Investment and Foreign Exchange operation of Islami Bank Bangladesh Limited (ibbl) Table of Contents

In a developing country like Bangladesh people of middle and lower class especially service holders with limited income find it difficult to purchase articles like refrigerator, television, cot, Almirah, wadrobe, sofa-set, pressure cooker, sewing machine etc. which are part of modern and decent living. They cannot enhance the standard and quality of life to the desired level due to constrain of their limited income. Islami Bank Bangladesh Limited has, therefore, introduced Household Durables Investment Scheme that has already created great enthusiasm among the people and received tremendous response from them.

Interested permanent officials of the following organizations may apply for investment:

• 
  Government Organizations.
  
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  Semi-Government Organizations and Autonomous Bodies.
  
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  Banks and Financial Institutions.
  
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  Armed Forces, BDR, Police and Ansars.
  
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  Teachers of Universities, Government Colleges, School and Senior Madrashas.
  
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  Officers of International Financial & Relief Organization.
  
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  Officers of the multinational companies.
  
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  Officers of the local established and renowned public limited companies.
  
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  House Owners.
  
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  Investment clients of IBBL.
  
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  Deposit client of IBBL.
  

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  The Bank’s investments and profit thereon shall be recovered in 24 monthly installments within a period of 2 (two) years.
  
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  The monthly installment shall be payable by the first week of every month. The first installment shall be due for payment in the first week of the subsequent month of the disbursement/ delivery of goods/articles.
  

One of the basic human needs is to have a house to live in. A house is an abode of peace and happiness. Housing has now become an acute problem in the country, especially in the towns, cities and metropolis. With their limited income, it has become almost impossible on the part of the lower middle class, middle class and sometimes, even for upper middle class to solve their housing problem. To meet this basic human need, Isalmi Bank Bangladesh Limited is committed to contribute to this end to provide a peaceful and happy living. The Bank has introduced “Housing Investment Scheme” with the objective to ease and minimize the housing problem and assist service holders and professionals with limited income in materializing their dream of becoming owner of housing.

Initially the following categories of people shall be eligible to apply for availing investment facilities under this Scheme: Officials of the Defense Forces, Permanent Officials of Government, Semi-Government and Autonomous Organizations, Teachers of the established Universities, University Colleges & Medical Colleges etc.

At the initial stage, the Scheme is being implemented in all divisional area

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  The maximum period of investment shall be generally 15 years.
  
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  Reasonable gestation period for construction be allowed considering the size of construction and Bank’s investment.
  

Bank will pay the sanctioned money through Pay-Order directly or through investment client to the supplier of construction materials/owner of the built house. However, the following points shall be taken into consideration in disbursing the investment:

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  In case of purchase of apartment/flat/built house, the client shall have to deposit the equity money in the Branch of produce documentary evidence in support of his investment up to the satisfaction of the concerned Branch.
  
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  In case of construction of house on the client’s own land or for extension of the existing house, the valuation of the Bank as regards client’s investment shall be consideration final.
  
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  The client shall have to submit to the Bank, the construction plan approved by the competent authority and also the required permission to mortgage the property, where necessary.
  
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  The client must execute all necessary documents including mortgage deed and complete all necessary documentation formalities to avail the investment. Related documents of mortgage, agreement of sale and other documents must be vetted by the penal lawyer of the Bank.
  

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  The client shall have to pay the Bank’s dues by monthly installment immediately after the expiry of the period of construction.
  
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  The Bank shall realize the amount of monthly installment by depositing the cheque of a particular month on the first week of every month.
  
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  The client shall have to execute irrevocable power of attorney in favor of the Bank authorizing the Bank to collect monthly rent from the tenants incase of failure of the client to pay the monthly installment.
  

Professionals, Service-holders, Businessmen, Real Estate developer and other categories of people who are not entitled for availing investment facilities under Housing Investment Scheme, shall be eligible under this program. Investment is to be extended to build new houses and for extension / completion of the house already constructed, commercial building, shopping complex, flat/apartment etc

The role modern communication is most vital for the socio-economic growth and uplift of a developing country like Bangladesh. A sound and efficient communication network is the pre-requisite for sustained development through the expansion of trade, commerce and industry. In this backdrop the demand for road and water transport has increased manifold throughout the country. Moreover, the use of modern transports has increased keeping pace with the rise of standard of living of professionals. Considering all these facts, Islami Bank Bangladesh Limited has introduced ‘Transport Investment Scheme’ Under this scheme investment on easy terms is being extended to the existing successful businessmen in road and water transports and potential entrepreneurs in this sector for different types of road and water transport. Besides, Multinational companies, established business house and well to do officials and professionals can become owner of various kinds of transports through Hire Purchase under scheme.

