Documente Academic
Documente Profesional
Documente Cultură
Prepared By Zordan Ri Z Vy
10
In the later 19th century, Finance was a part of the Economics. But due to the
globalization and more expansion of international trade, Finance plays the major role for
the economic development. The development of a modern economy would not have been
possible without the use of money. Bank is an important and essential financial institution
for the necessity of the use of money and the protection of the money.
Export Import Bank of Bangladesh Limited falls into the third generation segment
and undoubtedly leads its own generation. EXIM Bank was established in the year 1999
under the leadership of Late Mr. Shahjahan Kabir, Founder Chairman who had a long
dream of floating a commercial bank which would contribute to the socio-economic
development of our country.
It’s a scheduled commercial bank in the private sector, started its banking
operation on the 3rd of August, with its name as Bengal Export Import Bank Limited.
1999. On 16th November 1999, it was renamed as Export Import Bank of Bangladesh
Limited and from 1st July, 2004 the bank converted its banking operation into Islamic
Banking based on Islamic Shariah from conventional banking operation. During the same
year, the bank issued 3,138,750 ordinary shares through IPO placement.
11
Islami Banking:
From 1st of July of 2004 the bank became Shariah Based Islamic Bank and from
then it is conventional banking services according to Islamic banking principles. For
smooth operations, the Board of Directors established a Shariah Board, which decides on
the banking principles according to which the bank will operate its business.
Mission:
Every financial institution want earn at least a reasonable profit for its long-term
survival and also want to obtain a sustainable position in the Banking sector in the
country.
In keeping this in mind, the bank has checked out the following corporate
objectives in order to ensure smooth achievement of its goals-
To be the most caring and customer friendly and service oriented bank.
To create a technology base most efficient banking environment for its
customers.
To ensure ethics and transparency in ail levels.
To ensure sustainable growth and establish full value of the honorable
shareholders.
Above all, to add effective contribution to the national economy.
12
Fulfilling its social commitments by expanding its charitable and
humanitarian activities.
Vision:
The gist of our vision is “Together Towards Tomorrow”. Export Import Bank
of Bangladesh Limited believes in togetherness with its customers, in its march on the
road to growth and progress with service. To achieve the desired goal, there will be
pursuit of excellence at all stages with climate of continuous improvement, because, in
Exim Bank, we believe, the line of excellence is never ending. Bank’s strategic plans and
networking will strengthen is competitive edge over others in rapidly changing
competitive environment. Its personalized quality services to the customers with trend of
constant improvement will be the cornerstone to achieve our operational success.
EXIM Bank fully appreciates the importance and implication of the rapidly
emerging competition in the Banking and finance sector of Bangladesh. It intends
financing its customer Suited to his or her place in the market. In this regards EX1M
Bank emphasizes in its employment the software aspects of human resource capability. It
also emphasizes competence among its Banking professional to cater to varied customer
requirements to the modem time.
The objectives and the goals of EXIM Bank Limited are the following:
Their main objective isn’t maximizing profit, maximize wealth.
EXIM Bank Limited is always ready to maintain the highest quality of services
by banking technology prudence in management and by applying high standard
of business ethics through its established commitment and heritage.
EXIM Bank Limited is committed to ensure its contribution to national
economy by increasing its profitability through professional and disciplined
growth strategy for its customer and by creating corporate culture in
international banking area.
13
To establish welfare oriented Banking systems.
Feature of EXIM Bank:
There are many reasons behind the better performance of EXIM Bank Limited
than any other newly established banks:
The inner environment of all branches is well decorated.
EXIM Bank Limited provides attractive profit rate in deposit scheme, which are
the highest among other conventional banks.
The bank invests to the customer business at lower profit rate with easy and
flexible condition than the other do.
L/C commissions and other charges are relatively low than other banks. The bank
has established correspondent relationship with many foreign banks.
14
Corporate Culture of EXIM Bank :
During the last two decades Corporate Culture has become an important theme in
business as an intangible concept which clearly plays a meaningful role in corporations,
affecting employees and organizational operations. It is not the only determinant of
business success or failure, but a positive culture can be a significant competitive
advantage over organizations with which a firm competes. EXIM Bank, as an amenable
bank, who believes if the employees can identify the culture and if he/she can relate him
with the culture then the work environment tends to be more enjoyable, which boosts
morale and leads to increased levels of teamwork, sharing of information, and openness
to new ideas.
Branch Network :
Since the growth and profits of banking business largely depend upon the
locations of branches where large concentration of other businesses and industries are
involved, But EXIM Bank are not so much strength-full on location-based strategy. They
have only 62 branches, which are divided, into seven different regions.
They have only 11 ATM booths in overall Bangladesh, which are relatively a
poor situation to comparison with other Conventional & Islamic bank. So for what their
clients need to use their EXIM Bank card on other bank booths e.g. DBBL, BRAC bank;
for what clients are charged by 10 to 30 tk. on each transaction.
Regions No of Branches ATM Location
Dhaka 30 10
Chittagong 16 -
Sylhet 8 -
Rajshahi 2 1
Khulna 3 -
Barishal 1 -
Rangpur 2 -
15
Overall Performance :
16
Product & Services :
The Bank serves all types of modern, progressive and dynamic business as
well as banking services to the customers of all strata of society. During the short span of
time, the Bank has been highly recognized and praised by the business community, from
small entrepreneurs to large traders and industrial conglomerates, and emerged as the
fastest growing among the third generation banks in respect of business and profitability.
