This report is prepared as a requirement of the Internship of BBA program of the DEPARTMENT OF BANKING, University of Dhaka. This report focuses one and half months working experiences in NEWMARKET BRANCH, Islami Bank Bangladesh Limited, Dhaka and ten days training in Islami Bank Training and Research Academy (IBTRA). This report will give a clear idea about the investment activities and operational strategies of IBBL. Especially this report focuses on the investment performance of Islami Bank Bangladesh Ltd. (IBBL).
The long drawn struggle to establish an Islamic Bank in Bangladesh becomes a reality when Islami Bank Bangladesh Ltd. was established in March 1983 with a clear manifesto of demonstrating the operational meanings of participatory economy, banking and financial activities as an integral part of an Islamic code of life
Basically the IBBL is an Islami Bank based on “Islamic Shariah”. It follows the alternative concept of Islamic Banking which represents unique human approach to credit and banking based on profit oriented economy devoid of interest. In this regard the IBBL has introduced a number of income generating programs for the millions of urban and rural poor. With that objective in view the IBBL has formulated a profitable live in a better society with greater security and peace. IBBL is operating in a three sector banking system, such as formal, non-formal and voluntary sector. General Banking, investment and foreign exchange are operated under the formal sector. Development and management of wag and mosque properties, management of in heritance properties, and joint venture project for management of non-profit foundations, charitable firms and organizations are executed under the Voluntary Sector.
General Banking provides the foundation of banker - customer relationship through opening account. This is the most common department and daily transaction is concerned to the customers for drawing depositing money. Selling of instruments to them for remittance purpose, collection of their instruments providing other ancillary services to them and keep customer section busy. Officers of this department should possess the required behaviors for optimum satisfaction of the customers.
In this competitive age, foreign trade becomes very much crucial for any country in the world. Specially, in the country like Bangladesh import is becoming very much crucial with the increasing rate of population. Every year a lot of food grains, machinery spare parts, dyes and chemicals, industrial raw materials, cotton textiles, pharmaceutical, cements, steel, etc are imported from various countries of the world.
At the same time, exportable goods, pottery, handicrafts, shrimps, ready-made garments, fishes, frog legs spices etc. So the foreign trade is playing an important role for the economic development of our country.
Investment is the important activities of Islami Bank. The special features of the investment policy of the Bank are to invest on the basis of profit-loss sharing system in accordance with the tenets and principles of Islami Shariah. Profit earning is not the only motive and objective of the Bank’s investment policy rather emphasis is given in attaining social good and in creating employment opportunities. This Bank has mainly 3 investment modes such as: (i) Bai-Trading Modes (ii) Leasing/Ijara modes and (iii) Share modes and also the IBBL have several investment schemes such as Rural Development scheme,Small business investment scheme, Transport investment scheme, etc. In this report I tried my best to explain all the investment modes of Islami Bank Bangladesh Limited.
As a kid in the banking industry, the IBBL is performing well as have acquired the assets and human resources of higher quality.The IBBL will be more effective in our economy by adopting modern financial technology by extending their activities in human & social welfare.
The establishment of Islami 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. It is committed to conduct all banking and investment activities on the basis of interest-free profit-loss sharing system. In doing so, it has unveiled a new horizon and ushered in a new silver lining of hope towards materializing a long cherished dream of the people of Bangladesh for doing their banking transactions in line with what is prescribed by Islam. 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, Islami Bank Bangladesh Limited has by now earned the unique position of a leading private commercial bank in Bangladesh.
1.1 Background of the Study
This report is based on an internship program. Department of Banking arranges internship program to gather practical knowledge about banking activities students as University conduct the program after the completion of theoretical courses of program of Bachelor of Business Administration (BBA). A must carry out a specific report, which is assigned by the supervisor of the concerned department. Consequently a report based on the topic is to be submitted to the authority of Department.
In this particular report, the author is the intern of the previously mentioned program and the concerned organization is Islamic Bank Bangladesh Limited (IBBL) which is a prominent private and the first Bank of Bangladesh that based on Islamic Shariah. However I was placed in New Market Branch of Islami Bank Bangladesh Limited from July 18 to August 30, 2010.
1.2 Rationale of the Study
Bangladesh is one of the largest Muslim countries in the world. The people of this country are intensely 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 fashion and design their economic lives in accordance with the precepts of Islam. 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, Islami Bank Bangladesh Limited has by now earned the unique position of a leading private commercial bank in Bangladesh. It has around 5 millions customers and has been successful for many years. Now many banks are opening their Islamic wing to follow Islami Bank’s success.
My report will discuss the inception of Islami Bank Bangladesh Limited, its different investment modes. The purpose of this report is to evaluate its performance through ratio analysis; trend analysis, regression etc. and to understand how an Islami Bank runs its business without interest Knowledge and learning become perfect when it is associated with theory and practice. Theoretical knowledge gets its perfection with practical application. As our educational system predominantly text based, inclusion practical orientation program, as an academic component is as exception to the norm. As the parties, educational institution and the organization substantially benefit from such a program, it seems a “win-win situation”. It establishes contracts and networking contracts. Contracts may help to get a job. That is, students can train and prepare themselves for the job market. A poor country like Bangladesh has an overwhelming number of unemployed educated graduates. As they have no internship experience they have not been able to gain normal professional experience of establish networking system, which is important in getting a job. That’s why practical orientation is a positive development in professional area.. In such state of affairs the present aiming at analyzing the experience of practical orientation related to an appraisal of the Islami Bank Bangladesh Limited.
1.3 Objectives of the study:
In this report, I have attempted to give an overview of evaluation of investment performance of Islamic Bank Bangladesh Limited. The study aims at some objectives, which are as follows:
v To understand how an Islami Bank earns its profits through investment.
v To know its investment objectives.
v To find out how the investment of the IBBL contribute to the economy.
v To calculate the ratio of mode wise investment to see which was dominant.
v To understand the impact of the Islamic investment on society.
v To find out the risk and profitability of different modes of investment.
1.4 Methodology of the study:
Technique of analysis:
To conduct the Analysis part I have chosen the most widely used techniques of analysis. These are Least Squares method for Time Series Analysis and Regression Analysis.
(a) Time series analysis
The first step in making estimates for the future consists of gathering information from the past data. In this connection, one usually deals with statistical data which are collected, observed or recorded at successive lest of time. Such data are generally referred as Time Series data.
Least squares method for straight line trend
Here I have used Least squares method for measuring a straight line trend by using time series data. This method is most widely used in practice. When this method is applied, a trend line is fitted to data in such a manner that the following two conditions are satisfied-
1. ∑(Y-Yc) = 0; it means the sum of deviations of the actual values of Y and the computed value of Y is zero.
2. ∑(Y-Yc)2 is least; it means the sum of the squares of the deviations of the actual and computed values is last from the line. That is why this method is called the method of Least square. The line obtained by this method is known as the line of “Best Fit”.
Series data for straight line trend:
The straight line trend is represented by the equation-
Yc = a +bX;
Where-
Yc = The trend (computed) values to distinguish them from the actual Y values,
a= The Y intercept on the value of the Y variable when X=0,
b= Slope of the line or the amount of change in Y variable.
By using the straight line trend, I have calculated the investment of th IBBL for the year 2010. The time series data for this analysis are given below with a round figure-
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