an appraisal of social investment bank limited (vvi)

8/11/2019 an Appraisal of Social Investment Bank Limited (VVI)

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Origin of the report

The internship program is an integral part of the MBA program that all the students have to

undergo of University of Chittagong. The students are sent to various organizations where they

are assigned to one or more projects. At the end of the program, the internships are required to

place the accomplishments and findings of the project through the writing of the internship

report covering the relevant topics. During this program, supervisor guides each student one

from the university and the other from the organization.

This report is the result of a 3 months (February 10 to May 10, 2004) internship program in

Social Islami Bank Limited (SIBL).

This report contains Introduction about the report-

In Chapter 1: Background of Islamic economy and Islamic banking.

In Chapter 2: To present an overview of SIBL.

In chapter 3: To appraise the principal activities of SIBL.

In chapter 4: To appraise performance evaluation of SIBL.

In chapter 5: Online Banking Operation of Social Investment Bank Limited.

In chapter 6: To Identify problems of SIBL.

In chapter 7: To suggest suggestion for the development of SIBL.

In chapter 8: The topic of the report has been consulted & directed by the internship supervisorfrom University of Chittagong.

Objectives of the Study

This study is aimed at providing me invaluable practical knowledge about banking operation

system especially Islamic banking in Bangladesh. It will also help me to develop my concept of

banking and it operations. The objectives are:

To relate theoretical knowledge with practical experience in several functions of the bank

To be acquainted with how bank perform its operation

To know about the modes of investment of Islamic Banks

To study strengths & weakness of SIBL compares to competitors

To present my observation and suggestions to the bank

To make myself more confident and active in future to handle my job

Purpose


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Knowledge and learning become perfect when it is associated with theory and practice.

Theoretical knowledge gets its perfection with practical application. As our educational system

predominantly text based, inclusion practical orientation program, as an academic component is

as exception to the norm. As the parties; educational institution and the organization

substantially benefit from such a program, it seems a win-win situation. It establishes contracts

and networking contracts. Contracts may help to get a job. That is, students can train andprepare themselves for the job market. A poor country like Bangladesh has an overwhelming

number of unemployed education graduates and Postgraduates. As they have no internship

experience they have not been able to gain normal professional experience or establish

networking system, which is important in getting a job. Thats why practical orientation is a

positive development in professional area. Recognizing the importance of practical experience,

School of Management and Business Administration has introduced a three months practical

exposure as a part of the curriculum of Bachelor of Business Administration program. In such

state of affairs the present aiming at analyzing the experience of practical orientation related to

an appraisal of SocialIslami Bank Limited, Alanker Moor Branch, Chittagong.

Scope

This report will be dealing with an appraisal of Islamic banking system, its history and

mechanism, policies, and appraisal of Social Investment Bank Limited.

Methodology

For collaborating the data and information collected through primary and secondary sources I

have used both qualitative and quantitative method which contains the past, present and future

situation of Islamic bank system in Bangladesh specially Social Islami Bank Ltd. During mystudy I followed some methodology to find out the fact and feature of the bank which are given

as follows:

a) Area of study:

My project was limited in overall banking function of SOCIAL ISLAMI BANK LTD. I studied all

the main three functional areas of the bank. They are:

i) General Banking.

ii) Investment Area.

iii) Foreign Exchange Area.

b) Sources of Data/Information:

I have collected my information/data from the following sources, which helped me to make this

report. The source has divided by two parts. Such as


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Primary source and

Secondary source

I used both the sources.

Primary Sources:

Primary sources include interviews and conversation with officers and executives of the bank of

different divisions and department.

Secondary Sources:

Secondary sources of information include annual report, general report, investment manual,

general banking manual, foreign exchange manual, selected books journals and other

publication etc.

Analysis of data

Two approaches have been mainly used in this report.

Conceptual Approach

Empirical Approach.

These two approaches are discussed below:

Conceptual Approach:

A theoretical section is given in this report (i.e. the organization part) to give an insight various

information concerning the financial function. It is given in relevance with the organization in

context i.e. Social Islami Bank Limited (SIBL). A background of SIBL is given to facilitate the

understanding of this report. Every single portion is discussed in order to understand the

empirical section.

Empirical Approach:

This refers to the information that has been directly collected and interpreted from the survey on

Social Islami Bank Limited (SIBL). The report is prepared by interviewing the officials of SIBL.

The reports of SIBL and documents are also been studied to do the report.

Time Allocation


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activities needed for economic prosperity. Performance-based arrangements, like profit sharing

or partnership, represent the most cooperative form of beneficial agreements, and thus are highly

encouraged in Islam. Responsibility means that each individual is entitled for reward or return

based on his effort and contribution. Thus gambling and lotteries are not permissible. Gambling

lows an individual to gain based on pure luck, not on merit or effort. It shifts wealth blindly among

participants leading to improper distribution of wealth. Gambling is a clear form of zero-sum game

where one party wins only if the other loses, and causes hatred and enmity among participants. A

society where lotteries or gambling-like activities prevail is a zero-sum society, where the winner

takes all, and the rest is doomed to fail.

Islamic Economics:

Islamic economics is a framework for studying economic activities that allow mutual benefit of

exchange to be realized. It provides proper tools and techniques for evaluating economic

decisions, showing when and how to achieve win/win outcomes and avoid win/lose or lose/lose

ones. Islamic economics is based on the principle that Allah, the Almighty created this world with

plenty of resources that satisfy the needs of everyone. Thus one persons success is not

necessarily achieved at the expense or excluding of the success of others. This win/win

framework leads to better economic behavior and performance, and thus promises better future

for mankind.

Islamic Banking:

Islamic banking is an inseparable part of Islamic economy. During the fiftys it was only a subject

matter of research and was limited to the writing of scholars and philosophers. During the sixtys

actual experiment were made and in the seventys Islamic Banking Institutions started gaining

strength. The eightys and ninetys are the period of consolidation and now Islamic Banking is

coming up as the only welfare banking system of the modern world.

There has always been a desire to establish financial institution to operate as per the tenets of

Islamic Shariah. A successful Islamic banking venture in My Gamer, Egypt was launched in 1963.

Subsequently, Islamic banking movement achieved steady progress and assumed significant

dimension and role with the establishment of the Nasser Social Bank (1972), Dubai Islamic Bank

(1975), Islamic Development Bank (IDB) (1975), Faisal IslamicBank in Egyptand Sudan (1977).Emergence of the Islamic Development Bank as and International Islamic Financial Institution

with a view to involving all the Islamic Countries in the establishment of Islamic Banks and

Financial Institutions was considered as a milestone in the history of Islamic Banking. In August

1974, Bangladesh signed the charter of Islamic Development Bank and committed itself to

reorganize its economic and financial system as per Islamic Shariah.


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Earlier in November 1980, Bangladesh Bank, the countrys central Bank sent a representative to

study the working of several Islamic Banks abroad. In January 1981, at the 3rd Islamic summit

conference held at Mecca and Taif, a great emphasize were given on that the Islamic countries

should develop a separate banking system of their own in order to facilitate their trade and

commerce.

In November 1982, a delegation of IDB visited Bangladesh and showed keen interest to

participate in establishing a joint venture Islamic Bank in the private sector. They found a lot of

work had already been done and Islamic banking was in ready for immediate introduction. Islamic

Economic Research Bureau (IERB) and Bangladesh Islamic Banker Association (BIBA) made

contributions towards introduction of Islamic Banking in the country.

Definition of Islamic Bank:

Islamic banking is a part and parcel of Islamic Economy. It is an interest free financial institute,

which is based on Islamic Shariah. OIC (Organization of Islamic Conference-1978) defined

Islamic Bank as a financial Institution whose statutes, rules and procedures expressly state its

commitment to the principles of Islamic Shariah and to the principles of Islamic Shariah and to the

banking of the receipt and payment of riba (interest) on any of its operations.

Islamic Banking in Bangladesh

Growth and Present Status:

Background of Islamic Banking in Bangladesh:

Bangladesh is the third largest Muslim country in the world with around 130 million population

and 90 percent of them are Muslim. The hope and aspiration of the people to run Banking system

on the basis of Islamic Principles came into reality after the OIC recommendation of its Foreign

Ministers meeting in 1978 at Senegal to develop separate Banking system of their own. After 4

years of that declaration in 1983, Bangladesh established 1st Islamic Bank. At present, in

Bangladesh, out of 51 banks, 6 full-fledged Islamic Banks and 2 Islamic Banking Branches of two

conventional Banks have been working in the private sector on the basis of Islamic Shariah.

Islamic Banking system has been designed and developed to prevent exploitation, ensure justice

and growth in the society. However, Islamic Banks in Bangladesh since their inception have been

facing multifarious problems in their operation, which needs to be carefully addressed.

