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Islamic Bank's Contribution

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This document is about the contribution of the Islamic banks in poverty alleviation and fund mobilization
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Chapter 1 Introduction Banking sector is expanding its hand in different financial events every day. At the same time the banking process is becoming faster, easier and the banking arena is becoming wider. As the demand for better service increases day by day, they are coming with different innovative ideas & products. In order to survive in the competitive field of the banking sector, all banking organizations are looking for better service opportunities to provide their fellow clients. As a result, it has become essential for every person to have some idea on the bank and banking procedure. Private sector banks started functioning during the year 1983-84 with the objective of government policy to make sure effective and meaningful participation of the private sector in the overall national economy. The perception of Islamic banking has been bloomed from the inspiration of building up a society on justice in accordance with basic socio-economic principles of Islam. The difference between Islamic bank and conventional bank is .
Transcript

Aims and Objectives

Chapter 1

IntroductionBanking sector is expanding its hand in different financial events every day. At the same time the banking process is becoming faster, easier and the banking arena is becoming wider. As the demand for better service increases day by day, they are coming with different innovative ideas & products. In order to survive in the competitive field of the banking sector, all banking organizations are looking for better service opportunities to provide their fellow clients. As a result, it has become essential for every person to have some idea on the bank and banking procedure.

.

Private sector banks started functioning during the year 1983-84 with the objective of government policy to make sure effective and meaningful participation of the private sector in the overall national economy.

The perception of Islamic banking has been bloomed from the inspiration of building up a society on justice in accordance with basic socio-economic principles of Islam. The difference between Islamic bank and conventional bank is on principles. The functions of this type of bank are completely different.

This bank is established on Islamic Shariah and all types of transactions are free from interest. Justified profit is the basis of financial transaction of this bank. This bank is committed to establish socio-economic justice. Islami Bank Bangladesh Limited is the first interest free commercial bank in South-East Asia. The bank has opened 176 branches covering important commercial areas.

Islami Bank Bangladesh is a financial institution whose status, rules and procedures expressly state its commitment to the principle of Islamic Shariah. Consequently Islamic banks operate on Islamic principles of profit and loss sharing, strictly avoiding interest, which is the root of all exploitation and is responsible for large-scale inflation and unemployment.

1.1 OBJECTIVES OF THE STUDY:

Primary objective:

As we know that 40% of our people living below poverty line and the Islami Bank Bangladesh Limited believe in welfare banking, so my primary objective is to know what the role of IBBL in alleviating poverty from the societies.

Secondary objective:

In order to fulfill the primary objective the secondary objectives are - to identify the poverty alleviating schemes of IBBL

welfare services provided by IBBL

finding the problems and prospects of the schemes and services

on the basis of the problems giving some recommendations

1.2. METHODOLOGY OF THE STUDY:

The study is performed based on the information extracted from different sources collected by using a specific methodology. This report is informative in nature. The methodology is

Data collection: Sources of data of this report can be divided into two categories:

Primary Sources:

Face to Face conversation with the respective officers and staffs.

Interviewing officers and staffs.

Sharing practical knowledge of officials.

Relevant file study provided by the officers concerned.

In-depth study of selected cases.

Secondary Sources:

Annual Report of IBBL

Audit Reports

Website

Relevant books, Research papers, Newspapers and Journals.

1.3. Limitations of the Study:

This study has suffered from certain constraints noted below: Unpublished data have not considered for the study. The depth of the analysis has been limited to the extent of information collected from different sources.

As the poverty alleviating schemes are new, it is difficult to find out the necessary data.

This study has been conducted within a limited time. So, time constraint has played a key role for the whole study.

The annual report is published in 2006, so lack of up to date data

Lack of cooperation of the respondents.

Chapter 2

Some information regarding the Islami Bank Bangladesh Ltd.

1. What is Islamic Banking

Islamic banking has been defined in a number of ways. The definition of Islamic bank, as approved by the General Secretariat of the OIC, is stated in the following manner. An Islamic bank is a financial institution whose status, rules and procedures expressly state its commitment to the principle of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations(Ali & Sarkar 1995, pp.20-25). Shawki Ismail Shehta viewing the concept from the perspective of an Islamic economy and the prospective role to be played by an Islamic bank therein opines: It is, therefore, natural and, indeed, imperative for an Islamic bank to incorporate in its functions and practices commercial investment and social activities, as an institution designed to promote the civilized mission of an Islamic economy (Ibid). Ziauddin Ahmed says, Islamic banking is essentially a normative concept and could be defined as conduct of banking in consonance with the ethos of the value system of Islam (Ibid).

It appears from the above definitions that Islamic banking is a system of financial intermediation that avoids receipt and payment of interest in its transactions and conducts its operations in a way that it helps achieve the objectives of an Islamic economy. Alternatively, this is a banking system whose operation is based on Islamic principles of transactions of which profit and loss sharing (PLS) is a major feature, ensuring justice and equity in the economy. That is why Islamic banks are often known as PLS-banks.

2.2. Some Key points about IBBL:

2.2.1. Bangladesh Bank License for IBBL operation:

The bank operates within the frame work of the existing banking laws, rules and regulation subject to such minor adjustment that may be considered for an Islami Bank to function. In addition to the above all requirements of Banking Companies Ordinance 1962 (as adapted in Bangladesh) as also the relevant position of Bangladesh Bank Order, 1972 (P.O. No. 127 of 1972) and instructions issued from time to time there under by Bangladesh Bank will also apply to the bank.

2.2.2. Aims and Objectives

To conduct interest-free banking.

To establish participatory banking instead of banking on debtor-creditor relationship.

