An Internship Report On Modes of Investment A Study on Islami Bank Bangladesh Limited (part-1)
An Internship Report On Modes of Investment A Study on Islami Bank Bangladesh Limited
Executive Summary
The main objective
of this report is to analyze and focus on the overall investment operations of
Islami Bank Bangladesh Limited (IBBL). I used trend analysis, ratio analysis to
describe the investment of IBBL. So, the report will be descriptive in nature.
I discussed with the officials and executives of the IBBL, Sylhet Branch and
found the approximate data which has been used in this report. I have also
collected secondary data from the annual reports and business development
conference reports of IBBL, IBBL’s website.
In this Report I
highlighted my findings through the parts. First part is introductory part of
my study; the second part is an overview of IBBLs and corporate profile that is
organizational overview as the study required. Third part is the theoretical
aspects; four part describes about the modes of investment of IBBL; five part
is analysis and findings of my study; and six part is recommendations and
conclusion of my study .
To analyze and
present the numerical data and values I have used column chart, bar chart, line
chart, pie chart, doughnut chart and the formula has generated and used in
Microsoft Excel. To start with the investment trend and different investment
and ratios of the bank reveals that IBBL has proven to be quite mature and
financial strength over the past five years. I prefer it to work with audited
data rather than unaudited one. Thus it gives a better insight about the change
incurred in the each situation. Finally I have shown some findings from the
qualitative and quantitative analysis of IBBL. I have found that the IBBL’s
investment management policies are effectively shaped with all rules and
regulations of the Bangladesh Bank and the Islamic Shariah.
So,
overall investment performance of IBBL is increasing day by day. Because most
of the people in our country are religious minded and they want to invest their
money according to Islamic Shariah.
Table
of Contents
Part
|
Contents
|
Page
No.
|
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Acknowledgement
|
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Letter of transmittal
|
|||||||
Declaration
|
|||||||
Letter of
certificate
|
|||||||
Executive
Summary
|
|||||||
Part One
|
Introduction
|
1-5
|
|||||
1.1
|
Introduction
|
1
|
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1.2
|
Origin of
the Study
|
2
|
|||||
1.3
|
Rationale of
the Study
|
2
|
|||||
1.4
|
Scope of the
Study
|
3
|
|||||
1.5
|
Objectives
of the Study
|
3
|
|||||
1.5.1
|
Board Objectives
|
3
|
|||||
1.5.1
|
Specific
Objectives
|
3
|
|||||
1.6
|
Methodology
of the study
|
4-5
|
|||||
1.6.1
|
Types of
Research
|
4
|
|||||
1.6.2
|
Sources of
Data
|
4
|
|||||
1.6.2.1
|
Primary
Sources of Data
|
4
|
|||||
1.6.2.2
|
Secondary
Sources of Data
|
4
|
|||||
1.6.3
|
Data
Analysis Tools and Techniques
|
5
|
|||||
1.6.4
|
Data
Analysis and Reporting
|
5
|
|||||
1.7
|
Limitations
of the Study
|
5
|
|||||
Part Two
|
An Overview of Islami Bank Bangladesh Limited
|
6-21
|
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2.1
|
History of
Islami Bank in Bangladesh
|
6-7
|
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2.2
|
Mission
|
8
|
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2.3
|
Vision
|
8
|
|||||
2.4
|
Strategic
Objectives
|
8-9
|
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2.5
|
Core Values
and Commitments
|
9-10
|
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2.5.1
|
Core Values
|
9
|
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2.5.2
|
Commitments
|
10
|
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2.6
|
Code of
Conduct and Ethical Principles
|
10-11
|
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2.6.1
|
Shari’ah
Foundation of Ethics
|
10
|
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2.6.2
|
Principles
of Personal Ethics
|
10
|
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2.6.3
|
Rules of
Ethical Conduct
|
10-11
|
|||||
2.7
|
Corporate Information
|
12-13
|
|||||
2.8
|
Organogram
of Islami Bank Bangladesh Limited
|
14
|
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2.9
|
Products and
Services
|
15-21
|
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2.9.1
|
Deposits
Products
|
15
|
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2.9.1.1
|
Deposits
Products in Local Currency
|
15-16
|
|||||
2.9.1.2
|
Deposits
Products in Foreign Currency
|
16
|
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2.9.2
|
Investments
Products and Schemes
|
16-17
|
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2.9.2.1
|
Investments
Products
|
16
|
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2.9.2.2
|
Welfare-Oriented
Investment Schemes
|
17
|
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2.9.3
|
Offshore
Banking Unit (OBU) Products
|
18
|
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2.9.3.1
|
Deposits
Product
|
18
|
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2.9.3.2
|
Investment
Products
|
18
|
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2.9.4
|
Remittance
Services
|
18-19
|
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2.9.4.1
|
Foreign
Remittance Services
|
18
|
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2.9.4.2
|
Inward
Remittance
|
19
|
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2.9.4.3
|
Outward Remittance
|
19
|
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2.9.5
|
Treasury Activities
|
19
|
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2.9.5.1
|
Dealing Room Operations
|
19
|
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2.9.5.2
|
Money Market Operations
|
19
|
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2.9.6
|
Technology Based Services
|
19-20
|
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2.9.6.1
|
Any Branch Banking Services
|
19-20
|
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2.9.6.2
|
Cash Services
|
20
|
