internship report of Mariam

Page I
Internship Report
On
Different Modes of Investment of First Security Islami Bank Limited

Page II
Part: One
Introductory
Part

Page III
Different Modes of Investment of First Security Islami Bank Ltd.
Submitted to:
M. MokarromHossain
Professor
Department of Business Administration
Faculty of Business & Economics
Daffodil International University
Submitted by:
Mariam Jahan Nipun
ID No. –111-11-1945
Faculty of Business & Economics
Date of Submission
06-09-2014

Page IV
Dedicated
To
My Beloved Parents
And
My Respected Supervisor

Page V
Preface
As a student of business administration, I have completed my internship report in First Security
Islami Bank Limited on ''Different Modes of Investment of First Security Islami Bank
Limited''. I have tried my level best to collect the information related to study topic and
prepared the report within a very short time. That is why there may be some unexpected mistakes
in the report. I regret for my mistake in the report.
I worked First Security Islami Bank Limited at Topkhana Road Branch. The best feature of my
internship program was the access to motivate the hard working team of highly knowledgeable
banking professionals. The most important skill I learnt was the ability to work in a team.
In this report I am extremely grateful to my supervisor M. MokarromHossain, Professor,
Department of Business Administration, Faculty of Business and Economics, Daffodil
International University.
During my internship period I tried to follow supervisor’s guideline. My practical experience has
been upgraded through performing banking institution duties. The internship report has made me
perfect and fit for a good bank services performance.
………………………………..
Mariam Jahan Nipun
ID NO: 111-11-1945
Major in Finance
Faculty of Business and economics

Page VI
Acknowledgement
It was a great pleasure to prepare internship report on the “Different Modes of Investment of
First Security Islami Bank Limited". I would like to give thank and convey my gratitude to
my honorable supervisor, M.MokarromHossain, Professor, BBA Department, Daffodil
International University, for letting me to prepare this report and I would like to express my
sincere appreciation to him for his whole hearted support and guidance.
I am also grateful to the management of First Security Islami Bank Limited for offering me the
internship training. My special thanks to (Manager of FSIBL on Topkhana Road branch), and all
the Staffs of First Security Islami Bank Limited, Topkhana Road branch who have given me
the practical knowledge about the banking operations.
I also owed to each person whom I bothered inside and outside of First Security Islami Bank
Limited, Topkhana Road branch in carrying out this report.
…………………………………………..
Mariam Jahan Nipun
ID: 111-11-1945
Major in Finance
Faculty of Business and Economics

Page VII
Letter of Transmittal
Date: 18-07-2014
To
M. MokarromHossain
Professor
Subject: Submission of internship report on ‘Different Modes of InvestmentofFSIBL’.
Dear Sir,
This is my pleasure to submit my internship report on “Different Modes of Investment of
FSIBL”. It was a great opportunity for me to acquiring knowledge and experience in respect of
the functions, procedures, and operational mechanism of a commercial bank based on Islamic
banking principle while working in Topkhana Road Branch of First Security Islami Bank
Limited.
I have tried hard to fulfill your expectations by sharing details of each and every topic and
avoiding unnecessary amplification of the topics.
Therefore, I will be very much glad to hear from you for further clarification.
Sincerely yours,
…………………………..
Mariam Jahan Nipun
ID: 111-11-1945
Major in finance
BBA Program

Page VIII
Letter of Approval
I am pleased to certify that the internship report on “Different Modes of Investment Of First
Security Islami Bank Limited "conducted by Mariam Jahan Nipun bearing ID:111-11-1945
of the Department of Business Administration has been approved for presentation and
defense/viva-voce under my direct supervisor. Mariam Jahan Nipun worked with First
Security Islami Bank Limited as an intern.
The data and the findings presented in the report are the authentic work of Mariam Jahan
Nipun. I recommend the report prepared by Mariam Jahan Nipun for Presentation. She bears a
good moral character and pleasingpersonality.
I wish her all the success in every step of her life.
Supervisor,
………………………………………….
M.MokarromHossain
Professor

Page IX
Declaration
I, Mariam Jahan Nipun, hereby declare that the presented report of internship titled “Different
Modes of Investment of First Security Islami Bank Limited” uniquely prepared by me after
completion of three months’ work in First Security Islami Bank Ltd.
I also confirm that, the report prepared only for my academic requirement not for any other
purpose. It might not be used with the interest of opposite party of the organization.
………………………………………………
Mariam Jahan Nipun
ID: 111-11-1945
Major in Finance
BBA Program

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Executive Summary
First Security Islami Bank Limited (FSIBL) started commercial operations October 1999 with
authorized capital BDT 1500 million and paid up capital BDT 200 million objective of creating
Islamic Shariah based financial products. At present FSIBL is operating with116 branch different
areas of the country. In conventional bank the investor is assured of a predetermined rate of
interest whereas, FSIBL promotes risk sharing between provider of capital and the user of funds.
FSIBL deposit on Mudaraba (profit sharing) and Al-Wadiah (current account) Basis on Islamic
Shariah. The depositor of business partners of its and they share profit and loss of the business.
For the better use of the depositor’s fund, FSIBLinvest its funds as per different modes of
investment or financing by Islamic Shariah. Most of the investment of FSIBL on the by Bai-
mode (buying& selling) and HPSM. The other ideal mode of FSIBL is Musharaka (partnership).
So, overall investment performance of FSIBL is increasing day by day. Because most of the
people in our country are religious minded and they want to invest their money according to
Islamic Shariah. Moreover, people of all walks of life can easily transact with FSIBL comparing
to other commercial private banks in the country.

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Table of Contents
Part: One
Prefatory Part
Contents Page No.
Cover Page I
Title Page II
Submission III
Dedications IV
Preface V
Acknowledgement VI
Letter of Transmittal VII
Letter of Approval VIII
Declaration IX
Executive Summary X
Table of content XI- XIII
Part: Two
Report Body
Chapter-1
Introductory Part
Contents Page No.
Introduction 01
Origin of the report 02
Significance of the study 03
Objective of the study 03
Scope of the study 04
Methodology of the study 04
Limitations of the study 05

Page XII
Chapter-2
Profile Of First Security Islami Bank Ltd.
History of First Security Islami Bank Ltd. 07
Islamic Banking 08
Missionof FSIBL 08
Visions of FSIBL 08
Objectives of the FSIBL 21
Special features of FSIBL 21
Distinguishing of conventional bank &FSIBL 22
Management structure of FSIBL 23-24
Chapter-3
Report Body
Different Modes Of Investment Of FSIBL
Objectives of Investment 25
Investment procedures of FSIBL 25
Different Modes of Investment ofFSIBL 26
Bai-Mechanism
 Bai-Murabaha
 Bai-Muajjal
 Bai-Salam
 Bai-Isthisna
27-30
Share Mechanism
 Mudarabaha
 Musharaka
31-39
Ijarah Mechanism
 Hire purchase
 hire purchases under shirkatulmelk
40-43
Welfare investment scheme of FSIBL 44-46
SWIFT 47
Mode wise investment 48-50
Investment trend 51
Distributions of investment by area 52
Financial stability of FSIBL 53-57

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Chapter-4
SWOT Analysis
SWOT analysis 58-59
Chapter-5
Recommendation & Conclusion
Findings 60
Recommendation 61
Conclusion 62
Part: Three
Appended part
Contents Page No.
Bibliography 64
Corporate information at a glance 65
Organizational structure 65
Annual Report of 2009

Page XIV
Part: Two
Report Body

Page XV
Chapter- I
Introductory Part
Introduction
Origin of the Report
Significance of the Study
Objective of the Study
Scope of the Study
Methodology of the Study
Limitations of the Study

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Introduction
Banking plays an important role in the economy of any country. In Bangladesh Muslim
constituted more than 80% of its population. These people possess strong faith on Allah and they
want to lead their lives as per the constructions given in the holy Quran and the way shown by
the prophet Hazrat Muhammad (Sm.). But no Islamic banking system was developed here up to
1983 The Traditional banking is fully based on interest it is commonly meant as commercial
banks. But interest is absolutely prohibited by Islam. As a result the people of Bangladesh have
been experiencing such a non-Islamic and prohibited banking system against their normal values
and faith.
The present world especially the third world is affected by unemployment socioeconomic
injustice inflation, inequitable distribution of income and wealth etc. The main aim of traditional
banking is to earn profit by borrowing and lending money in exchange of interest. As a result
there is an unfair competition among the bankers and among the customers.
Under conventional framework a bank borrows to lend and it mobilizes savings/deposits by
borrowing from savers and lends those deposits to productive interest on deposits and advances
respectively. The banks generally maintain a difference is known as interest-spread which is the
main income of an interest-based bank. In the Islamic banking system the bank receives no
interest. In this case Islami bank receives its entire deposits from the investment of the clients on
the basis of profit-sharing places it to the actual entrepreneurs on the basis of the profit sharing.
So, it is clear that in case of the traditional banking systems, a fixed percentage of interest,
irrespective of income earned is paid to the depositors. The depositors of IB are never deprived
of excess income, which the bank may make at the end of year. Not only has this traditional bank
given fixed interest rate even when they incur operational loss. The critics of Islamic banking
system are of the opinion that both are found same in terms of deposits mobilization and
advances investment.