To invest on profit and risk sharing basis.

To accept deposits on Mudaraba & Al-Wadeah basis.

To establish a welfare-oriented banking system.

To extend co-operation to the poor, the helpless and the low-income group for their economic upliftment.

To play a vital role in human development and employment generation.

To contribute towards balanced growth and development of the country through investment operations particularly in the less developed areas.

To contribute in achieving the ultimate goal of Islamic economic system.

2.2.3. Corporate information of IBBL:

Date of Incorporation 13 March, 1983

Inauguration of First Branch (Local Office) 30 March, 1983

Formal inauguration 12 August, 1983

Listed in Dhaka Stock Exchange

Listed in Chittagong Stock Exchange 1985

1986

Share Capital ( Local and Foreign)42.62%, 59.38%

Authorized Capital Tk 5,000.00 Million

Paid Up Capital Tk 3801.60 Million

Investment Tk 174058.00 Million

Foreign Exchange Business Tk 287919.00 Million

Number of Branches 193(29.05.08)

Number of Shareholders 26488

Manpower8426

2.2.4. World Ranking of IBBL amongst Top 3000 International Bank

Sl. NoYearRank

119982119

219992100

320001999

420011902

520021771

620031755

720041581

820054658

920061620

1020071490

2.2.5. Ranking of IBBL amongst Top 500 Banks of Asia

Sl. No.YearRank

11998465

21999443

32000437

42001414

2.2.6. Conventional banks Vs IBBL:

The distinguishing features of the conventional banking and Islamic banking are shown in terms of a box diagram as shown below:

Conventional BanksIslamic Bank

1. The functions and operating modes of conventional banks are based on manmade principles.1. The functions and operating modes of Islamic banks are based on the principles of Islamic Shariah.

2. The investor is assured of a predetermined rate of interest. 2. In contrast, it promotes risk sharing between provider of capital (investor) and the user of funds (entrepreneur)

3. It aims at maximizing profit without any restriction.3. It also aims at maximizing profit but subject to Shariah restrictions.

4. It does not deal with Zakat.4. In the modern Islamic banking system, it has become one of the service-oriented functions of the Islamic banks to collect and distribute Zakat

5. Leading money and getting it back with interest is the fundamental function of the conventional banks.5. Participation in partnership business is the fundamental function of the Islamic banks.

6. Its scope of activities is narrower when compared with an Islamic bank.6. Its scope of activities is wider when compared with a conventional bank. It is, in effect, a multi-purpose institution.

7. It can charge additional money (compound rate of interest) in case of defaulters.7. The Islamic banks have no provision to charge any extra money from the defaulters.

8. In it very often, banks own interest becomes prominent. It makes no effort to ensure growth with equity.8. It gives due importance to the public interest. Its ultimate aim is to ensure growth with equity.

9. For interest-based commercial banks, borrowing from the money market is relatively easier.9. For the Islamic banks, it is comparatively difficult to borrow money from the money market.

10. Since income from the advances is fixed, it gives little importance to developing expertise in project appraisal and evaluations.10. Since it shares profit and loss, the Islamic banks pay greater attention to developing project appraisal and evaluations.

Contribution of IBBL to Bangladesh Economy

Islami Bank Bangladesh Limited has many success stories of achievements. These are summarized below:

IBBL is the pioneer institution of Islamic Banking in Bangladesh.

The success of IBBL has imbibed other sponsors at home and abroad to establish Islamic Banking in Bangladesh. Four national, one international Islamic Banks have since been established in the country. A private sector traditional bank has also established two full-fledged Islamic Banking branches. Several other existing and proposed traditional banks have also expressed their intention to introduce Islamic Banking.

IBBL has successfully mobilized deposits from a section of people who hither-to-before did not make any deposit with interest based banks.

The Islamic Banking products which are offered by IBBL through its 176 branches located at important centers all over the country and spontaneous acceptance of those products by the people proves the superiority of Islamic by the people proves the superiority of Islamic banking.

IBBL market share of deposit investment and ancillary business is steadily increasing

IBBL, through still a tiny bank, handless more than 10% of country's export and import trade.

Among the contemporary commercial Banks IBBL's position is first in respect of mobilization of deposit, deployment of found and earning profit.

Investment in industrial sector occupies nearly 49.19% of IBBL's investment portfolio. This is a unique example of industrial finance by a commercial Bank.

More than 1.15,000 workers are employed in the industrial projects financed by IBBL. IBBL has thus made significant contribution to solving unemployment problem of the country.

Dhaka-the capital of Bangladesh being a Mega city has acute transport problem. IBBL has joined hands with an enterprising group to introduce a fleet of Premium Bus service, which has attracted the attention of all section of the people and mitigated transportation problem of the city to some extent.

2.2.7. Poverty alleviating schemes of IBBL

For the development of the distress people of the society and alleviating their poverty, the IBBL has taken some special investment schemes. These are

Rural Development Schemes ,

Household Durable Schemes,

investment schemes for Doctors,

transport investment schemes,

Micro investment schemes,

Agricultural equipment investment schemes.

Islami Bank foundation is also working for the welfare of the people.