Development of Islamic Banking in Bangladesh:

At present six full fledged Islamic Banks viz.

IslamiBank Bangladesh Limited (IBBL).

Al-Baraka Bank Bangladesh Limited (ABBL).

Al-ArafahIslami Bank Limited (AIBL).


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First Security Islami Bank Ltd.

ICBIslamic Bank Limited

SocialIslami Bank Limited (SIBL).

ShahjalalIslamic Bank Limited (SBL).

Shamil Bank of Bahrain EC (Islamic Bankers)

And two Islamic Banking Branches of prime Bank Limited and two Islamic banking branch of

EXIM Bank Ltd. are operating in Bangladesh as per Islamic Shariah.

The first Islamic Bank, Islami Bank Bangladesh Limited was established in March, 1983 to

conduct banking activities on the basis of the basic tenets of Islamic Shariah.

Later, Al Baraka Bank Bangladesh Limited was established as the second interest free Islamic

Bank in March 1987.

The third and fourth Islamic Banks of Bangladesh namely, Al-Arafah Islami Bank Limited & Social

Islami Bank Limited has started functioning in Bangladesh from September 27, 1995 & November

25, 1995 respectively.

At last, fifth private sector Islamic Bank Shahjalal Bank Limited has been started banking

operation very recently from Mid-May 2001.

The only Foreign Islamic Bank Shamil Bank of Bahrain e.g (Islamic Bankers) which is the

largest Islamic Bank of the world opened a Branch in Dhaka, Bangladesh, in August 1997.

Besides, two Islamic Banking branches of Prime Bank Limited also started operation on Islamic

Shariah basis from 18th December, 1995 & 17th December, 1997 respectively and two Islamic

banking branch EXIM Bank started operation from on mid-2002.


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An overview of Social Investment Bank Limited:

3.1 Corporate information:

Social Islami Bank Limited (SIBL) was established in the year 1995 as a public limited company

which is engaged in Shariah based commercial banking in the country and its modus-operandi

are substantially different from other conventional banks. This is the second generation pioneerIslamic Bank in this country to introduce online banking facilities to its customers.

Name of the Company Social Islami Bank LimitedLegal Form Public Limited CompanyCompany Registration No C-28763(44)/95

Authorized Capital Taka 10,000,000,000Paid up Capital Taka 703,14,15,640Registered Office City Center, Level 19, 20, 21 & 22, 90/1 Motijheel C/A, Dhaka-1000

Phone: PABX 88 02 09612001122FAX: 88 02 9568098Email:[email protected]:www.siblbd.comSWIFT: SOIVBDDH

Tax Payer IdentificationNo

035-200-4971

VAT Registration No 9011046380 Area Code: 90101Credit Rating Agency Emerging Credit Rating Ltd.

Auditors M/S Kazi Zahir Khan & Co.Chartered Accountants, 67/4, Pioneer Road, Kakrail, Dhaka-1000

Chairman Major (Retd) Dr. Md. Rezaul HoqueManaging Director Md. Shafiqur RahmanCompany Secretary Md. Humayun KabirChief Risk Officer Md. Yunus AliChief Financial Officer Walid Mahmud Sobhani, FCMANumber of Employees 1802Number of Branches 94 (Ninety Four)Number of Shareholders 82,614Investors Enquiry Share Division

City Center, Level-19, 90/1 Motijheel C/A, Dhaka-1000 Phone:PABX 88 02 09612001122

For SIBL SecuritiesLimited(a subsidiary of SIBL)

Managing Director3rd floor, 15 Dilkusha C/A, Dhaka-1000

For SIBL InvestmentLimited(a subsidiary of SIBL)

Managing Director3rd floor, 15 Dilkusha C/A, Dhaka-1000

For Offshore Banking Off Shore Banking Department
mailto:[email protected]:[email protected]:[email protected]://www.siblbd.com/http://www.siblbd.com/http://www.siblbd.com/http://www.siblbd.com/mailto:[email protected]


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48 Kamal Attaturk Avenues, Banani, Dhaka-1213Phone: PABX 88 02 09612001122

Listing Status (Shares) DSE (Dhaka Stock Exchange):Symbol: SIBL, Listing Date: 18.11.2000

CSE (Chittagong Stock Exchange):Symbol: SIBL, Listing Date: 04.10.2005

Market Price as on 31.12.2013DSE: Taka 13.30 Category: A, CSE: Taka 13.20, Category: A

Background of Social Islami Bank Ltd.

Introduction:

Social Islami Bank Ltd. (SIBL) became operational on 22nd November, 1995 with a clear

manifesto to demonstrate the operational meanings of participatory economy, banking and

financial activities as an integrated part of an Islamic code of life. It is an alternative concept of

Islamic Banking with a unique human face approach to credit and Banking based on interest

free economics and financial transactions and income generating program for the millions of the

urban and rural poor and a profitable investment option for the rich to invest, earn and live in a

better society with greater security and peace at the operational level, 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, trading to transport, farming to fishing, manufacturing to mining and

so on. Some renowned personalities and institutions are sponsors and directors of this bank,

specially, the Founder Chairman Prof. Dr. M. A. Mannan, who is an internationally reputed

Islamic thinker and Professional Economist. He served in different important capacities in

different International Organizations including Asian Development Bank and Islamic

Development Bank. With his heartiest efforts and inspiration Ex-Secretary General of O.I.C Dr.

Hamid AI-Gabid and Deputy Speaker of Saudi Arabia and former Secretary General of Rabeta,

Dr. Abdullah Omar Nasseef, and Ex-Commerce Minister of Saudi Arabia Salah Jamjoom took

part in the establishment of the Bank. Besides, International Solidarity Fund (IFS) and

International Islamic Relief Organization (IIRO) also took part as Sponsors.

Vision

Working together for a caring society

Mission

Establishing Three Sector Banking Model


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Transformation to a service oriented technology driven profit earning Bank

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 resources

Empowering real poor families and creating local income opportunities

Providing support for social benefit organizations by way of mobilizing funds and social services

Strategic Objectives

Transformation into a service-oriented technology-driven profit earning bank

Ensure fast, accurate and best-in class customer services with customers satisfaction

Balanced and sustainable growth strategy

Optimum return on shareholders equity

Introducing innovative Islamic Banking Products

Attract, motivate and retain high quality human resources

Empowering real poor families and creating local income opportunities

Providing support for social benefit organizations-by way of mobilizing Funds and social

services

To achieve global standards in Islamic Banking

To invest in the priority sector for the overall economic development

Ensure best CSR (Corporate Social Responsibilities) practices

Ensure Green Banking

Commitments

To the Shariah

To the Regulators

To the Shareholders

To the Nation


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To the Customers

To the Employees

To the other Stakeholders

To the Environment

Code of Conduct for the Employees

Adhere to the Shariah Principles

Adhere to the disciplinary measures of the bank

Adhere to applicable laws and regulations during performance of duties

To inform the customers about the benefits and risks of the products and services

offered to them

To offer unbiased and fair service to the customers receiving the same services

Not to disclose the secrets of their customers and the banks which they come to learn by

virtue of their positions and titles to anyone other than those persons and authorities whoare explicitly authorized under laws

Not to cause any loss of reputation of the bank during works and attitudes

Not to be engaged in any activity that can be classified as personal business

Not to behave in contradiction with the principles of justice, integrity, honesty, reliability

and social responsibility

To cooperate with other employees for common purposes through building a courteous

and diligent communication during their fulfillment of duties

Not to use the banks assets and resources unproductively and outside the designated

purpose

Not to derive any personal benefits both from their own job potentials and from potentialsof their customers by using their positions and titles

To refuse all such benefit offers immediately and to inform such offers to the competent

authorities and to their superiors

Not to be involved in relations with the customers such as borrowing-lending, being

guarantor and opening common accounts with the customers which do not correspond

with ethical principles

Not to accept presents from the current or potential customers, other than those

presents accepted by the bank personnel under the established practices in the bank

To be aware of his accountability regarding the duties assumed during the performance

of the services Not to assume any position in any private and public organization other than

associations, foundations, cooperatives, and similar organizations without the approval

of his bank

Ethical Principles of SIBL

Objectivity


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Just and equitable

Reliability

Transparency

Observing Social Benefit and Respect to Environment

Fighting with money laundering

Insider Trading Relations with public organizations, regulators and other institutions

Personnel behaviors

Competition

Honesty

Impartiality

Advertisements and Announcements

Customer complaints

Security

General employee qualities

Employment and career development Working environment

Job Descriptions

------------------------------------------------------------------------------------------------------------------

ISLAMI SHARIAH BASHEL BANKING ACTIVITIES OF THIS BANK AREAS FOLLOWS

Formal Sector:

A. Deposit

AI-Wadiah Current Deposit Account

Mudaraba Savings Deposit Account

Mudaraba Term Deposit Account

Mudaraba Notice Deposit Account

Foreign Currency Account

Mudaraba Monthly Profit Deposit Account

Mudaraba Hajj/ Umrah Savings Account

Mudaraba education Savings Scheme Account

Mudaraba Special Savings (Pension) Scheme Account

Mudaraba Millionaire Scheme Account

Basasthan Savings Account

Social Fund Deposit Account

Shelter Finance Deposit Account

Cash-Waqf Deposit Account

Voluntary Sector Development Deposit Account


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B. Investment

Mudaraba-Trust Finance Partnership

Musharaka-Participation Financing /Equity Financing

Murabaha- Cost Plus Sale

Bai- MuajjalSale under deferred payment

Bai- SalamForward Purchase

Leasing -The Bank leases out Machineries, Transport, Houses, Ship 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 houses etc.