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2.9.6.3
|
Corporate Services
|
20
|
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2.9.6.4
|
Upcoming Services
|
20
|
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2.9.7
|
Other Value Added Services
|
21
|
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Part
Three
|
Theoretical Aspects
|
22-30
|
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3.1
|
Islamic Bank and Banking
|
22
|
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3.2
|
Islamic Investment
|
23-24
|
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3.3
|
Factors Related to Investment
|
24
|
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3.4
|
Investment (Credit) Risk
|
24-25
|
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3.5
|
Investment (Credit ) Risk Management
|
25
|
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3.6
|
Investment and Investment Risk Management Policies
of IBBL
|
25-26
|
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3.7
|
Guideline to Manage Investment (Credit) and
Investment (Credit)Risk
|
26-27
|
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3.8
|
Basel Guidelines and its Compliance
|
28
|
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3.9
|
Principles of Sound Investment Criteria
|
28-30
|
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Part
Four
|
Modes of Investment of Islami Bank Bangladesh Limited
|
31-50
|
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4.1
|
Investment Process of Islami Bank Bangladesh
Limited
|
31-37
|
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4.1.1
|
Selection of client
|
32-33
|
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4.1.2
|
Application Stage
|
34
|
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4.1.3
|
Appraisal Stage
|
34-35
|
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4.1.4
|
Sanctioning Stage
|
35-36
|
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4.1.4.1
|
Cash/Goods Security
|
36
|
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4.1.5
|
Documentation Stage
|
36
|
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4.1.6
|
Disbursement Stage
|
37
|
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4.1.7
|
Monitoring and Recovery Stage
|
37
|
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4.2
|
Investment products of Islami Bank Bangladesh
Limited
|
38-39
|
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4.3
|
Bai-Mechanism
|
39-42
|
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4.4
|
Sharing Mechanism
|
43
|
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4.5
|
Ijra-Mechanism
|
43-44
|
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4.6
|
Welfare-oriented Investment Scheme
|
44-47
|
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Part
Five
|
Analysis
and Findings
|
48-60
|
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5.1
|
Analysis of Investment
|
48-59
|
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5.1.1
|
Year Wise General Investment Trend
|
48
|
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5.1.2
|
Investment Deposit
|
49-50
|
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5.1.3
|
Mode Wise Investment Position
|
50-51
|
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5.1.4
|
Sector Wise Investment Position
|
52-53
|
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5.1.5
|
Scheme Wise Investment Position
|
54-55
|
|||||
5.1.6
|
Year Wise SME Investment of IBBL
|
56
|
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5.1.7
|
Investment Deposit Ratio
|
57-58
|
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5.1.8
|
Division Wise Investment
|
58
|
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5.1.9
|
Area Wise Investment
|
59
|
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5.2
|
Findings
|
60
|
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Part
Six
|
Recommendations and Conclusion
|
61-63
|
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6.1
|
Recommendations
|
61-62
|
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6.2
|
Conclusion
|
63
|
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Bibliography
|
64
|
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Part One
Introduction
1.1 Introduction:
Banks are
financial institutions engaged in boosting national savings and capital
formation as well as constituting infrastructure through the financing of
various development projects. It performs multi-dimensional activities like
borrowing, lending and investing of money, drawing, collecting and discounting
bills, transferring funds, safe deposit, vault/locker service, foreign exchange
transactions etc. The world of banking is undergoing a transformation. Banking
today has evolved into a highly competitive and sophisticated business in which
technology increasingly provides the edge. Today’s customers want service and
information to be provided at all times and places. As Bangladesh is one of the
largest Muslim countries in the world, the deep commitment of the people of
this country to the Islamic way of life according to the Holy Quran and the
Sunnah. Obviously, it remains a deep cry in their hearts to fashion and design
their economic lives in accordance with the precepts of Islam. The
establishment of Islami Bank Bangladesh Limited (IBBL) on March 13, 1983, is
the exact reflection of this inner urge of its people. IBBL has pioneered need
based, socially responsive and development focused Banking through operations
& services unique by mechanism and objectives. Since inception at the early
nineteen eighties as the first Shari’ah based Bank in South and Southeast Asia,
the Bank emerged as the provider of financial solution to the people of all
strata in the society through inclusive, diverse and cordial services. Driven
by the core value of equitable distribution and justice in financial
activities, IBBL prioritizes welfare banking through diversifications of its
financing in terms of size, sector & geographical location with emphasis on
employment generation for ensuring sustainable development.
