefore, become necessary to ensure that activities of the fast growing Islamic Banks are carried out properly and uniformly according to the principles of Islamic Shari‟ah. With this end in view, Bangladesh Bank constituted a Focus group comprising representatives of 20 | P a g e

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the central Bank, a number of Islamic Banks and the Central Shari‟ah Board for Islamic Banks of Bangladesh to formulate an integrated guideline for conducting banking business of the Islamic Bank/Islamic bank

branches of conventional banks. Based

on the

recommendations of the Focus group this guideline embodying different terminologies used in Islamic Banking operations, definitions of the terminologies, the principles and modes of deposits and investments has been prepared. It also dwelt upon the issues of liquidity, maintenance of books of accounts and preparation of financial statements and other related issues. This guideline has been prepared mainly on the basis of Banking Companies Act 1991, Companies Act 1994 and Prudential Regulations of Bangladesh Bank. However, this guideline should be treated as supplementary, not a substitute, to the existing banking laws, rules and regulations. Incase of any point not covered under this Guideline as also in case of any contradiction, the instructions issued under the Banking Companies Act and Companies Act will prevail.

Definitions of Terms used in Islamic Banking Operations

The following terms as used in this guideline, if not repugnant to the subject or affairs, shall have the following meaning:

"Shari‟ah" means such rules and regulations as have their origin in the holy Qur'an and Sunnah to govern all aspects of human life.

"Islamic bank" means such a banking company or an Islamic banking branch (es) of a banking company licensed by Bangladesh Bank, which follows the Islamic Shariah in all its principles and modes of operations and avoids receiving and paying of interest at all levels.

"Islamic Banking Business" means such banking business, the goals, objectives and activities of which is to conduct banking business/activities according to the principles of Islamic Shari‟ah and no part of the business either in form and substance has any elements not approved by Islamic Shari‟ah.

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"Branch or Branch Office" means any branch or Branch Office of Islamic Bank Company or office or Branch of such interest based conventional Banks which run Islamic banking business.

"Depositor" means some one who holds with any Islamic Banking Company any account namely Current account based on Al-Wadiah principles, Savings or long and short term deposit accounts under Mudaraba principles.

"Investment" means any such modes of financing which Islamic Bank Company does bin accordance with principles of Shari‟ah or as per the Shari‟ah approved modes like Mudaraba, Musharaka, Bai-Murabaha, Bai-Muajjal, Istisna, Lease, Hire-purchase under Shirkatul Melk, etc.

"Client" means such a person or institution who/which has any business relationship with Islamic Banking Company.

"Compensation" means such financial penalty as is imposed by a Islamic Banking Company over and above the amount of installment when a client fails to repay Bank's investment on due dates as per the agreement executed by him

Bangladesh is one of the largest Muslim countries in the world. The people of this country are deeply committed to Islamic way of life as enshrined in the Holy Qur‟an and the Sunnah. Naturally it remains a deep cry in their hearts to direct and design their economic lives in accordance with the precepts of Islam. The establishment and commencement of Islamic banks in Bangladesh, is the true reflection of this inner urge of its people.

In our banking sector there operates 7 banks which are backed by Islamic Shari‟ah and approved principles according to Quran and Sunnah. First Islamic bank is IBBL which is established in 1983. This was in fact the one of a kind bank in the Southeast Asia. Other players in the market are:

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EXIM Bank

SIBL

First Security Islami Bank Ltd Al-Arafah Islami Bank Ltd Social Islami bank Ltd ICB Islamic Bank

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ChapterTwo

About theOrganization

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IslamiBankBangladeshLimited The establishment of Islamic Bank Bangladesh Limited on March 13, 1983, is the true reflection of this inner urge of its people, which started functioning with effect from March 30, 1983. This Bank is the first of its kind in Southeast Asia. It is committed to conduct all banking and investment activities on the basis of interest-free profit-loss sharing system. With the active co-operation and participation of Islamic Development Bank (IDB) and some other Islamic banks, financial institutions, government bodies and eminent personalities of the Middle East and the Gulf countries, Islamic Bank Bangladesh Limited has by now earned the unique position of a leading private commercial bank in Bangladesh.

Corporateinformation:(As on Diary2009ofIBBL)

Date of Incorporation

13th March 1983

Inauguration of 1st Branch

30th March 1983

(Local office, Dhaka) Formal Inauguration

12th August 1983

Share of Capital

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Local Shareholders

37.76%

Foreign Shareholders

62.24%

Authorized Capital

Tk. 20,000.00 million

Paid-up Capital

Tk. 2,509.64 million

Deposits

Tk. 400,377.00 million

Investments (including Investment in Shares)

Tk. 392,795.00 million

Foreign Exchange Business

Tk. 648,303.00 million

Number of Branches

276

Number of SME Service Centers

30

Number of Shareholders

60,173

Manpower

2068

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

VISIONOFIBBL

The vision of Islami Bank Bangladesh limited is to strive to achieve superior financial performance be considered a leading Islamic bank by reputation and performance.

To establish and maintain the modern banking techniques

To ensure the soundness and development of the financial system based on Islamic 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 stability of financial systems.

Encourage savings in the form of direct investment.

To encourage investment particularly in projects which are more likely to lead higher employment

MISSIONOFIBBL

To establish Islamic banking through the introduction of a welfare oriented banking system and also ensure equity and justice in the field of all economic activities, achieve balanced growth and equitable development through diversified investment operations particularly in the priority sectors and less developed areas of the country, to encourage socio-economic uplift and financial services to the low income community particularly in the rural areas.

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Specialfeaturesof IBBL

The bank is committed to run all its activities as per Islamic 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 features of IBBL are as follows:

All activities are conducted on interest-free banking system in accordance with Islamic Shari‟ah. Investment is made through different modes permitted under Islami Shari‟ah. Establishment of participatory banking instead of banking on debtor-creditor relationship.

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 enlistment particularly in the rural areas.

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

Its aim is to achieve balanced growth and equitable development of the county 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 27 | P a g e

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MANAGEMENTOFIBBL

Islami Bank Bangladesh limited is being managed by a board of directors comprising foreigners and local. An executive committee is formed by the board of directors for efficient and smooth operation of the Bank. Besides a management committee looks after the affairs of the bank.

Organizational Structure of the Company

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FinancialPerformanceofIBBL ataglance

2008 Authorized 10,000.00 Paid-up capital

4,752.00

Shareholde 18,572.00 capital

2009

2010

2011

2012

10,000.00

10,000.00

20,000.00

20,000.00

6,177.60

7,413.12

10,007.70

12,509.64

23,620.00

28,400.00

33,717.00

38,803.30

Total r‟s equity

202,115.45 244,292.14 291,934.60 341,853.67 400,337.00

Total deposit

187,586.55 225,752.41 275,493.94 322,722.83 392,795.00

Investment 13% investment

20%

29%

17%

19%

Export rate

93,962.00

Import

168,329.00 161,230.00 246,281.0

301,207.0

237,307.00

Remittanc

0 0 140,404.00 194,716.00 214,629.00 236,607.0

249,391.00

e No. Of

196

276

Branches

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106,424.00 148,421.00 178,244.00 161,605.00

231

251

266 0

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

ChapterThree

AnalyticalPartofIBBL

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PESTAnalysisofIslamiBankingSystem

Political > Economical > Social > Technological

PESTanalysis: BangladeshPerspective

PEST analysis is a comprehensive analytical process to trace the competitive position in the general business environment of any country. The countrywide various factors under the four terms specified above categorize the status of any business concern.

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Politicalfactors:

Regional legislation, legal procedure, law and order of a country influence the banking mechanism to a greater extent. Our provision is more or less friendly towards the banking sector. Principles directed by the regulatory authority and international bodies‟ impact the banking performance of our country.

Economical:

GDP, corporate income tax provision and distribution channels, market routes and customer base are components of economical factor. Our country background and increasing customer demand raise the importance and evolution of Islamic banking system.

Societal factors:

The biggest proposition of Islamic banking system is the religious perception in minds of people since most of the residents of our country are Muslims. Media support, life style, major events like RAMADAN, Eid festivals and Hajj saving propensity also stimulate the advancement of Islamic banking.