Hire Purchase- In this system of business the bank invests for purchasing durable assets like

machineries, equipment, transport, land and building etc. along with the client with the stipulation

that the client shall pay off the principal amount 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

This bank remits clients money both at home and aboard, completes all formalities of

remittance in respect of Bangladeshi living abroad and other customers.

E. Special Banking Services:

In addition to sale and purchase of foreign currencies the Bank issue Guarantees, accept

certificate and shares, accept articles & valuable documents, for safe custody locker service,

discharge responsibility as investment trustee, act as clients agents for recovery of clients

demand and carry on transactions on their behalf within the stipulated period, work as

correspondent of local and Foreign Banks and other Financial institutions, act as; Banker to the

issue on behalf of the companies, provide consultancy service to the customers and all other

Banking Services.

F. Special services for Bangladesh living abroad :

Provide financial assistance to the Bangladeshis for the travel to the place of employmentoutside the country, prepare projects for investment of wage earners,accept housing projects and

provide other necessary services to them.

G. Social Fund

The Social investment Bank considers man not with money but with a human face approach.

So, this Bank is firmly committed to provide a human face approach in all its activities. This Bank


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builds a Social fund with the part of the profit earned by the bank and collects all kinds of gifts,

Zakat and Sadakah from clients. This fund is invested in projects for betterment of the less

fortunate and poor people of the society.

Non-Formal Sector :

The Banks special program is directed mainly to up-lift the socio-economic conditions of rural

and urban poor. In order to achieve this objective, Social Investment Bank Ltd. is involved in the

mobilization and utilization of local resources and the surplus labor mainly from within and

provide employment opportunities to the unemployed and the landless besides investing in

N.G.O. activities, educational, health expansion activities etc. Social Fellowship Program for

Students has already been introduced; Family health service cheque is being introduced.

Non-Formal Banking Sector:

i) Family Empowerment Micro Credit Program

ii) Family Empowerment Micro Enterprise Program

iii) Student Social Fellowship Program

iv) Social Fund Investment and its utilization

v) Rotating Family Savings and Credit Net (RFSCN)

vi) Non-formalRealLifeSchool of Management

vii) Displaced Garments Child Worker Student Stipend Disbursement Program

Islamic Voluntary Sector :

This Bank has a special program of development of various religious and social service orientedinstitutions. Within this program, Mosque, Maktab, Waqf, Charitable organizations etc. will be

modernized and activated. All properties under this program will be utilized in productive activities

on participation basis. Besides, Hajj (pilgrimage) and Kurbani (sacrifice of animals according to

dictates of Islam) schemes are included in the program of Social Investment Bank Ltd Cash Waqf

Certificate has already been introduced for the first time in history. Various methods of

compulsory and voluntary Islamic distribution of finance, such as, Zakat, Sadakah, Waqf etc. will

be institutionalized

Voluntary Banking Sector:

i) Social Capital Market Operation Program:

a) Cash Waqf Certificate

b) Mosque / waqf Property Development Bond

c) Mosque / waqf Property Development Quard-e-Hasanah Certificate

d) Non-Muslim Trust Property Development Bond


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ii) Mosque / waqf Property Development Scheme

iii) Sabuj Haat Project

iv) Non-Muslim Trust Property Development Scheme

Model of Social Investment Bank Limited

Natures and Scope:

Social Investment Bank Ltd. (SIBL) intends to demonstrate the operational meanings of

participatory economy, banking and financial activities as an integrated part of code of life. It is an

alternative concept of Islamic Banking with a unique human face approach to credit and banking

based on interest-free economic transaction, mutual participation and sharing of profit and loss

through various modes of finance and humanism as reflected in its general name.

In the context of labor-surplus economy of Bangladesh, it represents a comprehensive alternative

concept and an operational model meant to combine together: (a) real material benefits, (b)

visible social advantages and (c) clear spiritual vision-all three in one package to the benefit of

not merely its clients and shareholders but also to the advantages of vast poor masses at the

grass-root level. Because Islam knows no distinction between a spiritual and temporal realm nor

between religious or secular activities in a society. Thus, there will be clear manifestation of

human and moral dimension in each of its interest-free banking, financial and economic Activities

ranging from credit to construction, trading to transport, farming to fishing, manufacturing to

mining and so on. This Bank is expected to offer an alternative income-generating program for

the millions of urban and rural poor and a profitable investment option for the rich to invest, earnand live in a better society with greater security and peace.

At the operational level, this Bank will provide a clear linkage among three sector of the real

economy :(a) monetized formal sector, (b) non-monetized informal sector and (c) Islamic

voluntary third sector. It will offer the modern banking services and undertake projects in the

formal, non-formal. Voluntary third sector as well as provide special services for the Bangladeshi

living abroad. The concept of depositor in this model of social banking Is different. Here

depositors participate in a variety of participatory modes of financial, commercial and project

specific investment activities such as profit- loss-sharing, rent-sharing, cost-plus trading,dividend- sharing hire-purchase arrangements, installment sale, forward of Salam sale as well as

various financial instruments (i.e., Mudarabah Bond), Co-operative Insurance (Takaful) and so

on.

It offers a socio- economic action program that conveys life in its totality so that it will not only

generate economic and social opportunities for work but also to foster the spirit of voluntary


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sharing and participation, collective social responsibility, mutual concern and reliance rather than

self-reliance likely to promote acquisitive behavior and individualism. This involved participation is

expected to create an environment of economic security and viable social peace through a sense

of belongingness that, in turn, breeds loyalty and encourages people to do their best sense.

Each project is to be designed in a manner so that income earning, spending and non-spending

activities become economic, social and moral necessities all at one, Work is viewed as an

extension of prayer through the diverse programs of this Bank. This comprehensive economic

and social banking program goes much beyond the mere replacement of interest rate by profit-

sharing ratio. It is expected to introduce inter-dependency and mutual concern into the life-style,

effecting the behavior of savers, investors, consumers, producers, labors, farmers, poor and rich

members of the society. The bank is expected to provide and institutional frame work for

implementing these, ideas, Ideas die without institution.

Operational Strategies:

This Banks program will be directed mainly to uplift the socio- economic conditions of rural and

urban poor with a view to eventual elimination of poverty. In the process, this Band intends to

empower the family as a basic unit of the society. Thus investment program of this Band will be

geared to generate profits, a percentage of which will be set aside to support social projects on a

non-profit basis. Thus all activities of the Bank will be subject to social Assignments, thereby

making social and moral preferences transparent and revealed in all its financial and economic

operations. The concept of social welfare will then have a different meaning. Here right will be

linked to duties. The operational strategies of the Band would, therefore, involve mobilization and

utilization of:

1. Local resources at the grass-root level mainly from within;

2. Surplus labor wherever possible;

3. Human and money capital of beneficiaries of earlier programs;

4. Unemployed and underemployed in the informal sector;

5. Islamic voluntary sector and voluntary labor for social capital accumulation and welfare;

6. Adoption of class-harmony extended family approach to industrial relations through employment

buy participation; and

7. Participation of women, minorities, and people or other religions to operationally the concept of

brotherhood of man and humanism.

The management of such a Bank would mainly be participatory in nature so that employees feel

that the enterprise belongs to them.

The program of this Bank would include commercial, agricultural, small industrial, educational,

health and grass-root level social banking activities. The will be designed in a manner so as to

make finance, production, marketing, training and moral suasion in one package. While basic


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human endowments and God-loving or God-fearing criteria will be used as fundamental

collateral, in all operations of this Bank, it will give particular emphasis on programs dealing with

the problem of absolute rural and urban poor, the various mechanics of partnership, equity-based

and profit-sharing operations (i.e., Mudarabah, Musharaka, Murabaha) and other tools will be

operational zed in manner so that economic, human and moral dimensions are clearly manifested

in order to hive them a distinctive character of Islamic finance.