EXIM Bank Limited successfully marketed its products designed to fulfill the needs of
various socio-economic strata. Attractive features of the products have given a distinctive
image among the private banks. The Bank has been making continuous endeavor to offer
new products and services. However, the principal products and services of the bank
include the following:
Deposit Scheme
17
Foreign Exchange
✓ Import
➢ Letter of Credit
➢ Murabaha Import Bills (MIB)
➢ Murabaha Trust Receipt (MTR)
➢ Murabaha Post Import: (MPI)
➢ Izara Bill Baia
✓ Export
➢ Pre Shipment Finance
Back to Back L/C
Export Cash Credit
Packing Credit
➢ Post Shipment Credit
Negotiation of Documents under L/C
Purchase of DP & DA Bills
Advance against bills for Collection
✓ Foreign Currency Account
✓ Non-resident Foreign Currency Deposit Account
✓ Resident Foreign Currency Deposit Account
18
Investment
✓ Corporate Finance
✓ Industrial Finance
✓ Project Finance
✓ Syndicate Investment
✓ Mode of Investment
➢ Murabaha
➢ Bai Muazzal
➢ Izara Bill Baia
➢ Wazirat Bill Wakala
➢ Quard
➢ Local Documentary Bill Purchased
➢ Foreign Documentary Bill Purchased
Other Services:
✓ SME Banking
➢ EXIM Uddyog
➢ EXIM Abalamban
✓ Agri Banking (EXIM Krishan)
✓ Visa Islamic Card
✓ SMS Banking
✓ Locker Services
19
Chapter-02 Page No:
Introduction of the Study 21-23
20
Rationale of the Study:
Now a days banking sector have built up as the most important player of the
economy. Economists have observed that investment is of the most important aspects of
economic activity because of its great role in establishing various projects that generates
production and thus generating employment. The only important aspect of investment is
economic and social development in addition to achieving a suitable profit margin.
Islamic banks consider investment as the basic motivation for community development
and a means to get rid of social and economic problems through employment and
operation of available resources, such as money and individuals.
Especially after the financial crunch, Islamic banking and Islamic investment have
proved to be more profitable and less risky. Since EXIM bank is a Shariah based bank,
the major portion of it assets consists of Investment. By analyzing the investment the
productivity of a bank can be analyzed. Moreover analyzing the investment helps us to
analyze the actual well-being caused by Islamic investments.
This report is an opportunity for readers as it bears a great significance emphasizing the
concept of investment. It familiarizes the readers with the practical business operations of
EXIM Bank. By the reports readers can get a chance to know about the real business
world closely and can familiarize with internal and external aspects of business.
Basically, a proper picture of EXIM Bank’s investment operation will be found through
analyzing its annual report of 2010 and 2011.
21
Objective of the Study:
The main objective of practical orientation is to get a clear-cut idea about Investment
sector of EXIM Bank and how it runs and what functions it does to be acquainted with
practical everyday functions of Banking Business. Along with the other main objective of
Report are —
To have a better Understanding on Investment Policy / activities.
Try to find out the Investment procedure / method.
Know about the overall investment performance situation of bank
Trend analyses of the different scheme.
An overview on the major financial activity and practices of EXIM Bank.
To identify the strategies for EXIM Bank Limited, implementing in constant
prosperity of the company.
To apply theoretical knowledge with practical situation.
To analyze the financing system of the Bank and to have greater contribution
towards country's economy.
The scope of this report is limited to the overall description of the company, its
services, and its position in the industry and its financial performance analysis. The scope
of the study is limited to organizational setup, functions, and performances Since EXIM
bank of Bangladesh is still in its growth stage in Bangladesh; it has still to go a long way
to achieve its destination. To achieve the long-term goal it must take each step very
carefully. The report will mainly focus on investment activities& situation of EXIM bank
and might be it will be helpful for reader & EXIM bank to know about their investment
section and makes easier to improvised investment section, which may be lead the
profitability in future.
22
Limitation of the Study:
Basically, this report is prepared through discussion with bank employees and
with the clients. The Employees are very co-operative but they are too busy to give me
time to provide knowledge about their activities. Moreover they have to deal in a very
competitive environment based on money related activities. Thus the following are the
limitations to prepare this report
Two months time is not enough for such an extensive study. It is very difficult to
collect all the required information in such a short period and visit the entire
department within this specific time.
Due to some legal obligation and business secrecy banks are reluctant to provide
data. For this reason, the study limits only on the available published data and certain
degree of formal and informal interview.
The bankers are very busy with their jobs, which lead a little time to consult with.
Many officials are not well informed about different systems of EXIM bank. This
way, the collection of different kinds of information became difficult.
23
Chapter-03 Page No:
Review of Related Literature 25-27
24
Review of Related Literature:
Definition of Investment:
In general, Investment means an asset or item that is purchased with the hope that
it will generate income or appreciate in the future.
In an economic sense, an investment is the purchase of goods that are not
consumed today but are used in the future to create wealth.
From finance perspectives, an investment is a monetary asset purchased with the
idea that the asset will provide income in the future or appreciate and be sold at a higher
price.
Investment is putting money into something with the expectation of gain, that
upon thorough analysis, has a high degree of security for the principal amount, as well as
security of return, within an expected period of time.
Islamic banking activities are consistent with the principles of sharia law and its
practical application through the development of Islamic economics. Sharia prohibits the
fixed or floating payment or acceptance of specific interest or fees (known as riba, or
usury) for loans of money.
25
Investment from Islamic bank perspectives:
Islamic banks adopt several modes of acquiring assets or financing projects. In the
main, they can all be broadly categorized into four:
1. Investment financing,
a. Musharaka
b. Mudarabha
2. Trade financing,
a. Mark-up Trade Financing
b. Leasing
c. Hire Purchase
d. Sell-and-buy-back
e. Letters of Credit
3. Lending
a. Loans with a Service Charge
b. No-cost Loans
c. Overdrafts
4. Other financial services:
a. money transfers, bill collections, and trade in foreign currencies at
spot rate
26
profit cannot be made explicit and therefore there are no additional penalties for late
payment. In order to protect itself against default, the bank asks for strict collateral. The
goods or land is registered to the name of the buyer from the start of the transaction. This
arrangement is called Murabahah.
In Islam, there is a clear difference between lending and investing ;lending can be
done only on the basis of zero interest and capital guarantee, and investing only on the
basis of mudaraba (profit-and-loss-sharing).Conventional banking does not — and need
not — make this differentiation. But an Islamic bank has to take this into consideration in
devising a system to cater to the Muslims. Therefore such a system has to provide for two
sub-systems — one to cater to those who would “lend” and another for those who wish to
invest.
Since Islamic banks do not charge interest rates, consumer loans are therefore
unattractive since there is no profit to be derived in the form of interests on the loans.
