It is my great pleasure to submit internship report on “Financial Growth and Risk Analysis of Islami Bank Bangladesh Limited” as part of BBA program of Sonargaon University for your kind consideration. I have endeavored to design this internship report as productive and design it as instructive as possible. I therefore announce that the Internship Report titled “Financial Growth and Risk Analysis of Islami Bank Bangladesh Limited” solely arranged by me and submitted to the Department of Business Administration, Sonargaon University (SU) for obtaining the BBA degree.
This is to certify that Rabiul Islam, ID: BBA a student of BBA program at Sonargoan University, completed the Internship Report titled "Financial Growth and Risk Analysis of Islami Bank Bangladesh Limited" under my supervision. In-depth knowledge and great interest of my supervisor in the field of Finance to carry out this practical Report. His endless patience, scientific guidance, constant encouragement, constant and energetic supervision, constructive criticism, valuable advice, reading many inferior drafts and correcting them at all stages have made the completion of this Internship Report possible.
I would like to thank our entire coursemate in Sonargaon University, who participated in this discussion while completing the internship report. I incredibly pay my isolation to all the writers and journalists whose works help me to produce this unique internship report. This internship report examined and depicted the current status of Islami Bank Bangladesh Limited and it also assessed its comparative performance in terms of financial growth and risk management over the past five years.
INTRODUCTION
- Introduction
- Objectives of the Report
- Methodology of the Report
- Scope of the Report
- Limitations of the Report
The primary purpose of this report is to complete my BBA program successfully and gain awareness about the Islamic banking system in Bangladesh. Mainly secondary sources will be used to prepare this report considering the COVID situation where health and safety is essential. The validity of this report only for the banking industry in Bangladesh with the concern of the Islamic banking system which is analyzed here in this particular report.
This report will assist those who wish to delve further into the Islamic banking system in Bangladesh, especially IBBL, with its critical analysis of financial growth and organizational risks over the period of the past five years, indicating a strategic view and ideas for future prospects. in Bangladesh based on this analysis. Although the consideration I have made is extremely important and has cost me a tremendous amount of work in preparing this report, there are some obvious limitations that hinder a smooth working process. The COVID-19 pandemic is one of the biggest obstacles to collecting primary data for this report.
For this reason, large-scale analysis for this report cannot be done using only publicly available information.
ORGANIZATIONAL PROFILE
These are Islamic Shariah financing banks analyzed in this consideration and these are moderately fully leveraged Islamic banks within the administration of an account industry in Bangladesh.
Islamic Bank Bangladesh Limited (IBBL)
- History of IBBL
- Vision Statement of IBBL
- Mission Statement of IBBL
- Core Values & Commitments of IBBL
- Strategic Objectives of IBBL
- Products & Services of IBBL
The vision of IBBL is always to strive for superior financial performance, to be considered a leading Islamic bank in terms of reputation and performance. To achieve the desired goal is to establish and maintain modern banking techniques, to ensure the soundness and development of the financial system based on Islamic principles, and to become a strong and efficient organization with highly motivated professionals working for the good of the people, on accountability, transparency and integrity to ensure stability of financial systems. It always tries to encourage saving in the form of direct investment and tries to encourage investment mainly in projects that are more likely to lead to more employment.
To establish Islamic banking through the introduction of a welfare-oriented banking system and also to ensure equality and justice in all economic activities, to achieve balanced growth and equitable development through diversified investment operations, especially in the priority sectors and less developed areas of the country. To promote socio-economic development and financial services to the low-income community, especially in rural areas. Continuously improving products and services to meet the changing needs of the customer base to maintain market share.
Islami Bank Bangladesh Limited operates Al-wadeah current account according to Al-wadeah principles. The bank undertakes to repay money deposited in these accounts at the request of customers. On the other hand, the bank takes permission from customers for the bank to use their money.
In the perspective of these accounts, the Bank is 'Mudarib' and customers are 'Shahib Al-Mal'. On behalf of depositors, the Bank invests their deposited money and distributes minimum 65% of investment income earned through the deployment of Mudaraba funds among Mudaraba depositors after the close of the year.