In the following chapters these schemes are described in details

In the following table various welfare oriented investment amount of IBBL is given

Sl no.Name of schemes20022003200420052006

1Rural Development Schemes432.04570.88789.971106.072242.22

2Household Durable Schemes886.79910.91878.76782.09699.95

3Investment schemes for Doctors97.21101.0185.5464.4233.38

4Transport investment schemes.1822.382311.602442.162947.382698.88

5Car investment schemes28.2533.5830.3027.7523.54

6SME325.06395.75501.26629.81768.45

7Micro investment schemes, 6.6310.1017.1810.216.24

8Agricultural equipment investment schemes13.6612.7614.6912.5311.94

9Housing investment schemes597.64661.56672.10609.78506.75

10Real state investment projects 2264.353418.854713.705859.756582.85

Sub-total (Investment schemes)6474.018427.0010145.6612050.1913574.20

Total investment46280.1159007.4975858.5693644.15113575.07

Percentage of total investment13.99%14.28%13.37%12.87%11.95%

Chapter 3

Rural development schemes of IBBL

Bangladesh with its 40% people living below poverty line and 18% living in absolute poverty is suffering from acute rural-urban economic disparity coupled with illiteracy, lack of proper health and sanitation facilities. The country's economy is basically an agrarian one with vast majority living in rural areas.

The agriculture sector is unable to provide any further scope for employment resulting in influx of rural population towards urban areas. Rural areas are characterized by stagnant agriculture and scanty industries. Underemployment and unemployment is a regular phenomenon particularly in rural areas.

The vast human resources have remained unutilized due to lack of education, proper training and concerted efforts to help grow the rural economy. These results in uneven distribution of income which causes serious set back in balanced geographical growth as well as growth of GDP.

Islami Bank Bangladesh Limited was 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 enlistment of the rural people.

Accordingly, a Scheme in the name and style of 'Rural Development Scheme' has been introduced to cater to the investment needs of the agriculture and rural sector to create opportunity for generation of employment and raising income of the rural people with a view to alleviate poverty.

Objectives

The followings are the important objectives of IBBLs Rural Development Scheme:1) To bring the poorer population within an organizational framework by setting up certain rules and regulations with a view to free them from the curse of poverty and make them self-reliant, thereby converting RDS into a self-reliant sustainable program; 2) To extend bank investment to agricultural and non-agricultural sectors in the rural areas;3) To invest on employment and income generation activities of the rural population;4) To provide self-employment for distressed people;5) Socio-economic development of the poor and distressed by group/center formation;6) To bring both male and female to provide employment under income generation activities and help them to attain self-reliance step by step;7) To continue to support the self-reliance drive of the poor in their search of capital formation from savings they make out of their increased income;8) To help reduce and eventually stop, through enhancement of their income, the lending on high and exorbitant rates of interest by the village money-lenders, the advance sale of crops, land and mortgage of land by the poor at the time when they are most in need.9) To follow an approach of comprehensive development side by side with economic development; and10) To provide financing to develop housing in the area.The followings are the important objectives of IBBLs Rural Development Scheme:1) To bring the poorer population within an organizational framework by setting up certain rules and regulations with a view to free them from the curse of poverty and make them self-reliant, thereby converting RDS into a self-reliant sustainable program; 2) To extend bank investment to agricultural and non-agricultural sectors in the rural areas;3) To invest on employment and income generation activities of the rural population;4) To provide self-employment for distressed people;5) Socio-economic development of the poor and distressed by group/center formation;6) To bring both male and female to provide employment under income generation activities and help them to attain self-reliance step by step;7) To continue to support the self-reliance drive of the poor in their search of capital formation from savings they make out of their increased income;8) To help reduce and eventually stop, through enhancement of their income, the lending on high and exorbitant rates of interest by the village money-lenders, the advance sale of crops, land and mortgage of land by the poor at the time when they are most in need.9) To follow an approach of comprehensive development side by side with economic development; and

10. To provide financing to develop housing in the areaTarget Group

Farmers having land holding of maximum 0.50 acres.

Sharecroppers with consent from the landowners.

Persons engaged in off-farm activities having no land or land up-to-maximum 0.50 acres.

Persons/farmers permanently residing in the selected villages.

Persons having derelict pond will be eligible for investment for re-excavation and fish cultivation.

Destitute women and distressed people will be provided investment for mulch cows/poultry birds/ducks/goats etc. and other suitable off-farm activities for raising their supplementary income.

Avenues of investment: other than agricultural activities, seven categories of non agricultural activities in the rural areas are financed under the RDS program of Islami Bank Bangladesh Limited. The categories and the types of activities financed under each category are presented in following table

Investment Avenues, Higher limits and Duration:

Investment AvenuesHigher limitDurationRemarks

Crop productionTk.10000Highest 1(one)yearCrop of twelve varieties

Fish cultivation in pondsTk.25000Highest 3(three)years

IrrigationTk.5000Highest 1(One)yearAccording to need

Agriculture and irrigation ImplementsTk.25000Highest 3(three)years10%borrower equity

All non-agricultural sectorTk.10000Highest 1(one)yearFor 343 non-agricultural items payable in weekly installment

Rickshaw ,van and rural transportTk.5000Highest 2(two) yearsPayable in weekly installment

Hand Tube wellTk.3000Highest 3(three) years

House-building materialsTk.15000Highest 3(three) years

Documentation

To secure Bank's investment, the following documents have to be executed:

Group guarantee form.

Deed of Agreement.

Usual charge documents.

Sanction and Disbursement

On the basis of the list submitted by the Field Officers, the Investment Committee of the Branch carefully scrutinizes the applications and sanction the investment at the Branch level. The Investment Committee consists of Manager, Project Officer and the Field Officer.

After sanction of the investment the Branch complete documentation formalities and then disburse the amount with the help of the Investment Officer and Field Officer. In all the cases Branch must ensure strict adherence to the banking and Shariah norms.

Appointment of Field OfficerField Officers are appointed by the Head Office of the Bank. After recruitment, the Field Officers have to undergo compulsory Foundation Training for a period of two weeks so that they can perform satisfactory.