Hence, Islamic banks deliberately avoid consumer lending. Islamic researcher’s
(e.g.Siddiqi, 1983) have tried to excuse the Islamic banks. While recognizing the need for
such interest-free loans / benevolent loans qard hasan, especially for meeting basic needs,
they seem to think it is the duty of the community and the State through its treasury baitul
mal to cater for these basic needs. Downplaying the role of Islamic banks in providing
consumer loans, they suggest that Islamic banks give limited overdraft facilities without
interest instead. They also consider a portion of bank loanable funds being set aside for
consumer loans, provided repayment will be guaranteed by the State. This, they reckon,
will minimize the risks involved in consumer lending.
Profit-sharing ratios and the modes of payment vary from place to place, from
bank to bank and from time to time, depending on supply and demand conditions. Profits
are provisionally declared on a monthly basis in Malaysia, on a quarterly basis in Egypt,
on a half-yearly basis in Bangladesh and Pakistan, and on an annual basis in Sudan.
27
Chapter-04 Page No:
Overview of Investment Program of EXIM 29-36
28
Investment of EXIM Bank:
The word credit is derived from the Latin word "credo" which means, "I believe"
and is usually defined as the ability to buy with a promise to pay. It consists of actual
transfer and delivery of goods and services in exchange for a promise to pay in future. It
is simply the opposite of debt. Diversification of banking service increasing the use of
credit in the expanded business operation. It is a fundamental instruction of banking that
advances are made for the customers and the customer are promises to pay rather than the
security held by the banker.
According to Islamic Shariah Principle any interest or extra money against the
money which was lent, is called "Riba" and for that it is prohibited. For what the financial
institute, Shariah Council has made some rules for validity of business transactions,
which is safe and easy to maintain the Islamic rules and regulation. According to the
Islamic Shariah one cannot lend money to other expecting some more in return. But bank
can invest money to other business under various modes and that will be discovered
clearly before starting a business. In that point "Credit" is named as "Investment" and for
what bank act as an investor and bear profit or loss whatever happens all of that things
will be treat like as a business.
29
Principal of Investment:
According to the Qureshi (1997) a prudent banker should more concern to the
following general principal:
Background, character and ability of the borrowers,
Purpose of the facility,
Term of facility,
Safety,
Security,
Profitability,
Source of repayment,
Diversity.
30
The other objectives and principles of investment operations of the Banks are:
Maintain the investment fund strictly in accordance with the principles of Islamic
Shariah.
To diversifies its portfolio by size of investment, by sectors (public and private),
by economic purpose, by securities and by geographical area including industrial,
commercial and agricultural.
To ensure mutual benefit both for the Bank and the investment client by
professional appraisal of investment proposals, judicious sanction of investment,
close and constant supervision and monitoring therefore.
To make investment keeping the socio-economic requirement of the country in
view.
To increase the number of potential investors by making participatory and
productive investment.
To finance various developments schemes for poverty alleviation, income and
employment generation with a view to accelerating sustainable socio-economic
growth and up-liftmen of the society.
To invest in the form of goods and commodities rather than give out cash money
to the investment clients.
31
Products & Services of Investment Program:
The Bank has primarily divided all investment facilities into two major
categories. In this section are discussed in details.
Term Investment:
Continuing loans:
These are investment having no fixed repayment schedule, but have an expiry
date at which it is renewable on satisfactory performance.
1. Izara Bill Baia: These are the investment made by the Bank with fixed repayment
schedules.
The terms of investment are:
✓ Short term : Up to 12 months
✓ Medium term : More than 12 and up to 36 months
✓ Long term : More than 36 months
32
a. Izara (Lease Finance):
It is one of the most convenient sources of acquiring capital
machinery and equipment whereby a client is given the opportunity to have an exclusive
right to use an asset usually for an agreed period of time against payment of rent. It is a
term financing repayable by installment.
2. Bai-Muazzal:
Continuous Investment have no fixed repayment schedule, but have an expiry
date at which it is renewable on satisfactory performance. It allowed to
individual/firm for trading as well as wholesale purpose or to industries to meet up
the working capital requirements against hypothecation of goods as primary security
fall under this type of lending. It is allowed under the categories
(i) "Commercial Lending" when the customer is other than an industry and
(ii) "Working Capital" when the customer is an industry
Investment allowed to the manufacturing units to meet their working capital
requirements, irrespective of their size-big, medium or small, fall under the
category.
3. Murabaha:
Financial accommodations to individual/firm for trading as well as for wholesale
or to industries as working capital against pledge of goods as primary security fall
under this head of investment. It is also a continuous investment.
4. Agriculture:
The Bank has committed itself to the government’s initiative to provide
agricultural investment directly to the farmers for agricultural development of the
country. Investment facilities to the agricultural sector fall under this category. It is
subdivided into two major heads:
33
a) Investment to primary producers: Financing under these categories refers
to the investment facilities allowed to production units engaged in farming,
fishing, forestry or livestock.
b) Investment to dealers/distributors: It refers to the financing allowed to input
dealers and (or) distributors in the agricultural sectors.
5. Investment on Export:
Investment facilities allowed to facilitate export of all items against Letter of
Credit and/or confirmed export orders fall under this category. Investment Facilities
available under this category are:
a) Musharaka Pre-shipment (Export Cash Credit):
Financial accommodation allowed to a customer for exports of goods fall
under this head and is categorized as "Investment on Export". The loans are liquidated
out of export proceeds with 180 days.
b) Musharaka Pre-shipment (Packing Credit):
Investment allowed to a customer against specific L/C contract for
processing/packing of goods to be exported falls under this head and is categorized as
"Musharaka Pre-shipment". The investments are adjusted from proceeds of the relevant
exports within 180 days.
c) Foreign Documentary Bill Purchase (F.D.B.P):
Payment made to a customer through purchase/negotiation of a foreign
documentary bills falls under this head. This temporary investment is adjustable from the
proceeds of the shipping/export documents.
d) Local Documentary Bill Purchase (LDBP):
Payment made against documents representing sell of goods to Local
export oriented industries that are deemed as exports and which are denominated in Local
Currency/Foreign Currency falls under this head. This temporary liability is adjustable
from proceeds of the Bill.
e) Foreign Bill Purchase (FBP):
Payment made to a customer through purchase of foreign currency
cheque/drafts fall under this head. This temporary loan is adjustable from the proceeds of
the cheque/draft.
