Social Investment Bank Limited: An Analysis of The Overall Performance and Activities
Social Investment Bank Limited
An Analysis of
The Overall Performance and Activities
Submitted by
It has long been recognized that credit is an important tool in increasing productivity and thereby increasing the income of borrower. Adequate flow of credit can remove the financial constrains of the borrower. There has been phenomenal growth in the flow of credit after liberation due to governments desire to increase productivity in the country. All the credit institutions were geared up thorough a dynamic credit policy to disburse both short-term credit and long-term credit. As a result the flow of annual credit has increased significantly. As the volume of loan default increased substantially over the years, the percentage of loan default increased gradually. Although loan is one of the major assets of the banking sector, it becomes a liability when the loan is not repaid. Since the late 70s the whole banking sector of Bangladesh is being haunted by the specter of problem loans.
A great bulk of problem loans and their ever deepening thrust on Bank credit has brought a gloomy situation in the cost of fund. The impact of such loan in banking arena hinders the flourishing of banking business. Default culture has started in Bangladesh mainly after the nationalization o banks. However, it was enhanced by the availability of hue amount of credit in the name of developing private and industrial sector. From a statistic of Government it is seen that investment Board did not find may existence of 4422 industrial units amongst he sanctioned 7531 units during the years 1985 to 1990. There happened interesting events in the name of industrial credit. Valuation certificates were managed hundred times over the collateral security. Industry set-up was shown as sick industry to get additional loan and relieve from interest.
Despite various Acts, Ordinances as well as various circulars issued by Bangladesh Bank from time to time and special instructions by individual Banks, the striving for realization of such credits proved discouraging.
The Bank of Bangladesh Small industries and commerce (SOCIAL INVESTMENT BANK LIMITED) Bank Limited, which was established to promote the development of Small-scale industries in Bangladesh, is also prone to such disappointing features of problem loans.
Background of the Study:
This academic course of the study has a great value as it has practical application in the real life. Only a lot of theoretical knowledge will be little important unless it is applicable in the practical life . so, “The Overall Performance and Activities”of Social Investment Bank Limited (SIBL). Is my report and I worked in Social Investment Bank Limited.
Origin of the Report:
The main objective of the study is to gain practical knowledge apart from our institutional teaching and also to acquire knowledge about the practice of banking business. Also the prime objective of the study is to know the existing banking business in Social Investment Bank Limited.
The other objectives bellow:
To have an exposure on the banking environment of Bangladesh.
To study pre-reform, reform and present situation in the banking and Financial Sector of Bangladesh.
To gain experience on different functions of different department of the bank.
To identify the business prospects and performance of the bank through various department.
Assigned by the guide teacher, this report is prepared as partial fulfillment of MBA requirement.
Objective of the Report:
The principal intent of this report is to examine Credit Policy of SOCIAL INVESTMENT BANK LIMITED Bank Ltd. In particular the objectives are as follows:
- To have a glace at the commercial banking system in Bangladesh.
- To examine the present banking system in Bangladesh.
- To get acquainted with the loan structure, size, profile of sector wise outstanding position of loans and system of loan classification of SOCIAL INVESTMENT BANK LIMITED.
- To know the deposit behavior of NCBs, FCBs, PCBs and SOCIAL INVESTMENT BANK LIMITED bank and to cross-examine any structural changes regarding deposit behavior.
- To examine the credit operations by our commercial banking system.
- To explain the procedures, systems of credit management and appraisal of SOCIAL INVESTMENT BANK LIMITED Bank.
- To find out the nature and size of problem loans in SOCIAL INVESTMENT BANK LIMITED Bank.
- To find out the causes of problem loans.
- To analyze the effects of problem loan on income of SOCIAL INVESTMENT BANK LIMITED bank Ltd.
- To evaluate the various loans programs of SOCIAL INVESTMENT BANK LIMITED bank which includes Industrial, Trade and Commerce, Transport etc.