Page | 1
1.2 Origin of the Study:
The current world is changing rapidly.
To face the challenge of competitive free market economy, to keep pace with the
trend of every organization who demanded executive with modern knowledge and to
provide fresh graduate with modern theoretical and professional knowledge in
banking as well as all other different institutions, Leading University has
assigned the internship program for the students to help them out to have a
practical knowledge to work in a real office environment. Under this program
the students are sent to gather practical knowledge about the working
environment and activities. The report is a requirement of the internship
program for my BBA degree. My University supervisor Mr. Md. Shamimul Islam, Senior Lecturer suggested me that the topic
of my report would be “Modes of Investment: A Study on Islami Bank
Bangladesh Limited, Sylhet Branch, Sylhet.”
1.3 Rationale of the Study:
There are three types of scheduled
commercial banks are in operation in our economy. They are Nationalized
Commercial Banks, Private Commercial Banks and Foreign Private Commercial
Banks. Islamic Banks have discovered a new horizon in the field of banking area,
which offers different general banking, investments and foreign exchange
banking services. I have chosen Islami Bank Bangladesh Limited, which has some
special mission and vision to establish an interest free banking in the
country. From the very beginning since inception the bank has been facing
different kinds of problem due to lack of Islamic Banking Act and Islamic Money
Market besides general people has no idea about the Islamic mode of operations.
So, for obvious reason I have selected the topic “Modes of Investment:
A Study on Islami Bank Bangladesh Limited, Sylhet Branch, Sylhet.” The
dissertation report is an integral part of the BBA program of the university.
So it is obligatory to undertake such task by the students who desire to
complete and successfully end-up their BBA degree. This also provides an
opportunity to the students to minimize the gap between theoretical and
practical knowledge. Students are required to work on a specific topic based on
their theoretical and practical knowledge acquired during the period of the
internship program and then submit it to the respective authority. That is why
I have prepared this report.
Page | 2
1.4 Scope of the Study:
The scope of the
organizational part covers the organizational structure, background, products
and services and the financial performance of Islami Bank Bangladesh Limited
(IBBL) as a whole. This report helps us to understand the clear real-time
experience about the investment business operations of IBBL. It also helps us
to understand how they deal with the investment clients alongside the way of
managing investment and investment risk. This report is only done for gathering
information about modes of investment of IBBL by focusing on the performance
and management of investment business.
1.5 Objectives of the Study:
1.5.1
Broad Objective:
The prime objective of
this report is to analyze the “Modes of Investment: A Study on Islami Bank
Bangladesh Limited, Sylhet Branch, Sylhet.’’
1.5.2
Specific Objectives:
In order to accomplish
the broad objective following specific objectives are emerged,
§
To depict the procedures IBBL follow for investing to the customer.
§
To know the policies of investment management of
IBBL.
§
To know the trend and growth of investment of
IBBL over the year.
§
To know and analyze the sector-wise investment,
mode-wise investment, geographical distribution of investment etc. of IBBL.
§
To know
the comparison of Islami bank and conventional bank.
§
To compare and analyze the investment and
investment risk related performance of IBBL with other Islamic banks of
Bangladesh as well as the banking sector.
§ To
identify the future prospect of IBBL in consumer investment.
Page | 3
1.6 Methodology of the Study:
1.6.1 Type of Research:
Trend analysis, ratio analysis and
comparative analysis were used to describe the “Modes of Investment: A Study
on Islami Bank Bangladesh Limited, Sylhet Branch, Sylhet” in this report.