34
f) Bai-Muazzal (Export):
Investments allowed for purchasing foreign currency for payment against L/Cs (Back to
Back) where the exports do not materialize before the date of import Payment fall under
this head. This is also a investment for temporary period, which is known as export
finance.
6. Investment on Import
a) Murabaha Import Bills (MIB):
Payment made by the Bank against lodgment of shipping documents of
goods imported through L/C falls under this head. It is an interim investment connected
with import and is generally liquidated against payment usually made by the party for
retirement of the documents for release of imported goods from the customs authority.
7. Others:
Any investment that does not fall in any of the above categories is considered
under the category "Others". It includes loans to i) Transport equipment’s, ii)
Construction works including house (commercial/residential), iii) work order finance,
iv) personal loan etc. Investment Facilities available under this category are:
35
a) Izara Bill Baia (House Building):
Investment allowed to individual/enterprises for construction of building
for commercial purpose fall under this type of investment. The amount is repayable by
monthly installment with a specified period.
Tenure: Bank does not ordinarily go for any investment facilities for long-term basis.
1. Short-term investment facilities are for 3 months to 12 months.
2. Medium term investment facilities are for 12 months to 36 months.
3. Long-term investment facilities are for more than 36 months.
Size:
1. Maximum 50% (Funded & non-funded) of total capital of the Bank.
2. Maximum 25% (funded) facilities of total capital of the Bank.
Security:
All assets (Bai-Muazzal & Murabaha) are to be covered under proper insurance
risk with enlisted Insurance Companies.
36
Chapter-05 Page No:
Investment Procedure, Rules & Restriction 38-46
37
Investment Facilities Restriction:
The bank establishes a specific Industry Sector Exposure Cap for preparing sector
wise loan budget in order to avoid over concentration in any one-industry sector. The
budget is approved by the Board in the month of January every year and includes the
following points:
Total Facilities: The aggregated of all cash facilities is kept at 80% of customer's
deposits (MSS). It is also governed by the statutory and liquidity reserve requirement of
Bangladesh Bank.
Term Facilities: Aggregated long-term facilities are restricted to 70% of the total loan
portfolio and are not allowed for a period more than 5 (five) year.
Security: Security accepted against loan facilities is properly valued and is affected in
accordance with the laws of the country in which the security is held. An appropriate
margin of security is taken to reflect such factors as the disposal cost or potential price
movement of the underlying assets.
38
Sectors/Areas are prohibited for Investment:
The Bank does not provide loan facilities to the following businesses:
Branch Activities:
39
Investment/Lending Procedure:
Lending is the main profit generating activity of EXIM bank ltd. The assessment
of investment appraisal process is shown as a set of sequential by the following diagram:
Collection Documents
Legal Opinion
Sanction Advice
Disbursement of Loan
40
Borrower Selection:
Lending is one of the most important functions of a bank. Therefore, it is of
paramount importance that the bank chooses a reliable borrower. For this the bank places
the kind of mechanisms that helps it identify the borrower who can be creditworthy. This
section deals with some of the mechanisms that the bank can able to find the reliable
client for investment on his/her business.
Personal Interview:
The bank arranges interview with the borrower to know more about his specific
requirements, the prospects of his employing the funds prudently, his capacity to repay
and the suitability of the security offered. The main points that are covered in the
interview are: his business, all legal documents required for operation of his business
(Memorandum and Article of Association, trade and import license), his capital with
reference to working capital, his experience in the business, results of financial
statements, amount of investment and period, purpose of advance, source of repayment,
terms of payment, security documents that are offered etc… The bank officials who
conduct the interview try to analyze and judge for themselves the correctness or
otherwise of the various statements and documents of the prospective borrower and to
arrive at a balanced opinion regarding the acceptability or otherwise of the proposal.
After the initial interview, if the officer found that the information meets with the
basic investment criteria of the bank, then the next step will be to conduct a more in-
depth investigation, relying upon the documents obtained from the client and from bank's
own and outside sources.
41
Review Credit Information Bureau (CIB) Report:
Reviewing the CIB report are most important task for Bank which are provided
by the Bangladesh Bank. Basically EXIM Bank considering the CIB report for the
purpose on business investment to know about previous information of client. Therefore
bank strictly follow the CIB report as per rules & regulation of BRPD instruction. After
receiving the client information, bankgo for checking CIB of the particular clients via
online from Bangladesh Bank website. The purpose of this report is to be whether or not
the borrower has taken any loan and advances from any other bank and the status of those
loan and advances.
The Credit Risk Grading (CRG) is a collective definition based on the pre-
specified scale and reflects the underlying credit-risk for a given exposure.
42
Use of Credit Risk Grading:
The credit risk grading matrix allows application of uniform standard to credit
to ensure a common standard approaches to assess the quality of individual
obligor.
As evident, the CRC output would be relevant for individual credit selection,
wherein either a borrower or a particular exposure/facility is rated. The other
decision would be rated to pricing and specific feature of the credit facility.
These would largely constitution obligor level analysis
Risk grading would also be relevant for surveillance and monitoring, internal
MIS and assessing the aggregate risk profile of a institution. It is also relevant
for portfolio level analysis.
43
No Risk Grading Short Name Score
100% cash covered Government guarantee
1 Superior SUP
International Bank guarantees
2 Good GD 85+
3 Acceptable ACCPT 75-84
4 Marginal/Watch list MG/WL 65-74
5 Special Mention SM 55-64
6 Sub-standard SS 45-54
7 Doubtful DF 35-44
8 Bad & Loss BL <35
Security Evaluation:
Security is a cover against loans and advances. It ensures recovery of loans and
advances. Securities play an extremely important role in a loan granting decision.
44
Valuation of Collateral Security
All other additional security other than the primary securities such as land or
building etc. are considered as collateral securities which may be offered or deposited by
the borrower or, by any other third party.
The Bank follows the following steps for valuation of collateral security:
❖ The property is physically inspected and verified jointly by 2 (two) bank's
Officers. A valuation certificate mentioning market value and forced sale value is
prepared in a designated form supplied to the officials and is jointly signed by the
inspecting officers of the Bank. The forced sale value of the collateral security is
to be 1.5 times higher than the facility/facilities allowed.