ANALYSIS & EVALUATION OF FINANCIAL INFORMATION
- IBBL-General trend and growth of Investment
- IBBL-Growth in Import & Export Business
- IBBL-Financial Performance
- IBBL-Operating Performance
- IBBL-Statement of Financial Position
- ANALYZING RISK
- Risk analysis Systems in IBBL
- Investment Risk
- Equity Price Risk
- Liquidity Risk and 6. Value at Risk (VaR) Liquidity Risk
There are 8 sectors where IBBL invests, among which is the highest investment in the Industrial sector. On the other hand, in case of Return on Equity went the same way where in 2019 positioning was with second highest and minimum in the 2015 and ROE was the highest in 2018. Statement of Financial Position is one of the five Financial Statements that report three main important financial information of the entity at the end of the balance sheet date.
The bank's risk management covers a wide spectrum of risk issues, and the 6 (six) core risk areas in banking, i.e. a Risk Management Committee (RMC) has been formed to ensure correct and timely risk management in all areas of the bank. The committee submits decisions and recommendations to the board quarterly with a view to further review and guidance in the interest of the stakeholders.
To streamline the risk management system of the bank, a separate department called "Risk Management Department" is formed. In addition, active work is being done on a Management Level Risk Management Committee to focus the entire risk management system of the bank. In this regard, banks are very concerned about the business risk and its proper management so that the risk and return can be optimized.
IBBL Bank has its own clear risk management objectives and a well-defined strategy to address them, through risk management processes related to basis risk and capital adequacy and includes all activities that affect the profile of its risk. Market risk refers to the risk of losses to the fair value of financial assets, liabilities and off-balance sheet items resulting from unfavorable changes in market variables, which may adversely affect the financial position. Operational risk is the potential loss resulting from a breakdown in the Bank's systems and procedures and corporate governance practices resulting in human error, fraud, failure, reputational damage, delay in performance or compromising the Bank's interest by employees.
According to this approach, the average gross income of the last three years is taken as a determinant for operational risks. In the case of stress testing, the following risk factors are taken into account: .. i) Increase of NPI (in general). ii) Increase in NPI due to non-payment of large main borrowers iii) Decrease in forced sale value of mortgaged collateral iv) Negative shift of categories of NPI .. v) Increase in NPI in particular in 2 (two) sectors: RMG and Textiles 2. Profit Rate Risk .. i) Simple Sensitivity Analysis ii) Duration GAP Analysis 3. In Bangladesh, Sharia based money market is yet to flourish and is still under development.
This refers to the risk of a potential earnings disadvantage due to revenues and/or costs underperforming plant targets.
FINDINGS AND INTERPRETATION
Price Earnings Ratio of IBBL
The higher the PE ratio, the greater the growth of the organization, so shareholders expect greater growth of the organization.
Gross Profit Ratio of IBBL
RECOMMENDATIONS AND CONCLUSION
Recommendations
To ensure progress, banks need to set up external oversight sheets and incorporate people in the selection who are preparing for tremendous progress. Bank's IBBL must have aggressive marketing and encourage people in Bangladesh to attract in Shariah banks. Strong monitoring will help reduce risk, and the top authority must focus on developing its risk management system.
Ratio analysis says that IBBL needs to balance its cost management system against its revenues and perform accordingly to improve financial growth. IBBL the banks should be dynamic so that their dependency income and investment method can be diversified and alternative investment plans can be set up. Customizing products and services would have a great appeal to customers and the services can be offered from different angles, resulting in high financial growth.
In this highly competitive market, Value for Money (VFM) must be ensured to bring most customers to this bank financing considering the effectiveness and efficiency of the services. Ethics is the most important topic in the corporate world, and the bank must confirm the ethical view towards its services and customers to have a positive life and transparency. It is always very difficult to make a specific comment analyzing only the Shariah banking system among the 8 in Bangladesh, and also avoiding advertising banks in this sector.
From the above analysis and information, it is crystal clear that although Islami Bank Bangladesh Limited has the larger number of branches, employees and customers, its profitability ratio was not too strong compared to Social Islami Bank Limited. There are enormous opportunities for further growth for the bank, as many people are still leaving banking in Bangladesh. Therefore, we are all optimistic about the future strengthening of these organizations, especially where Islamic Sharia is followed, considering the religious faith in Bangladesh and efforts with the right aspect.
Acronyms