So, the report will be descriptive in nature which is possible through
descriptive research.
1.6.2 Sources of Data:
All the relevant data regarding this
report are collected from two sources,
1.6.2.1 Primary Sources of Data:
I discussed with
the officials and executives of the IBBL, Sylhet Branch and found the
approximate data which has been used and presented in this report. The study
has been conducted through the assistance of Investment Department, Sylhet Branch
as per their operating and maintaining an investment business through applying
modern and technological means. I have also physically observed the
effectiveness of the efforts relating investment business effectively and efficiently
managed by Islami Bank Bangladesh Limited, Sylhet Branch.
Primary sources of data include the following:
§
Personal inspection,
§ Practical work experience,
§ Informal face to face conversation with the clients and officers
of the bank.
1.6.2.2 Secondary Sources
of Data:
I have collected
secondary data from the following sources,
§
Annual Reports of IBBL: 2010-2014.
§
Business Development Conference Report: 2013 and
2014.
§
Manuals of IBBL regarding investment business.
§ Bank Documents.
Page | 4
1.6.3 Data Analysis Tools and Techniques:
To analyze and
present the numerical data and values associated with Modes of Investment: A
Study on Islami Bank Bangladesh Limited, Sylhet Branch, Sylhet I have used
following tools and techniques,
i.Column Chart,
ii. Bar Chart,
iii. Line Chart,
iv. Pie Chart,
v. Doughnut chart and
vi. The formula has
generated and used in Microsoft Excel.
1.6.4 Data Analysis and Reporting:
Both qualitative
and quantitative analyses have been done while conducting this study. Microsoft
Word and Excel were used to analyze, process and graphically represents the
gathered data.
1.7
Limitations of the Study:
Although I have
obtained the whole hearted co-operation from the employees of Islami Bank
Bangladesh Limited, Sylhet Branch but in the way of my study, I have faced the
following problems, which may be termed as the limitations of the study. Some
limitations are as under:
§
The main constraint of the study was
insufficiency of information, which was required for the study. There are
various information the bank employee can’t provide due to security and other
corporate obligations.
§
Lack of in-depth knowledge and analytical
ability for writing such report.
§
Learning all the banking functions about the
investment within just 90 days was really tough.
§
Data and information used in this study are
mostly from secondary sources.
§
Large scale research was not possible due to the
constraints and restrictions posed by the bank.
The report has
encountered these limitations that may hinder the progress of the study but
with constant effort, I try to minimize the negative effects of these
limitations.
Page | 5
Part Two
An Overview of Islami
Bank Bangladesh Limited
2.1 History of Islami Bank in Bangladesh:
In the late
seventies and early eighties, Muslim countries were awoken by the emergence of
Islami Bank which provided interest free banking facilities. There are
currently more than 614 interest free institutions all over the world. Today
Islami Bank not only operates in almost all Muslim countries, but have extended
their wings to the western world to serve both Muslim and non Muslim customers.
In case of Islami Banking, the establishment of Mitghamar Local Savings Bank in
1963 is said to be a milestone for modern Islami Banking.
In 1974,
Bangladesh signed the Charter of Islamic Development Bank and committed itself
to reorganize its economic and financial system as per Islamic Shariah. In
1978, Bangladesh recommended in Islamic Foreign Minister Conference in Senegal
towards systematic efforts to Islamic Banking. In 1980, Foreign Minister
Conference in Pakistan where Bangladesh Foreign Minister Prof. Shamsul Hoq,
proposed for taking steps for Islamic Banking. Further, Bangladesh Bank sent
representation abroad to study Islamic Banking System.
Page
| 6
In 1981, President
of the Peoples Republic of Bangladesh addressed the 3rd Islamic Summit
Conference held at Makkah and Taif suggested, ''The Islamic countries should
develop a separate banking system of their own in order to facilitate their
trade and commerce.'' In 1982, IDB visited Bangladesh for study. They found
contributions done by Islamic Economics Research Bureau (IERB) and Bangladesh
Islamic Bankers Association (BIBA); they mobilized the seminars, public opinion
through symposia and workshop. Professional activities reinforced by Muslim
Businessman Society (now reorganized as Industrialists and Businessman
Association).The body mobilized mainly equity capital for emerging Islamic
Bank. Finally, in 1983 Islami Bank Bangladesh Limited (IBBL) came out to take
the challenge of doing banking business.