❖ "A Site Plan" and "Map" along with 3R size district photographs of the
mortgaged property covering full exposure from 3 angles mentioning detailed
particulars on the back of the photographs.
❖ The collateral security must be in the physical possession of the mortgagor and
the mortgagor/owner has valid title over it.
❖ A letter of satisfaction from the Bank's Lawyer is obtained that the mortgage
formality has been properly created.
DOCUMENTATION
The bank does not disburse any loan facility until the required documentation is properly
completed. After completion of credit investigation, the bank official begins to prepare
investment proposal. The investment proposal defines clearly amount and type of
investment, the purpose of the facility, summary of the results of risk assessment, the
sources of repayment, tenor, covenants, the agreed repayment schedule, profit and value
of security.
Where security is to be accepted as collateral for the facility all documentation relating to
the security are to be in the approved form. All approval procedures and required
documentation are completed and all securities are in place, prior to the disbursement of
the facilities. There may be requirement of specific banking or legal documents to secure
a investment according to sanction terms and conditions. All required documents are
required before any investment is disbursed.
45
APPROVAL AUTHORITY
After preparing the investment proposal by the branch officers, it is sent to the head
office for approval to the approval authority. To ensure proper and orderly conduct of the
business of the Bank, the Board of Director empowers the Managing Director and other
Executives of the Bank to finance up to certain amount under certain terms and
conditions at their discretion.
There is no exact time required for the total investment appraisal process. It varies
for different types of investments. EXIM Bank depends a lot on CIB report of the
borrower and for previous track record. Therefore if the CIB report is clean and provided
by the central bank promptly, then it is up to Banks efficient service that how quickly the
bank can serve its customers by appraising the credit proposal.
Investment Recovery:
The Law and Recovery unit of Head office directly manage the continued declining
accounts. The recovery unit functions as following way:
46
Chapter-06 Page No:
Analysis of Investment Program 48-71
47
Financial Analysis:
Investment Scenario:
Financial soundness of all banks depends on the performance of its disbursed loan on
various sectors. Loan performance means how the loans were scheduled to act and how
they are actually acting. It is closely associated with timely and steady repayment of
interest and principal of a loan. A loan is said to be well performed when its repayment is
duly made. If a loan fails to be repaid duly for some consecutive period or installments, it
falls under the classification criteria.
Investment
100,000,000,000
90,000,000,000
80,000,000,000
70,000,000,000
60,000,000,000
50,000,000,000 Investment
40,000,000,000
30,000,000,000
20,000,000,000
10,000,000,000
0
2008 2009 2010 2011
48
The total amount of investment of the bank stood at TK 99,699.62 million as on
December 31, 2011 as against TK 93,296.64 million as on December 31, 2010 showing
an increases investment with the growth rate of 6.86%. But investment increases hugely
on 2010 rather than from 2009, in terms of percentage which are 35.98%. Investments are
the core asset of the bank. The bank should give emphasis to acquire quality assets and
does appropriate investment risk analysis while approving commercial and trade
investment to clients.
Investment/Loan is the core income sector for each & every financial institution
but for doing investment they need to depend on clients’ deposit. So for what they need
to look for deposit to invest in several sectors and besides that also need to look on cash
liquidation by which they can able to fulfill the depositors demand because depositors
have first priority on their money if bank fails to pay their money at on time, then bank
reputation will be decreases. Here it seems that last four year EXIM bank provides above
90% of deposits on investment purposes which are quite risky for a bank from the
purpose of liquidation. But good thing is that they can able to fulfill of customer demand
for what their growth rate of deposit increases continuously rather than from preceding
year same as on investment. The ratio of investment to compare with deposits is given
below in table and chart:
49
Investment scenario compare with Deposit
120,000,000,000
100,000,000,000
80,000,000,000
Investment
60,000,000,000
Deposit
40,000,000,000
20,000,000,000
0
2008 2009 2010 2011
Under this classification it seems that “Over 3 months but not more than 1 year”
represents greater volume than any other in last four year. Bank normally gave less
concentration on “Repayable on demand” because it generated less investment income.
And other sides EXIM bank also prefer to invest on more than five years sectors because
of more profitable amount.
50
45,000,000,000
40,000,000,000
35,000,000,000
30,000,000,000
25,000,000,000 2008
20,000,000,000 2009
15,000,000,000 2010
10,000,000,000 2011
5,000,000,000
0
On Demand Less than 3 over 3 to Over 1 year More than 5
Month Less than 1 Less than 5 year
year Year
It shows that EXIM bank prefer to invest on more than 3 months but less than 1
year sector because of less risky, cash liquidation and profitable sector which shows the
good strategy of the bank management. More than 5 years investment has on their 2nd
preference which are quite risky for a bank. Most important thing is that bank
management gives less concern to invest on repayable on demand investment, which are
relatively riskier for the EXIM bank. Because EXIM bank invest almost 90% of his
deposit on investment purposes and among them only 1% to 2% are on repayable on
demand sector so for what their has a chance of cash liquidation in case of huge
depositors demand.
51
50.00%
45.00% 44.21%
42.62%
40.00%
37.54% 38.28%
35.00%
30.00%
25.00% 25.54%
24.45%
21.96%
21.74% 21.54%
20.00% 19.82%
18.09% 19.06%
16.33%
15.00% 14.95% 14.15%
12.74%
10.00%
5.00%
2.49% 2.63%
0.65% 1.18%
0.00%
2008 2009 2010 2011
On Demand <3 month 3 month< 1 Year 1 < 5 Year more than 5 year
Change in Percentage
Particulars 2010 2011
from preceding year
Bai-Muajjal 34,689,419,345 36,991,343,058 6.64%
Bai-Murabaha 16,387,615,174 17,746,405,168 8.29%
Bai-Salam 2,638,112,443 3,033,228,095 14.98%
Izara bill baia (commercial) 32,422,859,431 36,825,680,283 13.58%
Izara bill baia (Staff) 577,200,724 894,471,784 54.97%
Quard 383,563,586 209,492,097 -45.38%
Local Documentary Bill Purchased
3,074,062,953 2,374,501,763 -22.76%
(LDBP)
Foreign Documentary Bill
670,617,006 449,528,622 -32.97%
Purchased (FDBP)
Murabaha Import Bill (MIB) 2,453,198,193 1,174,976,786 -52.10%
52
EXIM bank of Bangladesh provide several suitable and luxurious mode/program
to their customer based on their needs. Most popular modes of EXIM bank are Bai-
Muajjal, Bai-Murabaha, Bai-Salam &Izara bill baia and those modes were increasing
every year with a handsome percentage, which credit goes to the investment management
mostly.