Technological aspect:

Technological factors involve competitive development, research methodology, revolutionary online transaction system, innovative potentials, one stop service delivery system manipulate the Islamic shari‟ah powered banks operating in our country.

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SWOTANALYSIS

SWOT analysis is a tool for screening an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. It helps to detect the possible threats and opportunities in the market and viability. It helps recognize internal strength and overcome weaknesses.

It is the scanning of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths, or weaknesses, and those external to the firm can be classified as opportunities or threats.

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STRENGTHS

Islamic Banking will explicitly reorganize the deplorable condition of the poor and marginalized segments of society. Banking products which comply with Islamic law are becoming increasingly popular, not only in the Gulf countries and far eastern states like Malaysia, but also in other developed markets such as the United Kingdom. Reputed banks like Standard Chartered, Citibank, and HSBC are operating interest free windows in several West Asian countries, Europe and USA. There is a huge potential market in Bangladesh for Islamic banking products.

Moreover, Islamic banking helps the weaker and hapless section of the society through various financial products. Islamic banking finances (through its Joint ventures, partnerships and leasing)are provided by investors or banks to the borrowers with a condition that financial risk is to be borne by the investors, and other risks to be borne by the borrower. This helps even the indigent and vulnerable to get finance at a no risk and cost basis, but definitely requires other credits like strong business proposal, rational planning, skilled hands and specialized art to attract the financier. Better business proposals succeed in fetching funds as opposed to the projects with comparatively poor propositions. Such inclusive growth will aggrandize the Bangladeshi economy.

There is no room for diversion of funds. Therefore, investment in consonance with Islamic banking principles will surely boost the engine of economic growth in our country. 34 | P a g e

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Commercial banks cannot raise deposits without promising a specified rate of return to depositors, but under Shari‟ah, returns can only be determined post-facto depending on profit. Also banks have to maintain a Statutory Liquidity Ratio (SLR), which involves locking up a substantial portion of funds either as cash, gold or in government securities. Such cash will not get any return, keeping it in gold is risky as it could depreciate and government securities come with interest.

We have seen the fall of giants in the world of financial sector like Lehman Brothers in the aftermath of the US sub-prime mortgage crisis. Therefore, it is of paramount importance to be strict about credit rating system, to circumvent any chance of further bankruptcy. Since Islamic banking adheres to strict credit rating system and prohibits indebted economic agents to avail more debt finance, it could save our financial and economic enterprises from bankruptcy.

WEAKNESS

Islamic banking needs to introduce corporate governance with transparent accounting standards. It needs to perform detailed evaluation before embarking Profit Loss Sharing Scheme, which demand a pool of highly trained professionals. The imparting of professional training is costly. Detailed principles are still to be laid down and techniques and procedures evolved to carry them out.

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Financial Institutions. Banks in Bangladesh are governed through some Regulatory Acts. But Islamic banking operations sometimes contradict with the set laws. Like:

 Banking Regulations Act prohibits bank to use any sort of immovable property apart from private use –this is against Ijarah for home finance.  Banking Regulations Act requires payment of Interest which is against Shari‟ah.

It is observed that inability to evaluate a projects' profitability has tended to act against investment financing. Some borrowers are frustrated to the banks appraisal efforts as they are reluctant to provide full disclosures of their business.

Limited appeal outside core customer base.

Widely acceptable and reliable techniques are yet to be devised.

Adverse selection has been one of the major impediments in the world of Islamic banking.

Among the other disincentives from the borrower's point of view are the needs to disclose his accounts to the bank if he were to borrow on the Profit Loss Sharing basis. However, many small-time businessmen do not keep any accounts, leave alone proper accounts. And large conglomerates do not like to disclose their real accounts to anybody. The widespread lack of business ethics among certain business community will be another major hurdle in the path of Islamic banking in Bangladesh. 36 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

The practices in use by the Islamic banks have evoked questions of morality. Bai mu'ajjal (sale with deferred payment) and Murabaha (cost-plus financing) are permitted in the Shari‟ah under certain conditions. What are being done in many countries are fictitious deals which ensure a predetermined profit to the bank without actually dealing in goods or sharing any real risk. This is against the letter and spirit of Shariah.

Opportunity

The size of the market will be very large if it can be targete properly .

In the name of religious faith, people are looking for interest free banking and finance. It is significant to mention here that Islamic banking is not meant for Muslims only but non Muslims may also avail the benefit of it. And it is feasible to have a parallel banking system based on Shari‟ah along with a conventional one.

After 4/5, most of the countries started pulling out their investments from the US and Europe because of the fear of freezing of assets. Another reason could be the slowdown in the economies of western countries. A growing Bangladeshi economy has created a huge enthusiasm among Islamic nations as it sees the unlimited opportunities it can avail.

Islamic banking is an effective mechanism to defeat the liquidity and inflation 37 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

problems along with allowing comprehensive growth. For real inclusive growth, we have to ensure increase in income and employment status of workers in all segments.

If Islamic banking is introduced, the inadequate labor capital ratio, for informal sector workers associated with agriculture and manufacturing industries could be resolved through equity finance, which might be a revolution in our agriculture and unorganized sector. With improved labor capital ratio, our vulnerable workers associated with agriculture and unorganized sector might be able to compete effectively with the formal sector workers. Thus Islamic Banking may financially empower majority of our work force.

Islamic banking should not be a religion based banking business, but could be profitably used to resolve our issues pertaining to economy.

Threats Moving towards more Shari‟ah compliant services offered by mainstream banks.

It may bring financial segregation in the economy. The compartmentalization of Shari‟ah compliant and Non Shari‟ah Compliant banking might be dangerous for the stability of our financial environment.

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Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

ChapterFour

Ibanking/ mobile banking, g r e e n b a n k i n g & o n l i n e b a n k i n g s y s t e m of IBBL

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Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

E- Banking related software ICTW, in coordination with all other departments, has decided upon the following software standards (Any software used may be added with the concern of ICTW as per requirement):

Desktop operating system • Microsoft Windows

Server operating system • Sun Solaris • Linux (Freeware) • Windows 2008/2003/2012 • Any Customized OS for Appliance or Virtualization

Database Management System (DBMS) • Oracle • MS SQL Server • MySQL (Freeware)

Web Servers • Apache • Tomcat • IIS

Development Tools • PHP • Java • JSP • Cocoon • Hibernet • Struts • Intelij IDEA 40 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

• i-report • Microsoft Visual Studio • Microsoft Dot Net

Productivity tools package • Microsoft Office oWord oExcel oPowerPoint

oAccess oOutlook oOpen Office / Star Office

Core Banking System (CBS) • eIBS (Electronic Integrated Banking System) – Developed by ICTW, IBBL

Other In house Software (Developed by ICTW, IBBL) • MIS • Bach Application (for Automated clearing Housing) • HRM • Inventory • Attendance • Reconciliation • BACH • BEFTN • Trade Ware for foreign trade centralization • Back office Management system (IBW) • Auto reconciliation system 41 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

• Other Financial Module

Internet browsing software • Internet Explorer • Mozilla Firefox • Google Chrome

Software Tools • WinZip/Power Archiver • Adobe Acrobat Reader • VNC •

McAfee Total Protection for anti-virus, anti-Spam (Server and Desktop

Protection) •

JDK

Contact Center (Interactive voice response) System • IVR based Phone Banking • Agent Desktop based support System • Post Call Management System Bangla • Lekhani • Bijoy

Banking Services • ATM-Debit Card (Third party software) • Khidmah Card-VISA/Master card • Remittance Card • Travel Card 42 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

• SWIFT • i-Banking • Mobile Banking • Instant Cash (Web Payment via exchange house) • Contact Center System The current software can exist in any one of the following scenarios: • An ICTW created “image” • An ICTW installation procedure that provides for the following: o Installation options o Upgrade considerations (if applicable) o Data conversion (if applicable) • A shortcut to a network application • An automated installation through an ICTW developed solution that may be used in a rapid- deployment scenario or silent-install situation • A terminal application, or other thin-client type of application accessible via the IBBL, intranet page

