INTRODUCTION Since the establishment of Social Islami Bank Limited has come forward as a private commercial bank and

very encourage has come forward as the stimulator of economic activities in the country. The bank has been entrusted with the responsibility of undertaking various steps related to the development of the countrys commercial, industrial and agricultural sectors. The banking sector of a country is called the economic barometer of the country. As a pioneer commercial bank in the private sector in Bangladesh, Social Islami Bank provides considerable financial helps to the business sector that imports industrial goods and/or exports excess production outside the country for profit. Thus for imports the Social Islami Bank provides LIM (Loan against Import Merchandise) and LTR (Loan against Trust Receipt) facility and for exports provides both pre shipment and post shipment finances. Thus with these bank helps the prospect sin the business sector has increased more than ever before. HISTORICAL BACKGROUND OF SIBL Social Islami Bank Limited (SIBL) is a banking company registered under the companies Act 1994 with its head office in 15 Dilkusha C/A, Dhaka-1000. The bank operates as a scheduled bank under a banking license issued by the Bangladesh Bank, Central Bank of the country. The Bank started its operation from 22, November 1995. SIBL is a capitalized new generating Bank with an authorized capital and paid up capital of Taka 585 million in 2007 and also 585 million respectively as of December 2006. Currently the bank has 24 branches of which 12 in Dhaka, 4 in Chittagong, 1 in Sylhet, 2 in Narayanganj, 1 in Bogra, 1 in Khulna, 1 in Rajsahi, 1 in Sirajgonj. The bank undertakes all types of banking transaction to support the development of trade and commerce in the country. SIBL services are also available for the entrepreneurs to set up new venture and BMRE of industrial units. To provide clientele services in respect of international trade it has established wide corresponded banking relationship with local and foreign banks trade and financial interest home and abroad. Since the very inception, Social Islami Bank Ltd. is working with the philosophy of serving the nationals as an ideal and unique financial

house. The prime objective of Social Islami Bank Ltd. is to earn profit throw undertaking the responsibility of providing financial help for the development of the countrys commercial and industrial sector. EVOLUTION OF ISLAMIC BANKING:In Muslim communities limited banking activity, such as acceptance of deposits, goes back to the time when the Prophet Muhammad was still alive. At that time, people deposited money with the Prophet or with Abu Bakr Siddique, the First Khalif of Islam. The first modern Islamic bank, established in Egypt in1972, was called Nasser's Social Bank. Islamic accounting, an essential tool for the success of Islamic banks, is said to have been developed contemporaneously at the University of Cairo. Islamic banking operations are not limited to Arab soil, or Islamic countries, but are Spreading throughout the world. One reason is the "growing trend toward transcending national boundaries, and unifying Muslims into a political and economic entity that could have a significant impact on the pattern of world trade. ...Since Muslims are inclined to follow Islamic traditions, there is a tendency to establish an Islamic economic system in every Islamic nation and to restore Shariah Law as the basic source for legislation" Islamic banking is no longer confined to concepts and ideas only. The Islamic banking and financial framework has developed into a full-fledged system and discipline. The concept has become clear to a great extent by now as to what are its basic requirements for compliance with Shariah. The earliest Islamic bank raced serious challenges ranging from general suspicions about their viability to a common mistrust about their intentions. Since then, the Islamic banks have been steadily growing to a remarkable level at this stage. During the last decades, financial instruments used by Islamic banks have developed significantly, both on assets and liability sides. Many instruments have been developed to mobilize financial surpluses. A number or Islamic banks have launched investment instruments in the form of certificates with short-term maturities or have established funds earmarked for certain investments. Accordingly, Islamic financial institutions are operating at present in one former the other, in around70 countries of the world. SALIENT CHARACTERISTICS OF ISLAMIC BANKING;-