Mode-Wise Investment
40,000,000,000
35,000,000,000
30,000,000,000
25,000,000,000
20,000,000,000
15,000,000,000 2010
10,000,000,000 2011
5,000,000,000
0
Bills discount & purchased are the less risky sector for a bank because here bills
works as a collateral so for what most of the banks prefer this program because of less
riskier and profitable sector. But in case of EXIM bank which are not in a satisfied
situation in 2011 to comparison with 2010. Here it shows that there has been a decrease
not only in total amount also in Bangladesh & outside region.
Change in
Particulars 2010 2011
Percentage
Payable in Bangladesh 5,527,261,146 3,549,478,549 -35.78%
Payable Outside Bangladesh 670,617,006 449,528,622 -32.97%
53
Classification Bill Discounted & Purchased by Country Wise
6,000,000,000
5,000,000,000
4,000,000,000
2008
3,000,000,000 2009
2010
2,000,000,000
2011
1,000,000,000
0
Payable in Bangladesh Payable in Outside
Bills discount & purchased department focused more on less than 1 month and
above 6 month investment. But it seems in the table that in 2011 they emphasized more
on above 6 month investment and gave less focused on less than 1 month investment
whereverin this section investment amount decreased 52.10% from 2010 to 2011. Other
sides payable within 1 to 3 month bill discounted & purchased investment increased
hugely form 2010 to 2011, in terms of percentage which is 306.16% so it can be said that
they should be focused more on payable less than 1 month investment as like as payable
within 1 to 3 month investment.
54
Classification Bill Discounted & Classification Bill Discounted &
Purchased on Maturity Wise of 2011 Purchased on Maturity Wise of 2011
2010
< 1month 1 < 3 month 3 < 6 month > 6 month
< 1month 1 < 3 month
3 < 6 month > 6 month
29%
40%
64% 4% 57%
3%
1%
2%
Actually production activities are performed mainly in rural areas and financial
activities are performed in urban areas. So from this perspectives EXIM bank
invest/finance more in the urban area. One thing to note is that a country’s economy
mostly depends on rural area, so it can be said that only 4% to 5% investment only rural
area is not satisfactory. However, it appears good that their investment on rural sectors
was increasing rather than from urban areas on 2011 in comparison to 2010.
55
Division Wise Classification of Investment:
From below table and chart, we can easily understand the investment focus of
EXIM Bank in terms of division. Here it found that EXIM Bank invested mostly in
Dhaka division and secondly in Chittagong. There are several reasons behind the
percentage of focus in Dhaka division. Major Group or high rated individual industries
have bank account in Dhaka division. Another reason is that EXIM Banks has more
branches in Dhaka compared to any other division. In 2011, this bank sanctioned
74,196.53 million taka in Dhaka division, which is larger than previous year.
74.42% 74.19%
56
Industry Wise Classification of Investment:
57
Industry-Wise Classification of Investment
70,000,000,000
60,000,000,000
50,000,000,000
2008
40,000,000,000
2009
30,000,000,000
2010
20,000,000,000 2011
10,000,000,000
0
Garments Textile Agro based Other Trading &
Industry Industry Others
58
There has a complements that 80% profit will comes from 20% clients from that
thinking EXIM bank makes leagues with some renewed organization with whom bank
doing business for longer time and for what at a certain time they became a part of EXIM
bank, some of their investment amount are given above.
Loan classification is required to have a real picture of the loan and advances
provided by the Bank. It helps to monitor and take appropriate decision regarding each
loan account. All types of loans fall into following four scales:
59
Classification Wise Investment:
60
Classification-Wise Investment of Classification-Wise Investment of
2011 2010
Substandard Doubtful Bad/Loss Substandard Doubtful Bad/Loss
15% 9%
20%
25%
60%
71%
Doubtful
Doubtful
Doubtful
Substandard
Substandard
Substandard
Substandard
Bad/Loss
Bad/Loss
Bad/Loss
Bad/Loss
61
Percentage of Classified Investment to comparison with Investment:
Basically bank invests the depositors money into several sector but it’s quite
tough to recover 100% of the investment, that’s mean some the investment will be
classified. Basically bank’s performance depends on lower rate of classified investment
and higher rate of recovery. Last four years EXIM bank has averagely 2% classified
investment of total investment, which seems satisfactory. In 2011 classified investment
percentage to comparison with total investment are decreased which shows the good
recovery rather than from preceding year i.e. 2010..
62
Provision Required for Investment:
Unclassified Investment
Balance at 1st January 387,655,694 513,803,015 660,928,535 917,924,554
Add:- Provision made during
126,147,321 147,125,520 256,996,019 59,586,244
year
Balance at 31st December 513,803,015 660,928,535 917,924,554 977,510,798
Special Mention Account
Balance at 1st January 22,005,816 42,049,460 43,876,414 24,797,908
Add:- Provision made during
20,043,644 1,826,954 ------ 62,312,442
year
Less:- Provision no longer
----- ----- (19,078,506) ----
required
Balance at 31st December 42,049,460 43,876,414 24,797,908 87,110,350
Classified Investment
Balance at 1st January 270,763,271 369,899,801 522,432,383 539,205,420
Less:- Fully provided
----- ----- ----- (179,224,770)
Investment written off
Less:- Profit waived (147,534,765) (140,697) (3,697,846) (3,450,410)
Add:- Provision made during
246,671,295 152,673,279 20,470,883 42,907,357
year
Balance at 31st December 369,899,801 522,432,383 539,205,420 399,437,597
EXIM Islamic Investment
Ltd. (EIIL)
Balance at 1st January ----- ----- ---- 8,411,325
Add:- Provision made during
----- ----- 8,411,325 2,999,675
year
Balance at 31st December ------ ----- 8,411,325 11,411,000
63
Basically provision is one kind of fund which will be deposited in to Bangladesh
bank from the concern of depositors. Banks collects money from the depositors and
invests those among to the borrowers so for that as a central bank Bangladesh bank are
totally responsible to follow up on depositor’s money. That means if bank fails to recover
invested amount on that time bank need to deposit certain portion of those unrecoverable
amount into the Bangladesh bank according to Bangladesh bank rules. Way of
calculating provision required for investment of EXIM bank is shown in above.