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  Bus/Truck/Minibus
  
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  Private car/Microbus/ Jeep
  
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  Auto Rickshaw/ Tempo/ Pick-up van
  
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  Ambulance.
  
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  Water transport
  

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  Bank’s sanctioned amount shall be disbursed directly to the supplier of the vehicles.
  
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  The client shall have to complete all documentation formalities including mortgage of property before disbursement of the Bank’s investment.
  
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  The cost of chassis and bodybuilding shall be taken into consideration in ascertaining the price.
  

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  The client shall have to repay the dues to the Bank in monthly installment stating immediately after the expiry of the gestation period fixed by the Bank.
  
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  The Bank shall collect the monthly installment of a particular month through encashment of the cheque in the first week of the concerned month.
  
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  If a client fails to pay 3 consecutive installments, the Bank can take back the possession of the vehicle from the client and sell or transfer it to another client.
  

Islami Bank, being and welfare oriented banking institution, has now deigned and implemented a good number of investment schemes keeping in view the needs of different sectors and various sections of the people for their socio-economic uplift and to improve their quality of life. The investment schemes including the “Transport Investment scheme” and the “Household Durables Investment scheme” so far introduced have gained popularity and received wide response from the people.

Permanent senior officers/executives of the following organizations: Government Organizations, Semi-Government Organizations/Autonomous Bodies/Corporations, Banks, Commissioned Officer of Armed forces, BDR, Police and Ansars, Teachers of the Universities, Government Colleges, Executives/ Directors of big companies and business houses of repute, Members of all other professional groups having good income.

Minimum 30% of the purchase cost of the vehicle. The amount of equity shall have to be deposited with the Bank before disbursement of Bank’s investment.

Period of investment is maximum, 4 (four) years from the date of disbursement or delivery of the vehicle to the client, whichever is earlier.

Dues to the Bank shall recover in the following manner:

• 
  In equal monthly installment along with monthly rent,
  
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  The monthly installment shall be payable by the first week of every month.
  
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  Post-dated cheques for the whole period of investment mentioning the amount of monthly installment shall have to be deposit by the client.
  
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  The amount of monthly installment shall not exceeded 50% of the total income of the client
  
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  The Branch shall have the right to take possession of the vehicle in case of failure of the client to pay 3 (three) consecutive monthly installments.
  

(Taka in million)

Islami Bank Bangladesh Limited has taken the initiative an introduced the “Doctors Investment Scheme” to ensure modern treatment and medical facilities available to the people through extension of Bank’s investment facilities for self-employment of newly graduated doctors and the same time extending investment facilities to the established medical practitioners to procure modern and sophisticated medical equipment.

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  Newly passed medical graduates who are willing to establish chambers, pharmacies and small clinics in district and Thana level towns.
  
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  Experienced and established doctors who are settled in district and other towns but cannot procure modern medical equipment to improve their techniques of treatment.
  
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  Specialized and consulted physicians who are willing to procure latest and specialized type of medical equipment.
  
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  Newly passed medical graduates who are willing to from groups in order to establish clinic.
  
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  Priority is given to specialist and consultant physicians like dentists, child specialists, and ophthalmologists etc.
  

• 
  Investment of the Bank is to be repaid on monthly installment basis.
  
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  Re-payment of the 1st installment will start after three months from the date of investment.
  
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  If the client fails to pay back three consecutive installments without any satisfactory reasons, the bank may take possession and control of the machinery and equipment etc. supplied by the Bank.
  

(Taka in million)

The Bank, to make effective contribution in this respect, has taken-up a special program and introduced ‘Small Business Investment Scheme’ to make the small traders, entrepreneurs and neglected unemployment youth of urban and rural areas self-reliant by providing them required financial support

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  Investment clients must be permanent residents of the command area of the branch
  
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  They must have valid trade license and shops or selling centers.
  
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  Small business man and entrepreneurs, who has the shortage of fund/capital, will also be eligible to avail investment facilities under the Scheme.
  