Seven Distinctive conceptual features:

At the conceptual level, seven distinctive features of this Bank are as follows:

1. To develop an alternative human face approach to credit and finance based on participation and

sharing of profit and loss.

2. To implement projects, targeting absolute poor on a priority basis;

3. To involve the poor and all beneficiaries of the program in the recycling process for mitigating the

poverty of relatively less fortunate people around him though contribution into a social Fund.

4. To foster the notion of sharing and participatory management designed to raise the level of self-respect and mutual reliance rather than self-reliance likely to promote individualism;

5. To raise the level of human qualities and potentialities of the participants of the program through

required de-education, re-education, neweducation and programs for non-formal training onthe

job;

6. To provide a clear sense of economic, social and moral purpose to each of the participants of the

Banks programs; and

7. To design and implement programs that conveys life in its totality with a view to developing a

sense of humanism and a caring society.

Ten unique operational features:

At the operational level, ten unique features of this Bank are as follows:

1. To develop a built-in provision for a contribution to a Social Fund in all financial contracts and

transactions with the Banks clients either on individual or group or family basis as well as to

operational zed the notion of integration between secular economic and non-secular activities.

2. To involve local public and workers in the decision-making process in the management of cottage,

small or medium scale industries. The poor will be placed at the focal point of an integrated

package.

3. To develop training program for generation and updating the required skill of the employs.

4. To enable selected target groups of people to have an access to non-formal banking facilities on a

continuous basis.

5. To identify and execute finance and business programs / deals involving absolute poor and

destitute people having no physical asset as collateral.

6. To organize door-todoor mobile banking.

7. To develop income-generating programs specially suited for women and disadvantages groups of

minority too.

8. To design programs for utilizing surplus labor as well as voluntary labor services in rural and urban

areas.


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9. To organize programs intended to institutionalize the various obligatory and voluntary tools of

Islamic distributive measures such as Zakat, Sadaqa, Waqf Fund, etc.

10. To establish links between the formal, informal and voluntary sectors of the real people in area

economy.

AT A GLANCE OF SOCIAL INVESTMENT BANK LIMITED

Followings are the important historical events of this unique model Bank:

February 02, 1989: The concept and three-sector model of Social Investment Bank Limited was

formally presented and discussed with his Excellency Late. Prof. Dr. Ahmed Al- Nagger of Egypt,

who is considered to be the father of modern Islamic Banking as well as Prof. Dr. A. Wadoed

Shalaby of AL- Azhar University, Cairo.

April 21, 1989: The concept of this Bank was presented and then a series of discussions took

place with His Excellency Dr. Abdullah Omar Nasseef of Saudi Arabia, Vice Chairman, Majlish e-

Shura, the Kingdom of Saudi Arabia, former President of the King Abdul Aziz University and

Secretary General of the World Muslim League.

July 04, 1989: This model of Banking was presented and then a serious of discussions took

place with His Excellency Dr. Hamid AL- Gabid, Secretary General of the Organization of Islamic

Conference (OIC) of 53 Muslim Countries.

July 27, 1989: Memorandum (85) on this Bank was formally submitted to the Prime Minister of

the Government of the Peoples Republic of Bangladesh.

August 01, 1989: Formal memorandum on this Bank was formally submitted to the Honble

President of the Peoples Republic of Bangladesh.

September 24, 1989: Formal presentation of this model was made before the full council of

ministers at President House fro about two hours with the President in the Chair.

September 30, 1989: The proposal of this Bank was submitted to Governor, Bangladesh Bank.

December 6, 1994: The Letter of intent for establishing this Bank was issued by Bangladesh

Bank.

July 05, 1995: The Memorandum and Articles of Association were duly incorporated under the

Companies Act of 1994 to implement this Model of this Bank as conceivedand developed by Prof.

Dr. M.A. Mannan.

August 21, 1995: Permission to open First Branch of the Social Investment Bank Limited at

Dhaka was given by Bangladesh Bank.

November 22, 1995: After a long journey, SIBL was formally opened at 15, Dilkusha C/A, Dhaka

by the Honble President of the Peoples Republic of Bangladesh in a grand ceremony.

Authorized capital of the company is taken 1,000 million.

General Banking of SIBL


19/96

Opening of different types of Mudaraba Saving Deposit

Mudaraba Saving Deposit (MSD)

These are profit bearing deposit accounts. The drawings are restricted in respect of both the

amount of withdrawal and the frequency thereof so that the payment of interest does not become

any compensating for the banker. Some time the restrictions are ignored against the depositors

written confirmation to forgo his claim for interest on the total balance for the whole month of

withdrawal.

When a client wants to open a MSD accounts, s/he fill up a form. Any account holder introduces

him. He signed form & signature card where needed his signature and give his own 3 copy pp

photo & 1 copy pp nominees photo. Nominees also fill up nominee form & put his/her signature

nominee form. Then the officer gives him a accounts number against money.

** Enclosed original Mudaraba Saving Deposit (MSD) form.

Special Savings Scheme

1. Mudaraba Hajj Savings Scheme

Hajj is one of the basic pillars of Islamthe complete code of life. Social Investment Bank Limited

has introduced a scheme in the name & style Mudaraba Hajj Savings Scheme to facilitate the

intending Muslims to perform Hajj properly at appropriate age. This is purely a savings Scheme

for Hajj. Any Muslim intending in perform Hajj by building-up deposit required for meeting Hajj

expenses will select one of the 20 (Twenty) alternative choices based on duration of period from

1 year to 20 years for building-up savings by monthly installments under this Scheme.

** Enclosed original Mudaraba Hajj Savings Scheme form.

2001 & next 19 years savings and Hajj / Umrahs approximate expenditure (Tk.) chart:

2001 2002 2003 20

Period Monthly

Savings

Hajj/

Umrahs

estimated

cost

Monthly

Savings

Hajj/

Umrahs

estimated

cost

Monthly

Savings

Hajj/

Umrahs

estimated

cost

Mo

Sa

20 Yrs 350/- 2,22,700/- 370/- 2,33,800/- 385/- 2,45,500/- 405/

19 Yrs 370/- 2,12,100/- 390/- 2,22,700/- 410/- 2,33,800/- 430/

18 Yrs 395/- 2,02,000/- 415/- 2,12,100/- 435/- 2,22,700/- 455/

17 Yrs 420/- 1,92,400/- 440/- 2,02,000/- 460/- 2,12,100/- 485/

16 Yrs 445/- 1,83,200/- 470/- 1,92,400/- 495/- 2,02,000/- 515/

15 Yrs 480/- 1,74,500/- 500/- 1,83,200/- 525/- 1,92,400/- 555/


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14 Yrs 515/- 1,66,200/- 540/- 1,74,500/- 565/- 1,83,200/- 595/

13 Yrs 555/- 1,58,300/- 580/- 1,66,200/- 610/- 1,74,500/- 640/

12 Yrs 600/- 1,50,800/- 630/- 1,58,300/- 665/- 1,66,200/- 695/

11 Yrs 655/- 1,43,600/- 690/- 1,50,800/- 725/- 1,58,300/- 760/

10 Yrs 725/- 1,36,800/- 760/- 1,43,600/- 795/- 1,50,800/- 835/

9 Yrs 805/- 1,30,300/- 845/- 1,36,800/- 885/- 1,43,600/- 965/

8 Yrs 905/- 1,24,100/- 950/- 1,30,300/- 995/- 1,36,800/- 1,05

7 Yrs 1,030/- 1,18,200/- 1085/- 1,24,100/- 1,135/- 1,30,300/- 1,19

6 Yrs 1,200/- 1,12,600/- 1,260/- 1,18,200/- 1,325/- 1,24,100/- 1,39

5 Yrs 1,435/- 1,07,200/- 1,510/- 1,12,600/- 1,585/- 1,18,200/- 1,66

4 Yrs 1,790/- 1,02,100/- 1,880/- 1,07,200/- 1,975/- 1,12,600/- 2,07

3 Yrs 2,375/- 97,200/- 2,495/- 1,02,100/- 2,620/- 1,07,200/- 2,75

2 Yrs 3,550/- 92,600/- 3,725/- 97,200/- 3,915/- 1,02,100/- 4,11

1 Yrs 7,065/- 88,200/- 7,415/- 92,600/- 7,785/- 97,200/- 8,18

2. Mudaraba Education Savings Scheme

Social Investment Bank Limited, being encouraged by the success of the Mudaraba deposit

accounts, has introduced another savings scheme namely Mudaraba Education Savings

Scheme . Savings money Tk.25,000/= aged 7 year, 10 year, 15 year, 20 year. After Maturity

Bank will pay 55,000/=, 77,000/=, 1,36,000/=, 2,40,000/=. If any client deny to received the

amount at a time, bank will monthly pay Tk. 1,000/=, 1,500/=, 2,500/=, 4,500.