- To inspect the recovery of loans by SOCIAL INVESTMENT BANK LIMITED Bank.
- To examine whether the attributes of gook performance are observed in SOCIAL INVESTMENT BANK LIMITED bank.
Scope:
The report concerns about the Overall banking policy in SOCIAL INVESTMENT BANK LIMITED Bank. The study is made primarily only on the basis of the observation of SOCIAL INVESTMENT BANK LIMITED operations in its Principal Branch. This bank deals with all types of general banking operations, foreign exchange operations, investment operations and credit operations under the overall control of Bangladesh Bank and thus follows the regulation set by the Bangladesh Bank.
Methodology:
Methodology includes direct observation, face-to-face discussion with employees of different department, study of files, circular, etc and also practical work.
In preparing this report both Primary Data and Secondary Data sources of information have been used.
For collecting Primary Data:
I had to ask the respective officers. Others are like direct communication with the clients, exposure on different desk of the bank.
The primary source of data and information was the interviews with managers and officials of the Head Office and Principal Branch of Social Investment Bank Limited.
Necessary data were segregated from the source material and collected data were complied and processed to prepare the report.
The secondary sources are:
Annual reports and performance reports of the Bank
Various files and documents of Credit and industrial Credit Division of SOCIAL INVESTMENT BANK LIMITED .
Articles related to problem loans in different journals and magazines.
Study of files and documents of some default borrowers of the main Branch of SOCIAL INVESTMENT BANK LIMITED.
Some articles.
Different publication of Bangladesh.
Data sources
Primary sources of the data collections were direct observations, face-to-face interview with both the customers and the staff, obtaining responses from the customers through questionnaire. A model of the questionnaire is including in the appendix. Secondary data is collected from Annual Report, Booklets and credit manual of SOCIAL INVESTMENT BANK LIMITED Bank Limited and a report titled “Credit Policy” in study Bangladesh Small Industries and Commerce Bank Ltd.
Limitations:
The present study is not free from limitations. Those limitations are described in bellow:
Lack of secondary information:
The study could have been more representative if the banks could provide all the information is not available.
Limitation of scope:
This type of limitation was faced when collecting information about the study. Every organization has their own secrecy that is not revealed to others. While collecting data i.e. Interviewing the employee, they did not disclosed much information for the sake of the confidentially of the organization.
Limitation of time:
The area of banking operation is very large. I had been working in this bank about three months. This time is not enough to understand all the banking functions. Besides the employees are very much busy for tremendous workload, so they could not able to extend their cooperation properly.
Introduction:
Social Investment Bank Limited is a joint venture Shariah based bank, which became operational on the 22nd November 1995. As a corporate objective, SIBL has defined its operation in three different sectors – formal, non-formal and voluntary. While formal sector deals with general commercial activities as a scheduled bank, non-formal sector aims at ‘Empowering Family’ by creating investment opportunities for micro and SME clients. Voluntary sector offers Cash Waqf Certificate Scheme-an innovative financial product towards welfare of the mankind.
SIBL is operating three-sector Banking such as Formal, Non-formal and Voluntary sector. SIBL is beginning a new era of Islamic Banking having social, ethical and moral dimension in each of its activities ranging from credit to construction.
SIBL’s Vision
Social Investment Bank Limited started its journey with the concept of 21st Century Islamic participatory three sector banking model. Those are:
- Formal sector-commercial banking with latest technology;
- Non-Formal Sector-Family Empowerment Micro-Credit & Micro-Enterprise Programme and
- Voluntary Sector-Social Capital Mobilisation through Cash Waqf and others. ‘Reduction of Poverty Level’ is our vision, which is a prime object as stated in Memorandum of Association of the Bank with the commitment— ‘Working Together for a Caring Society.
SIBL’s Mission:
- High quality financial services with the latest technology.
- Fast, accurate and satisfactory customer service. Balanced & sustainable growth strategy.
- Optimum return on shareholders’ equity.
- Introducing innovative Islamic banking products.