Islami Bank Bangladesh Limited (IBBL) is
considered to be the first interest free bank in Southeast Asia. It was
incorporated on 13-03-1983 as a Public Company with limited liability under the
companies Act 1913. The bank began operations on March 30th, 1983, with major
share by the foreign entrepreneurs. IBBL is a joint venture multinational Bank
with 63.92% of equity being contributed by the Islamic Development Bank and
financial institutions. The Bank was established with Tk.80.00 million as paid
up capital which has been increased to Tk.12,509.64 million as on December 31,
2012. Corporate Headquarter of the Bank, housed in an 18-storied own modern
building, is located at 40, Dilkusha Commercial Area, Dhaka. Islami Bank of
Bangladesh Limited has gained the first position in all private banks in terms
of deposits, investment, export and import and remittance collection. According
to the Bangladesh Bank, the Central Bank of Bangladesh, the total deposits of
the Islamic banking systems are now 25 percent of all private banks deposits
and its investment are 30 percent. The total
number of branches in 2015 stood at 302.
Page | 7
2.2 Mission:
§ To
establish Islamic Banking through introduction of a welfare oriented banking
system and also ensure equity and justice in 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 socioeconomic development and financial services to the low-income
community particularly in the rural areas.
2.3
Vision:
§ To
always strive to achieve superior financial performance, be considered a
leading Islami Bank by reputation and performance.
§ To
establish and maintain modern banking techniques.
§ To
ensure soundness and development of the financial system based on Islamic
Principles and to become a strong and efficient organization with highly
motivated professionals, working for the benefit of people, based on
accountability, transparency and integrity to ensure stability of the financial
systems.
§ To
encourage savings in the form of direct investment.
§ To
encourage investment particularly in projects, which are more likely to lead to
higher employment.
2.4 Strategic Objectives:
§ Ensure
welfare oriented banking.
§ Ensure
customers satisfaction.
§ Be
excellent in serving the cause of least developed community and area.
§ Achieve
global standard.
§ Emerge
as a healthier & stronger Bank at the top of the banking sector.
§ Build
and consolidate corporate culture.
§ Ensure
Corporate Social Responsibilities (CSR) through all activities.
§ Promote
green banking culture and ecological balance.
Page | 8
§ Provide
impeccable and progressively better customer services using latest technologies
ensure diversification of investment by sector, size, economic purpose and
geographical location and expand need based Retail, SME and Micro financing.
§ Establish
a set of managerial succession and adopt technological changes to ensure development
of an Islamic Bank as a stable financial institution.
§ Pay
more importance in human resources as well as financial capital.
§ Strive
hard to become a company of choice and nurture and develop talent in a
performance driven culture.
§ Ensure
lucrative career path, attractive facilities and excellent working environment.
§ Develop
human resources continuously and provide adequate logistics to satisfy
customers’ need.
§ Motivate
team members to take the ownership of every job.
§ Ensure
zero tolerance on negligence in compliance with both Shari’ah and regulatory
guidelines.
2.5 Core Values and Commitments:
2.5.1
Core Values:
§
Trust in Almighty Allah.
§
Strict Observance of Islamic Shari’ah.
§
Highest Standard of Honesty, Integrity &
Morale.
§
Welfare Banking.
§
Equity and Justice.
§
Environmental Consciousness.
§
Personalized Service.
§
Adoption of Changed Technology.
§
Proper Delegation, Transparency and
Accountability
Page | 9
2.5.2
Commitments:
§
To Shari’ah.
§
To the Regulators.
§
To the
Shareholders.
§
To the
Community.
§ To the Customers.
§ To the Employees.
§ To other Stakeholders.
§ To Environment.
2.6
Code of Conduct and Ethical Principles:
2.6.1 Shari’ah
foundation of ethics
§ Accountability to
Almighty Allah
§ Integrity
§ Principle of
vicegerency on the earth
§ Sincerity
§ Piety
§ Righteousness and
making one’s work perfect Allah fearing conduct in all activities
2.6.2 Principles of personal ethics
§ Faith-driven conduct
§ Legitimacy
§ Objectivity
§ Trustworthiness
2.6.3 Rules of ethical conduct
Self-motivated rules
influencing job performance
§ Professional
competence and diligence
§ Allah-fearing state
of mind
§ Adhering to the
shari’ah and implementing its principles
Page | 10
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