Internship Report on Investment Operation of Islami bank Bangladesh Limited

The internship report titled on “Investment Operation of Islami bank Bangladesh Limited (IBBL)” has been prepared as a partial prerequisite of the Internship Program of Islami Bank Training and Research Academy. This Intern program is a perfect merge of the theoretical and practical knowledge.
Islami Bank Bangladesh Limited (IBBL) is trying to establish the maximum welfare of the society by maintaining the principles of Islamic Shari’ah which is based on “Quran” and “Sunnah”. Since 1983, IBBL is the pioneer in welfare banking in this subcontinent and it is trying to do all its activities for the betterment of its depositors. For the greater interest of the depositors the investment policy of IBBL is to invest on the basis of profit and loss sharing in accordance with the tents and principles of Islamic Shari’ah.

To complete my report I have used both qualitative and quantitative data. My report is composed of four chapters. Chapter one: Introduction, Chapter two: Background of Islami Bank Bangladesh Limited, Chapter three: Findings and Analysis, Chapter four: Conclusions and recommendations.

In the first chapter I have tried to discuss about the objectives , methodology, scope and limitations of the study. The main objective of the report is to acquaint with the different modes of investment of Islami Bank Bangladesh Limited and to evaluate its effectiveness. In the second chapter I have tried to show about the concept of Islami banking and its background in Banking sector in Bangladesh. In the third chapter I have included six sub chapters. The first subchapter includes the theoretical analysis of investment products of IBBL. The second subchapter includes the Graphical Analysis. The third subchapter includes Ratio Analysis. The Fourth sub chapter includes the regression analysis part. In the fifth subchapter SWOT analysis and Porter’s five forces model included in the sixth subchapter. In the fourth chapter I have given conclusion and some recommendation.

Bank is a nothing but a financial intermediary. Bank works as a bridge between the depositor and the investment seeker or loan taker. The investment or loans that are sanctioned by the banks are the most managing issue for the management of bank. Proper selection of client, choosing appropriate investment option for alternative, bringing back the invested money to the bank with profit are the core investment related work. If this jobs are functioned properly a bank can earn sufficient profit to satisfy its depositors and also for the shareholders. The banks that are regulated according the Islamic Shari’ah they operate their investment operation on the basis of profit and loss sharing. While the conventional banking system sanction loan on the basis of interest. That is why there are always observation prevails whether the Islamic banking system is doing well or conventional banking system performing better jobs. Naturally there are some specific difference prevails between the investment operation of Islamic banks and conventional banking system. From the context of our country Islamic Banks are doing good job comparing with the conventional banking system. Islamic banks are searching for Shari’ah approved sectors and bringing out smart profit. Among all the banks Islami Bank Bangladesh Limited is doing the finest job in our country. Not only in competing with the Islamic Banks but it is absolutely ahead in performance in comparing with the conventional banks. That is why Islami Bank Bangladesh Limited is got special attention to examine its performance specially its investment.

We said earlier that a bank deeply depend on the performance of the investment section. Only choosing and making proper investment carry the bank into a position to widen the business to diverse area. So understanding properly the investment operation and performance of bank lead to the understanding the trend of whole movement of that particular bank:

  •  To study the subject matter that contributes profit for bank.
  •  To know about the tradeoff between investment and deposit.
  •  To understanding the different mode of investment as per Islamic Shari’ah.
  •  To point out which type of investments contribute most to make profit
  •  To realize the balanced portfolio of investment mode
  •  To analyze the relation of investment over time with return
The primary objective of this report is to observe the investment related activities for the Investment Department of Islami Bank Bangladesh Ltd.
The other objectives include:
  •  To understand the different modes of investment of IBBL.
  •  With a view to familiarize with the various investment schemes.
  •  To assess the investment performance IBBL for 5 years.
  •  To analyze performance through the flow of time.
  •  To understand various forces those have impact on investment operation.
  • To Analyze the Bank about its strength, weakness, opportunities and threat
In this report I have focused on all the qualitative which include profiles of IBBL, investment modes like Bai mode, Profit & loss sharing, bearing mode, Rent sharing mode,. This study covers the performance of the bank through the years using ratio analysis, regression analysis, SWOT analysis etc.
a) Nature of the study: Exploratory
b) Sources of information: Both primary and secondary information sources were used to complete this report.
o Primary sources: Primary sources were officers and manager (AVP) of the Islami Bank Bangladesh Ltd., Local office branch. Following factors were considered to collect information:

a. Face to Face conversation.
o Secondary sources: Secondary information was collected from various books, journals, manuals, and also from the web sites.
c) Analysis techniques: Self study was used to analyze the collected information.
d) Presentation of information: Collected information and findings of the analysis are presented in both table and graphical form
e) Methods of data analysis:
I analyze the data in both quantitative and subjective way. I used some techniques for the purpose of analysis. These are:
  •  Theoretical analysis
  •  Graphical analysis
  •  Tabular analysis
  •  Ratio Analysis
  •  Multiple & Simple Regression Analysis
  •  SWOT Analysis
  •  Porter’s Five Forces Analysis
Regular return from investment can carry a bank into a healthy position. That is why every bank tends to make huge amount of investment and gaining maximum profit. So while investing there are a lot of tasks are interrelated. Making excessive investment not identifying the withdrawal behavior of depositor can put the bank in risky position and carry to bankruptcy situation. On the other hand bank cannot rest it money idly by not making investment fearing the withdrawal behavior of depositor. So there are needed to maintain a tradeoff between reserve money for depositor and money for investing.
It is also important for the bankers to assess the maximum return giving sectors to investment. Banks are committed to return the depositors money with some profit. So making sustainable profit is important for any bank. Profit Loss Sharing kind of business places the bank in a risky position. So it is interesting to see whether an Islami bank makes investment in profit loss sharing business.

In recent years there is economic slowdown occurred worldwide. The side effect of this economic slowdown put the investment situation of our country vulnerable. The RMG sector of our country is experiencing lots of trouble. Overall the economic environment of our country is not in most excellent mode. To overcome the crisis the banks are opted to invest in capital market to make quick profit which is not only making vulnerable situation of the capital market but also making the banks unable to meet the demand of the depositors.

Investment operation of any bank ensures the proper growth of any bank. To understand the performance of any bank it is important to properly analyze the investment of bank from different aspects. To properly analyze, analyzing the operational efficiency of any bank (islamic banking in bangladesh: performance, problems & prospects md. abdul awwal sarker) can be a handy tool as it analyze how much amount of money is used within the money available to invest. Under this head, investment opportunity utilization test, project efficacy test and other operational test are useful to analyze the investment operation of Islamic banks. Analyzing the investment performance in the light of mode wise investment or form the viewpoint of portfolio structure can provide a crystal picture actually which mode of investment is performing well and islamic banks are usually utilizing which mode. Md. Abdul Awal Sarker used this method in his article (islamic banking in bangladesh: performance, problems & prospects md. abdul awwal sarker) and Muhammad Nurul Islam shows the impact of mode wise investment on performance of investmen operation ( islamic banking in bangladesh: a case study of ibbl mohammed nurul alam). Ratio Analysis always a useful way to analyze performance.