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Origin of the report
This internship report has been preparing under the internship program, an indispensable part of
the Bachelor of Business Administration (BBA) program. For the internship purpose, I chose
First Security Islami Bank Limited (FSIBL), Topkhana Road Branch hand prepare this report on
the investment related activities of the organization.
Significance ofthe study
FSIBL is the biggest bank in Bangladesh in private sector. There are a few number of private
bank that can compete with FSIBL. The banking system aiming to gain the goal of Islamic
economy through setting a well-designed Islamic monitory system. Regarding use of money
Islam has its clear-cut instruction through some distinctive guidelines. Avoiding interest (Riba)
restricting exploitation & speculation etc. are major guidelines in this process. So Islamic
banking is doing banking business under Islamic guidelines.
Objectives of the Study
 To identify the areas ondifferent modes of investment of FSIBL.
 To evaluate different investment modes of First Security Islami Bank Limited.
 To identify problems related to investment modes and operations of First Security Islami
Bank Limited.
 To make some recommendations based on findings.

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Scope of the Study
In this report I have focused on all the qualitative that include profiles of FSIBL, investment
activities like (trade, leasing, real estate, manufacturing, agriculture, agriculture production etc.
or using Shariah expressions Murabaha, Mudaraba, Musharaka, Ijarah, Istisna, etc). And lastly
evaluation of investment has been described.
Methodologyofthe Study
Methodology is an important part of a study. Methodology refers to the way by which data are
collected for preparing any report or study. The report is an exploratory research and for
qualitative survey open ended question was ask to the Bank officials.
Sources ofData:
1. Primary Sources:
 Officers;
 Clients of the branch.
2. Secondary Sources:
 Annual reports of FSIBL
 Relevant business research books.
 Internet search Information kept by branch manager, operations manager in their
own files.

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Limitation of the Study
The main limitations of the report are as follows:
Lacks of adequate knowledge about Investment of any organization sufficient records,
publications, facts and figures are not available. These constraints narrowed the scope of the real
analysis.
For the reason of confidentiality, some useful information cannot be expressed in this report.
 Lack of available information about investment operations of FSIBL.
 Unavailability of sufficient written documents as required making a comprehensive
study.
 In many cases up to date information is not published.
 Because of the unwell/illness of the busy key persons, necessary data collection became
hard.
 Lack of experiences has acted as constraints in the way of meticulous exploration on the
topic.

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Chapter- II
Profile of FSIBL
History of FSIBL
Islamic Banking
Mission of FSIBL
Visions of FSIBL
Objectives of The FSIBL
Special Features of FSIBL
Distinguishing of Conventional bank & FSIBL
Management Structure of FSIBL

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History of First Security Islami bank Ltd.
In Muslim countries were awoken by the emergence of islami bank which provided interest free
banking facilities. There are currently more than 300 interest free institutions all over the world.
Islami bank now a day’s not only operate in almost all Muslim countries but also have extended
their wings to the western world to serve both Muslim and non-Muslimcustomers. In case of
Islamicbanking, the establishment of Mitghamar local saving bank in 1963 is said to be a
milestone for modern islami banking. The history of islami banking can nevertheless be traced
back to the birth of Islam.
First Security Islami Bank Ltd. (FSIBL) is a financial institution operating based on the
principles of Islamic Shariah. FSIBL was incorporated in Bangladesh on 29 August 1999 as a
banking company under Companies Act 1994 to carry on banking business. It obtained
permission from Bangladesh Bank on 22 September 1999 to commence its business.
First Security Islami Bank Ltd. provides all kinds of commercial banking services to its
customers through its branches in Bangladesh. The Bank carries banking activities through its 92
branches in the country. The commercial banking activities of the bank encompass a range of
services, including accepting deposits, making loans, discounting bills, conducting money
transfer and foreign exchange transactions, and performing other related services, such as safe
keeping, collections and issuing guarantees, acceptances and letter of credit. The Bank’s product
and services include deposit scheme, investment scheme, online banking, short message service
(SMS) banking, automated teller machine (ATM) banking, utility bills and locker services. First
Security Islami Exchange Ltd. Is a wholly owned subsidiary of the Bank.
The Bank offers a wide range of banking services through its 116 branches in the country,
including accepting deposits, making loans, discounting bills, conducting money transfer and
foreign exchange transactions, and performing other related services such as safe keeping,
collections and issuing guarantees, acceptances and letter of credit.

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Islamic Banking
First Security Islamic bank is a financial institution whose status, rules, and procedures expressly
state its commitment to the principle of Islamic shariah and to the banning of the receipt and
payment of interest on any of its operations.-OIC
Another one is-‘Islamic bank is essentially a normative concept and could be defined as conduct
of banking in consonance with the ethos of the value system of Islam.’
Missionof FSIBL
The banks operate on Islamic principles of profit and loss sharing, strictly avoiding interest,
which is the root of all exploitation and is responsible for large-scale inflation and
unemployment.
The mission of FSIBL is to establish Islami banking through the introduction of a welfare
oriented banking system and also ensure equity and justice in the field of all economic activities,
achieve balanced growth and equitable development through diversified investment operations
particularly in the priority sectors and less developed areas of the country. To encourage socio-
economic uplift and financial services to the low-income community particularly in the rural
areas.
Visions of FSIBL
The vision of First Security Islami Bank Bangladesh Limited is to always strive to achieve
superior financial performance, be considered a leading Islamic bank by reputation and
performance.
Their goal is to establish and maintain the modern banking techniques to ensure the soundness
and development of the financial system based on Islamic principles and to become the strong
and efficient organization with highly motivated professionals, working for the benefit of people,
based upon accountability, transparency and integrity in order to ensure stability of financial
systems.
 They will try to encourage savings in the form of direct investment.
 They will also try to encourage investment particularly in projects which are more likely
to lead higher employment.

Page XXIII
Objectives of Islamic bank
It is a golden desire of every Muslim that his social and political lives should be in accordance
with the divine guides prescribed in the holy Quran and the Sunnah. In the same tune of
aspiration as above, he desires to follow a purified life in financial and business life. So, the
objectives of the Islamic banking may be derived from the broader objectives of the Islamic
economy. Morespecially the objectives of Islamic banking when viewed in the context of its role
in the economy are listed as following:
 To offer contemporary financial services in conformity with Islamic shariah.
 Replacement of interest by profit sharing.
 Creation of money through a process of investment, rather than through process
of lending.
 Social welfare state nature.
 To help ensure equitable distribution of income.
Specialfeatures of the bank
First Security Islami Bank Limited (FSIB) was Establish in Bangladesh on August 29 1999 as a
banking company under Companies Act 1994.On September 22, 1999. FSIBL obtained
permission from Bangladesh Bank to commence its business. It is one of the Shariah based
interest-free banking South-East Asia.
The bank is committed to run all its activities as per Islamic Shariah. FSIBL through its steady
progress and continuous success has, by now, earned the reputation of being one of the leading
private sector banks of the country. The distinguishing features of FSIBL are as under:
All its activities are conducted on interest-free system according to Islamic Shariah.
 All activities are conducted on interest free system in accordance with Islamic Shariah
principles
 Investment is made through different modes as per Islamic Shariah.
 Investment-income of the bank is shared with the Mudaraba depositors according to a
ratio to ensure a reasonably fair rate of return on their deposits.
 Its aims are to introduce a welfare-oriented banking system and also to establish equity
and justice in the field of all economic activities.