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  Investment shall also be extended to those poor and asset-less unemployed youths, especially those who have ability to run business.
  
• 
  Besides the above categories, investment facilities under this Scheme shall also be extended to small and cottage industries and service sector.
  

• 
  Hire purchases Shirkatul Meelk: For all kinds of machineries i.e. equipments & transport sector.
  
• 
  Bai-Muajjal-TR: For trading shop keeping, agro-processing and raw materials for manufacturing purposes.
  

• 
  For HPSM investment: Monthly installment basis
  
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  For Bai-Muajjal-TR: Monthly/Quarterly/Half-yearly installment/ lump-sum/ at a time-within the date of expiry.
  

(Taka in million)

Islami Bank Bangladesh Limited is a welfare oriented Bank. It can play positive and important role in the economic development, progress and uplift of the country by investing in the agriculture sector. The Bank has, therefore, introduced “ Agriculture Implements Investment Scheme” to provide power tillers, power pumps shallow tube wells, thrasher machine etc. on easy terms to the unemployed youths for self-employment and to the farms to help augment production in agricultural sector.

Investments are allowed under this Scheme through all branches of the Bank expected the branches located in the metropolitan areas. The command area of the concerned branch is within 15 miles radius from its location.

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  Educated or half-educated rural youths, educated or illiterate farmers and any person may apply for investment facilities under this scheme.
  
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  The applicant must be physically and mentally fit and willing to operate the machine himself.
  
• 
  Applicant must be a permanent resident of the concerned area and be willing to stay and work there.
  

Client shall have to pay 20% of the cost of agriculture implements/equipment as equity. Equity shall be 10% if the Bank undertakes any special project under the supervision of any registered NGO approved by the Bank.

The investment shall have to be repaid in 4 installments within a year. The installment shall be fixed on the basis of the sowing/transplantation and harvesting seasons of the crop. The branch Manager shall decide both the amount and time of the repayment of installment.

(Taka in million)

Particulars	2001	2002	2003	2004	2005	2006
Small Business Investment Scheme	244.10	325.06	395.75	501.26	629.81	768.45

4.3.9 Micro Industries Investment Scheme

Islami Bank Bangladesh Ltd. has been appreciably participating in this direction by financing industrial sector. With a view to creating wider base for industries, the Bank has decided to launch “Micro Industries Investment Scheme” through its Branches. This scheme has been devised to cater to the investment needs of those persons who intend to set-up new micro industrial ventures or to restructure their old units by way of BMRE involving a total cost of Tk. 5.00 lac.

This is intended mainly to create new jobs for the educated, skilled & semi skilled unemployed and also to encourage those who remain outside the purview of investment due to shortage of funds and insufficient collaterals. The scheme has been prepared with easy terms and conditions to encourage the small entrepreneurs, educated unemployed youths and skilled/semi skilled persons to come forward for establishment of micro industries commensurate with the local demand.

Eligibility

The eligibility criteria for the selection of the entrepreneurs under the scheme will be as under:

• 
  Engineering diploma or degree holders, or persons having diploma or certificate from any Technical/Vocational Training Institutes and willing to set up micro industries.
  
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  Educated unemployed youths having initiative and knowledge regarding the proposed industry.
  
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  Skilled and semi-skilled persons having practical knowledge and experience in industrial operations.
  
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  Persons already engaged in micro-industries as owners and willing for BMRE of their enterprises.
  
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  Wage earners who want to establish micro industries having work experience/training in the particular field of industry.
  
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  The proposed enterprise must be exclusively owned by Bangladeshi Nationals that use indigenous raw materials or imported raw materials not exceeding 25% of the total requirement of raw materials.
  
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  Defaulters and persons/enterprises having outstanding liabilities with other Banks and Financial Institutions will not be eligible for availing investment under the scheme.
  

Different sectors including food and agriculture based industries, plastic & rubber industries, forestry and furniture industries, engineering industries, lather industries, chemical industries, textile industries, recycling industries, service industries, electrical accessories industries, computer technology industries, paper products industries, handicraft industries, fishery & livestock farming, hollow bricks, roof tiles and any other viable micro-industries have been identified for financing under the Scheme.

Capital Machinery: 5(five) years including reasonable gestation period.

Raw materials: One year from the date of 1st disbursement.

Mode of Investment

Capital Machinery: Hire-Purchase Shirkatul Melk (HPSM)

Raw Materials: Bai-Muajjal.