Software cannot be present on IBBL, computers in the following scenarios: • An installation not by a procedure • A piece of software purchased for one‟s home computer • A downloaded title from the Internet • A pirated copy of any title • A different title from the current software list of this policy • Any means not covered by the ways that software can exist on IBBL computers

Automation system of IBBL

IBBL has always been a front runner in harvesting and using new technologies and innovative services to make banking operations easier and simpler. Also, it has taken initiatives to make the bank totally IT driven and to achieve full automation. The bank has, by this time, 43 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

established online connectivity to its all branches having dual connectivity at all major and city branches, which has turned out to be the largest in the banking sector of the country. Establishment of own ATM network of the bank & introduction of remittance card for beneficiaries of foreign remittance earners are already done and the Bank has a vision to incorporate Islamic Credit Card (Khidmah Card) & different prepaid cards along with existing ATM (debit) card. All types of Electronic Fund Transfer (EFT) & Alternative Payment System( ATM,POS,SMS Banking & internet banking & Mobile banking) are either already incorporated or being incorporated into the Bank‟s long list of services. All branches including SME/KRISHI Branches of IBBL have sophisticated IT systems equipped with state of the art IT components used in the Banking sector.

EIBS( Electronic Integrated Banking System)

IBBL boasts to be the only bank in Bangladesh possessing in – house developed and implemented Core Banking System, eIBS, which is based on open source technologies and most secure Database Management System like ORACLE. All banking modules have been fully integrated in eIBS including three major modules: General Banking (GB), Investment and Foreign Exchange. GB & Investment modules are running at all including SME branches. While investment and Foreign exchange are fully integrated with the existing eIBS GB modules. An advanced version of RDS module of eIBS has been developed by the Bank‟s own workforce and meanwhile implemented in all RDS branches of the Bank and found them satisfactory. It has targeted to implement the system in the newly declared 14 RDS branches as well.

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Operations of CPS ( Cheque Processing System) of IBBL

A. Scanner Operation Scanning the Instrument

i. ii.

Endorsement

iii.

Error/Modification

iv.

Zip File

B. CPS Operation Outward Clearing Branch Operation Maker Operation i. Login into CPS ii. Upload Images from Zip file iii. Error and Modification iv. Entry Data Making Checker Operation i) Correction in Branch level ii) Mark Instrument Ready to Verify iii) Correction after rejection from Service Branch iv) Process of Credit Operation v) Accounting 45 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

i) Monitoring PBM Service Branch Operation a) As a Branch all operations of Branch level b) As a service Branch: i) Verify by Service Branch ii) Generate OCE c) As a Supervisor: iii) Push OCE to PBM iv) Pull Acknowledgment v) Pull IRE vi) Read IRE vii) Mark Clearing/Return instrument

viii)

Process report from PBM

ix) Verify Report of PBM and CPS x) Monitoring PBM PBM Supervisor (Head Office)

ii) Monitor QFTP iii) Monitor HSM and other Devices iv) Monitor Related Software v) Monitor Network Link vi) Download Broadcasting 46 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Inter bank fund transfer of IBBL

BACH Bangladesh Bank has been working to modernize the country‟s payment system. The most visible step towards modernizing payment system is the establishment of the Bangladesh Automated Clearing House (BACH). Bangladesh Automated Cheque Processing System (BACPS) is one of two components of BACH. The other component of BACH is the Bangladesh Electronic Funds Transfer Network (BEFTN).

BACPS The basic features of BACPS are : the adoption of new cheque design standard with a Magnetic Ink Character Recognition (MICR) code line and the exchange of cheque-image and data instead of paper cheques for clearing and settlement purpose. Retention of the original paper cheque will become the responsibility of the presenting bank rather than the paying bank. Terminologies  CHM- Clearing House Module  PBM-Participating Banks Module  CPS-Cheque Processing System  CBS-Core Banking Solution(i.e.:eIBS)  OCE – Outward Cheque Envelope  ICE-Inward Cheque Envelope  ORE-Outward Return Envelope 47 | P a g e

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 IRE-Inward Return Envelope

Flow of Data(Outward)

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Flow of Data(Inward)

Cut offs

Session

Presentment

Return

Regular Value (500,00 tk)

1:00 PM

6:30 PM

High Value (above 500,00

12:00 PM

3:00 PM

tk) 49 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Sharp Points: Outward  Instruments can be presented till 11.30 AM of that particular business day which will increase customer satisfaction.  Some instruments failed in PBM for IQA parameters. These instruments can be rescanned and re-presented in that same business day if time is available.  Users should check CPS whether the credit file is being created or not.

Sharp Points: Inward  Inward instruments processing should be started from 10 AM of that particular business day.  Inward reports in CPS and eIBS should be checked whether no of instruments are equal or not.  Frequent sending of feedback files from eIBS should be done while processing the debits and returns.

BEFTN  The Bangladesh Electronic Funds Transfer Network (BEFTN) will operate as a processing and delivery centre providing for the distribution and settlement of electronic credit and debit instruments among all participating banks.

EFT Credits  • Inward Foreign remittances  • Domestic remittances  • Payroll private and government  • Dividends/Interest/Refunds of IPO  • Business to business payments (B2B)  • Government tax payments  • Government vendor payments  • Customer‐initiated transactions 50 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

EFT Debits  • Utility bill payments  • Equal Monthly Installments (EMI)  • Government tax payments  • Government license fees  • Insurance premium  • Mortgage payments  • Club/Association subscriptions

EFT Applications  I. Consumer Applications  • CIE – Customer Initiated Entry: Customer initiated entries are limited to credit applications where the consumer initiates the transfer of funds to a company or person for payment of funds owed to that company or person, typical example of these entries are utility bill and other Internet banking product payments.  • PPD – Prearranged Payment and Deposit Entry o Direct Deposit: Direct deposit is a credit application that transfers funds into a consumer‟s account at the receiving bank, such as payroll, remittances, interest, pension, dividends and/or refunds etc. o Preauthorized Bill Payment: A preauthorized payment is a debit application. Companies with existing relationship with the customers may participate in the EFT through the electronic transfer (direct debit) of bill payment entries, such as insurance premiums, loan installments, etc.  II. Corporate Applications o • CCD – Corporate Credit or Debit: This application can be either a credit or a debit application where funds are either distributed or consolidated between corporate entities or government entities, such as funds are being transferred between organizations (i.e. sister concerns) under the same group. o • CTX ‐ Corporate Trade Exchange: This application supports the transfer of funds (debit or credit) within a trading partner relationship in which business payment remittance information is sent with the funds transfer. 51 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

SETTLEMENT AND POSTING  Originating Bank: Specific procedures and timing of settlement between the OB and the originator are solely at the discretion of the OB and the originator and therefore, governed by agreement between them. It is the OB„s responsibility to monitor the credit‐worthiness of its corporate customers to ensure that the OB„s risk in originating EFT payments is managed efficiently.  EFT Operator (BEFTN): BEFTN will calculate net settlement figures for each participating bank. BEFTN will also provide information to participating banks on the amounts that will be settled for each bank on each settlement date.  Receiving Bank (RB) o a) Posting: The RB is responsible for posting entries and for providing funds availability, both of which are determined by the settlement date in the batch header record. 

EFT Debits will be delivered to a RB not earlier than one banking day prior to the settlement date. The rule clearly mentions that debit entries cannot be posted prior to the settlement date.



EFT Credits will be delivered to a RB not earlier than one working day prior to the settlement date.

o b) Settlement :Settlement between the originator and the OB is governed by agreement. Settlement between the RB and the receiver is determined by these Rules.