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Distinguishing features of Conventional Bank and First Security Islami Bank
Limited:
The distinguishing features of conventional banking and FSIBL are shown below:
Conventional Banks FSIBL
The functions and operating modes of
conventional banks are based on manmade
principles.
The functions and operating modes of FSIBL
is based on the principles of Islamic Shariah.
The investor is assured of a predetermined
rate of interest.
It promotes risk sharing between provider of
capital(investor) and the user of
funds(entrepreneur)
It aims at maximizing profit without any
restriction.
It also at maximizing the profit but subject to
shariah restriction.
It does not deal with Zakat. In the FSIBL system, it has become one of
the service oriented functions of the IBBL to
collect and distribute Zakat.
It can charge additional money (compound
rate of interest) in case of defaulters.
FSIBL has no provision to charge any extra
money from the defaulters.
Lending money and getting it back with
interest is the fundamental function of the
conventional banks.
Participation in partnership business is the
fundamental function of FSIBL.
Conventional banks provide finance by using
the following
Techniques-
a)Loan
b)Cash Credit
c)Overdrafts
d)Purchase and discounts bills
e)Advance for hire bills
There are seven Islamic financing
modes practiced by the most of the
Islamic banks of the world-
a) Bai-Murabaha
b) Bai-Muajjal
c) Bai-salam
d) Ijarah
e) Qardhasana
f) Mudaraba
g) Musharaka

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1.1 Organ Gram of First Security Islami Bank Limited:
Executive
Committee of the
Board
Board Audit
Committee
Shari’ah CouncilBoard Secretariat
Managing
Director
Senior Executive
Vice President
D.M.D Corporate
Affairs
Division
Research &
Development
Marketing
Division
Investment
Division
International
Division
Treasury Unit
Public Relation
Division
H.R.D
F.A.D
General
Service
Division
Monitoring &
Inspection
Division
Computer
Division
Credit
Committee

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1.2 Managerial Hierarchy of the Branch:
Executive Vice President (EVP) - 1 Person
First Assistant Vice President (FAVP) - 1 Person
Senior Executive Officer (SPO) - 3 Persons
Principal Officer (PO) - 1 Person
Senior Officer (SO) - 3 Persons
Officer - 2 Persons
Junior Officer - 1 Person
Assistant Officer - 6 Persons
Trainee Assistant Officer - 4 Persons
I worked with
these persons

Page XXVII
Chapter- III
Report Body
Objectives of Investment
Investment Procedures of FSIBL
Different Modes of Investment of FSIBL
Bai-Mechanism
Share Mechanism
Ijarah Mechanism
Welfare Investment Scheme of FSIBL
SWIFT
Mode Wise Investment
Investment Trend
Distribution of Investment by Area
Financial Stability of FSIBL

Page XXVIII
Objectives of Investment
The objectives of investment operations of the Bank are:
 To invest fund strictly in accordance with the principles of Islamic Shariah.
 To diversify its investment portfolio by the size of investment, by sectors (public &
private), by economic purpose, by securities and by geographical area including
industrial, commercial, and agriculture.
 To ensure mutual benefit both for the bank and the investment-client by professional
appraisal of investment proposals, judicious sanction of investment, close and constant
supervision and monitoring thereof.
Investment Procedures of FSIBL
There are three types of investment Mechanism. Every mechanism of investment is strictly
followed investment procedures. These are as follows-
 Selection of the client
 Application stage
 Appraisal stage
 Sanctioning stage
 Documentation stage
 Disbursement stage
 Monitoring and recovery stage

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Modes of finance followedby FSIBL
Investment is the action of deploying funds with the intention and expectation that they will earn
a return for their owners of a fund can deploy it through real investment or financial investment.
When resources are spent to purchase fixed and current assets for use in a production process for
trading purpose, then it can be termed as real investment. For example, deposit of money with a
bank, purchase of Mudarabah Savings Bond or share of a company. Financial investments
ultimately takes form of real investment as it is meant for so. Since hoarding is condemned by
Islam and a 2.5 percent annual tax (Zakat) is imposed on savings, the owner of a fund, if he is
unable to make real investment, has no option but to invest his savings as a financial investment.
Modes of finance followed by First Security Islami bank Limited are exercised under three
principles:
1. Bai- (Buy & Selling) Mechanism
2. Sharing (Profit & Loss) Mechanism
3. Ownership Sharing Mechanism
Modes of finance under three principles can be presented by using chart as follows-

Page XXX
BAI-MECHANISM:
BAI- MURABAHA
Meaning
The terms 'Bai-Murabaha' have derived from Arabic words Bai and Ribhun. The word Bai means
purchase and sale and the words Ribhun means an agreed upon profit. Bai-Murabaha means sale
on agreed upon profit.
Definition
Bai-Murabaha may be defined as a contract between a Buyer and a seller under which the seller
sells certain specific goods permissible under Islamic Shariah and the Law of the land to the
Buyer at a cost plus agreed profit payable on cash or on any fixed future date in lump- sum or by
installments. The profit marked-up may be fixed on lump sum or in percentage of the cost price
of the goods.
Features of Bai-Murabaha
 It is permissible for the client to offer an order to purchase particular goods by the Bank
dealing its specification and committing himself to buy the same from their bank on
Murabaha.Cost-plus agreed upon profit.
 It is permissible to make the promise binding upon the client to purchase from the Bank
that is he is to either satisfy the promise or to indemnify the damages caused by breaking
the promise without excuse.
 It is permissible to take cash/collateral security to guarantee the implementation of the
promise or to indemnify the damages.
 It is also permissible to document the debt resulting from Bai-Murabaha by a Guarantor
or a mortgage or both like any other debt is permission. Mortgage/ Cash Security may be
obtained prior to the signing of the Agreement or at the time of signing the Agreement.
 Stock and availability of goods is a basic condition for signing a Bai-Murabaha
agreement. Therefore, the Bank must purchase the goods as per specification of the client
to acquire ownership of the same before signing the Bai-Murabaha agreement with the
client.
Application of Bai-Murabaha
Murabaha is the most frequently used form of finance in FSIBL throughout the world. It is
suitable for financing the different investment activities of customers with regard to the

Page XXXI
manufacturing of finish goods, procurement of raw materials, machinery, and other plant and
equipment purchases.
BAI-MUAJJAL (Deferred sale)
Meaning
The terms "Bai" and "Muajjal" have been derived from Arabic words 'Bai' and 'Ajal'. The word
Bai means purchase and sale and the word 'Ajal' means a fixed time or a fixed period. "Bai-
Muajjal" means sale for which payment is made at a future fixed date or within a fixed period. In
short, it is a sale on Credit.
Definition
The Bai-Muajjal may be defined as a contract between a Buyer and a Seller under which the
seller sells certain specific goods (permissible under Shariah and law of the country), to the
Buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a
fixed period by fixed installments. The seller may also sell the goods purchased by him as per
order and specification of the buyer.
Features of Bai-Muajjal
 It is permissible for the Client to offer an order to purchase by the bank particular goods
deciding its specification and committing him to by the same from the bank on Bai-
Muajjal I.e. deferred payment sale at fixed price.

It is permissible to make the promise binding upon the Client to purchase from the bank,
i.e. he is to either satisfy the promise or to indemnify the damages caused by breaking the
promise without excuses.
 It is permissible to take cash/ collateral security to guarantee the implementation of the
promise
 It is also permissible to document the debt resulting fromBai-Muajjal by a Guarantor, or a
mortgage or both like any other debt. Mortgage/ Guarantee/ Cash security may be
obtained prior to the signing of the Agreement or at the time of signing the Agreement.
 Stock and availability of goods is a basic condition for signing a Bai-Muajjal Agreement.
Therefore, the Bank must purchase the goods as per specification of the client to acquire
ownership of the same before signing the Bai-Muajjal Agreement with the Client.
After purchase of goods the bank must bear the risk of goods until those are actually
delivered to the Client.