Recovery of Bank’s dues:

• 
  Hire Purchase: In monthly/fortnightly/weekly installment basis.
  
• 
  Bai-Muajjal: In Lump sum at the end of the tenure of investment.
  

Investment under the Scheme shall be made within the 20 Km. radiuses from the branch.

. Islami Bank Bangladesh Limited has been founded with the major objective of establishing Islamic economy for balanced economic growth by ensuring reduction of rural-urban disparity and equitable distribution of income. In view of the above, Branches of the Bank have been encouraged to invest their deposits in their respective areas and in particular for the economic uplift of the rural people.

Accordingly, a Scheme in the name and style of ‘Rural Development Scheme’ has been introduced to cater tot eh investment needs of the agricultural and rural sector to create opportunity for generation of employment and raising income of the rural people with a view to alleviate poverty.
Command Area:

Each designated Branches will select villages initially within a radius of 10 kilometers of the Branch.

• 
  Farmers having land of maximum 0.50 acres.
  
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  Sharecroppers with consent from the landowners.
  
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  Persons engaged in off-farm activities having no land or land up-to maximum 0.50 acres.
  
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  Persons/farmers permanently residing in the selected villagers.
  
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  Persons having derelict pond will be eligible for investment for re-excavation and fish cultivation.
  
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  Destitute women and distressed people will be provided investment for mills cows/poultry birds/ducks/goats etc. and other suitable off-farm activities for raising their supplementary income.
  
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  Persons having liabilities with other banks/institutions including defaulters will not be eligible for the investment under the Scheme.
  

Bank’s rate of return will be @ 11% per annum (approximate).

Risk Fund contribution of the client will be @ 1% per annum, on the net disbursement.
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Sanction and Disbursement

On the basis of the list submitted by the field officer, the Investment Committee of the Branch will carefully scrutinize the applications and sanction the investment at the Branch level. The members of the Committee will consist of Manager, Project Officer and the field officer. After sanction of the investment the Branch will complete documentation formalities and then disburse the amount with the help of the Investment Officer and field officers. In the entire case Branch must ensure strict adherence tot eh banking and Shariah norms.

The Branch will select any of the following modes depending upon the sector and purpose of investment:

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  Bai-Muajjal TR
  
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  Hire-Purchase under Shirkatul Melk (HPSM) or Leasing
  
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  Mudaraba
  
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  Musharaka
  
• 
  Bai-Salam
  
• 
  Murabaha TR
  

To ensure recovery of investment in time, the Branch will determine the investments judiciously. Installments should be fixed in the following manner, keeping in view the income generation capacity of the investment and time thereof:

• 
  In case of off-farm activities installments should be fixed on weekly basis.
  
• 
  In case of agricultural/crop production, installment should be fixed on quarterly basis or on the basis of harvesting period of the crop in each of the investment area. A token installment may however be realized on weekly basis.
  

(Taka in million)

Table:

Sector wise distribution of investment as on December 31, 2006 vis-à-vis corresponding period of last year are given below:

Analysis:

From the above table, it is observed that investment in the Industry sector is the highest of all the sectors. In Industry sector, in 2006 investments are increased by 5.96% then 2005. Second highest sector is others sector that is increased by 2.18% in 2006 then 2005. In case of commercial sector investment is decreased by 5.75% then 2005. In Transport sector investment is the lowest of all the five sectors.

Investment in Different Mode:

Table: (Amount in million Tk.)

Mode	2006	% to total Investment	2005	%to total Investment
Bai-Murabaha	59,465.09	52.36%	51,822.28	55.34%
Hire Purchase Under Shirkatul Meelk	39,399.19	34.69%	30,046.89	32.09%
Bai-Muajjal	6,921.40	6.09%	5,917.18	6.32%
Purchase and Negotiation	4,846.62	4.27%	3,179.81	3.40%
Quard a hasana	1,974.20	1.74%	1,966.13	2.10%
Bai-salam	905.62	0.80%	641.44	0.68%
Mudaraba	50.00	0.04%	50.00	0.05%
Musharaka	12.95	0.01%	20.42	0.02%
Total	113,575.07	100.00%	75,858.56	100.00%

Analysis: The above table shows that in 2006 Investment increased 2.60%

than 2005 under Hire purchase mode. 0.87% under Purchase & Negotiation mode, remaining does not positively increased rather most of them are decreased.

.

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