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BEFTN-System Overview

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Inward EFT File

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Authorize Inward EFT Instruction

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Payment Inward EFT Instruction

Send EFT Feedback

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Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Portion of commission income on EFT from total commission income Year

2011

commission 169,800,000

2012 357,840,000

income on EFT total commission income

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548,500,000

688,600,000

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

I Banking:

IBBL has already started SMS banking, internet banking (I banking) and spot cash services. Though SMS push service, remitters and beneficiaries of the foreign remittance can automatically receive a message in their mobile phones once the amount is credited in their accounts. Though SMS push- pill service, clients can see their latest balance information and last three transactions in their mobiles from any corner of the globe. At present 1,10,000 clients have been registered in SMS banking and on average 6500 requests are being received per day. Though iBanking , foreign remittance houses and valued clients can check account details at IBBL‟s Web Portal. So far, nearly twenty thousand clients have registered for taking the internet banking services. The bank is in the process of providing e- commerce services to the cutomers using ibanking. It is also planning to provide full scale mobile banking services like mobile airtime recharge, utility bills payment etc. to its customers. Separate advisory committee and implementation team have been working collaboratively. Though it, IBBL intends to catalyse a new banking trend and bank the unbanked population bringing them under the umbrella of the Islamic banking. From I banking services corporate clients are mostly benefitted. At now Akij group of industries and Pran AMCL co. are some of the largest clients of IBBL and they are benefitted through real time fund transfer and online payment system. IBBL maintains Robi Top Up collection a/c and all corporate multinational bank‟s collection a/c .IBBL provides through iBanking:  P to P services (Person to Person)  P to B services (Person to Business)  B to B services ( Business to Business) As a result banks profit making is increasing tremendously. Customers loyalty has increased.Where there is no branch customers can make payment their deposit installment through iBanking.8000 comission agents have been registerd. This is the all about ssyber banking which has made banking industry geographically independent.

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IBBL is offering ibanking services through fund transfer and irecharge.

FUND TRANSFER Conditions for Fund Transfer: 1. Maximum amount Tk. 20,000.00 within 5 transactions per day. 2. Maximum 5 (Five) account can be subscribed as a destination account. 3. Subscribed account cannot be deleted within 30 days. 4. After subscribing collect secret PIN CODE from Branch. 5. Charge applicable. Steps of subscribing Fund Transfer:

After login client will view new links for subscribed these feature (displayed just below of

Click the link Fund Transfer to subscribe this feature. Next page will show some instructions.

64 | with P a g all e instructions tick the check box and click subscribe me. If agree

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Web portal based existing services are listed below: Sl.

Service name 1.

Description of the service

Service charge

A/C wise Liability

Customer is provided with his investment

Report

account wise liability details.

Summary of Mode

Customer can see his liability position in

wise Liability Report

mode-wise form.

Cost sheet for

Cost sheet for negotiation prepared by

Negotiation

branch can be availed throw this service.

Cost sheet for

Cost sheet for realization prepared by

6.

Realization

branch can be availed throw this service.

Currently free of

7.

Cost Sheet for Cost sheet for retirement prepared by View account Retirement of aBalance Bill branch can be availed throw this service.

Currently free of

8.

View account Account

Customer can see the detail of an account

Currently free of

information Statement

(i.e.: Installment amount for a particular

Search FTT Message

Special Savings Account.)

2. 3. 4. 5.

9.

10. Search FDD Payment

Customer can check his current deposit

Currently free of Currently free of Currently free of Currently free of Currently free of

Currently free of

Currently free of

account balance. 11. Clearing Instrument Status (Credit & Debit) 12. Transaction Summary

Account statement of deposit account can

Detail and current status of an FTT Transaction summary of all accounts the message which are sent by Exchange customer has been registered in his house of remitter can be viewed. iBanking Profile. Detail and current status of an FTT message which are sent by Exchange house of remitter can be checked. Detail information of a clearing instrument for debit or credit is available.

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Currently free of

be checked and printed. Currently free of

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Portion of commission income on iBanking from total commission income Year

2011

commission 299,953,640

2012 566,282,700

income on iBanking total commission income

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548,500,000

688,600,000

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Services through Mobile (m-Banking)

Controls over mobile transaction are required to manage the risks of working in an unprotected environment. Therefore, bank shall establish following control procedures to ensure confidentiality, integrity, authenticity and non‐repudiability: • Security standards shall be followed appropriate to the complexity of services offered. • Appropriate risk mitigation measures shall be implemented like transaction limit, transaction frequency limit, fraud checks, AML checks etc. depending on the risk perception, unless otherwise mandated by the regulatory body. • Services provided by bank through mobile shall comply with security principles and practices for the authentication of transactions mandated by the regulatory body. • Proper level of encryption and security shall be implemented at all stages of the

transaction processing. The following measures with respect to network and

system security shall be adhered to: o Implement application level encryption over network and transport layer encryption wherever possible. o Establish proper firewalls, intrusion detection system (IDS), intrusion prevention system (IPS), data file and system integrity checking, surveillance and incident response procedures. o Conduct periodic risk management analysis, security vulnerability assessment of the application and network at least once a year. • Proper documentation of security practices, guidelines, methods and procedures used in such mobile services shall be maintained and updated.

Registration scopes of Islami Bank mCash account: i.Availability Service 67 | P a g e

of

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Islami Bank mCash Account can be registered from: 1. Any branch of Islami Bank Bangladesh Limited, 2. Any agent approved by Islami Bank Bangladesh Limited and 3. Mobile network operators‟ approved agent endorsed by IBBL. Islami Bank mCash signboard will be appeared in all these places. Account opening form will be available at the places having m-Cash signboard. ii.

Eligibility

criteria 1. Anyone who has an active mobile SIM of any mobile bank 2. Possesses 1 copy of passport size photograph. 3. Has Photocopy of National ID Card / Nationality Certificate / Driving License / Passport He/she can open the Islami Bank mCash account by filling up account opening form and submitting it to the agent. iii.

Validation, activation and

notification a.

Combination: The mobile account number will be a 12 digit number combining his mobile number with a check digit which will be placed at the last of his mobile number.

b.

PIN generation: After the customer calls *16259# or *259# he/she will get the mCash Account Activation Confirmation menu and would submit a four digit PIN number. It will be used for each transaction done by him/her. At this stage, customer only can deposit money to his account but will not be able to perform other transactions.

c. Validation: After activation of his/her mobile account, he/she will get a confirmation SMS. After that, he/she can enjoy all the services of Islami Bank mCash.

Usage of PIN Number: PIN will provide the first level of security to the customer and for each transaction his 68 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

mobile phone and PIN number

will

be

required. This PIN number is not shareable to anyone and must have to be remembered by the customer with higher preference.

Closing procedure of Islami Bank mCash account: i.

To close a mCash account, customer will go to the agent and request him to close his/her

account. ii. Agent will request the system to close his/her account from his/her Account close menu after taking the PIN number from the customer. iii. System will deduct a closing charge as per fixed by management from his deposit and create an auto withdrawal request of the rest of the deposit amount and the account will be closed. iv. The agent will give the cash money to the customer.

Transaction Rules: Cash in (deposit): • Customer will give the deposited amount and mobile account number to the agent • Agent will start the cash in process from his mobile phone. • Agent will give the deposit slip to the customer • Than agent will receive a SMS as the confirmation of his/her cash in (deposit) • After receiving the SMS customer will confirm about his/her cash in. So, he/she must not leave the agent counter before getting the SMS.

Cash Out (withdraw): • Customer will give mobile account number and tell the amount of cash out (withdraw) to 69 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

the agent • Customer will call *16259# or *259# from his mobile and get the Cash Out (withdraw) menu in his mobile phone. • Then he will submit the agent‟s mobile account number, amount of money and PIN number • Then transaction will complete and both the customer and the agent will receive the confirmation SMS from the System. • Agent will take the customer‟s signature/finger print and give the cash out (withdraw) receipt and money to the customer.

Fund Transfer from one account to another: • Customer will call *16259# or *259# from his mobile and get the Fund Transfer menu in his mobile phone. • Then, the customer will submit the mobile account number, amount of money and PIN number. • Then, both the account holder and the customer will receive a confirmation SMS and transaction will be completed.

Merchant Payment: • To purchase products from any merchant, the merchant should be a registered IBBL merchant. • Customer will call *16259# or *259# from his mobile and get the Merchant Payment menu in his mobile phone. • Then, the customer will submit the mobile account number of the merchant, amount of money and PIN number. • Then, both the customer and the merchant will receive a confirmation SMS and 70 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

transaction will be completed.