They are appointed well ahead of starting operation of the Scheme in a Branch. The concerned Branch starts operation of the Scheme after satisfactory completion of the base- line survey, formation of the Groups, motivation of the Group members and compliance of the Group disciplines etc.

The eligible criteria for the Field Officers are the followings:

a. Young man with initiative and drive.

b. Minimum qualification: graduate or equivalent.

c. Willingness to work in the rural areas.

d. They are recruited as per Recruitment Policy of the Bank under a separate Service Rules for the RDS Employees.

e. Their services are confirmed after one year on satisfactory performance. The performance are considered satisfactory if rate of recovery is 95% or above.

Statistics of Rural Development Scheme (1998 to 2007)

YearBranch.Dis:UPVillMen:Women members (%)Amount of Accumulated investmentInvestment InstallmentRecovery Rate.Savings

199825211755201940352%1.90-100%0.19

199927241806203335155%18.489.94100%0.91

200032271907633819062%60.3527.0199%3.50

2001453319812587513575%131.8649.4499%7.99

20025238102206214111587%326.74140.30100%22.97

20036945111336517431591%714.93272.6099%56.05

20046945125521420047093%1323.87371.0998%99.07

20058948140687530722593%2029.67432.0698%166.83

200712050190770043046594%2923.59557.9798%228.74

2007129612201002351672589%2884.66789.9799%323.10

PERFORMANCE OF RURAL DEVELOPMENT SCHEME: UP TO March 2008Sl.Areas of performanceNumber/Amount

01Total number of Branch of IBBL 190

02No. of Branch handling the Scheme 119

03No. of Village 7,788

04No. of District 60

05No. of Centre 14,256

06No. of Group 73,712

07No. of Male member 339,115

08No. of Female member 29,445

09Total number of Members 368,560

10No. of Client (Who availed investment) 259,064

11Cumulative disbursement 8,589.74

12Average size of investment 0.011

13Present outstanding 1,944.47

14Amount of overdue 6.68

15Percentage of Recovery 99%

16No. of account adjusted (Since inception) 707,401

17Adjusted amount (Since inception) 5,833.90

18Balance of personal savings 653.18

19Total waiver from inception 4.46

20Number of client under MEIS 1,808

21Cumulative disbursed under MEIS 88.18

22Present outstanding under MEIS 77.23

23No. of Field Officer 1,391

24No. of Tube-well provided (Since inception) 5,372

25Amount disbursed against Tube-well 9.98

26No. of Sanitary Latrine provided (Since inception) 3,042

27Amount disbursed against Sanitary Latrine 2.79

Islami Bank Bangladesh limited (IBBL) envisages an economic system based on equity and justice. Taking into consideration that majority of the population below poverty line lives in rual Bangladesh, the Bank has devised a Rural Development Scheme (RDS) with a view to creating employment opportunity for them and alleviates their poverty through income generation activities.

The IBBL through its RDS project has been implementing integrated programs for the landless poor, eager laborers and marginal farmers aimed at meeting their basic needs and promoting their comprehensive development. Consciousness among the poor needs should be enhanced so that they can lift their position in the socio-economic structure of the country. In order to consolidate their economic base, invested money should be used in income generating activities so the poorer section of the population can become self-reliant. RDS works for the realization of that objective.