Mudaraba Education Savings Scheme :

Term Initial

Deposit

End of the

Terms

Monthly Educational

Allowance

7

Years

Tk. 25,000/- Tk. 55,000/- Tk. 1,000/-

10

Years

Tk. 25,000/- Tk. 77,000/- Tk. 1,500/-

15

Years

Tk. 25,000/- Tk. 1,36,000/- Tk. 2,500/-

20

Years

Tk. 25,000/- Tk. 2,40,000/- Tk. 4,500/-

** Enclosed original Mudaraba Education Savings Scheme form.


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3. Mudaraba Special Savings (Pension) Scheme

Considering increasing demands from the clients of the bank as from the people of the all walks

of the country for special and attractive savings scheme on the basic of the Islamic Shariah so as

to enable and encourage them to save as per their capacity in Islamic way for their old age when

they will normally retire from their active economic life, Social Investment Bank Limited has

introduced Mudaraba Special Savings (Person) Scheme in which a person gets the opportunity

to build-up savings by contribution small monthly installments for getting an attractive amount at

the end of a specified term or a monthly amount for a specific period after the expiry of the term.

Mudaraba Special Savings (Pension) Scheme:

Monthly

Savings

Term Lump sum

amount

payable at

Maturity

Monthly

Savings

Term Lump sum

amount

payable at

maturity

Tk. 100/- 5

Yrs

Tk. 8,000/- Tk.

100/-

10

Yrs

Tk. 22,500/-

Tk. 200/- 5

Yrs

Tk. 16,000/- Tk.

200/-

10

Yrs

Tk. 45,000/-

Tk. 300/- 5

Yrs

Tk. 24,000/- Tk.

300/-

10

Yrs

Tk. 67,000/-

Tk. 400/- 5

Yrs

Tk. 32,000/- Tk.

400/-

10

Yrs

Tk. 90,000/-

Tk. 500/- 5

Yrs

Tk.40,000/- Tk.500/- 10

Yrs

Tk.1,12,500/-

Tk.1,000/- 5

Yrs

Tk. 80,000/- Tk.

1,000/-

10

Yrs

Tk.2,25,000/-

Tk.1,500/- 5

Yrs

Tk.

1,20,000/-

Tk.

1,500/-

10

Yrs

Tk. 3,37,500/-

Tk.

2,500/-

5

Yrs

Tk.

2,00,000/-

Tk.

2,500/-

10

Yrs

Tk. 5,62,500/-

Tk. 5 Tk. Tk. 10 Tk.


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5,000/- Yrs 4,00,000/- 5,000/- Yrs 11,25,000/-

** Enclosed original Mudaraba Special Savings (Pension) Scheme form.

4. Mudaraba Monthly Profit Deposit Scheme

Social Investment Bank Limited 1.mined has launched a new, deposit product under the nameand style MudarabaMonthly Profit Deposit Scheme in accordance with the principle of Islamic

Shariah Any individual may open account under the- Scheme by depositing a minimum amount

of Taka 50,000/=, 1,00,000/=, 1,50,000/=, 2,00,000/=, 2,50,000/=, 3,00,000/= and multiple

thereof at a time for 3 years. Monthly provisional profit shall be given to the account just after

completion of 30 days from the dale of opening the account. The profit amount will be adjusted on

completion of each accounting year after declaration of final rate of profit.

** Enclosed original Mudaraba Monthly Profit Deposit Scheme form.

5. Mudaraba Millinery Deposit SchemeSocial Investment Bank Limited 1.mined has launched a new, deposit product under the name

and style Mudaraba Millinery Deposit Schemein accordance with the principle of Islamic

Shariah Any individual may open account under the- Scheme by monthly depositing amount of

Taka 550/= @ 25 years, 1,50/= @ 20 years, 2,050/= @ 15 years, the profit amount will be Tk.

10,00,000/= after maturity.

Mudaraba Millionaire Scheme :

Term Monthly Deposit Lump Sum Amount Payable at Maturity

15 Years Tk. 2,050/- Tk. 10,00,000/-

20 Years Tk. 1,050/- Tk. 10,00,000/-

25 Years Tk. 550/- Tk. 10,00,000/-

** Enclosed original Mudaraba Millinery Deposit Scheme form.

6. Mudaraba Home Savings Scheme

Considering increasing demands from the clients of the bank as from the people of the all walks

of the country for special and attractive savings scheme on the basic of the Islamic Shariah so as

to enable and encourage them to save as per their capacity in Islamic way for their old age when

they will normally retire from their active economic life, Social Investment Bank Limited has

introduced Mudaraba Home Savings Scheme in which this scheme gets the opportunity to

build-up shelter by contribution small monthly installments for getting an attractive amount at the

end of a specified term or a monthly amount for a specific period after the expiry of the term.


23/96

Under this Scheme account may be open for monthly deposit of, Tk. 500/-, Tk. 1000/. Tk 1500/-.

Tk. 2000/-. After 15 years he will get total amount of Tk. 260000/-, 520000/-, 780000/-

&1040000/-.

** Enclosed original Mudaraba Home Savings Scheme form.

Mudaraba Term Deposit

Mudaraba Term Deposit are accepted by the bank with a sum of Tk. 5000 or above from

individual (single and joint), firms (proprietorship/partnership), limited companies, autonomous

bodies, charitable institution, association, educational institution, local bodies, trust etc. against

issuance of nontransferable receipts in acknowledgement of MTD received. MTD Account may

be opened in the name of minors jointly with their guardians.

The Mudaraba Term Deposits are accepted for period of 3, 6, 12, 24, & 36 months. Weightage on

the rate of return is given to deposits of longer maturity. Mudaraba Term Deposit Accounts

holders will share the profit of investment with Social Investment Bank Limited, at the rate

declared by the bank from time to time.

** Enclosed original Mudaraba Term Deposits form

Mudaraba Term Savings Scheme Based on Monthly Deposit:

Monthly Savings Tk. 200/-

Term Net

Savings

Lump Sum

Profit

Lump Sum Amount

Payable at Maturity

Net

Savings

Lum

5 Years Tk.12,000 Tk. 4,000 Tk. 16,000 Tk.18,000 Tk. 6

8 Years Tk.19,200 Tk.10,800 Tk. 30,000 Tk.28,800 Tk.1

10

Years

Tk.24,000 Tk.18,000 Tk.42,000 Tk.36,000 Tk.2

12

Years

Tk.28,800 Tk.25,200 Tk. 54,000 Tk.43,200 Tk.3


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Monthly

Savings

Tk. 500/- Tk. 2000/-

Term Net

Savings

Lump

Sum

Profit

Lump Sum

Amount Payable

at Maturity

Net

Savings

Lump Sum

Profit

5 Years Tk.30,000 Tk.10,000 Tk.40,000 Tk.1,20,000 Tk. 40,000

8 Years Tk.48,000 Tk.27,000 Tk.75,000 Tk.1,92,000 Tk.

1,08,000

10

Years

Tk.63,000 Tk.45,000 Tk.1,05,000 Tk.2,24,000 Tk.1,80,000

12

Years

Tk.72,000 Tk.63,000 Tk. 1,35,000 Tk.2,88,000 Tk.

2,52,000

Mode of Deposits and Profit Rate

1. Mudaraba Term Deposits: Profit

Rate (%) a. 36 Months@ 10.55% b. 24 Months@ 10.35% c. 12 Months@ 10.15% d. 6

Months@ 9.70% e. 3 Months@ 9.25% 2. Mudaraba Savings Deposits@ 7.45% 3.

Mudaraba Notice Deposits@ 6.15%4. Deposit under Special Schemes a. Hajj Deposit

Schemes@ 10.55% b. Monthly Profit Deposit

Scheme

(Minimum Tk.50,000/- &

Maximum Tk.10,00,000/-)@ 12.00% c. Cash Waqf@ 10.70%

Opening of different types of Al-Wadia Current Accounts

Drawings are allowed from such an account without any restriction within the funds available in its

credit. Ordinarily, no interest is paid on this deposit.If some one open AWCD, he fill up form and enclosed this type of paper shown as bellow:

1. For Sole Proprietorship

Trade License

Trade License

Partnership Deed


25/96

A Certificate Copy Of The Memorandum And Articles Of Association Duly Attested By The

Signatory Of The Amount

Certificate Of Incorporation

Certificate Of Commencement Of Business

Copy Of The Last Balance Sheet

List With Name Designation And Specimen Signature Of Person Authorized To Operate The

Account Duly Certified By The Chairman

Minutes Of Board Of Directors Meeting Authorizing The Opening Of Accounts With Us Duly

Certified By The Chairman/ Managing Director

List Of Directors With Address

2. For Partnership

3. For joint Stock Company

** Enclosed original Al-Wadia Current Accounts form.

Cheque Book

Negotiable Instrument Act, 1881, says that Cheques, Bills of Exchange and Promissory notesare negotiable instruments (Section 13). The term cheque is defined under section 6 of

Negotiable Instrument Act 1881 which states that A cheque is a bill of exchange drawn on a

specified banker and not expressed to be payable otherwise than on demand. It we analyze this

section; a cheque has the following characteristics:

i) A cheque is a bill of exchange.

ii) A cheque is always drawn upon a banker.

iii) A cheque is always payable on demand.