Mobile Recharge (Top-Up): • Customer will call *16259# or *259# from his mobile and get the Mobile Recharge menu in his mobile phone. • Customer will select this menu and then will select the mobile number of his own phone or give the other mobile number. • Then customer will submit the recharge amount and PIN number. • Then, the customer will receive a confirmation SMS and transaction will be completed.

Balance Check: • Customer will call *16259# or *259# from his mobile and get the My Wallet menu in his mobile phone. • Then customer will select the Balance Check menu and submit the PIN number • In the reply SMS, he will get the current balance of his mobile account.

Mini Statement Check: • Customer will call *16259# or *259# from his mobile and get the My Wallet menu in his mobile phone. • Then customer will select the Mini Statement menu and submit the PIN number • In the reply SMS, he will get the Mini Statement (last 5 transactions) of his mobile account.

PIN Number Change: • Customer will call *16259# or *259# from his mobile and get the My Wallet menu in his 71 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

mobile phone. • Then customer will select the Change PIN menu and submit the current PIN number and twice the new PIN number. • In the reply SMS, he will get the confirmation about the change of his PIN number.

Receiving of Foreign Remittance in mCash: A remitter can send the foreign remittance directly to the mCash mobile account from the IBBL foreign liaison offices, approved agents and exchange houses. There, the remitter must provide the following information: 1. Amount of Money 2. Name of the beneficiary 3. Account Number (mCash Mobile Account) 4. Bank Name: Islami Bank Bangladesh Limited After the fund will be credited directly to the mobile account, both the remitter and the beneficiary will get the confirmation SMS.

This money can be withdrawn from any of the service point of mCash.

Security of Islami Bank mCash: 1.

The mobile account number is generated from the customer‟s mobile number and the check digit so that the account number will not be known to anyone. So, anyone can not able to make any transaction without knowing his/her full mobile account number.

2. The 4 digit secret PIN number and mobile phone, both are required for every transaction where the PIN is in the brain of the customer and the mobile phone is kept under the control of the customer. So anyone can not be able to make any transaction without taking the PIN number and control of the mobile phone. 3.

USSD and SMS based Interactive Voice Response (IVR) channels are used as communication/transaction media which are secured and safe.

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Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Online banking: Presently, IBBL possesses the largest online banking network in the country. All branches including SME/Krishi branches are under on-line connectivity with 83 branches under dual connectivity using Fiber Optics, DDN and Radio Link where “any Branch Banking” facilities to the clients are being provided. Both the revenue and number of transactions of online banking of IBBL have indicated positive growth over the past years. More than 15,000 transactions per day are taken place with volume of approx Tk. 500 crores using online remote deposits and withdrawals. Services 

Cash Deposit



Cash Withdraw



Fund Transfer



Account Statement



Balance Inquiry



Investment Recovery Transaction Limit



There will be no limit for Cash Deposit and Fund Transfer.



For Cash Withdrawal, transaction limit will be Tk.10,00,000 per day per account. 

Charges



For Cash Deposit, Cash Withdrawal and Fund Transfer, charges at the following rates and VAT will be recovered from the Customer's Account:

Within the District:

Cash Deposit / Withdrawal / Transfer Charges Amount Upto Tk. 20,000.00

Tk. 15.00

Above Tk. 20,000.00

Tk. 15.00 + 0.20 for next per thousand of part thereof

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Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Tk. 1,500.00

Maximum Online Charge

Inter District:

Cash Deposit / Withdrawal / Transfer Charges Amount Upto Tk. 20,000.00

Tk. 20.00

Above Tk. 20,000.00

Tk. 20.00 + 0.30 for next per thousand of part thereof Tk. 2,500.00

Maximum Online Charge

Within the Divisional City Area:

Cash Deposit / Withdrawal / Transfer Charges Amount Free. But not more than 2 (two) times in a day.

Upto Tk. 1,00,000.00

Portion of commission income on remote transaction from total commission income Year

2011

commission 299,953,640

2012 337,573,882.87

income on remote transaction total commission income

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548,500,000

688,600,000

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

E-Cash - ATM Card Since 2001, IBBL began providing AYM services to its customers from 55 branches through a consortium of 9nfinancial organizations using a 3rd part ATM service provider. Accordingly since 2008, the bank is operating its own ATM network presently having 200 self ATMs along with almost 1400nshared ATMs. Upto 31st December 2011, ATM card holders of IBBL used IBBL‟s own 141 ATMs, 465 booths of 8 banks of OMNIBUS, 485 booths of Qcash of 15 banks. The other deliverables of the project are POS( Point Of Sale), Shariah based Credit Card (Khidmah), Prepaid Cars & Remittance Card services. Among them, Remittance card has been rolled out into the service line of IBBL. Customers now can perform full or partial withdrawal of their foreign remittance amount either from IBBL ATMs or branches using the remittance Card. In the meanwhile, IBBL has joined VISA, the largest world retail electronic payment network, as a principal member. It would pave the way for making IBBL cards usable at any global outlets (ATMs and/or POS). 76 | P a g e

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Upcoming e-products:  Khidmah  Salary card/Wage card  Hajj card  Gift card( electronic Prize bond )

Automated Teller Machine (ATM), interalia, has unveiled the horizon of Electronic Banking of 21st Century. Through ATM, customers can avail non-stop online teller service without going to the specific branch of the member bank. They can withdraw or deposit cash or cheque as well as pay utility bills like BTTB, Grameen, AKTEL, City Cell Phone, DESA, WASA, TITAS etc. with the help of this modern computer controlled machine. The service is now offered by ETN and eleven member banks including Islami Bank Bangladesh Limited. Facilities 

ATM Card holders can withdraw cash from ATM at any time.



Customers can make transactions from any of the machines with logo „E-cash‟ installed at different places in the city.



In course of time utility bills like WASA, TITAS and DESA etc can be paid through ATM.



Now BTTB, Grameen, AKTEL, City Cell Phone bill can be paid through ATM.



Now IBBL E-cash cardholders can be paid their monthly installment of Mudaraba Hajj Savings, MSS (Pension), Mudaraba Muhor Savings and HDS schemes of IBBL through ATM .



The machines are located in convenient places where customers usually deal with money matters. So they can easily avoid the risk of cash carrying by using ATM Card.

 

Customers may know their present balance at any time from the machine. In course of time POS (Point of Sale) can be used.

Getting an ATM Card from IBBL 

A customer having a deposit account with the designated branch of Islami Bank Bangladesh Limited can get an ATM card.

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Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL 

Interested customer would collect ATM Account Opening Form from the concerned branch and submit it along with the Card Fee of Tk.500/= (Taka five hundred) only.



After 7 (seven) days from the date of application, the customer would collect the PIN and Card separately from the designated Officials of the concerned branch and then after 48 (forty-eight) hours, customer can use his Card at any ATM with logo „E-cash’.



Customers can withdraw any amount multiplied by Tk.1000/- per instance subject to fulfillment of the above conditions i.e. Tk.1000/=(Taka One thousand), Tk.2000/=(Taka two thousand), Tk.3000/=(Taka three thousand) and maximum Tk.5000/=(Taka five thousand) per instance and maximum withdrawal limit Tk.20,000/- per day.

Procedure for cash withdrawal ATM 

Go to any of the ATMs located anywhere within Dhaka / Sylhet / Chittagong City.



Insert your card into the ATM and type PIN –press ENTER.



Select the „Cash Withdrawal‟ option by pressing > key



Press the > key against your required amount



Collect the money along with receipt



If you want another transaction, press YES or press No to end transaction.

BTTB bill payment procedure We are pleased to inform you that recently, arrangements have been made for payment of BTTB Bill through ATM Card from 20 ATM booths are going on.

The phone numbers of the following Exchange of BTTB (with in Dhaka city) will avail the facilities:

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

1.

Gulistan

6.

Sher-e-Bangla Nagar

2.

Moghbazar

7.

Mirpur (Amin bazar)

3.

Uttara (Tongi)

8.

Islambag (Zinzira)

4.

Khilgoan

9.

I.G. Gate

5.