Some Recent Field Experiences of RDS Hamid and Rahman (2001) have recently evaluated the Rural Development Scheme of the IBBL under the sponsorship the Islamic Bank Training and Research Academy. Some results are given as under. 1. In Islami Bank, among the total funds disbursed in 2000, the maximum amount (24.9%) has gone to processing and manufacturing. In order of importance, the other heads are trading (20.5%), agriculture and forestry (17.9%), services (12.1%), and others. In the GB the picture is not very different. Here, maximum amount of loan (36.9%) has gone to processing and manufacturing sector, followed by services (23.3%), trading (13.8%), livestock and fisheries (7.8%) and others. The data as published by Credit and Development Forum (CDF) shows that about 42 per cent of total funds of 369 NGOs including ASA, BRAC and Proshika was distributed in the small business sector and another 18 per cent to the livestock sector up to June 1988. 2. Characteristics of EntrepreneurshipAs many as six major characteristics have been identified for the entrepreneurs. These are: He/She: (a) produces wholly new product (b) undertakes new line of business (c) adopts new process of production (in the case of old products)(d) goes for expansion of the existing business (e) adopts new marketing techniques (f) generates new employment opportunities. It can be seen from the Report that expansion of business is the most dominating feature of entrepreneurship development of the clients under discussion. In the IB as many as 60 per cent of the clients possessed this feature. In order of importance other features include new line o business (16%) and wholly new product (12%). In the GB, expansion of business accounts for about 52 per cent of the total activities. Interestingly next dominant feature of GB clients is that 40 per cent of them have gone for new line of business. Other features are not worth mentioning. For others category, only 17 per cent fall within the category expansion of business. This is followed by generation of new employment. The most dominating characteristic of this others category is that as many as 65 cent do not possess any quality of entrepreneurship development constitute only 7 per cent and 5 per cent in the IB and GB, respectively. From the discussion of these necessary characteristics, it may be concluded that both the IB and the GB have contributions towards the development of small entrepreneurs. 3. Practical work experiencesThe RDS members were asked to give their experiences briefly in working with the IB. Interestingly enough, about half of the members agreed that the Bank Supervisors spoke about the Quran and the Hadiths. Many of them categorically stated that they had learned many things about Islam. It was good that they need not go to the Bank to collect their loans or mix with unknown male persons in unknown places. About one-fifth of the members said that the IB was quite flexible: it did not put undue pressure for weekly instalment when the members were in genuine difficulty. They also said that sometimes the Bank Supervisors had gone to their residences to deliver the goods (investments). This answer constitutes about 15 per cent of the total responses. Some mentioned about the help and assistance given by the IB at the time of their daughters marriages. Although in terms of percentage it is very negligible, a few argued that the IB did in fact take extra charge in terms of profit, where is then the interest-free bank? they argued (!!!) 4. Expectations from the IB A question was asked about their expectations from the IB. It is shown that of the 15 answers noted, the most important one relates to the amount of loan/investment given. They expected more loans and more than one type of loans (like GB) simultaneously. This constitutes 27.3 per cent of the total answers. Next important one (17.3%) was the loans for housing, sanitary latrine, and tube well for drinking water. Eleven per cent of the members very forcefully argued that the IB must provided training facilities in tailoring, hand-works, fish-culture and pisciculture works particularly for the women. They alleged that because of lack of training they were unable to make economic use of the sewing machine given to them. The same number of respondents expected financial assistance for their daughters marriages. Contrary to normal expectation, about 6 per cent opined that IB should give financial assistance in kind, and not in cash, and that they should not be allowed to speak lie on this issue! There were people who wanted to learn about the Quran and the Sunnah. Although not significant, there are other interesting expectations as given in the Report. 5. SuggestionsThe members of the RDS have given many interesting and important suggestions for the increasing the number of clients. Perhaps very consistently, the members have suggested that the IB should increase the volume of credit. Through experience they were of the opinion that peoples demand for money was very high. The lending institutions gave fell short of their demands. Even the amount of loan/investment given by the IB fell short of their demands. Even the amount of loan/investment given by the IB fell short of the amounts given by the other institutions, particularly, GB, ASA and BRAC. Given the opportunities for proper utilisation, the bank should also provide more than one type of loans (general loans, housing loans etc.) simultaneously. This is treated as the most appropriate weapon for increasing the number of clients under the present clients under the present circumstances. Another very important suggestion given by the members was to preach more about the teachings of the Quran and the Sunnah. The added that the Supervisors should say that the bank or the RDS was not for any particular category of people but for every one who wanted to improve her/his living standard by avoiding (interest). In order to compete with other conventional lending institutions, the members suggested that the rate of profit (many say interest) should be comparatively lower and that should made clear to the members by way of simple examples. Introduction of housing loans and the loans for such things as latrine, education, tube wells and others would definitely attract the general people to come within the umbrella of the RDS. Many members have praised the behavior of the RDS Supervisors: Some suggested that they should improve their activities with more modern and appropriate tolls. Their numbers should be increased. The members have also very consistently insisted introduction of training program events for the women on various important issues. Another no-negligible suggestion given by the members was that they should be given outright grants in terms of cash or food during the period of natural calamities such as floods, earthquake and other catastrophic.

Chapter 4Some other special investment schemes of IBBL for alleviating poverty

4.1. House - hold durables investment schemes:

Under this investment scheme in 31st December 2007 27010 people have been given investment. The amount of total investment was 1371.31 million taka. On the other hand, in 2006, 27349 people were given investment and the amount of investment and the amount of investment was 699.95 million taka.

4.2. Investment in Small and Medium Enterprise:The Small and Medium Enterprise creates enough employment opportunity and play a vital role in socio economic development of the country .The IBBL launched Small Enterprise and Consumer investment Division in 1st January 2006.The objective of this scheme is to provide investment facilities to the small entrepreneur. Besides this, the other two division of IBBL ,Project Investment Division(PID) and General Investment Division(GID),these two provides investment to the medium scale entrepreneur

In 31st December 2006, the investment in SME sector of the bank was 18902 million which was 16.64% of the total investment of the bank .Investment in this sector proves that IBBL is trying to create employment opportunity for the people and wants to increase their per capita income.

Chapter 4Some other special investment schemes of IBBL for alleviating poverty

4.1. House - hold durables investment schemes:

Under this investment scheme in 31st December 2007 27010 people have been given investment. The amount of total investment was 1371.31 million taka. On the other hand, in 2006, 27349 people were given investment and the amount of investment and the amount of investment was 699.95 million taka.

4.2. Investment in Small and Medium Enterprise:The Small and Medium Enterprise creates enough employment opportunity and play a vital role in socio economic development of the country .The IBBL launched Small Enterprise and Consumer investment Division in 1st January 2006.The objective of this scheme is to provide investment facilities to the small entrepreneur. Besides this, the other two division of IBBL ,Project Investment Division(PID) and General Investment Division(GID),these two provides investment to the medium scale entrepreneur

In 31st December 2006, the investment in SME sector of the bank was 18902 million which was 16.64% of the total investment of the bank .Investment in this sector proves that IBBL is trying to create employment opportunity for the people and wants to increase their per capita income.

4.3 Small Business Investment Scheme

Bangladesh, a third-world developing country, is rich in natural and human resources. Inspite of vast possibilities, the majority people of the country live in hardship-below poverty line as these resources are not being properly tapped, explored and exploited. Physical labor is their only means of earning. A large segment of this populace is active youth force. Many of them are efficient, intelligent and energetic with initiative & drive and have courage to take risks. But they can not uplift their socio-economic condition due to poverty, lack of financial support and other required facilities. Lack of capital compelled many small traders to leave their profession. As a result the unemployment problem has been increasing day by day, and the unemployment youths, finding no avenues of employment, are getting themselves involved in anti-social activities creating threat to the social life. Islami Bank, as welfare oriented financial institution, is committed to generate employment and bring about an overall improvement in the socio-economic condition of the people and the quality of their life. 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 unemployed youths of urban and rural areas self-reliant by providing them required financial support. The following benefits will be achieved through implementation of this Scheme.