Page XXXII
 The Bank must deliver the specified goods to the Client on specified date and at specified
place of delivery as per contract.
 The Bank may sell the goods at a higher price than the purchase price to earn profit.
 The price once fixed as per agreement and deferred cannot be further increased.
 The Bank may sell the goods at one agreed price, which will include both the cost price
and the profit. Unlike Bai- Murabaha, the bank may not disclose the cost price and the
profit mark- up separately to the Client.
BAI- SALAM (Advance payment)
Meaning
The terms “Bai” and “Salam” have been derived from Arabic words. The words “Bai means
“sale and purchase” and the word “Salam” means “Advance”. “Bai-Salam” means advance sale
and purchase.
Definition
It is a sale in which an advance payment is made by the buyer, but the delivery is delayed to an
agreed date. In the Bai-Salam, a financial transaction happens in advance in cash as a price of
commodity whose delivery will be in a future date. It means deferred is the commodity sold
(debt in kind) and price of the commodity described is to be aid immediately in advance.
Feature of Bai-salam
Bai-Salam is a mode of finance allowed by Islamic Shariah in which commodity or product can
be sold without having the said commodity or product either in existence or physical possession
of the seller. If the commodity is ready for sale Bai-Salam is not allowed in Shariah. Then the
sale may be done either in Bai-MurabahaorBai-Muajjal mode of finance.
Application of Bai-Salam
Salam sales are frequently used to finance the agriculturalindustry. Bank advance cash to farmers
today for delivery of the corp. during the harvest season. Thus banks provide farmers with the
capital necessary to finance the cost of producing a crop. Salam sale are also used to finance
commercial and industrial activities.

Page XXXIII
ISTISNA'A SALE
Definition
Istisna'a sale is a contracting which the price is paid in advance at the time of contract and the
object of sales manufactured and delivered later A manufacturer, artist or craftsman may take
orders, with or without advance payment, to make articles himself or hire labor to do so.
The majority of the jurists consider Istisna's as one of the divisions of Salam, Therefore, It is
subsumed under the definition of Salam, But the Hanafie school of jurisprudence makes Istisna's
as an independent and distinct contract, The jurists of the Hanafie school have given various
definitions to Istisna'a some of which are "That it is a contract with a manufacturer to make the
something" and It is a contract on a commodity on liability with the provision of work" The
purchasers called Mustasnia contractor and the seller is called "sania" maker manufacturer and
the thing is called 'masnooa' manufactured, built, made.
Features of Isthisna
 It is permissible for the bank to buy a commodity on Istisna'a contract then sell it after
receipt for cash installed or deferred price.

 It is also permissible for the bank to enter into Istisna'a contract in the capacity of seller to
the who demand a purchase of a particular commodity and then straw a parallel istisna's
contracting the capacity of a buyer with another partition cake manufacture the -
commodity agreed upon in the first contract.
 The first Istisna'a can be immediate or deferred (the payment) the payment in the second
Istisna'a can be each or deferred stated blow are the practical steps which the bank applies
the modes of Istisna'a sale, parallel Istisna'a with reference to the non-existence of any
legal relation or financial obligation between.
 The purchaser requesting Istisna'a (the end use) in the first contract, and
 The (maker), manufacturer, (the builder), (the seller) who manufactures the article in
accordance to the parallel Istisna'a contract.
So any disagreements that may arise are settled under each contract separately according to the
provision therein.

Page XXXIV
Application of Istishna
The isthmians contract allows FSIBL to finance the public needs and the vital interest of the
society to develop the Islamic economy in accordance with Islamic teachings.Isthisna contracts
are used to finance high technology industries such as the aviation, locomotive and ship building
industries. It is also applied in the construction industry such as apartment building, hospitals,
schools, and universities to whatever that makes the network for modern life.
Share Mechanism:
MUDARABAH
Definition
It refers to a contact between two parties in which one party supplies capital to the other party for
the carrying on of some trade on the condition that the resulting profits be distributed in a
mutually agreed proportion while all loss is borne by the provider of the capital. Mudarabah is
also known aQirad and Muqaradah
Mudaraba is a contract of those who have capital with those who have expertise where the first
party provides capital and the other party provides the expertise with the purpose of earring
"halal" (Lawful) profit which will be devised between them in ration agreed upon. This mode
serves the business interest of the capital owner and the mudharib (agent).
The capital owner may not have the opportunity or the experience to make turn over capital and
trade with it. On the other hand, the agent (the Mubarib) May not have the adequate capital to put
to materialize his experience, such lacking of both parties bring them into a contract of
Mudarabah. It had certain steps to be followed. The following is the steps of the Mudarabah
contract.
Steps of Mudarabah
1. Establishing a Mudharabah Project: The bank- the bank provides the capital as a capital
owner.
The Mudharib- provides the effort and expertise for the investment of capital in exchange of a
share in profit agreed upon.

Page XXXV
2. The Results of Mudharabah: The two parties calculate the earrings and divide the profits at
the end of Mudharabah; this can be done periodically in accordance with the agreement along
with observance to legal rules.
3.Payment of Mudharabah Capital: The banks recovers the Mudharabah capital it contributed
before dividing the profits between the two parties because profit is protection to capital in case
of agreement to distribute profits periodically before the final settlement it must be on account
until the security of capital is assured.
4. Distribution of wealth resulting from Mudharabah: In case of loss, the capital owner (the
bank) bears the loss. In the event of profits, they are divided between the two parties in
accordance with the agreement between them with observance to the principle "profit is
protection to capital"
There are some legal rules for Mudharabah Mode of Finance, which are as follows:
Rules of Mudharabah
1. Capital Must be Specific: It is a condition in Mudharabah that capital must be specific or its
return to owner, so its amount must be known at the contract, and because the uncertainty about
the amount of capital necessarily leads to uncertainty about the amount of profit, which
represents an increment to capital.
2. Capitalmustbe in Currency: it is a condition that capital must be a currency in circulation.
However, It can be merchandise only in condition that it is evaluated at the contract and the
agreed upon value becomes the capital of Mudharabah.
3. Capital Not a Liability debt on Mudarib: It is a condition that in capital must not be a
liability debt on the Mudharib, because the Mudharib is a trustee and in respect to the debt, it is a
guarantor who can only be absolved after payment.
4. Mixing of Private Capital Permissible: It is permissible for a mudharib to mix its private
capital with the capital of the Mudharabah, thus it becomes a partner, as well, and its disposal of
capital on the basis of Mudharabah is permissible.
5. Delivery of Capital to Mudarib: It is a condition that the capital of Mudharabah must be
delivered to the mudharib because not delivering it imposes constrictions on the withhold it
imposes constrictions on the mudharib and restricts its power disposal. Some of the jurists permit
the capital owner to withhold capital and release it gradually according to the needs of the
mudharib since Mudharabah adjudges unrestricted disposal but not deliver.

Page XXXVI
6. Imposition of Restriction on Mudarib: It is permissible to impose restrictions on the
mudharib if the restriction is beneficial and does not constitute a constriction on the agent to
attain the profit required and is not counterproductive to the purpose of the Mudharaba if the
mudharib violates the restriction contravenes the beneficial condition, it becomes a usurper and
guarantees capital to the capital owner.
7. Hiring Helping Hands ByMudarib: It is permissible for the Mudharib to hire assistance in
difficult work, which it is unable to do by itself. Recourse shall be made to prevailing custom to
determine that.
8. Disposal of the Mudharib: The disposal of the Mudharib is confined to what is conducive to
the Mudharabah. It must lend or donate nothing of the Mudharabah capital It is also not allowed
to purchase, for Mudharabah with more than its capital, nor is it allowed to go into partnership
with others using the Mudharabah capital. All of the above is permissible if the capital owner
consents and authorizes the agent to use its discretion.
9. No Security or Guarantee except Negligence: No security on the Mudharib shall be stated in
the Mudharabah contract except in case of negligence or trespass because the mudharib is a
trustee on what is in its hold, capital is judged as a deposit. It is permissible to take a surety
mortgage from the mudharib to guarantee the payment in case of negligence or trespass or
violation of conditions, but it is impermissible to take that as a guarantee to capital or profit,
because it is impermissible for the Mudharib to guarantee neither Capital nor profit.
10. Profit Sharing as per Agreed Ratio: It is a condition that profit should be specific because
it the subject of the contract and being unknown abrogates the contract. The contraction parties
should stipulate in the contract the profit shares (in percentage) for each one. It is impermissible
to stipulate a lump sum as profit to either party so as not to lead to the termination of profit by
one of them. Profit in Mudharabah is distributed according to the agreement of the two
contraction parties. They may agree on specific rations, be more or less.
11. Loss to be borne by the Owner of the Capital: It is a condition that the capital owner bears
alone the loss (the Mudharib bears nothing of it) because loss is a decrease in capital and capital
belongs to the owner.
12. Profit is Protection to Capital: The Mudharib shall collect its share of the profit only after
obtaining the permission of the capital owner. Also the Mudharib is entitled to collect its share of
profit only after capital is recovered , because the principle says "profit is protection to capital"
In case of temporary division of profit before the final settlement, and the Mudharabah is
contenting, the loss incurred later shall be made good from the profit distributed.