Nilkhet

10. Gulshan

Firstly client will register his telephone number through BTTB application forms from respective branch from where he has taken ATM card. Branch would check and approve the Application form and send to Card cell.



Client can charge the Card for utility payment after 48 hours from registration. After successfully completion of bill payment through ATM, client would get a print copy (thermal paper) from ATM booth. This print out is the main document of payment the bill. So, client should preserve this document by photocopying the same.



A client can pay maximum three BTTB bill (s) from one card which was registered earlier.



The charge for the bill payment will be Tk.20/- per transaction.



Client may collect another document of paying the same bill from card cell / branch, if needed.



Actual figure of BTTB Bill must be paid. In case of less amount of bill payment, the rest amount would be added with the next month bill.



In case of higher bill payment, client has to apply for refund of the money.

IBBL Schemes IBBL‟s ATM Network is operationally ready to process the deposit and settlement of monthly installment of Mudaraba Hajj Savings, MSS (Pension), Mudaraba Muhor Savings and HDS schemes of IBBL made at ATMs by E-cash cardholders.

Pre-requisite: 1. Must have an IBBL E-cash ATM card. 2. Must open a Hajj / Pension / Muhor / HDS account at IBBL. 79 | P a g e

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3. Must apply for deposit of monthly installments under the schemes through ATM in prescribed form supplied from card cell, ITD. 4. Must have sufficient amount of money in the ATM Link Account (MSA / AWCA / SND) maintained at the branch. 5. Must maintain sufficient ATM balance. 6. Cardholders may deposit installments from 1 st to 25th day of the month only for HDS. 7. Presently Cardholders may deposit installments from 1 st to 20th day of the month only for Hajj, Pension and Muhor Schemes, which would be extended up to 25th later. However, clients would be able to do the same from 6 th to 25th day of the month if they deposit at the branch.

Paying installment of monthly Deposit Schemes 1. Go to any of the ATMs located anywhere within Dhaka / Sylhet / Chittagong City. 2. Insert your card into the ATM and type PIN –press ENTER. 3. Press the > key against Deposit 4. Press the > key against IBBL Schemes 5. Select the MSS / Hajj / Muhor / HDS 6. Select the installment month and ENTER 7. Confirm the transaction by pressing YES 8. Collect the payment receipt 9. If you want another transaction, press YES or press No to end transaction Important

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

For any transaction, type PIN carefully



If you fail to insert correct PIN thrice, card will be captured by ATM

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL 

Collect the money from the cash dispenser within 45 seconds otherwise the cash will be taken into by the ATM

In case of lost card or any other problem, customers have to inform card issuing branch and dial 101 immediately.

Portion of alternative income collection from net income Year

2011

2012

Direct

34,021,316.00

84,194,608.98

38,401,000.00

400,000,000

deposit collection from ATM charges recievered Net income

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Green Banking IBBL is aware that the change in climate has direct impact on biodiversity, agriculture, forestry, dry land, water resources and human health. To safeguard the planet and its Eco- system from the adverse effect of environmental degradation caused by rising carbon emission, encroachment of rivers, improper disposal of industrial, medical & household waste, deforestation, loss of open space etc., Bangladesh Bank in line with global norms has already introduced Green Banking and sustainable practices at all the scheduled banks in Bangladesh Green Banking activities as envisaged by Bangladesh Bank and IBBL‟s position there against is given below:

Sl.no.

Title

Functions (description

IBBL‟s position

of the Job)

1.

Policy

Establishment of a

Formed under RMW

Formulation &

Green Banking Unit,

a Senior Executive

Governance

headed by .

To formulate a high

EC has been entrusted

powered Committee comprising directors from the Board.

Green Banking policy

Policy drafted

and strategy

Fund allocation for

Allocated a fund of

green banking.

Tk. 592.37 million

Quarterly reporting of

Being complied

Green Banking 83 | P a g e

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activities

2.

Incorporation of

Environmental and

Environmental along-

Climate Change Risk

with Credit/

rating

do

Investment Risk Grading. Risk in CRM/IRM

3.

Initiating In-house

To prepare an

Environment

inventory of the

Management

consumption of water, paper, electricity, energy etc of the Offices and Branches

To take measures for saving electricity, water and paper consumption.

To circulate a set of general instructions (Green Office Guide) to the employees for efficient use of electricity, water, paper and reuse of 84 | P a g e

Under progress

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

equipments To use scrap papers as notepads and to avoid disposable cups/ glasses to become more Ecofriendly. To install energy efficient electronic equipments. To use energy saving bulbs in place of normal bulbs in branches/ offices of the bank To make plan to use solar energy at premises to save electricity.

To encourage employees to purchase energy efficient cars (that consume less fuel) for reducing gas and petroleum consumption. Arrangement of automatic shutdown of equipments 85 | P a g e

Do

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Use of extensively

do

online communication Double –side printing.

do

To apply Eco-font in

do

printing to reduce use of ink.

4.

Introducing

To prefer financing in

Green finance

the Eco friendly business activities and energy efficient industries such as: Renewable energy project

Clean water supply project

Waste water treatment plant

Solid & hazardous waste disposal plant, Bio-gas plant

Bio-fertilizer plant etc To promote 86 | P a g e

do

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

environmental practices applying consumer finance program.

5.

Creation of

Finance in economic

Climate Risk

activities of the flood,

Fund

cyclone and drought

Do

prone areas without charging additional risk premium.

6.

Creation of Climate

Allocated a fund

Change Risk Fund

of Tk. 50 million

Introducing

To use environmental

Partially

Green

causes for marketing

implemented

Marketing

i.e. financial services to the customer for awareness development among the common people. To advise the clients

Implemented and

for modifying the

being practiced

product, changing the production & packaging process and modifying advertisement for environmental 87 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

cause. 7.

Online banking

To allow the

Implemented

customers online banking 8.

Supporting

Arrangement of

More intensive

Employee

employee awareness

programs to be

Training,

development and

taken

Consumer

training program on

Awareness and

environmental and

Green Even

social risk

Arrangement

Steps to be taken

of customer awareness development

9.

Reporting

To take measure to

Green Banking

report on the

Practices

initiatives/practices to

Implemented

Bangladesh Bank and disclose in the Bank‟s websites.

10.

Sector Specific

To be designed

Under process

Green Strategic

Determine green

Steps to be taken

Planning

targets

Environmental Policies

11.

To determine a set of achievable targets and 88 | P a g e

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

strategies. To disclose these in the annual report and web-site for green financing and inhouse management. Target areas for green financing: i. To reduce loans/investments for environmentally harmful activities. ii. To attain a particular percentage of environmental loans/ investment. iii. To introduce Eco-friendly financial products.

12.

Setting up

eatures of Green

Green Branches

Branches: • To use maximum natural light

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Do

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

• To use renewable energy and energy saving bulbs and other equipments. • To reduce water and electricity use. • To use recycled water. • A green Branch will be entitled to display a special logo approved by BB.

13.

Improved

To take Strategy of

Partially

In-house

reuse, recycling of

implemented

Environme

materials

nt

& equipments, and

Manageme

source reduction and

nt

waste minimization.

To rely increasingly

Do

on virtual meeting through the use of video conferencing in lieu of physical travel for saving cost and energy. 14.

90 | P a g e

Formulation of

Develop and follow

Bank Specific

an environmental risk

Under process

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

Environmental

management manual

Risk

or guidelines for the

Management

assessment/

Plan and

monitoring of project

Guidelines.

and working capital investments.

To set internationally

Do

environmental standards. accepted higher

15.

Rigorous

Encourage the clients

Programs to

and business houses

Educate Clients

to

to be

comply environmental

undertaken.

regulation.

Introduce rigorous program to educate clients about environmental risk.

