Internship Report on

A Study on Difference Between Modes of Investment used by Social Investment Bank Limited and Modes of Advance & Loans used by Conventional Banks in Bangladesh

Prepared for M.A. Yousoof Dean Faculty of Business Administration University of Development Alt (UODA) Dhanmondi, Dhaka

Prepared by Md. Mahbubur Rahman ID : 0032420127 Batch:3rd ,BBA Program University of Development Alt (UODA) Dhanmondi, Dhaka.

Submission Date: December 06, 2006

University of Development Alt (UODA)

Dhanmondi, Dhaka.

Internship Report on
A Study on Difference Between Modes of Investment used by Social Investment Bank Limited and Modes of Advance & Loans used by Conventional Banks in Bangladesh

Letter of Submission
06th December, 2006 To M.A. Yousoof Dean Faculty of Business Administration University of Development Alt (UODA) Dhanmondi, Dhaka Sub: Submission of the Internship Report. Honbler Sir, I am submitting this Internship report titled as A Study on Difference Between Modes of Investment used by Social Investment Bank Limited and Modes of Advance & Loans used by Conventional Banks in Bangladesh for partial fulfilment of BBA Program. Though the time allocated for completion of this report was very short, even then I tried my best to accomplish this report and submit the same within the stipulated time. I hope that this report will be upto your satisfaction. Sincerely Yours,

Md. Mahbubur Rahman ID : 0032420127 Batch:3rd ,BBA Program University of Development Alt (UODA) Dhanmondi, Dhaka.

Letter Of Transmittal
To M.A. Yousoof Dean Faculty of Business Administration University of Development Alt (UODA) Dhanmondi, Dhaka

This is to certify that Md. Mahbubur Rahman, a student of BBA of University of Development Alternative (UODA), Dhanmondi, has successfully completed Internship Program on A Study on the Investment Modes used by ocial Investment Bank Limited and compare with Modes of Advance & Loan used by Conventional Banks in Bangladesh covering the period from 04th December, 2006 with sincerity of devotion.

I wish him every success in life.

____________ Md. Mahbubur Rahman ID : 0032420127 Batch:3rd ,BBA Program University of Development Alt (UODA) Dhanmondi, Dhaka.

Acknowledgement
I would like to express my gratitude to Prof. M.A Yousoof, Dean, Faculty of Business Administration, & the BBA Program Corodinator Devnath Shopon, UODA, for their encouragement and the opportunity they have provided me for preparing this internship report entitled A Study on the Investment Modes used by ocial Investment Bank Limited and compare with Modes of Advance & Loan used by Conventional Banks in Bangladesh.

I am indebted to M A Reza, Supervisor and Faculty Member, UODA for the interest he has kindly taken to help me select the topic, collect information and develop this report in spite of his awful business. It would have been unthinkable to prepare such a report and present it in a lucid manner without his active help and support.

I do acknowledge with thanks the help and assistance that have been extended to me by ABM Abdullahil Baqui, (professional supervisor) Mr. Mizanur Rahman, of SIBL, Dhaka, collecting necessary data, valuable information and formal guidelines for preparing this internship report . I am thankful to the officials of the UODA, for the sincere cooperation and support they have extended to me for successful completion of this report. Lastly, I gratefully acknowledge the invaluable help, support and inspiration that my beloved wife and members of my family provided me to complete writing of this Internship Report.

Executive Summary
Justice is the main focus of Islam. So, Islam therefore aims at rooting out all traces of Zulm, i.e. injustice from the human society and the economy as well. Interest based transaction cant remove injustice from the society rather it sometimes breeds injustice. Keeping this fact in view Social Investment Bank intends to keep its all transactions including investment financing free from interest. At present it has developed its modes of investment financing in such a way that every mode is interest-free but justice-oriented. As for example, Musharaka & Mudaraba modes of investment are full of justice. Social Investment Bank is working to fulfill the desire of people. The opportunity of the Banks is: SIBL has got a smooth growth of over the years in terms of deposit, investment and profit. Islamic values and ethics have been practicing widely in our country and it has been increasing world wide. It has Strong capital base and asset position, The bank posses the reputation and goodwill of quality services to its all kinds of customers, The bank has trained, honesty, experienced and well educated manpower, The bank has unique corporate culture, which acts as a great motivational factor among the employees. After completion of this report I have found many problems that are described in the last chapter. The major problems are the lack of Islamic Banking rule in our country; the authority of SIBL faces various problems in their investment operation as a result it cannot run smoothly; SIBL cannot invest in Shariah prohibited sector, so its investment scope is narrow in Bangladesh; Investment is heart of the Bank and it is the main source of income of SIBL, but lack of sufficient investment scope a large amount of money are being idle, as a result, profit is not increasing; SIBL lead their investment operation within limited number of investment mode; Most of the people of Bangladesh have no positive idea about Islamic Banking operation. To remove the problems SIBL should