Page XXXVII
13. Recovery of Capital: The ownership of the mudharib becomes secure after the liquidation of
the Mudharabah and the capital owner recovered its capital. Some of the Jurists hold the view
that auditing is like division and possession. If two parties reach a final settlement after the
liquidation of the assets and leave the Mudharabah, it is considered to be a new mudharabah and
neither one makes good the loss of the other.
14. Not a Binding Contract:Mudharabah is terminated if one of the two parties rescinds it
because it is an optional not a binding contract. Some of the jurists hold the view that
Mudharabah is binding and it cannot be rescinded if the Mudharib commences work.
MUSHARAKA (Partnership)
Meaning and definition
The word Musharaka is derived from the Arabic word Sharikah meaning partnership. Islamic
jurists point out that the legality and legality and permissibility of Musharakah is based on the
injunctions of the Holy Quran, Sunnah, and Ijma (consensus) of the scholars. It may be noted
that Islamic Banks are inclined to use various forms of Shariakt- al -Inan because of its built on
flexibility. At an Islamic bank, a typical Musharakah transaction may be conducted ob the
following manner.
One two or more entrepreneurs approach an Islamic Bank for the finance required for a project.
The bank along with other partners provides complete finance. All partners, including the bank
have the right to participate in the project. They can also waive this right. The profits are to be
distributed according to an agreed ratio, which need not be the same as the different partners
have provided the finance for the project Musharakah may be of two types:
1. Permanent and
2. Diminishing Musharaka which have been discussed below:
a. Permanent Musharakah:
in this case the bank participates in the equity of a company and receives an annual share of the
profits on a pre-rate basis. The period of termination of the contract is not specified. This
financing technique is also referred to as continued Musharakah.
b. Diminishing Musharakah:

Page XXXVIII
Digressive or Diminishing Muaharakah is a special form of Musharakah which ultimately
culminates in the ownership of the asset or the project by the client. It operates in the following
manner.
The bank participates as a financial partner, in full or in part, in a project with a given income
forecast. An agreement is signed by the partner and the bank through which the bank receives a
share of the profit as a partner. However, the agreement also provides payment of a portion of
the net income of the net income of the project as repayment of the principal financed by the
bank. The partner is entitled to keep the rest. In this way, the full owner.
Definition of permanent Musharakah
The contributions of the partners under this mode may be equal or unequal ratios of capital to
establish a new income-generating project or to participate in an established one, whereby each
participant owns a share in the capital structure permanently and deserves his share of the profit
income. Such a partnership originally is intended to continue up to the dissolution of the
company. But one can sell his share in the capital to withdraw from the project.
The Islamic Banks can use the mode of Permanent Musharakah in many income-generating
projects. They can finance their customers, for an intended projects, with pare of the capital
required for the project in exchange of a share of the output as they may agree upon. They can
also mostly leave the responsibility of management of the customer- partner and retain the right
of super vision and follow up.
It follows from the above discussion that there are three steps of permanent Musharakah which
are given below:
1. Partnership in Capital:
The bank tenders part of the capital required in its capacity as a partner and authorizes the
customer partner to manage the project.
The partner tenders part of the capital required for the project and be a trustee on what he holds
from the bank funds.
2. Results of the projects:
The work in the project is for the growth of capital. The project may achieve positive or negative
results.
3. The Distribution of wealth accrued from the project:In case of loss, each partner bears part
of the loss proportionate to its share in capital. In case of earning profits, they are divided
between the two parties (the bank and the partner) in accordance with the agreement.

Page XXXIX
Rules for Permanent Musharakah
1. Capital should be Specific: It is a condition that the capital of the company is specific,
existent and under disposal. It is invalid to establish a company on non-existent fund of debt, for
the purpose of profit,
2. Share of Equity: It is not a condition that partners have equal shares in capital, though
variation in shares is permissible. It is subject to agreement.
3. Nature of Capital: It is a condition that the capital of the company is money and valuables.
Some of the jurists permit participating with merchandise on condition it is evaluated in the
contract and the value agreed upon becomes the capital of the company.
4. Active Participation of Partners: It is impermissible to impose conditions forbidding one of
the partners from work, because the company is build on and each partner implicitly permits and
gives power of attorney to the other partner to dispose of and work wit capital but it is
permissible for one partner to singly work in the company by mandate of other partners.
5. No Security for Profit: A partner is a trustee on the funds in his hand from the company and
he guarantees only in case of trespass or negligence and it is permissible to take a mortgage or a
guarantee against trespass and negligence but it is impermissible to take security or profit or
capital.
6. Ratio of Profit Prefixed: It is a condition that profit for each partner must be known to avoid
uncertainty and it must be a prorate ratio to all partners and must not be a lump sum, because this
contravene the requirement of partnership.
7. Variation in Share of Profit Permissible: In Principe, profit must be divided among partners
in ratios proportionate to their shares in capital but some of the jurists permit variation in profit
shares whereupon it is determined by agreement for one of the partners may be more dexterous
and more diligent and may not agree to parity, so variation in profit becomes necessary.
8. Not a binding contract: In principle, partnership is a permissible and not a binding contract,
so it is admissible for any partner to rescind the contract whenever it wishes provided that this
occurs with the knowledge of the other partner or partners, because rescinding the contract
without the knowledge of other partners prejudices their interests. Some of the jurists are of the
view that the partnership contract is binding up to the liquidation of capital or the
accomplishment of the job accepted at the contract.

Page XL
Application of permanent Musharakah
Permanent Musharakah is helpful for large amount of investment in modern economic activities
the Islamic banks can use Musharakah to a new or established firm by using permanent
Musharakah as a mode of investment. The Islamic banks can make sufficient fund available to
the customer for the long term. The Islamic banks may become active partners in determining the
methods of production cost control, marketing etc. and to achieve the objectives of the
establishment. They can also supervise and follow up the overall activities of the firm. The
Islamic banks can share profit or loss with the (partners) clients in all situations of the firm.
Definition of diminishing Musharakah
Diminishing Musharaka is an intention from the very beginning not to stay in and continue the
partnership up to the liquidation of the company. The Islamic bank can give the other partner the
right to purchase portion of the bank on the ownership [the form for full payment at a time or by
installment basis as per agreement with the partners (the client).
The bank gradually can relinquish share to the partner, in exchange the partner pays the price to
the bank periodically during a reasonable period to be agreed upon. After the discharge, the bank
withdraws it claims from the firm and it becomes the property of the partner. Decreasing
partnership is a mode innovated by the Islamic banks. It differs from the partnership. Those are
mentioned below:
Steps of diminishing partnership:
1. Participation in capital: The bank-tenders part of the capital required to the project In its
capacity as a participant and agrees with the customer partner on a specific method of selling its
share in capital gradually.
The partner-tenders part of the capital required to the project and be a trustee in what is in its
hands of the bank funds.
2. Results of the projects: The purpose of the work in the project is the growth of capital. The
results of the project may be positive or negative.
3. The distribution of the wealth accrued from the projects : In the event of loss each partner
bears its share in the loss in a ratio proportionate to its share in capital. In case of earning profits,
are detonated between the two partners (the bank and the customer) in accordance with the
agreement. The shares the sale must be concluded as a separate deal with no connection to the
contract of the company.