- Attract and retain high quality human resource.
- Empowering real poor families and create local income opportunities.
- Providing support for social benefit Organizations-by way of Mobilizations of funds and social services.
ORGANOGRAM OF SIBL
Managing Director (MD)
Deputy Managing Director (DMP)
Senior Executive Vice President (SEVP)
Executive Vive President (EVP)
Senior Vice President (SVP)
Vice President (VP)
Senior Assistant Vice President (SAVP)
Assistant Vice President (AVP)
First Assistant Vice President (FAVP)
Senior Executive Officer (SEO)
Executive Officer (EO)
Principal Officer (PO)
Senior Officer (SO)
Management Trainee Officer (MTO)
Junior Officer (JO)
SIBL no more a “Problem Bank"
Social Investment Bank Ltd. (SIBL) has come out of problem bank list on November 05, Bangladesh Bank (BB) has informed that SIBL has earned remarkable progress in overall management and financial indexes. BB put SIBL in the problem bank list in October 2005 and asked SIBL to company with DOBBS (Directives Of Bangladesh Bank). SIBL Management with cooperation from all concerned has been successful to get desired progress in all the indexes of DOBBs.
A great change has occurred in the financial base of the bank. The capital of the bank as on September 2007 is Tk. 180.64 crore and 100% provision against debt has been preserved.
The bank has preserved provision of Tk. 40.24 crore against required 38.24 crore. Gross classified loan is 3.68 percent and net classified loan is 0.48 present. Thus the quality of assets of the bank has been improved significantly.
The adjusted capital shortfall of SIBL during its being listed as problem bank in 2005 was Tk. 64.71 crore and classified loan was 161.00 crore or 11.28 percent.
Bank's Chairman Abdul Awal Patwary has expressed hope that the management of the bank would continue their efforts to develop overall business in the days to come.
Managing Director K M Ashaduzzaman stated that because of release from problem bank list clients' confidence in the bank would increase and as such, in near future tremendous achievement would be possible in all business aspects.
Activities:
Social Investment Bank has efficient and experienced human resources for rendering better services to its clients along with modern technology.
Islami Shariah based banking activities of this bank are as follows:
Formal Sector
A. Deposit
Al-Wadiah Current: Deposit Account
Mudaraba Term Deposit Account
Mudaraba Notice Deposit Account
Foreign Currency Account
Cash-Waqf Deposit Account
Different Schemes Account
i) Mudaraba Monthly Profit Deposit Account.
ii) Mudaraba Hajj/Umrah Savings Account.
iii) Mudaraba Education Savings Deposit Account.
iv) Mudaraba Special Savings (Pension) Scheme Account.
v) Mudaraba Millionaire Scheme Account.
vi) Mudaraba Monthly Savings Based Term Deposit Account.
vii) Mudaraba Lakhopoti Deposit Scheme Account.
viii) Mudaraba Double Benefit Deposit Scheme Account.
ix) Mudaraba Foreign Currency Term Deposit Scheme Account.
B. Investment
Mudaraba- Trust Finance Partnership
Musharaka- Participation Financing/Equity Financing
Murabaha- Cost Plus Sale
Bai-Muajjal- Sale under deferred payment
Bai-Salam- Forward Purchase
Leasing-
The bank leases out machinery, transports, houses, ships etc. for an agreed period of time, the company being the legal owner and the lessee having the right to use the property for the duration of the contract.
Direct Investment-
This bank directly invests capital on medium and long-term basis in industry, agriculture, trade, transport, immovable property and for construction of house etc.
Hire Purchase-
In this system of business the bank invests for purchasing durable assists like machinery, equipment, transport, land and building along with the client with the stipulation that the client shall pay off the principal among with rent (at the agreed rate) in installment.
C. Foreign Exchange
To purchase and sell foreign currencies and carry on business of import through opening of L/C.
D. Remittance
The bank remits client’s money both at home and abroad, complete alt formalities of remittance in respect of Bangladeshis living abroad and other customers.