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Steps to be taken

Do

Islami Bank Bangladesh Ltd. ibanking/mobile banking , Green Banking & online banking system of IBBL

ChapterFive

Difference between Conventional & Islamic banking

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One must refrain from making a direct comparison between Islamic banking and Conventional banking (apple to apple comparison). This is because they are extremely different in many ways. The key difference is that Islamic Banking is based on Shari‟ah foundation. Thus all dealing, transaction, business approach, product feature, investment focus, responsibility are derived from the Shari‟ah law, which lead to the significant difference in many part of the operations with as of the conventional. By the way of the definition an Islamic bank & Conventional bank can be distinguished: “Islamic Bank is a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Shari‟ah and to the banning of the receipt and payment of interest on any of its operations”.- OIC “A commercial (conventional) bank is dealer in capital or more properly a dealer in money. It is an intermediate party between the borrower and the lender. It borrows from one party and lends to another and the difference between the terms at which it borrows and those at which it lends from the source of its profit”.- Prof. Gilbert

The foundation of Islamic bank is based on the Islamic faith and must stay within the limits of Islamic law or the Shari‟ah in all of its actions and deeds. The meaning of Shari‟ah is the way to the source of life and is now used to refer to legal system in keeping with the code of behavior called for by the Holly Qur‟an.

On the other hand, the conventional bank is based on man made principles. There many fundamental and functional differences exist in these principles. As a result various conflicts arise within the internal and external management systems. These principles vary man to man, place to place. As a result it increases complexity in the conventional banking systems.

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Maintenance of CRR/SLR:

All Islamic Banking Companies shall maintain Cash Reserve Ratio (CRR) and

Statutory Liquidity Ratio (SLR) as per rates prescribed by Bangladesh Bank from time to time. Every commercial Bank having Islamic bank branches shall maintain SLR/CRR for its

Islamic branches at the same rate as prescribed for the Islamic banks and shall, for the purpose, maintain a separate Current Account for the Islamic branches with Bangladesh Bank. For Islamic banks, SLR is 10.5%, CRR is 4.5% & LRR is 5%. But Conventional banks SLR is 18.5%, CRR is 5.5% & LRR is 13%.

Project appraisal and evaluation:

Islamic banks share profit and loss of any project financed. So the banks pay greater attention to developing project appraisal and evaluations. It gives more emphasis on the viability of the project. As the bank‟s interest is linked with the earnings capability of the enterprise, it has to judge the worthiness or suitability of the project by applying suitable appraisal criteria. Any failure on the part of the bank to assess the soundness of the project would seriously affect the profitability of the enterprise.

But in the conventional banking system, the bank is simply a financier and is not directly concerned about the success or failure of the project for which loan was made, as long as it receives its payments. This is so because the banks income (interest income) does not fluctuate with the fluctuations in the profit generated from the specific projects. Since return from loan is fixed, it gives little importance to project appraisal and evaluations.

Basis for collection of deposit

Islamic banks collect the deposits on the basis of profit sharing. The main function of Islamic banks is to mobilize savings and provide financial support to the entrepreneurs. Like the conventional banks, the Islamic banks neither pay nor receive interest from any of its transactions thereby saving everybody from the course of interest. It disapproves hoarding of 94 | P a g e

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savings and encourages its productive investment. It mobilizes savings of the common people in line with Islamic Shari‟ah.

In the conventional banking system, the collection of the deposit is on the basis of interest. Here depositors receive interest in a predetermined rate of their deposits. Investors are to pay a predetermined rate of interest to the bank. The techniques, thus, involves each and every partner in the transaction process with the element of interest.

Moral Dimension

In the Islamic banking system all economic agents have to work within moral value system of Islam. They can not finance any project which conflicts with the moral value system of Islam. They will not finance a wine factory, a casino, a night club or any other activity which is prohibited by Islam or is known to be harmful for the society.

But the conventional banking is secular in its orientation. It has no restriction to finance any project like Islamic banking systems. It emphasizes on the possibility of earning maximum profit. It does not follow any religious rules and regulations or does not obey any restriction.

Emphasis on Productivity as compared to credit worthiness

Islamic banks give greater emphasis on the viability and soundness of the project and the business acumen and managerial competence of the entrepreneur. Under profit loss sharing banking, the Islamic banks will receive a return only if the project succeeds and produces a profit. Islamic banks have very careful attitude towards evaluation of applications for equity oriented financing. Since Islamic banks have a built in mechanism of risk sharing, it would need to be more careful in how it evaluates financing requests. It adds a healthy dimension in the whole lending business and eliminates a whole range of undesirable lending practices.

On the other hand, conventional banks give greater emphasis on credit worthiness of the clients. It is customary that conventional banks evaluate applications, consider collateral and avoid risk as much as possible. Their main concern does not go beyond ensuring the security of their principal and interest receipts. 95 | P a g e

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Scope of the activities:

An Islamic Bank has wider scope of activities compared to a conventional bank. A substantial distinguishing feature is that Islamic banks are universal or multipurpose banks and not purely commercial banks. These banks are conceived to be a crossbreed of commercial and investment banks, investment trust and investment management institution and would offer a variety of service to their customers. A substantial part of their financing would be for specific projects or ventures. Their equity oriented investment would not permit them to borrow short term fund and lend to long term investment. This should make them less crisis prone compared to their capitalist counterparts, since they would have to make a greater effort to match the maturity of their liabilities with the maturity of their assets.

Compared to the Islamic banks, conventional banks have narrower scope of activities. The main function are collecting the deposits and ending to the borrower in different purposes in exchange of rate of interest.

Guarantee for deposit:

There is no guarantee for deposit money in the Islamic bank system. Without taking risk financial transactions are not allowed in Islam. Under Islamic framework, depositors are taking risk as Sahib-al-Mal. Therefore the earning of the depositors is uncertain. As Islamic banks works on the basis of profit loss sharing system, depositors or Sahib-al-Mal have to bear the loss if any. On the other hand conventional banks have to guarantee all its deposits. Without considering the trend of income these banks have to give interest on the deposits money at predetermined rate. They do not share any profit or loss with their clients. They only maintain a debtor-creditor relationship with their clients/depositors.

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Distributive justice and economic stability:

Since profits are shared between the entrepreneurs, the bank and depositors in the Islamic banking system, there is no bias towards any income sector. In fact, the banks welcome profitable business ventures form all income sectors. Islamic banks share a proportion of the profits accrued from a project implying an equitable distribution. The distributors remain unaltered since the Islamic banks receive a share of total profits accrued from different projects financed by the bank. But the conventional banking maintains a flat rate of interest regardless of the profitability of the projects financed by it. This system of fixed interest rate is somewhat biased against the borrower rate is determined in a way that assures profits to the other parties in the transaction. This limits investment opportunity utilization capacity of the conventional bank thereby reducing productive efficiency of conventional banking.

Allocate Efficiency:

The income distribution scheme under conventional banking works against the goal of optimum allocation of scarce financial resources. This is because of the fact that conventional banking, instead of financing in terms profitability of projects, diverts funds to projects with sound collateral. These results in loans being made to higher income borrower that can be meet the collateral requirements. But in Islamic banking, the productivity of the projects is more important. In this way, the resources instead of going to low to higher return projects even if the creditability of the borrower is lower. Therefore, this system is more efficient in allocation of resources. Since, they are specialized in the area of finance and investment; their expertise will be improving the profitability of the project as well as contribute in the management of that project.

Stability of banking system:

The Islamic banking model is more stable than the conventional banking model.

In an

interest based system, there is lack of symmetry in the cash flow of the banks and the cash 97 | P a g e

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flow of the enterprise. The entrepreneurs of the businessman have to give a fixed interest to the banks that has no relationship to the actual return of the project. This creates instability in the entire business sector. The bankers also lack equilibrium in their assets and liability side because their assets are fixed while liabilities are variable.

In case of Islamic banking system, the liabilities of the bank are on the basis of mudarabah and hence are also variable. If there is any stock, it affects equally both asset and liability side of the banker's balance sheet. Thus their liabilities are related with actual performance of the projects hey financed. The asset and liabilities are mutually linked and this mechanism returns equilibrium between the assets and the liabilities of the Islamic banks. So there is a very likelihood of bank failures.