Page XLI
4. The Bank sells its Share In Capital: The Bank- expresses its readiness, its readiness, in
accordance with the agreement, to sell a specific percentage of its share in capital.
The partner- pays the price of that percentage of capital to the bank and the ownership is
transferred to the partner.
This process continues up to the end of the partnership of the bank in the project and that's by
gradually transferring the ownership of the project customer/partner. In this way the bank has its
principal returned plus the profit earned during the partnership advice versa.
In the first Conference of the Islamic Banks in Dubai, the conferees studied the topic of
partnership ending with ownership (decreasing partnership) and they decided that this mode can
be applied in one of the following (ways) forms.
The First Form: The Bank agrees with the customer on the share of capital and the conditions
of partnership. The Conference has decided that the bank should sell its shares to the customer
after the completion of the partnership and in an independent contract where the customer has
the same provision.
The Second Form: The bank agrees with the customer in participating in the total or partial
capital of a firm of prospective earnings on the basis of the agreement with the right to relating
the remainder of the income for the purpose of paying the principal of what the bank has
contributed.
The Third Form: The shares of each partner (the bank and the partner) in the company are
determined as stocks co comprising the total value of the asset (real estate) Each partner, (the
bank and the customer) gets its share of the earnings accrued from the real property, If the
partner so wishes it can each year purchase a cretin number of the shares owned by the Bank,
The shares possessed by the bank shall be decreasing until the partner becomes the sole owner of
the real property.
Rules for diminishing Musharakah
In addition to all the legal rules that apply to the permanent partnership which also apply to the
decreasing partnership, the following matters must the observed:
1. Participation and Sharing profit and Loss: It is a condition in the decreasing partnership
that it shall not be a mere loan financing operation, but there must be real determination to
participate and all the parties shall share profit or loss during the period of the partnership.

Page XLII
2. Bank’s Ownership and Right to Management: It is a condition that the bank must
completely own it, share in the partnership and must have its complete right in management and
disposal. In case the bank authorizes its partner to perform the work, the bank shall have the right
of supervision and follow up.
3. Redeeming Bank's Share of Capital: It is impermissible to including the contract of
decreasing partnership a condition that adjudges the partner to return to the bank the total of its
shares in capital in assertions in addition to profits accruing from that share, because of
resemblance to RIBA (usury).
4. Bank’s Promise to Sell It Share to the Partner: It is permissible for the bank to offer a
promise to sell its shares in the company to the partner if the partner pays the value of the shares.
The sale must be concluded as a separate deal with no connection to the contract of the company.
Hire purchase Under ShirkatulMelk
Meaning and Definition
Hire purchase Under ShirkatulMelk is a special type of contract which has been developed
through practice. Actually, it is a synthesis of three contracts:
 Shirkat
 Ijarah and
 Sale
There may be defined as follows:
ShirkatulMelk
Shirkatul means partnership ShirkatulMelk means share in ownership. When two or more
persons supply equity, purchase an asset, own the same jointly, and share the benefit as per
agreement and bear the loss in proportion to their respective equity, the contract is called
ShirkatulMelk contract.
Ijarah
The term Ijarah has been derived from the Arabic words ‘Air’ and ‘Uirat’ which means
consideration, return, wages or rent. This is really the exchange value or consideration, return,

Page XLIII
wages, rent of service of an asset. Ijarah has been defined as a contract between two parties, the
Hire and Hirer where the Hirer enjoys or reaps a specific service or benefit against a specified
consideration or rent from the asset owned by the Hiree, it is a hire agreement under which a
certain assert is hired out by the Hiree to a Hirer against fixed rent or rentals for a specified
period.
Element of Ijarah
According to the majority of Fuqaha, there are three general and six detailed elements of Ijarah.
The wording: this includes offer and acceptance.
a) Contracting parties: this includes a Hiree, the owner of the property, and a Hirer, the party
that benefits from the use of the property.
Subject matter of the contract: this includes the rent and the benefit.
b) The Hire: the individual or organization hires/rents out the property of service is called the
Hiree.
c) The Hirer: the individual of organization hires / takes the hire of the property or service
against the consideration, rent/ wages/ remuneration is called the Hirer.
d) The benefit / asset: the benefit, which is hired/, rented out is called the benefit.
e) The rent: the consideration either in monetary terms or in kinds fixing quantity of
goods/money to be paid against the benefit of the asset or service of the asset is called the rent.
Sale
This is a sale contract between a buyer and a seller under which the ownership of certain goods
or asset is transferred by seller to the buyer against agreed upon price paid / to be paid by the
buyer.
Thus, in Hire Purchase under ShirkatulMelk made both the bank and the client supply equity in
equal or unequal proportion for purchase of an asset like land, building, machinery, transport etc.
Purchase the asset with that equity money, own the same jointly; share the benefit as per
agreement and bear the loss in proportion to their respective equity. The share part or portion of
the asset owned by the bank is hired out to the client partner for a fixed rent per unit of time for a
fixed period. Lastly the bank sells and transfers the ownership of its share/ part/ portion to the

Page XLIV
client against payment of price fixed for that part either gradually part by part or in lump sum
with in the hire period or after the expiring of the hire agreement.
Important features
1. In case of HPSM transaction the asset/ property involved is jointly purchased by the Hiree
(Bank) and the Hirer (Client) the Hiree and the Hirer become co-owner of the asset under
transaction in proportion to their respective equity participation.
2. In HSPM agreement, the exact ownership of both the Hire and Hirer must be recognized.
3. Under this agreement, the Hirer becomes the owner of the benefit of the asset but not of the
asset itself, in accordance with the specific provisions of the contract, which entitles the Hire, is
entitled for the rentals.
4. As the ownership of hired portion of the asset lies with the Hiree and rent is paid by the Hirer
against the specific benefit, the rent is not considered as price or part of price of the asset.
5. In the HPSM agreement the Hiree does not sell or the Hirer does not purchase the asset but the
Hire promise to sell the asset to the Hirer part by part only.
6. The promise to transfer legal title by the Hire and undertakings given by the Hirer to purchase
ownership of the hired asset upon payment part by part as per stipulations are effected only when
it is actually done by a separate sale contract.
7. As soon as any part of Hire’s ownership of the asset is transferred to the Hirer that becomes
the property of the Hirer and hire contract for that share/part and entitlement for rent there of
lapses.
8. In HPSM, the shirkatulmelk contract is affected from the day the equity of both partied
deposited and the asset is purchased and continues up to the day on which the full title of Hiree is
transferred to the Hirer.
9. Effectiveness of the sale contract depends on the actual sale and transfer of ownership of the
asset by the Hiree to the Hirer.
10. Under this agreement the bank acts as a partner, as a Hire and at last as a seller; on the other
hand the client acts as a partner, as a Hirer and lastly as a purchaser.
11. Ownership risk is borne by both the Hire and Hirer in proportion to their retained ownership
or equity.

Page XLV
12. The Hirer cannot, without obtaining prior written permission of the Hire make any changes
in the exact item of the hire, or remove it from its place of installation and transfer into Location.
13. HPSM transaction facilitates the client to get benefit from the hired asset in exchange of
rental and also to become full owner of the asset by purchasing it part by part.
14. The Hirer to secure the Bank (the Hire) will pledges hypothecate or mortgage his portion or
share in the asset and or any other asset of his own or third party guarantor to the Bank to
fulfill his all liabilities/commitments including the accrued rental, if any.
Rules
1. It is a condition that the subject of the contract and the asset should be known
comprehensively.
2. It is a condition that the asset to be hired must not be a fungible one which can not be used
more than once or in other words the asset must be a non-fungible one which can be utilized
more than once or the service of which can be separated from the asset itself. it is a
condition that the subject of the contract must actually and legally be attainable.
3. It is a condition that the Hirer shall ensure that he will make use of the asset as per
provisions of the Agreement.
4. It is a condition that the Hirer shall ensure that he will make use of the asset as per provision
of the agreement.
5. The hire contract is permissible only when the asset and the benefit derived from it is with
in the category as per Islamic Shariah.
6. In a hire contract, the period of hire and the rental to be paid per unit of time be clearly
stated.
7. Everything that is suitable to be considered a price, in a sale, can be suitable to be
considered as rental in a hire contract.
8. It is permissible to advance, defer or install the rental in accordance with the agreement.
9. It is permissible to make the Hirer to bear the cost of ordinary routine maintenance, because
this cost is normally known and can be considered as part of the rental.
10. If the hired asset is damaged or destructed by the act of Allah and if the Hire offers a
substitute with the same specifications agreed upon in the hire contract the contract does not
terminate.
11. Under HPSM agreement, both the Hire and the Hirer must pay their respective equity as
agreed upon to purchase the demised asset under joint ownership.
12. Ownership of the asset of both the Hire and the Hirer should be recognized as per law of the
land.