As cheque is a bill of exchange, it is necessary to understand what is understood by bill of

exchange. As per section 5 of Negotiable Instrument Act, 1881, a bill of exchange in an

instrument in writing containing an unconditional order, signed by the maker, directing a certain

person to pay a certain sum of money to a certain person or to the order of that certain person or

to the hearer of the instrument. If we apply this definition of a bill of exchange to understand the

meaning of a cheque, a cheque is an instrument in writing containing an unconditional order

signed by the maker directing a certain banker to pay a sum certain money, on demand to or to

the order of a certain person or to the bearer of the instrument. From above, we can summarize

the characteristics of a cheque as under;

1)A cheque is a negotiable instrument

2)A cheque is a bill of exchange, hut every bill of exchange is not a cheque.

3)A cheque is always drawn upon a specified banker.

4)A cheque is always payable on demand.

5)There are three parties to a cheque:


26/96


27/96

due course. In practice, the banker insists on identification of the payee while making payment of

such a cheque in cash. This is done to avoid any chance of being charged with payment out of

due course.

Stale or outdated cheque

As per banking custom a cheque becomes stale when it remains in circulation for more that six

months, though there is no legal sanction in this respect. Such an instrument is not honored by

the drawee banker unless invalidated by the drawer.

Post dated cheque

A post-dated cheque is one, which bears a future date as its date of issue. Such a cheque is valid

and its negotiability is not inspired simply because it is post dated. But the banker can not pay it

earlier than its date because the drawers mandate is not to pay it earlier. It the banker pays it

before its ostensible date, the payment is not a payment in due course and as such, he loses

legal protection and is liable to his customer for any loss that may arise out of his action. A post

dated cheque is not invalid by reason of only being post dated unless it involves any illegal or

fraudulent purpose or transaction.

Antedated cheque

Where a cheque bears a date before the date of its issue it is known as an antedated cheque and

is not invalid because of only antedating provided this does not involve any illegal or fraudulent

purpose or transaction. A cheque antedated for more than six months becomes stale or out of

date as per banking practice.

Stop payment

The drawer of a cheque has the right to countermand the payment thereof. To be effective Hire

notice of slop payment should be given in writing under his proper signature giving frill description

of the cheque to reach the banker before its actual payment. If the drawer sends notice which is

duly received, then the banker will have to bear any loss that may ensue should he pay the

cheque thereafter until the stop payment instruction is cancelled. A stop payment by telephone

requires written confirmation. Immediately on receipt of a telephone in this regard, the banker

should communicate with the customer asking for confirmation in writing and meanwhile, if the

cheque is presented, payment thereof should be tactfully avoided taking care that thisnonpayment may not be construed as causing damage to tile customers credit. The holder of a

cheque can not atop payment but on receipt of such a request, the holder should be advised to

obtain the drawers written instruction. If the cheque in question requires endorsement and the

holder reports to have lost it without any endorsement, the banker should take precaution so that

he is not charged for payment thereof out of due course and not In good faith.


28/96

Date

The mandate of the drawer as conveyed through the cheque requires being dated. It appeals

probable that any holder of a cheque may insert the date where it was issued undated but in

practice, the banker dishonors an undated cheque. The date as appears on a cheque is

presumed to be the date on which it was made or drawn.

Crossing of cheque

A cheque can be crossed generally or specially to a banker by the drawer, or the holder thereof.

The crossing must be on the face of the cheque, there must be two lines drawn transverse and

parallel. There can not be any general crossing without His two transverse lines, with or without

the words and company or abbreviation thereof though the name of a banker without the lines is

sufficient to constitute a special crossing. The crossing of cheque is a material part of the cheque.

Cancellation of crossing

The drawer of a cheque (not any body else) sometimes cancels the crossing for making it

payable over the counter. This must be done by writing crossing cancelled under his signature

as recorded with the banker and by an indication of having cancelled it. The cancellation is done

in practice and not under sanction of law. This is being an immaterial alteration, the paying

banker must be very cautious lest he pays a crossed cheque over the counter.

Payment in due course

Payment in due course means payment in accordance with the apparent tenor of the instrument

in good faith and without negligence. Apparent tenor means what appears on the face of the

instrument and comprises date, payee, form of drawing (order or bearer), amount, signature of

drawer and crossing.

Payee of cheque

There must be a person entitled to receive the payment of the cheque either as a payee or his

endorsee or bearer. The drawer himself may also be the payee by writing his name self or pay

cash. In the absence of the payees name, the cheque can not be treated as a bearer one nor it

can be looked upon as a cheque at all and the better course would be to return it for completion

under authentication of the drawer.

Amount of chequeThe law does not specify whether the amount of a cheque is required to be expressed both in

words and figures. But as per banking practice the amount is stated both in words and figure.

Where the amount in words and figure differs, the amount stated in words shall prevail if the

banker pays the amount of cheque expressed in words even though it is higher than that


29/96

expressed in figure, the banker may be protected under law but in practice, he does not pay a

cheque with discrepancy. To pay the smaller amount is also not the general custom.

Sufficient balance

The payment of a cheque is subjected to the drawers havingsufficient credit balance in his

account unless an arrangement has been made by the drawer for an overdraft. When the

balance is not sufficient to meet the whole amount of the cheque, the payee can not demand a

part payment nor His banker is bound to make such a payment the cheque can not be

considered as an assignment of funds in order to enable the payee have an equitable claim on

the drawers balance.

Drawers signature

The banker can not debit his customers account with the amount of cheque if the customers

signature thereon is forged, as this is not the order of the customer. It is the duty of the banker to

acquaint himself with the customers specimen signature and before payment of a cheque, he

must compare the signature with the specimen one on his record. Where a forgery is detected

subsequent to the debit of the account and the forgery is found to be directly due to or is

mundanely cumulated with negligence of the customer in the safe keeping of the cheque book,

the banker is entitled to debit his account.

Material alteration

A material alteration to negotiable instrument is one, which in any way alters the operation of the

instrument materially i.e., which causes it to speak differently than originally. The most common

material alterations include all those of the date, crossing, and place of payment, amount, and

name of payee. The Negotiable Instrument s Act in s.3 (f) provides material alteration in relation

to a promissory note, bill of exchange or cheque includes any alteration of date, the sum payable,

the time of payment, the place of payment, and where any such instrument has been accepted

generally, the addition of a place of payment without the acceptors assent. Any material

alteration renders the instrument void against all those who were already parties to it but not

against those who were parties subsequent to the alteration. Where a material alteration is not

apparent, the payment in due course and according to the apparent tenor of the instrument at the

time of payment, would discharge the payer from all liability on the instrument.Alteration by drawer

All material alterations in a cheque must he made with the drawers assent, evidenced by his

signature and not initials as an initial is easier lo forge than the full signature for which reason the

banker does not maintain record of the initials of the account holders. If there are two or more

signatories to the cheque all must join in authentication of the alteration. Amy material alteration


30/96

made without drawers assent renders the cheque void. An order cheque may be turned into a

bearer one by the drawer substituting the word order with bearer under signature. No other

person has authority to make the alteration. But any holder may alter a bearer cheque to an order

cheque without drawers verification by simply scoring the word bearer. Similarly, crossing of

and uncrossed cheque by the holder does not require die drawers authentication.

Bankers Liability on altered cheque

If the banker pays a cheque with a material alteration without drawers consent, he does so at his

own risk, for he can not generally debit his customer with the amount of such a cheque.

Mutilation

Sometimes, a cheque may be torn accidentally or otherwise in such a way as its condition may

not afford sufficient evidence that the drawer or a holder did not intend to cancel it. As such, in

such a case the paying banker would be justified in dishonoring the cheque for the reason of

mutilation and should not pay such a cheque without drawers confirmationw collection bankers

guarantee. A slight slit on a cheque should not. However, be taken as a mutilation unless there is

reasonable doubt whether the drawer or a subsequent holder intended to cancel it.