Gradually it will help to alleviate poverty and minimize unemployment.

It will help small traders and entrepreneurs to become self-reliant and to improve their quality of life through capital formation.

It will create opportunity for the unemployed youths to engage themselves in in-come generating activities.

It will help to expand the market for locally produced goods by increasing productivity of small traders and entrepreneurs.

Aims and objects To expand investment facilities for the small traders and entrepreneurs in urban and rural areas with a view to raise their level of income and to improve their quality of life.

To inspire and encourage unemployed youths to establish small business enterprises and thereby to create opportunities for self-employment for ensuring social justice and welfare of the people in large scale4.4. Agriculture Implements Investment SchemeBangladesh is predominantly an agricultural country with vast majority of people living in rural areas. Most of our people, for their living, are dependent on agriculture. Agriculture still contributes the lion share of the gross domestic product. But we could not as yet become self-sufficient in food production. We still import a bulk quantity of food grains from abroad to meet the deficit. This reliance on import has made us dependent on others. We must modernize our agriculture and establish more and more industries in order to minimize imports.

We can bring about revolutionary changes in the agricultural sector by adopting modern agricultural technology replacing the age-old traditional way of cultivation and increasing the use of fertilizer. This can only be done by collective efforts of both public and private sectors.

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 agricultural 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 farmers to help augment production in agricultural sector.

Objectives To create opportunities for self-employment of un-employed rural youths. To help farmers to augment agricultural production. To assist in the introduction and use of modern technology in the agricultural sector. To play auxiliary role in achieving self-sufficiency in food production. Types of Agriculture Implements Power tillers thrasher Machine Any other agricultural implements proposed by the branch and which has local demand. 4.4. Transport Investment SchemeThe role of 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 transports has increased manifold throughout the country. Moreover, the use of modern transports has increased keeping pace with the rise of the standard of living of the 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 transports. Besides, Multinational companies, established business houses and well to do officials and professionals can become owner of various kinds of transports through Hire Purchase under this scheme.

Aims and Objectives

To assist in the development of communication system of the country.

To help overcome the existing transportation problem.

To assist solvent service-holders and professionals having fixed income for acquisition of private cars and thus to help them to improve their professional efficiency and the standard of living. 4.5. Micro Industries Investment Schemes

Bangladesh as a developing country has been trying for its overall economic growth. One of the major problems confronting its growth is lack of development of enterprises and potential entrepreneurs who can create more job opportunities by establishing new enterprises in the industrial sector. There are a number of educated unemployed youths and also skilled & semi skilled unemployed persons in the country. Besides, every year quite a good number of youths are coming out of the general/technical educational institutions to add to this already crisis ridden employment market. Development programs and efforts will bring no meaningful result unless and until income- generating employment opportunities can be created for the growing number of unemployed people including the educated unemployed youths. Establishment and expansion of micro industries can play a vital role in creating more employment opportunities as well as in the overall socio-economic development of the country.

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.

Sectors of Investment:

Different sectors including food and agriculture based industries, plastic & rubber industries, forestry and furniture industries, engineering industries, leather industries, chemical industries, textile industries, recycling industries, service industries, electrical accessories industries, computer technology industries, paper products industries, handicrafts industries, fishery & live stock farming, hollow bricks, roof tiles and any other viable micro-industries have been identified for financing under the Scheme4.6. Investment in Industrial sector

In the investment policy of IBBL industrial sector of the country has given priority. The industrial investment of the bank is increasing rapidly .IBBLs investment in industrial sector is higher than other bank .The total investment of the bank in industrial sector as on 31st December 2005 was 46063.51 million taka and on 31st December 2006 it was 62642.10 million taka which is 36% higher than the previous year. In the following table investment in industrial sector by IBBL is given:

Sl no.DescriptionNo. of projectsPercentage of total numberAmount of investmentPercentage of total investment

1Textile, spinning weaving &dyeing14515.85%24337.8238.85%

2Steel, Re-rolling& Engineering424.59%7679.5812.26%

3Agriculture based industry14515.85%7336.6411.71%

4RMG& Parts of RMG26028.42%5019.508.01%

5Food & Beverage222.40%3787.746.05%

6Cement industry8.87%1489.442.38%

7Pharmacy industry8.87%1171.191.87%

8Poultry, poultry feed & Hatchery151.64%767.441.23%

9Sanitary Equipment1.11%431.78.69%

10Chemical, cosmetics& petroleum111.20%242.62.39%

11Printing & binding252.73%497.62.79%

12Power3.33%358.93.57%

13Ceramic & brick141.53%552.27.88%

14Health care(hospital &others)141.53%294.34.47%

15Plastic industry101.09%598.16.95%

16Petrol pump & CNG filling station181.97%126.99.20%

17Information technology2.22%10.11.02%

18Hotel & restaurant6.66%8.66.01%

19Others industry16618.14%7930.9312.66%

Total915100%62642.10100%

Chapter 5

Activities of Islami Bank Foundation

One of the distinguishing features of Islami Bank is that its overall activities are directed towards the welfare of the society. The Bank, since its inception, has dedicated itself for the uplift and emancipation of the helpless and downtrodden people of the society. With this end in view, the Bank has created a separate fund, which was earlier known as Sadaqua Tahbil. In 1991, the Sadaqua Tahbil was reorganized and enlarged under the new name of 'Islami Bank Foundation' with a fund of Taka 38.00 million in order to conduct social-welfare activities on a wider scale. As one of the leading non-government voluntary organizations of the country, the Foundation has been working with unique and special Programs for the welfare of distressed humanity and to make poor, down-trodden, landless and asset-less people self-reliant.