E. Special Banking Services
In addition to sale and purchase of foreign currencies the bank issues guarantees, accepts certificates and shares, accepts articles & valuable documents, for safe custody locker service, discharges responsibility as investment trustee, acts as clients’ agents for recovery of clients’ demand and carries on transactions on their behalf within the stipulated period, works as correspondent of local and foreign banks and other financial institutions, acts as banker to the issue on behalf of the companies, provides consultancy service to the customers and all other banking services.
F. Information Technology Services:
As regard information technology, SIBL has uploaded its website which gives easy access to the world of communication technology.
Non-Formal Sector
SIBL has been successfully operating Family Empowerment Micro-Credit & Micro-Enterprise programme under non-formal banking sector since the inception of the bank in 1995. Meanwhile, it has been able to create job opportunities among significant numbers of micro-credit & micro-enterprise borrowers under SMEs financing, as we define Micro-credit & Micro-enterprise programme as small products of SMEs financing. Many of those borrowers have been able to establish themselves as successful entrepreneurs and to graduate from micro-credit to micro-enterprise programme. SIBL has been implementing Micro-credit Programme with the support from ILO to eliminate child labour from garment sector in Bangladesh. SIBL and UNICEF have been jointly implementing Micro-credit Programme to extend credit facilities among the parents/guardians of the former garment child workers.
SIBL & JOBS projects, USA1D in a collaborative effort are creating easy access to business capital for the small & medium enterprises (SMEs), which is an emerging sector in the context of economy of Bangladesh. At SIBL, there is a provision for micro-credit borrowers to graduate into Micro-Enterprise Programme and successful micro-enterprise graduates have the opportunity to get investment from the formal banking sector. SIBL, as part of its social commitment, keeps on patronising the SMEs clients under the coverage of Family Empowerment Micro-credit & Micro-enterprise Programme to fulfill their diversified needs.
The brief description of the programmed already been implemented and are being implemented through the Non-formal & Voluntary Banking Sector is given below:
- Family Empowerment Micro-Credit Programme
- Family Empowerment Micro-Enterprise Programme
- Small and Medium Enterprises (SMEs) Programme
- Displaced garments child worker stipend disbursement programmed jointly with ILO.
- Micro-Credit Programme to the Garments, child worker adult family member (parents) jointly with ILO under project finance from governments of Italy and Norway.
- Access to capital & strengthening small medium and Micro-Enterprise Development Programme jointly with JOBS project, USAID.
- Financial assistance among the 100 parents/guardians of former garments working children under Project UNICEF to continue their education.
- Family Empowerment Micro-Enterprise Programme among parents/legal guardians of HTR (Hard to Reach) graduates to support their self-employment.
Islamic Voluntary Sector
In the voluntary sector SIBL has also introduced Cash Waqf Certificate, a new product for the first time in the history of banking.
Cash Waqf
Waqf is an Arabic word, the plural of which is Awqaf. It is meant for permanent donation/ endowment of fixed assets made by the effluent and rich people to be used for the welfare of the mankind for obtaining the spiritual benefit and satisfaction/blessing of Almighty Allah. The waqf properties are converted into income generating units and the income so derived is utilised as per instruction of the Waqif (the persons who made the Waqf) or on the basis of Islamic Shariah. Many of our ancestors made waqf of their valuable properties for the welfare of the mankind by establishing mosque, madrasha, eidgah, orphanage, graveyard etc. for spiritual attainment.
The term Cash Waqf may appear to be new to us. Waqf in the form of cash is called Cash Waqf. Cash Waqf provides a unique opportunity for making investment in different religious, educational and social services. Savings made from earning by the well-off and the rich people of the society is utilised in an organised manner in Cash Waqf. Income earned from such funds will be spent for different purposes like the purposes of the Waqf properties. The person who made waqf is called Waqif and to whom (persons or institutions) the waqf is made is called beneficiary.