Account payee cheque

A cheque marked account payee or payees account only between the two parallel lines of

general crossing is said to be crossed account payee and ceases to be negotiable. These words

by themselves without the general crossing do not form a crossing but the instrument which

contains such a marking, may better be treated as such as the intention or the mandate of the

drawer could not be other than that conveyed by these words. The significance of the marking is

not minimized even if the cheque is a bearer one. The duty of the paying banker is fulfilled by

payment of such an instrument in good faith and without negligence, as he can not be expected

to follow the money after it has reached the collecting banker to ensure credit to the proper

account. But the paying banker should refuse to make payment of such a cheque if there appears

an indication of the amount being credited to other than the named payees account.

Cheque can not he paid

A cheque does not become payable even if it is otherwise in order, where its payment has been

slopped by the drawer in writing, there is notice of customers death, bankruptcy, insanity, there isknowledge of defective title of the holder, court injunction or any other court order restraining the

customer form operation the account.

Customers death

Upon receipt of the news of a customers death all operations on the account should be

suspended by the banker as with the death of the customer the title of his property passes to his


31/96

legal heirs unless otherwise provided for in a trust deed or a will left by the deceased or in letters

of administration. Cheque marked at the request of die deceased or paid before receipt of the

news of the death can however be debited to the account.

Inland Remittance

Bank is a service oriented industry and deals with public money. They provide services to their

clients through different ways. Transfer of money/fund of one person /customer to another

person/ firm/ organization through the bank is called remittance. Any Person can remit funds to

any one within the country through any of the branches of the some bank by the following means

with nominal charges:

i) Pay order

ii) Demand draft.

iii) Telegraphic Transfers

iv) Mail Transfers.

Payment order

This is an instrument issued by the branch of a bank for enabling the Customer/ purchaser to pay

certain amount of money to the order of a certain person/ firm/ organization/ deptt./ office within

the same clearing house area of the pay order issuing branch.

The payment order is used for making a remittance to the local creditor. As prevalent, the

payment orders are in the form of receipts, which are required to be discharged by the

beneficiaries, where applicable on revenue stamps of appropriate value, against payment in cash

or through an account. The payment order is not a negotiable instrument and can not be

endorsed or crossed like a bankers draft.

Characteristics

a) The issuing branch and the paying branch is same. (self drawing)

b) Applicable for payment with the clearing house area of the issuing branch.

c) This is may be open or can be crossed.

Procedure for issuing

a) Obtain P.O. application form (F-44) duly failed in and signed by the purchaser/applicant.

b) Receive the amount in cash/transfer with commission amount.c) Issue P.O.

d) Enter in P.O. Register

Procedure for Payment

a) Examine genuinely of the Pay Order

b) Enter in P.O. Register, give contra entry.


32/96


33/96

Dr. General A/ C- Drawer Br.

Cr. Bills Payable A/c-D.D. Payable.

Particulars of DD is entered in D.D. Payable Register under initial of an officer.

Payment of D.D. Through Suspense A/C: Sometimes it happens that a D.D. is presented to a

branch for payment before the IBCA for the same is received. The draft is then paid with extreme

care by giving the following entries

Dr : Suspense A/C D.D. paid without advice (instead of D.D. Payable A/C.)

Cr : Partys A/C/ Clearing banks A/C/ Cash (Stamp is affixed on the draft and in the register)

Then after receipt of IBCA.

Dr. H.O Gen. A/C (Drawer Branch)

Cr. Bills payable A/C-DD. Payable.

Dr. Bills payable A/C-D.D. payable.

Cr. Suspense A/c-D.D. paid without advice

Date of entry reversed is noted by in the register and initialed by the incharge.

Cash payment:

Satisfy as to the identity and respectability of the presenter and particularly the genuineness of

signatures of the drawing officials. Signature of Letter of introduction issued by Drawer Branch

Identification by a constituent/ respectable gentleman known to the branch would normally be

acceptable.

Cancellation of a D.D:

Steps / Care to be taken:

(i) Written application from the purchaser

(ii) Signature verification of the purchaser. The D.D. which bears any endorsement should

not be accepted for cancellation until No objection from the payee / endorsee is given.

(iii) Commission not refunded.

(iv) Debit the Drawee branch and pay proceeds on identification of purchaser.

(v) Torn Signature but not to be destroyed.

(vi) Mark the D.D. across the face Cancelled by red ink.

Duplicate D.D: Steps:(1) Written application by the purchaser.

(2) Signature verification (of the purchaser as per form).

(3) Indemnity bond.

(4) If payee is a company/semi govt./Govt. authority letter should also be obtained from the

payee.


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(5) Confirmation from drawee branch that D.D. is still unpaid and have marked caution (message

by quickest means duly tested and charges from the party.) If by letter to be signed by two P.A.

holders from both ends. Head Office approval for issuance if duplicate D.D to be obtained.

(6) Duplicate D.D. remain identical to the original except printed number and affix stamp

Duplicate D.D. issued in lieu of original D.D. No. Dated - reported lost, and noted on

D.D. issue register, D.D. application, counter foil of both D.D. at issuing Br. and in D.D. payable

register of drawee Br.

(7) Intimate issuance of Duplicate D.D. to the drawee branch.

(8) In case original is presented, the same should not be paid under intimation to Head Office.

** Enclosed Demand Draft. Application form

Telegraphic Transfer (T.T.)

It is an instruction duly tested sent by telex/fax/telegram/ telephone/ express mail etc. to the

drawee branch for paying a certain sum of money to a specified person. This mode of transfer of

fund may be effected at the written request an account holder of the branch and against value

received from him. It is preferable to obtain a confirmatory cheque from the customer.

Characteristic :

a) Issued by one branch to another branch and massage is tele-communicated

b) Remittance / transfer of money is done through tested tele messages.

c) Remittance is effected on the basis of tested message.

d) Test key apparatus is required.

Issue of T. T:

Obtain T.T. application form (form No. F17) duty failed in and signed by the purchaser/applicant

with full account particulars of the beneficiary. Receive the amount in cash/transfer with

prescribed commission, postage, and telephone/telex charge. Prepare T.T. message inserting

test number (code number). Enter in T.T. issue register (B-30). Issue advice to the payee branch.

Dr. : Cash or Cheque

Cr. : Gen. A/C Paying Branch

Cr. : Income A/CCommission on T. T.

Cr.: Telegram charges. Cost Memo given to the purchaser.T. T. message prepared in duplicate, checked and signed by the in charge and Manager, tested

and transmitted. IBCA prepared in duplicate. The original sent to paying branch as confirmation

of message.

T.T. commission is .15%

Vat is 15% of T.T. Commission.


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Telex / Postage charge is 50 tk.

T. T. Receiving and payment:

Go through text of the T. T. carefully and Decode the text and tally the test. If the test agrees

Pass the FollowingVouchers:

(A) T.T. Advise and Credit

Dr. Gen. A/cIssuing Br. (Responding)

Cr. Bills PayableT.T. Payable

Dr. Bills PayableT.T. Payable

Cr. Party A/c.

(B) T.T. Advise & PAY :

Dr. Gen. A/c Issuing Branch (Respond)

Cr. Bills payable A/cT.T. payable (T.T. PO is issued and delivered to the Payee)

Dr. Bills Payable A/cT.T. Payable (T.T. PO)

Cr. B/P Cash /Clearing (Duly signed by the payee on revenue stamp and identification)

** Enclosed T.T. application form

M.T. :

In the prescribed format the purchaser / the drawer branch instruct the drawer branch to pay a

specified sum of money to the payee named in the IBCA preferably by crediting his account.

Issuance Procedure;

- Application in writing in prescribed form

- Deposit of money including commission

- Issue of cost memo

- Entry in M.T. issue register serially

- M.T. advice in IBCA (in block letters) with Test.

Vouchers:

Dr. Cash / Party A/c

Cr. General A/c (Drawee Br)

Cr. income A/c. CommissionCr. Postage Charge.

Receiving / paying Branch:

Test decode / Signature verified

Vouchers;


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Dr. Gen. A/cIssuing Branch

Cr. Bills Payable A/cM.T. Payable

Dr. Bills Payable A/cM.T. Payable

Cr. Partys A/c Advice and Credit.

Clearing Hose

Functions, procedures and accounting entries

Clearing stands for mutual settlement of claims made in among member banks at an agreed time

and place in respect of instruments drawn on each other.

Clearing house is an arrangement under which member banks agree to meet, through their

representative, at the appointed time and place to deliver instruments drawn on themselves.

