Islamic Development Bank (IDB)

a. EstablishmentThe idea of establishing an international financial institution for Muslim counties was discussed in the late 1960s by the Organization of Islamic Conference (OIC) Working papers were circulated and proposals made. but no concerted action was taken until the first meeting of the Finance Ministers of the Islamic countries held in Jeddaha 1393H (December, 1973). The second conference of finance ministers held in August 1974 adopted the Articles of Agreements establishing the Bank. The Bank began functioning on 15 Shawal 1395H (20th October 1975).

b. ObjectivesThe establishment of the Islamic Development Bank was aimed at contributing to economic development and social progress of its member countries by reinforcing economic co-operation among them, assisting in the development of Islamic economics, banking and finance, and promoting the economic and social welfare of Muslim communities in non-member countries. In order to realize the above objectives, the IDB is empowered by its Articles of Agreement to engage in the following activities.

1. Participation in equity capital of productive projects and enterprises in member countries.2. Investment in economic and social infrastructure projects in member countries by way of participation or other financial arrangement.3. Extending loans to the private and public sector for the financing of productive projects, enterprises4. Establish and operate special funds for specific purposes including a fund for assistance to Muslim communities in non-member countries.5. Operate trust funds.6. Accept deposits and raise funds in any other manner.7. Assist in the promotion of foreign trade especially in capital goods. among member countries.8. Suitably invest funds not needed in its operations.9. Provide technical assistance to member countries.10. Extend training facilities for personnel engaged in development activities in member countries.11. Undertake research to enable the economic. financial and hanking activltic in Muslim countries to conform to the Shariah.12. Cooperate in such a manner as the Bank may deem appropriate with all bodies, institutions, and organizations having similar purposes in pursuance of international economic co-operation.13. Undertake any other activities, which may advance its purposes.14. According to the Articles of Agreement, all these activities arc to be undertaken in accordance with the principles of the Shariah.

Accounting And Auditing Organizations for Islamic Financial Institutions (AAOIFI)

The Accounting Standards for Islamic Banks are prepared by the 'Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)', which was established in accordance with the agreements signed by Islamic Financial Institutions on 26 February 1990 in Algiers during the meeting of Islamic Banks and Financial Institutions. AAOIFI was registered on 27 March 1991 in the state of Bahrain as an international autonomous non profit making corporate body.

The objectives of AAOIFI are as follows:

i. Develop the accounting, auditing and banking practices thought relating to the activities of Islamic Financial Institutions.

ii. Disseminate the accounting and auditing thought relating to the activities of Islamic Financial Institutions and it;, applications through training, seminars, publication of periodical newsletters, preparation of research and other means.

iii. Prepare, promulgate and interpret accounting and auditing standards for Islamic Financial Institutions in order to hannonize the accounting practices adopted by these institutions in the preparation of their financial statements as well as to hatmonize the auditing procedures adopted in auditing the financial statements prepared by Islamic Financial Institutions.

iv. Review and amend the accounting the auditing standards for Islamic Financial Institutions to cope with developments in the accounting and the auditing thought and practices.

v. Prepare, issue, review and adjust the statements and guidelines on the banking, investment and insurance practices of the Islamic Financial Institutions.

vi. Approach the concerned regulatory bodies, Islamic Financial Institutions, other financial institutions that otTer Islamic Financial Services, and accounting and auditing firms in order to implement the accounting and auditing standards, as well as the statements and guidelines on the banking, investment and insurance practices of Islamic Financial Institutions that are published by AAOIFI.

The structure consists of :i. a General Assembly,ii. a Board of Trustees,iii. an Accounting and Auditing Standards Board,iv. an Executive Committee,v. a Shari'ah Board, andvi. a General Secretariat to be headed by a Secretary- General.

Islami Bank Bangladesh LimitedFinancial Administration Division

Head Office, Dhaka.

Bangladesh Government Islamic Investment Bond (Islamic Bond) (BGIIB)

During the year 2004, Ministry of Finance, Government of the Peoples Republic of Bangladesh introduced Bangladesh Government Islamic Investment Bond (Islamic Bond) (BGIIB).

Salient Features of the Bond as under:

1. Name of the Bond: Bangladesh Government Islamic Investment Bond (Islamic Bond) (BGIIB).

2. Purchaser of Bond: Islamic Banks & Islamic Financial Institutions.(a) Institutions and individuals resident in Bangladesh agreeing to accept Islamic

Shariah based on profit and loss sharing under these rules shall be eligible for purchase.

(b) A non-resident Bangladesh Nationals agreeing to accept returns on the basis on profit and loss sharing under these rules shall be eligible, subject to the purchase being made with funds from a non-resident foreign currency account in the name of the purchaser with a Bank in Bangladesh.