encourage potential customers, so that they be engaged in bring forth Halal Products by dint of Halal device, thus they can inspire their investment scope; regarding the investment modes, Shariah law should be expanded among the potential investors; SIBL have to conscious about their advertisement. In the voluntary sector SIBL has also introduced Cash Waqf Certificate, a new product for the first time in the history of banking. Together, a new beginning can be made for a participatory economy. SIBL play the same role in society, as do conventional interest-based financial institutions, in that they pool together deposits of investors and lend these deposits out to business and entrepreneurs. The nation of Islam disapproves of hoarding savings and encourages the productive use of investment for the benefit of the whole society. SIBL provide the means by which smaller investors can contribute to the overall benefit of society, thereby ensuring adherence to Islamic laws. Investment financing by the conventional bank is interest-based. On the other hand, Investment financing by the SIBL is not based on interest rather it is based on margin profit as well as Profit & Loss sharing as per Islamic Shariah. We should know the people the differences between the modes of investment of used by Islami Banks and the modes of advance & Loan used by Conventional Banks. As interest is the root cause of economic & financial injustice. It should remove form the society. And for this, the peoples should learnt and encouraged to follow the Islamic financial system in taking financing opportunities from Banks.

Table of Contents
SL. No./ Chapter II III Chapter-1 1.1 1.2 1.3 1.4 Chapter-2 2.1 2.2 2.3 2.4 Chapter-3 3.1 3.2 3.3 3.4 3.5 3.5.1 3.5.2 Particular Acknowledgement Executive Summary Introduction Introduction Objective of the report Methodology Scope & Limitation An Overview of Social Investment Bank Limited Introduction Organogram Investment position of SIBL Financial Statements Investment policy & the different modes used by SIBL Islami Banking Investment policy of SIBL Objectives & Principles of Investment Salient Features of Investment Investment Modes of Social Investment Bank Limited: Partneship Mode (Share Macanism): a. Mudarabah b. Musharaka Trading Mode (Bai Macanism): a. Bai-Murabaha b. Bai Muajjal c. Bai Salam d. Isteshnaa Leasing Mode (Ijara Mechanism): a. Hire Purchase /Ijarah b. Hire Purchase Under shirkatul Melk There are two other modes of investment: a. Quard b. Quard-E-Hasana Special Schemes Under Investment Modes: a. Small Business Investment Scheme b. Real Estate Investment Program c. Transport Investment Program d. Rural Development Scheme e. Micro Industries Investment Scheme f. Special schemes Page No.

1 1 2 2 3 4 4 5 6 7 11 11 11 13 13 14 15 15 15 15 15 15 16 15 16 16 16 17 17 17 17 17 18 18 19 19 20

3.5.3 3.5.4 3.5.5

Chapter-4 4.1 a. b. 4.2 a. b. c. d. e. Chapter-5 5.1 5.2 5.3 5.4 Chapter-6 6.1 6.2 6.3 6.4 6.5

Modes of Advance & Loan used by the Conventional Banking in Bangladesh Advance: Cash Credit Overdraft Loans: Short Term Loan Term Loan Composite Loans Hire Purchase Advances Bills purchased/discounted Islami Banking differ with Conventional Banking Islami Banking vs Conventional Banking Comparison of Financial Modes Investment decision Conventional Banking Investment decision Islami Banking Findings, Recommendation, Conclusion, Bibliography, Annexure Findings Recommendation Conclusion Bibliography Annexure

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