Page XLVI
Products under Investment Scheme:
 Investment /Deployment of Funds
o Bai-Murabaha (Deferred Lump Sum /Installment Sale)
o Bai-Muajjal (Deferred Installment /Lump Sum Sale)
o Ijara (Leasing)
o Musharaka (Joint-Venture Profit-Sharing)
o Mudaraba (Trustee Profit-Sharing)
o Bai-Salam (Advance Sale & Purchase)
o Hire-Purchase
o Direct Investments
o Post Import Investment
o Purchase & Negotiation of Export Bills
o Inland Bills Purchased
o Murabaha Import Bills
o Bai-Muajjal Import Bills
o Pre Shipment Investment
o Quard-ul-Hasan (Benevolent Investment)
 Letter of Guarantee
o Tender Guarantee
o Performance Guarantee
o Guarantee for Sub-Contracts
o Shipping guarantee
o Advance Payment guarantee
o Guarantee in lieu of Security Deposit
o Guarantee for exemption of Customs Duties
o Others
 Letter of Credit (L/C) / Back to Back Letter of Credit (L/C)
 Specialized Schemes
o Consumer Investment Scheme
o SME Investment Scheme
o Lease Investment Scheme
o Hire Purchase
o Earnest Money Investment Scheme
o Mortgage Investment
o Employees House Building Scheme
o ATM, VISA Investment Card, EEF, etc.

Page XLVII
SWIFT
Society for Worldwide Inter-Bank Financial Telecommunication (SWIFT) is a bank owned co-
operative serving the financial community worldwide. The SWIFT Transport Network (STN) is
a dedicated global network for secure communication between SWIFT Customers. SWIFT
supports the financial data communication and processing needs of financial institutions, through
a range of financial messaging services and value-added processing, as well as, access through
the STN and interface and application software. In short SWIFT is a pioneer in the automation of
the global financial industries.

Page XLVIII
Mode wise Investment
In Bangladesh perspective Bai-Murabaha mode is most popular mode.FSIBL makes investment
against it by taking charge and mortgage documents.HPSM is proanother important mode of
investment. After the payment here customer gets the right to be the owner of the property. From
the bellow table of 5 years mode wise investment shows that Bai-Murabaha and HPSM is
highest investment and Quard is average of total investment of FSIBL.Mode wise investment of
CY2009-2010&2011, and CY2012-2013 are given bellow:
Mode wise Investment of 2009-2010 &2011
Modes
2009 2010 2011
Amount
% of
invest. amount
% of
invest. Amount
% of
invest.
BaiMurabaha
294257297
3
66.382283
8
393701063
7
62.135944
5
505289384
3
50.531319
9
Hire
purchase
under
ShirkatulMel
k
111376086
5
25.125626
6
176852616
6
27.911797
5
430957253
7
43.097756
5
Bai-Muajjal 13109722
0.2957456
9 13527513
0.2134982
3 1164364
0.0116441
9
Quard 348170079
7.8544611
1 601016156
9.4855487
9 633358640
6.3338849
1
Bai-Salam 15154875
0.3418828
4 16043764
0.2532110
1 2539331
0.0253945
1
Total
443276851
4 100
633612423
6 100
999952871
5 100

Page XLIX
66.38228375
25.1256266
7.854461109 0.341882843
Modeswise invesmentof 2009
Bai Murabaha
Hire purchase
under Shirkatul
Melk
Bai-Muajjal
Quard
Bai-Salam
62.13594447
27.9117975
9.485548793 0.253211007
Modeswise investmentof2010
Bai Murabaha
Hire purchase under
Shirkatul Melk
Bai-Muajjal
Quard
Bai-Salam

Page L
Modes wise investment of 2012-2013
Modes
2012 2013
amount % of invest. Amount % of invest.
BaiMurabaha 2980118018 78.5748718 7110642463 92.5885848
Hire purchase under
ShirkatulMelk 546381518 14.4060931 70110580 0.91291883
Bai-Muajjal 3750994 0.09890007 232249 0.00302414
Quard 2056770 0.05422954 2743986 0.03572979
Bai-Salam 260403968 6.86590541 496096996 6.45974243
Total 3792711268 100 7679826274 100
50.5313199
43.0977565
6.333884906
Modeswise investmentof2011
Bai Murabaha
Hire purchase under
Shirkatul Melk
Bai-Muajjal
Quard
Bai-Salam

Page LI
66.38228375
25.1256266
0.341882843
Modes wise investment of2012
Bai Murabaha
Hire purchase under
Shirkatul Melk
Bai-Muajjal
Quard
Bai-Salam
62.13594447
27.9117975
0.253211007
Modes wise investment of2013
Bai Murabaha
Hire purchase under
Shirkatul Melk
Bai-Muajjal
Quard
Bai-Salam

Page LII
Investment Trend of FSIBL
This higher investment growth of the bank in 2012 and 2013 was due to the thrust given to
promote investment for effective utilization of depositors fund..Trend of investment Shows a
clear direction in last 5 years.
Years 2009 2010 2011 2012 2013
Amount 38725874774 52123903164 64451579004 96304228588 1.14329E+11
From the above chart we can see that investment of FSIBL is increasing year to year. Investment
is the main source for income. The amount of income from year to year is increasing as the
Bank's investment policy is favorable to customers.
2009 2010 2011 2012 2013
38725874774
52123903164
64451579004
96304228588
1.14329E+11
Investmenttrendof FSIBL

Page LIII
Distribution of Investment by Areas (Rural & Urban)
years Rural % Urban %
2009 370160295 0.074746 38355714479 0.10472
2010 417502000 0.0843057 51706401164 0.14117
2011 1166763000 0.2356031 68300565284 0.18648
2012 1511669654 0.3052497 94792558934 0.2588
2013 1486144217 0.3000954 1.13116E+11 0.30883
total 4952239166 1 3.66271E+11 1
from the above chart it is found that First Security Islami Bank ltd. invested the maximum
money in urban area. Because maximum entrepreneur and businessman stay in urban area.
However maximum organization established in urban area.
0
2E+10
4E+10
6E+10
8E+10
1E+11
1.2E+11
2009 2010 2011 2012 2013
rural
urban

Page LIV
FinancialStability of FSIBL
In the perspective of stability in the financial system, Islamic banks are less vulnerable to risk
than conventional banks. They are able to pass the negative shocks on the asset side (Musharaka
a/c) to the investment depositors (Mudaraba a/c).The risk-sharing arrangements on the deposit
give secondary protection to the bank, in addition to its book capital. They also tend to be more
conservative (resulting in less moral hazard and risk taking) for providing a stable and
competitive return to investors, the shareholders responsibility for negligence or misconduct and
given the more difficult access to liquidity. Bangladesh has a large population of Muslim people
and among them the embrace of islami banking is increasing at a faster rate due to theirfaith. It is
indeed desirable to encourage Islamic banks to develop new products for their customers who are
willing to invest their savings in a shriah vehicle but these new products necessitate maintaining
close monitoring so that no advance shocks can arise from their expanding horizons. Some
financial ratio are given bellow-
Return on Asset=Net profit after tax/Total Asset*100
years 2009 2010 2011 2012 2013
Amount 0.68% 0.86% 0.64% 0.59% 0.48%
ROA is primarily an indicator of managerial efficiency. It indicates how capable the
management of the bank has been converting the asset into earnings.ROA of the islami bank in
year 2010 is 0.89% that is higher than 0.64% in 2009 ,indicating better quality assets under
possession of shariah banks and earnings more from the same amount of assets than the
conventional banks.
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
0.80%
0.90%
2009 2010 2011 2012 2013
years
years

Page LV
Return on Equity =Net profit after tax/Total Equity*100
years 2009 2010 2011 2012 2013
Amount 11.40% 13.99% 12.75% 13.35% 11.74%
ROE is measure of rate of return flowing to the bank’s shareholder. If approximates the net
benefit that the shareholders have received from investing their capital in the bank. The ROE of
FSIBL in year 2010 is 13% ,which is higher than year 2009,11,12 and 2013.ROE of 13% in
CY10 indicating the earnings of FSIBL become higher compared to their equity position.
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
2009 2010 2011 2012 2013
years
years