The net amount payable or receivable as the case may be, is settled through an account kept

with the controlling bank (Bangladesh Bank/Sonali Bank)

Types of clearing :

Outward clearing

Inward clearing

Types of returns :

Outward return

Inward return

Clearing (outward) process: tier

First tire : Collecting Branch

Second tire : Principal Branch/local office

Third tire: clearing house (Bangladesh bank/Sonali bank)

Procedures of outward Clearing : Flow sequence

First tire:Collecting Branch

Instrument received

Instrument checked

Instrument deposited in second payees account : guarantee.

stamping

Special Crossing

Clearing Stamp

Endorsement

Return of counterfoil to the customer

Particulars entered in the out. Clearing register/computer

Register Balanced, Vouchers separated from the instruments

Prepare voucher :

Dr. Sundry Assets A/C : Clearing house


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Cr. All pay-in-slips / Vouchers

Sorting of instruments, prepares sub & main Schedules

Prepare House page according to main schedules

Tallied house page with outward clearing register

Instrument sent to Pr. Br/local office/main branch (2nd tire)

Voucher passed.

For return and unpaid instrument

Dr. Party A/C

Cr. Sundry assets A/C : Clearing house

Advice received from Principal/Local office

Dr. Head Office A/C

Cr. Sundry Assets A/C : Clearing house

Second tire :Pr. Branch/LO/main branch

Instrument received by this office :Lodgment by this branch :

Received house pages with instruments.

Recorded the amount in a register from house page.

Prepare bank-branch wise main schedule.

Prepare house page.

The instrument with house page & house book sent to the clearing house.

Third tire : Clearing house (B bank/ Sonali bank)

The instrument are delivered to the respective banks

* everyday 5 to 10 cror tk are in outward

Clearing (inward) process : tire

First tire : Clearing house (B bank/ Sonalibank)

Second tire : Principal branch/LO/Main branch

Third tire : Paying branch

Procedures of inward Clearing : Flow sequence

First tire : Clearing house (B bank/ Sonali bank)

Instrument received from other banks in the clearing house.

The amount and number of instruments received are entered in the house book from the main

schedule of respective banks. Instruments delivered, received and the difference are written on a figure slip provided in the

clearing house.

Second tire : Pr. Br/LO/Main br.

Instruments with schedules arranged branch wise.

The amount of each schedule received entered in the house pages of the respective branches.


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The respective house pages are totaled and check the amount with total amounts of instrument

received from all banks.

The instruments are sent to respective branches with the slip showing total amount and number of

instruments.

The instrument sent to the branches concerned for clearance and advice are collected from them

for honored cheques.

Third tire :Paying branch.

Particulars of the instruments are compared with the schedule.

Instruments sent to the respective dept for honoring them.

From honored cheques pass the following vouchers :

Dr. Party A/C (already debited by instruments)

Cr. Head Office A/C

Dishonored cheques (if any) with reason memo and credit advice sent to principal branch.

Every day 3 to 7 cror tk in inward.

** Enclosed objection memo for cheque return

Crossing on cheque:

It is a direction to the paying banker by the drawer that payment should not be made across the

counter. The payment on a crossed cheque can be collected only through a banker.

Significance of crossing :

Serves as a measure of safety against theft, loss of cheque in transit.

A person, who is not entitled to receive its payment, is prevented from getting the cheque

enchased at the counter of the paying banker.

Types of crossing:

1. General2. Special

General crossing:

Where a cheque bears across its face an addition of the words and company or any other

abbreviation thereof, between two parallel transverse lines, or two parallel transverse lines

simply, either with or without the words not negotiable, that addition shall be deemed a crossing

and the cheque shall be deemed to be crossed generally.

Specimens of General crossing :

Special crossing:Where a cheque bears across its face an addition of the name of a banker, either with or without

the words not negotiable, that addition shall be deemed a crossing, and the cheque shall be

deemed to be crossed specially, and to be crossed to that banker.

Specimens of Special crossing :

Drawing two parallel lines is not necessary in case of specially crossed cheque.


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Endorsement :

The chief characteristic of negotiable instrument is its negotiability i.e. it can be negotiated from

one person to another. The essence of negotiation this lies not in the transfer of the instrument

from one person to another, but in the fact that the transferee must get the right as the holder of

the instrument. An instrument may be negotiated in any of the following two ways.

a) By delivery : A promissory note, Bill of exchange or cheque payable to bearer is

negotiable by delivery thereof.Thus in case of bearer instrument merely delivery thereof

constitutes its negotiation.

b) By endorsement and delivery: A promissory note, Bill of exchange or cheque payable to

order, is negotiable by the holder by endorsement and delivery thereof. Thus negotiation of an

order instrument requires endorsement and delivery thereon by its holder.

Vault :

All cash, instruments (PO, DD, check) and other valuable documents are kept in the vault, which

is insured by a local insurance company. If there is shortage of cash during transaction period

money is transferred to drawn from the central bank. There are three keys of vault, which are

given to three most senior officers. Daily an estimated amount (25 lacs, which is insured by a

local insurance company) of cash is brought out from the vault for transaction purpose. No more

than Tk. 25 lacs brought at once from the vault on a single day.

Deposit mobilization

A strong deposit base is a critical for success of a bank. During the last years the bank has

mobilized a substantial amount in deposits in transactional and savings accounts. The highest

deposit is seen to be in the year 2002 & the lowest in 1998.

Deposit mobilization :

Year Deposit (figure in million) Growth %

1999 3899.72 88.49

2000 4863.21 24.70

2001 10569.67 117.33

2002 15141.34 43.25

2003 19709.31 30.16

Sources : Annual Reports of Social Investment Bank Limited.

Deposit for the year 1998 was Tk. 2068.85 million.

Investment


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Appraisal of Investment Proposal, Sanction and Disbursement of Investment

Loans and advances of a banking/financial institution. In other words, investment of Islamic

Banking Institution account for its vital portfolio activity. This is the activity, which the bank /

financial institution must carry with care and prudence so that it can earn on the investments and

get back the money as per planning. Without such earning, it is not possible for a bank to sustain

by meeting the profit payable on deposits and the overall cost of fund including administrative

cost. Since the bank has to plan to invest the owners capital and depositors time fund in short or

mid or long term financing and get back the same as per schedule, a banker has to be very much

careful in selecting the client and the line of trade and while industry while committing for the

investment.

A banker must have its strategy of investment operation and sectoral credit budget and the

features of selecting sponsors/prospective client and the system of appraisal of any investment

proposal. A branch manager wile choosing a credit commitment need to consider the following

major points:

1. Character, Capacity and credit worthiness of the applicant to be critically ascertained.

2. Past business records and trend to be examined with reference to the different books of

accounts/financial statements bank accounts turnover.

3. Applicants previous banking exposure and tax paying (TIN) capacity to be examined to assess the

financial solvency.

4. self declaration of applicants moveable and immovable assets and any liability has to be obtained

and checked up with reference to valid documents and ownership/ possession and liability if any

either in the name of the applicant or business.

5. Applicants business license whether obtained from recognized competent authority and whether

the same is valid to be seen.

6. proposed investment if has the compatibility to the credit norms and criteria.

7. collaterals, if any the applicant has offered to additionally secure the facility prayed for, the status

and value thereof to be assessed with reference to valid ownership and possession document and

the adequacy thereof to be determined.

8. Primary security under the facility if has the ready marketability to be examined. The go down or

storing house should have the location of easy access.

9. Whether the concerned business is being operated at applicants own shop or at rented business.

If rented rental agreement and the up to date rent paid receipt to be examined.

1. The business shop and the items of goods and merchandise of primary security can be easily

inspected by bank official.

2. In case of applicant, where partnership firm, is has to be seen whether the same is registered and

the partnership deed to be examined to ascertain whether any detrimental clause is contained

therein.

3. If proposed client is Private Limited Company, M/A, A/A and certificate of incorporation to be

studied including companys Board resolution to obtain credit facility.


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4. There must be not any classified loan either in the name of the applicant or in the name of his

business establishment or any concern of his interest.

5. Credit needs of the applicant/ business firm/company with reference to production/service strength

and sale to be assessed in the line of circulated credit norms.

6. In case of higher investment limit, lending risk analysis to be made to determine the extent of risk

in management or financial commitments/security aspect.

7. In case of long term investment proposal, detailed feasibility to be examined with reference to

technical, financial and commercial viability and economic justification before going for the

commitment.

8. where there is any credit norms fixed up by the central bank for assessing the working capital

needs of industrial enterprise those to be followed for the fixing up of investment limit favoring of

the applicant.

9. In cases where there is guarantors their worth and creditability and the relationship of the

guarantors with the client to be ascertained and kept on record.

10. In case of HPSM investment for House Building (Commercial or residential), in addition to legal

security of the land, the prospect of recovering the periodic installment of loan out of the monthlyrental income of the house or market to be specially verified from reliable source and physical

assessment.

11. After satisfying the requirements as highlighted above, investments to be sanctioned by competent

authority/authorized officer.

Investment of SIBL

Year Investment

(Figure in million Tk)

an appraisal of social investment bank limited (vvi)

Documents