Provision is an expense set aside as an allowance for bad loans, which will
deposited into the Bangladesh Bank. It seems into table that, in last four years EXIM
bank need to deposit less than 1% of their total investment into the Bangladesh bank as a
provision for during year. Figures seem satisfactory from this perspective.
64
Pledged Collateral Against Investment:
Pledged collateral refers to assets that are used to secure a loan. The borrower
pledges assets or property to the lender to guarantee or secure the loan. Pledging assets,
also referred to as hypothecation, does not transfer ownership of the property to the
creditor, but gives the creditor a non-possessory interest in the property. This means that
the borrower still retains the ownership of the property, but the lender has a claim against
it. It seems into the table that, in 2011 EXIM bank provide 83.84% investment against the
100% pledged collateral that means an investor gets 80 tk. for 100 tk. collateral, which
was 70.83% in 2010.
65
As EXIM Bank increases its investments from year to year, so it is logical that it
income from sanctioning investments are more. The bank has achieved the highest profit
in 2011 from any other previous year though it had highest amount of bad loan also in
that year. So performance of providing investments of the bank is satisfactory.
5,000,000,000
4,000,000,000
2008
3,000,000,000
2009
2,000,000,000 2010
1,000,000,000 2011
0
Bai-Muajjal
Bai-Murabaha
Bai-Salam
Izara bill baia
EXIM bank has several types of mode/program among them Bai-Muajjal, Bai-
Murabaha, Bai-Salam & Izara bill baia are most popular mode of the investment
program. In 2011, EXIM bank invest 39,991 million tk. and from where they got 15.24%
income, which are the highest individual income from any particular mode. Not only the
Bai-Muajjal also Bai-Murabaha, Bai-Salam, Izara bill baia also got highest individual
income rather than from preceding year from their radical investment. So it can be said
that all of this four investment are in satisfied situation in terms of income and not only
that Bai-Muajjal, Bai-Murabaha & Bai-Salam got highest individual income from their
radical investment to compare with their last four years percentage of income against
their radical investment.
66
Percentage of
Investment Income from
Year Particulars Income compare
Amount Investment
with Investment
Bai-Muajjal 15,674,399,356 2,179,676,907 13.91%
Bai-Murabaha 10,885,066,418 1,500,422,215 13.78%
2008
Bai-Salam 2,597,501,097 322,694,784 12.42%
Izara bill baia 21,413,945,025 2,553,595,649 11.92%
Bai-Muajjal 34,689,419,345 3,744,874,954 10.80%
Bai-Murabaha 16,387,615,174 1,974,651,846 12.05%
2010
Bai-Salam 2,638,112,443 332,712,865 12.61%
Izara bill baia 33,000,060,155 3,543,824,333 10.74%
Bai-Muajjal 22,651,461,352 2,861,995,019 12.63%
Bai-Murabaha 14,082,917,549 1,750,004,728 12.43%
2009
Bai-Salam 2,392,768,456 321,772,801 13.45%
Izara bill baia 27,013,057,035 3,161,674,966 11.70%
Bai-Muajjal 36,991,343,058 5,638,938,092 15.24%
Bai-Murabaha 17,746,405,168 2,597,650,678 14.64%
2011
Bai-Salam 3,033,228,095 456,772,392 15.06%
Izara bill baia 37,720,152,067 4,285,302,438 11.36%
30,000,000,000
27,000,000,000
24,000,000,000
21,000,000,000
18,000,000,000
15,000,000,000
12,000,000,000
9,000,000,000 Investment
6,000,000,000 Income
3,000,000,000
0
Bai-Muajjal
Bai-Muajjal
Bai-Muajjal
Bai-Muajjal
Bai-Salam
Bai-Salam
Bai-Salam
Bai-Salam
Bai-Murabaha
Bai-Murabaha
Bai-Murabaha
Bai-Murabaha
Izara bill baia
67
Comparison of Investment Income with Total Income:
Investment is the core sector for a bank, basically most of the income comes from
this sector. That’s mean if the loan/investment sector is more than a bank can be able to
generate more profit likewise EXIM bank also give more emphasis on this sector. In
2011, they got 83.05% investment income from their total income which is the largest
portion among the last four years. So it can be said that EXIM bank focused more on
investment income rather than commission, brokerage, gain from share securities &
others, which shows the majestic idea of bank management.
2011
Investment Income from investment in Shares/Securities
Commission, Exchange & Brokerage Gain on sales of investment in shares
Other operating Income
11.59% 0.00% 4.74%
0.63%
83.05%
68
2010
Investment Income from investment in Shares/Securities
Commission, Exchange & Brokerage Gain on sales of investment in shares
Other operating Income
9.41% 6.36%
13.19%
70.00%
1.05%
SWOT ANALYSIS:
SWOT is an acronym for the internal Strength and Weakness of the firm and the
environmental Opportunity and Threat facing that firm. So, if we consider Investment
sector of EXIM bank as a business firm and analyze its Strength, Weakness, Opportunity
and Threats the scenario will be as follows:
STRENGTH
✓ Get good concern from the people because of Shariah based Islamic bank
✓ By this time it has established an integral, customer friendly relationship with its
clients.
✓ EXIM bank has adequate finance & deposit which are sufficient for their
investment.
✓ For adequate financial ability, they can provide more investment facility to their
rather than other Banks.
69
✓ All of the employees of EXIM Bank are honest and reliable. They are always
devoted themselves to the clients for better customer.
✓ Most of the people of Bangladesh are Muslim and they are trusted in superior
performance of EXIM bank as a Shariah based-Islamic Banking.
✓ They have experienced investment management team.
✓ All of the investment is sanctioned from the head office so there has no chance of
nepotism into the branch.
✓ High attention on recovery of overdue amount and or pre-overdue situation.
✓ Close monitoring on investment clients.