3. Denomination of the Bond: Tk. 1(One) Lac or multiplies thereof4. Period of the bond: 6(six) months, 1(one) year and 2(two) years.5. The bond will be transferrable between institutions and individuals eligible for purchase

of this bond.6. Bangladesh Government Islamic Investment Bond (Islamic Bond) (BGIIB) will be

eligible assets for fullfillment of Statutory Liquidity Requirement (SLR) prescribed for banks and finanical institutions.

7. Deduction of Tax will be applicable on the profit of the Bond.8. Profit of the Bond:

The bond purchaser will get profit at provisional rate 2% less than the average income earned by 6(six) months period Bond, 1.50% less than the average income earned by 1 (one) year period Bond and 1% less than the average income earned by 2(two) years period Bond subject to adjuestment with final profit within 31st March of the following year. Final profit will be shared as per following ratio:

Sl. No. Period of the Bond Share of Bondholders Share of Islamic Bond Funds1 6(six) Months 80% 20%2 1(One) Year 90% 10%3 2(Two) Years 95% 5%

It may be mentioned here that no provision for premature encashment of the Bond has been kept.

9. Loss if any will be debited / recovered from the Bond amount.10. Deployment of Bond Proceeds:

The proceeds of the bond will be deployed to Islamic Banks and Financial Institutions for maximum 180 days and profit will be paid on monthly basis at provisional rate at the rate of profit paid paid on the savings account subject to adjustment with the final rate of profit.

The Islamic Financial Instrument will surely bring ample benefit to the Islamic Banks & Financial Institutions of the country & will ensure best utilization of the funds of Islamic Banks & help boost up the economy of the country.

Islami Bank Bangladesh LimitedHead Office, Dhaka

IBBL MUDARABA PERPETUAL BOND (MPB): SPECIAL FEATURES

i. Shariah Principle:The MPB will be issued under the Mudaraba Principles of Islami Shariah. The Bank will act as Mudarib of the MPB holders.

ii. Nature:The MPB will be treated as “Tier-2 Capital (Supplimentary Capital)” upto 30% of the Core Capital of the Bank.

iii. Volume of MPB: Total Volume of MPB will be Tk. 3,000.00 million.

iv. Type:MPB will be irredeemable and non-convertible duly fullfilling the requirement of Securities & Exchange Commission and the Bangladesh Bank.

v. Tradability:MPB will be listed in the Stock Exchanges of the Country for trading.

vi. Restriction on encashment:No encashment of the MPB will be allowed.

vii. Status:MPB will be treated as on of the components of Mudaraba Fund and shall be governed by the rules and principles of utilization and distribution of profit of such funds as in vogue in IBBL and shall be subject to change, revision & modification from time to time.

viii. Profit Sharing Principle:The MPB will be of perpetual nature. However, 1.25 weightage has been assigned to rank the MPB equal to 8(eight) years Mudaraba Bond in sharing profit with other Mudaraba funds.

In addition to above, an additional rate of profit equivalent to 10% of the rate of dividend declared by the IBBL every year shall also be paid to the MPB holders from the Income of the Bank to make it attractive for the buyers.

The total amount of profit to be paid to the MPB holders as described above is to be debited to Profit Paid on Deposit (PPD) / Profit Paid on Perpetual Bond (PPPB). This profit will thus be an expenditure of the Bank chareable to pre-tax profit.

ix. Restriction on Profit Payment:No profit will be paid at provisional rate. Profit at Final rate will be paid to the MPB holder through MPB Warrant once in a year when final rate is declared by the bank.

x. Income Tax:For Income Tax benefit, we have already applied to National Board of Revenue (NBR) and waiting for their reply / approval.

xi. Trustee:Investment Corporation of Bangladesh (ICB) has been appointed as trustee of the MPB.

xii. Face Value & Market Lot:MPB will be issued at a face value of Tk.1,000/-, minimum subscription (Market lot) is Tk.5,000/- or multiple thereof.

xiii. Mix of MPB Issue may be as Under: Private Placement 50% i.e. for Tk. 1,500 Million Public Placement 50% i.e. for Tk. 1,500 Million Or, as is being decided in this respect.

xiv. MPB record:MPB record will be maintained as like as ordinary share holder’s record in the Computer / Central Depository Bangladesh Limited (CDBL).

xv. Eligible buyers:Private Placement offer may be given to Banks, Investment Corporation of Bangladesh (ICB), Financial Institutions, Merchant Houses, Industrial & Trading Corporates, Individuals etc. Public Offer may be given to Bangladeshi Nationals (including non-resident Bangladeshi Nationals working abroad) & also to foreign nationals.

xvi. Marketing Aspect:The investors are expected to be interested to buy the MPB due to its Shariah compatibility, tradability as also the expectation of aprreciable rate of return.

xvii. Present Status of proposed MPB:Bangladesh Bank accorded approval of the MPB as on 07.05.2006 subject to some conditions. Meanwhile the Shareholders of the Bank in the EGM held on 23.02.2007 approved issue of MPB for Tk.3,000 million. We shall apply to Securities and Exchange Commission for their clearance which is under process.