Growth of the banking system:

From growth point of view the Islamic banking system is better than the conventional banking system. Islamic banking model promotes innovation. In Islamic banking small and medium entrepreneur has a better project he has a possibility of getting it's financed. Since risk is shared between the financer and entrepreneur. It results in a better distribution of risk. Therefore ingenious efficient entrepreneurs will be forthcoming and innovation will be promoted. Moreover conditions of the cost of capital are more favorable under the Islamic system. Here the cost of capital varies with productivity. It does not have any deterrent effect on investment which a fixed cost of capital has.

Emphasis on the character of the loan applicant:

When money is deposited with an Islamic bank, the bank in turn makes investment in different forms approved by the Islamic Shari‟ah. When a client make an offer or a proposal regarding loan or investment the bank emphasizes more on the character of the applicants. The bank must verify the character of the applicant before allowing his application. The banks deal with their client based on faith and trust. So it is necessary for the bankers to know the background, family status, educational qualification, business experience, reputation of the applicant. Again the bank may meet with the prospective client regarding his investment 98 | P a g e

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needs and business experience prior to an application/proposal is submitted. The bank may review the client's past performance and other financing arrangement he may have had with the bank in the past. When the banks become contain that the applicant is not involved with any activities violating the Islamic Shari‟ah they grant his proposal.

On the other hand, conventional bank emphasizes on the financial strength, collateral security, and creditworthiness of an applicant more than his character. Without considering the character the bank will grant that proposal which will certainly give a maximum profit at a predetermined fixed rate.

Islamic banks perform mostly the same functions as the conventional banks but they do it in distinctly different manners. These differences make the Islamic banking system distinct from the conventional banking system. It may be mentioned that if the Islamic banking system, is to become truly liquid and efficient it must develop more standardized and universally tradable financial instrument. Islamic banks can provide more efficient banking services if they are supported with appropriate banking laws, regulations and guidelines. It would be better if Islamic banks had the opportunity to work as a sole system in an economy. That would provide Islamic banking system to fully utilize its potentials. Thus it can be free from all difficulties and problems that are in the conventional banking system. It can be hopefully expected that if the overall economic system as well as the banking system can be executed according to Quran, Sunnah and Hadit it will bring the maximum prosper in the entire economy.

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ChapterSix

Findings,Recommendations,Conclusion, Bibliography& Appendix

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Findings

From the above analysis we found that the overall functions and performance of IBBL over the years are quite satisfactory. Though the no of branches in not enough for this overpopulated country, the IBBL is performing well. Though it‟s a profitable bank, it has some lacking which are constrains for its operations.

Devising an interest-free mechanism:

They have not yet been successful in devising an interest-free mechanism to place their funds on a short-term basis. They face the same problem in financing consumer loans and government deficits.

Risk of profit-sharing:

The risk involved in profit-sharing seems to be so high that almost all of the Islamic banks in Bangladesh have resorted to those techniques of financing which bring them a fixed assured return. As a result, there is a lot of genuine criticism that these banks have not abolished interest but, they have, in fact, only changed the nomenclature of their transactions.

Inadequacy of legal support of the Central bank:

The Islamic banks do not have the legal support of the Central bank in Bangladesh, do not have the necessary expertise and trained manpower to appraise, monitor, evaluate an audit the projects that are required to finance. As a result, they can not expand despite huge excess financial liquidity.

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Lack of risk-hedging instruments: The prohibition against “riba” and some “fiqh” issues in the interpretation of “gharar” mean that many risk-hedging instruments based on traditional tools, such as option, futures and forwards are not available to Islamic banks in the current state of Islamic banking.

Underdeveloped money market and government securities based on profit-loss sharing:

This may difficult to manage the liquidity in terms of mismatching the asst-liquidity and increases the liquidity shocks. Fortunately, significant progress has been made in Iran for government securities and short-term instruments such as National Participation Certificates and Central Bank Mushrakah for such issues.

Requirement of holding a large proportion of the assets in reserve accounts:

Islamic banks have historically been forced to hold a large proportion of their assets in reserve accounts in central banks or in correspondent accounts than conventional banks. This has significantly affected their profitability because Central Bank gives minimum or no return to these reserves. This in turn, has affected their competitiveness ad increases their potentiality to the external shocks with its consequences.

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Operational risks:

Operational risks may arise from various sources;  The unique activities that Islamic banks must perform.  The non-standardized nature of some Islamic products.  The lack of an efficient and reliable Shari’ah legislation system to enforce financial contracts. Risks involved with „Salam’: Salam (purchase with deferred delivery) contracts expose Islamic banks to both credit and commodity price risk. This is because banks agree to buy the commodity on a future date against current payment and also hold the commodity until it can be converted to a cash. Risks involved with „Ijarah‟:

Ijarah also contain the credit and commodity price risk because this contract do not provide Islamic banks with the ability to transfer substantial risks and rewards to the lessee as leased assets must be carried on the balance sheet of banks for the term of the issue.

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Recommendations

After observing the operation procedure of IBBL, we recommend the following:

IBBL should launch new financial products to attract customers as Consumer Credit Scheme, Child Education Scheme, and Plastic Money etc. IBBL can also lunch ATM as diversification.

Marketing Division:

To increase the faith of people, IBBL should convince them in the best manner, so that market share can be captured. Marketing division should concentrate more on investment strategy.

Diversify Assets Portfolio:

Leading portfolio of IBBL should be diversified. It should not concentrate or give weight only in working capital financing.

IT Facilities:

IT facilities of IBBL are not satisfactory enough. Computer system which owned by branch are not up to date, not sufficient and moreover some of computer system not work properly when they are needed. There is no sufficient and high bandwidth Internet connection available in the bank. So, IBBL should develop Information Technology to ensure better service for the customer and support communication with outside

Upgrading website:

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Real judgment before sanctioning the loans:

When a loan is issued for the customer, he should justify by the KYC policy. It is a sensitive issue for the investment division. So the relevant officer must take the responsibilities to recover the loan.

Ensure Sufficient Manpower:

The number of human resources in documentation section is really insufficient to give services to huge number of customers. So, number of staff should be increased in the sections.

Need Personnel having Business Knowledge:

Most of the personnel have no business education. So selection of employee from business school can give proper solution.

Development of Human Resources:

Human resource is another sector for the branch to be developed urgently. Human resources, in the branch, need to be equipped with adequate banking knowledge. Majority of the human resources must have basic knowledge regarding money, banking, finance and accounting. Without proper knowledge in these subjects, efficiency cannot be optimized. Bank can arrange training program on these subjects.

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Ensure Proper Maintenance of Files:

IBBL gives personalized services. All the officers have to give concentration to the customers, while maintaining the customer files. Every staff should try to reduce these irregularities.

Ensure

Proper

Communication

System

and

Maintenance

of

Machineries:

Sometimes Communication System remains out of order. Attention should be given on proper maintenance of phone, computer, fax machine and photocopier.

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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 57 Banks are operated in Bangladesh. All the Commercial banks are offering almost the same products and services. But the way they provide the services are different from each other. So people choose their bank according to their satisfaction and need. On the other hand, Banks innovate new products and services to attract their desired customer. Islami Bank Bangladesh Ltd. is one of the fast growing banks in Bangladesh because of its rapid customers‟ satisfaction. The bank is committed to run all its activities as per Islamic Shari‟ah. IBBL through its steady process and continued success has, by now, earned the reputation of being one of the leading private sector banks of the country. Islami Bank Bangladesh Ltd. is also playing an important role in establishing Islamic Economics by combing the economic values with social and moral values. By following the novelty of Islamic Economics the bank is trying to make a balance development between spiritual and material life. Still now hear about 301 Islamic banking and financial institutions in about 49 countries of Asia, Africa, Europe, America and countries like Pakistan, U.K., U.S.A., Germany, Argentina, Denmark, Luxembourg, Switzerland and India have been established. The banking system of Pakistan and Iran was totally remodeled on the basis of Islamic Shari‟ah services. IBBL will be more effective in our economy by launching new financial products to attract deposit as Consumer Credit Scheme, Pension Scheme, and Child Education Scheme and contribute more to develop the living standard of middle class people.

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Bibliography

1. 2. Annual Reports of Islami Bank- 2011-2012 2. www.islamibankbd.com 3. Handout provided by IBTRA 4. Information from IT wing of IBBL

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