The aims and objectives of the Foundation are to serve distressed humanity, promote people oriented mass education, extend health and Medicare facilities to the poverty-stricken people in urban and rural areas, create facilities for productive self-employment and develop human resources for improving economic condition and quality of life, assist healthy growth of art, culture and literature, science and technology, sports, research and propagation of Islamic teachings. The Foundation has taken up a number of schemes covering the whole of Bangladesh.

Educational Programs

Education is the backbone of a nation. Awareness building, skill training, and access to information-all depend on education. But it is regrettable that the rate of literacy is still very low in Bangladesh. Most of the children are deprived of the light of education due to poverty, lack of sufficient educational institutions, non-availability of text books and equipments etc. In a ward, the unfavorable socio-economic conditions are responsible for this chaotic situation.

The Foundation has, therefore, taken up the following Programs to improve the country's educational scenario:

Support to model Forqania Maktab

Scholarship /lump grant for poor and meritorious students

Financial support to educational institution

Income Generating Programs

Access to required finance and other related inputs may help many to become self employed. In absence of such opportunity the unemployed youths entangle themselves in various anti-social activities. Islami Bank Foundation has, therefore, taken up the following Self-employment projects:

Rickshaw

Sewing

Poultry keeping

Rural health work

Goat rearing

Small trade

Health and Medicare Programs

Health and Medicare facilities are the basic and fundamental rights of each individual but most of the people of our country are still deprived of it. The Foundation has, therefore, taken up the following Programs to extend health, Medicare and sanitation facilities to the urban and rural areas:

Establishment of Medical Centers

Supporting Charitable dispensaries

Lump-sum help for medical treatment

Tube well Installation

Sanitary Latrine construction etc.

Such Assistance is also extended to the members of Rural Development Scheme (RDS) of IBBL. Under Health and Medicare Programs preventive measures have also been taken. Special steps have been taken for construction of sanitary latrines and installation of tube wells in the villages covered under to whom Islami Bank Bangladesh Ltd. is providing finance for income generation activities.

Humanitarian Help Programs

These program aims at providing help to distressed people who are unable to meet their basic needs like food, clothing, shelter and medicine. The old widow and children without guardians get preference. Besides, the program extends assistance to orphanages, provide fund for the marriage of poor girls, assist indebted people, help distressed wayfarers etc.

Relief and Rehabilitation Programs

Participation in relief and rehabilitation activities in natural disasters and in emergency forms an important program of Islami Bank Foundation. During calamities like flood, tornado, tidal surge etc. the Foundation mobilizes its own people as well as donates to the relief fund opened at the government level. The Foundation also tries its best to extend hands of assistance and co-operation to the Muslim brethren elsewhere in the world.

Dawah Programs

One important objective of Islami Bank Foundation is to disseminate the true knowledge and teachings of Islam. The Foundation has, therefore, taken up various schemes to enlighten the common people as well as the elite and make them familiar with the concept of Islam. Islamic research magazines and other Islamic Literatures are being distributed among the Academicians, Journalists, Justices, Lawyers, High Officials, Bankers, Literatures and important Libraries and Institutions of the country. The Foundation is also working among the prisoners for their moral reforms.

Islami Bank Hospital

With the objective of providing low-cost curative services to the less affluent segment of the society, the Foundation has so far set up Hospitals at three Divisional Headquarters in Dhaka, Rajshahi and Khulna. Services of eminent general practitioners and specialists in various fields of treatment like Medicine, Surgery, Gynae, Pediatric, E.N.T. Urology, Neuro-surgery, Skin, Orthopedic etc. are harnessed in these hospitals. Standard diagnostic, medical and surgical equipments are in used in these hospitals. The Foundation plans to establish Hospitals at each Divisional Headquarters of the country.

Islami Bank Medical College, Rajshahi

The number of Doctors in Bangladesh is not sufficient compared to the total population. The Govt. Medical Colleges are also a very few and a good number of meritorious students can not get admitted into the Govt. Medical Colleges due to insufficient number of seat capacities.

Though some private medical colleges have been established mostly in and around the capital but the tuition fees and other charges are so high that the students of poor and middle class families can not afford it.

Keeping in view the objective to enable the students of poor and middle class families to be a doctor, Islami Bank Foundation has established a medical college in Rajshahi, a metropolitan city of northern part of the country. In the meantime, the classes of the students of 1st 2nd and 3rd batch are going in full swing. The construction work of the hospital building at Naodapra, the own site of the college, is also going on.

Community Hospital

Besides establishing Hospitals at the Divisional Headquarters, IBF has a plan to assist local initiatives in setting up Hospitals at District level. Establishment of Four such Hospitals is planned during 1999.

Monoram: Islami Bank Crafts & Fashion

The project has been taken up as a sales outlet of home-made garments, handicrafts and other items produced by the distressed women. The main objective of the project is to create conducive and healthy atmosphere in which women can contribute to the family income by working within the limits of Shariah.

The other objective of this project is to develop designs of women-wear, which will conform, to the principles of decency and modesty as laid down by Islam and at same time compare well with the modern-day-fashions.

Service Centre

To save the people of coastal and river belt from natural disaster, erosion etc. a special project has been taken in the name and style of "Service Centre". Under this program pucca structure constructed in coastal areas, river belts and off-shore islands would be used for integrated social development of the people as well as provide safe shelters during natural calamities. Two such Service centers (in Noakhali and Manikgonj) have already been established.