Page LVI
Net Profit Margin =Net profit income /Gross earnings Assets*100
years 2009 2010 2011 2012 2013
amount 2.03% 6.35% 0.84% 0.79% 1.15%
(Gross earning assets = Balance with other banks & FIs + Investment in securities + Loans &
advances. For FSIBL profit income means income (interest) from investment (loans and
advances).
Net profit ( interest) margin measures how large a spread between profit (interest) revenues and
interest costs management has been able to achieve by close control over the bank’s earning
assets and pursuit of the cheapest sources of funding.Net profit of FSIBL in year 2010 is
92.0%,whichis higher than previous year and after year 2013.
76.00%
78.00%
80.00%
82.00%
84.00%
86.00%
88.00%
90.00%
92.00%
94.00%
2009 2010 2011 2012 2013
years
years

Page LVII
Net profit (interest) income to total Assets =Net profit income/Total Assets*100
years 2009 2010 2011 2012 2013
amount 0.12% 0.41% 0.09% 0.09% 0.16%
( For FSIBL profit income means income (interest) from investment (loans and advances).
The Net profit income to total assets ratio of FSIBL in year 2010 is 92%, which is higher than
the other year. Its indicated the higher income contribution from the other year.
76.00%
78.00%
80.00%
82.00%
84.00%
86.00%
88.00%
90.00%
92.00%
94.00%
2009 2010 2011 2012 2013
years
years

Page LVIII
Investment Deposit Ratio=Investment/Deposit*100
years 2009 2010 2011 2012 2013
amount 91.28% 92.50% 88.90% 87.63% 81.95%
In 2013investment deposit ratio is less than other year. Other year ratio is increasing it shows
that return to depositors is increasing year to year. Deposit is the main sources for investment.
From the diagram we can see that over the year it is fluctuating.
76.00%
78.00%
80.00%
82.00%
84.00%
86.00%
88.00%
90.00%
92.00%
94.00%
2009 2010 2011 2012 2013
years
years

Page LIX
Chapter- IV
SWOT Analysis

Page LX
SWOT Analysis
SWOT analysis is the detailed study of an organization’s exposure and potential in perspective of
its strength, weakness, opportunity and threat. This facilitates the organization to make their
existing line of performance and also foresee the future to improve their performance in
comparison to their competitors. As though this tool, an organization can also study its current
position, it can also be considered as an important tool for making changes in the strategic
management of the organization.
Strength
Adequate Finance: FSIBL has adequate finance. That is why, theydo not need to borrow money
from Bangladesh bank or any other bank.
More funds for investment: For adequate financial ability, they can provide more investment
facility to their rather than other banks.
Honest and reliable employees: All of the employees of FSIBL bank are honest and reliable.
They are always devoted themselves to the clients for better customer.
Religious feelings of the people: Most of the people of Bangladesh are Muslim and they are
trusted in superior performance of FSIBL as a shariah based Islamic banking.

Page LXI
Weakness
Lake of adequate of employee: FSIBL has very limited human resources compared to its
financial activities.
Lake of up-to-date equipment: FSIBL has lake of modern technologies and equipments like
adequate online facilities as well as cash card and credit card system.
Deficiency of expertise: Many of the employees are unskilled and from them, superior
performance is unexpected to survive in the national economy as well as in the world economy.
Lake of advertising: FSIBL has lake of aggressive advertising like other banks. They don’t
telecast any attractive in the media.
Centralized decision making: The decision making of the bank is too many centralized. No
decision is made without the authorization of the head office.
Opportunity
Innovative and modern customer service: This bank can introduce more innovative and
modern customer services to its customers to survive better in the competition market.
Retaining vast customer: FSIBL has a vast opportunity to hold most of the customers by
extending its banking operation all over the country as most of the people of Bangladesh are
religious minded.
Poverty alleviation: FSIBL has a great opportunity to save the county’s poor people from being
taking loan from different NGOs or few banks with higher interest rate.
Special Image: FSIBL has created special image to the people as a more reliable bank. People
believe that if they keep their money in islami bank it will be more secured than other banks.
Threats
Rules and regulation: Rules and regulation of Bangladesh bank defers with islami banking
system. So they have to face various problems to operate their activities according to the Islamic
shariah.
Lower salary structure: Now many of the banks are hiring young talent and expertise
employees with higher remuneration where FSIBL could not hire skilled manpower because of
lower salary structure compared to other banks.
Islami banking system introduced by conventional banking: Few other conventional banks
have opened their Islamic Banking Branch.

Page LXII
Chapter- V
Findings & Recommendation

Page LXIII
Findings
Since this study mainly focuses on the investment operations of FSIBL, it has been found that
the investment operations of FSIBL are not so strong. From the study it is observed that FSIBL
has some good points as:
 FSIBL is a financially sound company.
 FSIBL invest huge amount in industrial sector that is essential for Bangladesh as a less
develop country.
 FSIBL invest more also in rural development project and real estate project.
 FSIBL is now a very popular bank in our country because of its smooth operations.
 FSIBL performs mass banking which other bank does not perform for that reason it is
very popular bank in our country.
 Annual income of FSIBL is massive comparing to other commercial banks.
 FSIBL provides its customer excellent and consistent quality in every service. Rate of
return of FSIBL is low comparing to other conventional banks, which is good news for
poor people.
 FSIBL utilizes state-of-the art technology to ensure consistent quality and operation.
 FSIBL provides its works force an excellent place to work.
 FSIBL has already achieved a good will among the clients.
 FSIBL has a research division.
 Emergence of E-banking will open more scope for FSIBL.
 FSIBL can introduce more innovative and modern customer service.
 Many branches can be open in remote location.

Page LXIV
Recommendations
 FSIBL should concern to invest in agriculture sector.
 FSIBL should also provide scholarship to the poor students.
 FSIBL investment percentage should increase and customer will interest to take their
service.
 FSIBL investment sector employees should proper train-up.
 For the greater interest of the depositors the investment policy of FSIBL is to invest on
the basis of profit & loss sharing in accordance with the tents and principles of Islamic
Shariah.
 FSIBL should broadcast their product and investment criteria through media.

Page LXV
Conclusion
FSIBL is not material in its orientation. FSIBL does not invest any scheme, which conflicts with
the moral value system of Islam. FSIBL does not strictly consider the credit worthiness of the
industrialist. FSIBL receives a return only if the project succeeds and produces a profit. FSIBL
considers the soundness of the project and business acumen and managerial competency of the
entrepreneur. Therefore, the rate of return of investment of FSIBL is greater comparing to that of
conventional banks.
Finally, First Security Islami Bank Limited has been established with a view to conduct interest
free banking to establish participatory banking instead of debtor-creditor relationship and finally
to establish welfare oriented banking through its investment operations that would lead to a just
society.

Page LXVI
Part: Three
Appended part

Page LXVII
Bibliography
 A text book on Banking-
Commercial Bank Management (12th Edition)
 Dr. R.M. Debnath
 Durance B., Graddy and Austin H.
 Officials of First Security Islami Ban Limited
 Bangladesh Bank Guidelines
 www.fsibl.bd.com
 www.bangladeshbank.org.bd
 Publications & Articles of FSIBL

Page LXVIII
Corporate Slogans:
“Green in Living”
Corporate Information:
Name of the Company First Security Islami Bank Ltd.
Chairman Mohammad SaifulAlam
Vice Chairman Alhaj Mohammad Abdul Maleque
Managing Director A.A.M. Zakaria
Company Secretary Abdul Hannan Khan
Legal Status Public Limited Company
Date of Incorporation August 29, 1999
Date of Commencement of Business August 29, 1999
Date of Permission from Bangladesh Bank September 22, 1999
Date of Opening of First Branch October 25, 1999
Corporate Head Office House-SW(I) 1/A, Road-8, Gulshan-1, Dhaka
RegisteredOffice 23, Dilkusha, Dhaka-1000, Bangladesh
Line of Business Banking
Authorized Capital Tk. 4,600 Million
Paid up Capital Tk. 3,740 Million
Date of Consent of IPO 04 June, 2008
Branches in the Country 92 Branches
Phone 88-02-9560229 (Hunting), 9550334,7171029-30
Fax 88-02-9561637
E-mail bcs@fsiblbd.com, info@fsiblbd.com
Website www.fsiblbd.com

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