✓ High attention on making quality investment and disposal of proposals.
✓ It has prominent saving scheme named MDPS for a fixed or lower income group
of people of this society from where they can able to take loan at any time.
WEAKNESS
✓ EXIM Bank Bangladesh Ltd. has very limited human resources compared to its
financial activities.
✓ EXIM bank has lack of modern technologies and equipments like adequate online
facilities as well as cash card and credit card system.
✓ EXIM bank has only 11 ATM booths and among them almost all of them are in
Dhaka city so what their credit card & visa card can’t able to perform well.
✓ EXIM bank has lack of aggressive advertising like other banks. They don’t
telecast any attractive advertise in the media by which peoples will be informed
about their investment program.
✓ The investment decision making of the bank is too many centralized. No decision
is made without the authorization of the head office. So its takes too time to
sanction a investment after all procurement.
70
OPPORTUNITY
THREATS
✓ Because of the intense competition, most of the competitor banks of EXIM Bank
Ltd are coming up with new service line ATM but in this sector EXIM bank
performance are relatively poor to compare with other conventional & Islamic
bank.
✓ The competitor banks of EXIM Bank Ltd have more geographical coverage than
EXIM Bank Ltd.
✓ Rules and regulation of Bangladesh Bank defers with Islami banking system. So
they have to face various problems to operate their activities according to the
Islamic Shariah.
✓ Few other conventional banks have opened their Islamic Banking Branch or
program.
71
Chapter-07 Page No:
Major Observation & Recommendation 72-79
72
Major observation:
✓ Illegal Pressure from higher authority: In case of investment, some big parties
are applied for investment in reference with the high officials of the bank. They
do not submit all papers that required for an investment account & in future they
do not feel any urge to submit their papers and in this case, it’s tough to calculate
the issuing amount against on his/her collateral due to lack of information.
73
✓ Insufficient ATM booth: EXIM bank has only 11 ATM booths in overall
Bangladesh, which are not so sufficient to encourage the clients about credit card
of EXIM bank. Without one the entire ATM booth into the Dhaka region and
several times some of them can’t able to perform because of money crisis,
network or machine problems.
✓ Chance of raising cash liquidation problem: Last four years, EXIM bank
financed above 90% of their deposit for Investment purposes, which are quite
risky for a bank from aspects of cash liquidation.
✓ Less focus on short term Investment: By analyzing of last four years financial
scenario of Investment, it asserted that they gave less focus on demand loan &
less than 3 months investment, if its goes for longer time then it may be a big deal
from perspectives of cash liquidation.
✓ More focus on Urban Area: Production activities are performed mainly in rural
areas and financial activities are performed in urban areas. So from this
perspectives EXIM bank invest/finance more onto the urban area but other thing
is that countries’ economies not only depend on urban area also on rural area so it
can be said that only 4% to 5% investment only into the rural area are not
satisfied able.
✓ More focus on Dhaka region: EXIM bank has almost 45% of branches into the
Dhaka region who take place 80% of investment of total and rest of the 20% are
performed by outside the Dhaka’s branches.
✓ Strong Investment recovery division: Investment performance of a bank usually
depends on classified investment of total outstanding and from this perspectives
investment department performance are satisfy able just for 1% to 2% of total
outstanding.
✓ Strong collateral has deposited against investment: Pledged collateral refers to
assets that are used to secure a loan. If mortgage amount are higher than the
investment amount on that time bank are in secured situation, from this
perspectives investment of EXIM bank are in good situation because of providing
83.84% investment against the 100% pledged collateral.
74
✓ Upright income scenario: By analyzing their income scenario it seems that
income from investment picture are in satisfied situation.
✓ Credit risk grading: At the time of risk assessment, the risk managers are used
to obtain an integrated CRG & CIB for all corporate and individual customers.
✓ Insufficient time for risk assessment: The managers often have insufficient time
for credit risk management. Huge workload and time constraints for loan approval
prevent them from through assessment. So, it’s very troublesome to manage the
risk in a prudent manner for the risk managers.
✓ Lack of information into the credit proposal: Risk managers often could not
find all necessary documents and information for credit risk assessment. That’s
why risk managers use their assumption and experiences on risk management.
✓ Problems of Financial analysis: Most of the borrowers do not have audited
financials. They provided a financial statement which does not follow the rules of
accounting. On that time risk managers need to use assumption to calculate for the
necessary ratio so there have the question of accuracy.
75
Recommendation:
76
✓ Utilize the potentiality of rural areas: EXIM bank should consider utilization of
rural potentials from both efficiency and equity grounds in the context of the
present-day socio-economic conditions of Bangladesh. Strong commitments and
stepping up through experiment and implementation of innovative ideas are the
appropriate ways to do that.
✓ Increase Promotional Activities: EXIM Bank should pursue an aggressive
advertising campaign in order to build up a strong image & reputation among the
potential customers. It must give the idea of maintaining a low profit in the
market. Rather it should come in to the limelight through an aggressive marketing
campaign such as advertisement in newspaper & magazine, more billboard &
neon signs, publicity message & promotional campaigns. EXIM Bank can also
pursue promotional campaigns with its customers particularly the corporate
clients in order to build up a stronger rapport with them. Advertisement to be
made in Newspaper, Journal, Magazine, TV etc. TV advertisement is also a major
method for attracting the potential customers. The bank can sponsor sports event
of the country.
✓ EXIM bank should deserve immediate attention in the promotion of the image of
Shariah based banks as PLS (profit-loss-sharing) banks.
✓ EXIM bank can diffuse its scope of investment through focusing Shariah concept
regarding investment among the bank officers; employer and the clients by strong
training, workshops.
77
Conclusion
EXIM bank within a short period of just few years has made good progress in
terms of profitability and growth rate of deposits and Investment& advances despite
tremendous competition in the industry and world economic crisis. The bank has to keep
updating its investment operation. Although for the time being the figures are good but
the trend in the figure indicate that unless the bank becomes more prudent in its
investment granting process else it can become laden with heavy bad debts.
Success in the banking business largely depends on effective lending. Less the
amount of loan losses, the more the income will be from investment operation the more
will be the profit and here lies the success of EXIM Bank Limited.
78
References
Acronyms
79