Islami Bank Physiotherapy and Disabled Rehabilitation Centre

In Bangladesh there are a great number of unfortunate disabled persons who have no other means to maintain themselves without resorting to beggary. The burden of the society might be lessened and these people can be helped to become self-reliant through imparting special skills. Keeping this in view, Islami Bank Foundation has decided to rehabilitate these unfortunate disabled persons through establishing a centre named "Islami Bank Physiotherapy and Disabled Rehabilitation Centre" This Centre while making temporary arrangement for food and shelter for the disabled, will arrange for health check up, physiotherapy and occupational therapy and look for job placement through internship in various factories and trading houses.

Islami Bank Institute of Technology

The large number of unemployed youth of the country may be turned as assets through taking up Human Resource Development (HRD) Program.

The youths with skills in various sectors of technology may become self-employed in the land and can also get employment opportunities abroad. Islami Bank Foundation has, therefore, established 3 Technical Institutes, two in Dhaka and another in Bogra, which are rendering training facilities in Computer, Secretarial Science, Driving, Electrical, Refrigeration and Air Conditioning, Radio & TV, Tailoring and Garments etc.

Centre for Development Dialogue

Alongside with the governmental efforts at National level and multilateral and bi-lateral institutions at the international level, Non Govt. Organizations (NGOs) in different parts of the world especially in the developing countries are playing increasing role in experimentation with Development models.

Most of the organizations unfortunately, try with development techniques from a standpoint, which often turn antagonistic to the belief and social norms of the people. The renowned foreign and national NGOs have their established training centre(s) where they train their own people and also rent out the facilities to others. Islami Bank Foundation has decided to establish a training centre of its own named "Center for Development Dialogue" which will create opportunity for imparting training facilities for its own staff members as well as the staff members of other development organizationsChapter 6Findings of study

After discussing some schemes and social welfare activities of Islami Bank Bangladesh Limited which are contributing to poverty alleviation, I have found some problems of those schemes and activities. These are:

1. In case of rural development schemes of IBBL the target group are farmers owning land up to 0.50 acres of land. So there are no investment facilities for the landless people. But the number of landless people is large in rural areas.

2. The people who are not the permanent resident of the project area will not get invest under RDS .Determining the permanent resident is a troublesome work.

3. Most of the poverty alleviating schemes and welfare activities of IBBL are not known by the people. So there is a lack of advertising and awareness among people.

4. As IBBL has less branches in rural areas, The Rural Development Schemes of IBBL is not as popular as like Grameen Bank or other NGOs program.

5. The poverty alleviating activities specially the RDS is new schemes. On the other hand, many NGOs are working in that field to reduce the rural poverty .So the RDS face a tough competion.

6. The investment schemes of IBBL needs lots of papers and documents which are hazardous for the rural people as most of them are illiterate.

7. The modes of investment of IBBL are different from the conventional banks. But most of the people of our country are familiar with the conventional banking system. As a result, the modes of investment are not clear to rural as well as urban people.

8. Lack of proper step in observation that the poor people who are taking the loan from IBBL are using it for productive purposes and their real income are really increases as a result of taking the loan.

9. Lack of Research and Development work for the Rural Development Schemes.

Chapter 7: Concluding Part

Recommendation Some special investment schemes need to be launched for the landless rural people.

In order to make people aware about the investment schemes and modes of investment various kinds of seminars, workshops, road shows in rural and urban areas need to be arranged.

More branches should be opened in rural areas. The field officers of the Rural Development Schemes must make the rural people understand about the documentation process of taking investment .They must be cordial about it.

More research work needs to be done in the Islami Bank Training &Research Academy in order to improve the Rural Development Schemes.

The access of the target groups to productive resources, services and markets needs to be ensured. The target group must be organized, mobilized and planning mechanism must be oriented toward those groups. More work needs o be done to clarify the factors that undermined the success of particular projects , with a view to providing practical operational models that can be used to project design and implementation.

Moreover proper management of schemes needs to be ensured.

Conclusion:

Islamic bank Bangladesh limited is a bank which operates it(s activities according to Quaran and Sunnah. It(s banking activities based on profit \ loss sharing. It does not create any illegal pressure on client. The strength of islami bank Bangladesh limited are - employees of Islamic Bank Bangladesh Ltd. are honest because they strongly believes in Islamic rules and Allah and they do not take any types of bribe form clients. So believes of people are increasing on the activities of Islamic bank Bangladesh limited. Many people of Bangladesh are involving with IBBL for doing their daily financial activities. It has a bright future because it has got huge customer then other conventional bank in Bangladesh that are based on interest.

The weaknesses of Islamic bank Bangladesh limited are - although it is getting bright future but it does not operate it(s activities 100% based on Islamic shariah. Because still there is not existed an Islamic environment in the economic activities of Bangladesh. It is performing it(s daily financial transaction with other financial institution that are not based on Islam. In this case, it is involving with some unislamic activities unintentionally. On the other hand every client is not 100% honest. So they are taking investment form IBBL and after maturity, they are showing loss on that project intentionally. So IBBL is losing some profit form their investment .For this reason, Islami bank Bangladesh limited has closed it(s bai - mechanism. Now it is not providing investment under this mechanism.

Threats of Islamic bank Bangladesh limited are - at this time, many financial institutions have commenced their financial activities according to Islamic shariah. This type of organization will create more competition in the financial market. So it is a threat for Islamic bank Bangladesh limited.

As the poverty alleviating activities of IBBL is new Islami bank needs to popularize it

After all, although it is facing some problem, it has a bright future and day-by-day it is enhancing it(s financial activities over the country. Many organizations are following to IBBL and they are starting their business based on Islamic shariah in the economy in Bangladesh.


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