An Islamic bank is a full service intermediary financial institution that abides by the Islamic law. However, some writers like to see in Islamic banks more than a financial institution. This is not true. In a paper, Kuran (1997) said, "Islamic banking defies the separation between economics and religion. It invokes religious authority in a domain that modem civilization has secularized One must know the difference between Shariah, as a law, and religion. The only authority exercised on Islamic banks is that of their respective boards of directors and the supervision of central banks. The commitment of Islamic finance to abide by the Islamic law determines its main characteristics. This commitment is manifested is redefining its modes of operation and relationships between the financial intermediary on one hand, and the suppliers and users of funds on the other hand, in order to make them compatible with Shariah. The actual practice of Islamic banking over the past three decades and the rise of Islamic banks as a new species of banks reveal three innovations in the banking traditions. 1. New kind of relationship between banks and depositors, 2. Integration of financial and real market in financing, 3. Incorporation of ethics and moral values in investment and financing decisions. Islamic Banking brings economic empowerment to Muslims in the areas of operation. It helps Muslim businesspersons, through financial aid, to remain competitive. It also leads towards the creation of job opportunities for Muslims as well as Non-Muslims. It is a basis for expansion into the Islamic Economic System since the establishment of each Islamic Bank is also the creation of another bank to co-operate with others in the International web of Islamic Banks. Thus also creating a link for international interests. It provides investors with flexibility in the types of accounts within which they could channel their investment. It thus links capital to labor and reduces expenditure, to levels, related with the type of investment, the value thereof and its period. Islamic Banks enable the saving of monetary resources for the future as shown by the Yusuf (A.S.) and in a methodology approved by Allah. This thus leads to the protection of

wealth. Sponsoring Islamic activity & the mobilization of resources for International Islamic Support not only investment, but moral as well, i.e. relief towards Muslim refugees and victims of war, etc. Islamic Banks facilitate international and local trade, provide foreign exchange services and profitably invest the Muslim fraternity's surplus wealth in conformity to Islamic principles through economically acceptable development and social projects indispensable for the Muslim Ummah. ISLAMIC MODES OF FINANCING:The important modes of financing are 1. Musharakah 2. Mudarabah 3. Murabaha 4. Salam 5. Istisna 6. Ijaraha Musharakah Musharakah means a relationship established under a contract by the mutual consent of the parties for sharing of profits and losses in the joint business. It is an agreement under which the Islamic bank provides funds, which are mixed with the funds of the business enterprise and others. All providers of capital are entitled to participate in management, but not necessarily required to do so. The profit is distributed among the partners in pre-agreed ratios, while the loss is borne by each partner strictly in proportion to respective capital contributions. Mudarabah A form of partnership where one party provides as the funds while the other provides expertise and management. The latter is referred to as the Mudarib. Any profits accrued are shared between the two parties on a pre-agreed basis, while loss is borne by the provider of the capital.

Murabaha Literally it means a sale on mutually agreed profit. Technically, it is a contract of sale in which the seller declares his cost and profit. Islamic banks have adopted this as a mode of financing. As a financing technique, it involves a request by the client to the bank to purchase a certain item for him. The bank does that for a definite profit over the cost, which is settled in advance. Salam Salam means a contract in which advance payment is made for goods to be delivered later on. The seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advance price fully paid at the time of contract. It is necessary that the quality of the commodity intended to be purchased is fully specified leaving no ambiguity leading to dispute. The objects of this sale are goods and cannot be gold, silver or currencies. Barring this, Salam covers almost everything, which is capable of being definitely described as to quantity, quality and workmanship. Istisna It is a contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment and future delivery. Istisna can be used for providing the facility of financing the manufacture or construction of houses, plants, projects, and building of bridges, roads and highways. Ijaraha A contract under which an Islamic bank finances equipment, building or other facilities for the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee. The undertaking or the promise does not become an integral part of the lease contract to make it conditional. The rental as well as the purchase price is fixed in such manner that the bank gets back its principal sum along with profit, which is usually determined in advance.

FORMATION OF SOCIAL ISLAMI BANK The Bank was incorporated in Bangladesh in the year 1995 as a banking company under the companies Act, 1994, all types of commercial banking services as provided by the Bank from time to time besides as a matter of policy the Bank conducts its Business on the principles of Mushataka, Murabaha, Bai-Muazzal and Hire Purchase transaction approved by Bangladesh Bank. Products & Services Mudarabah Term Deposit. Mudarabah Savings Deposit. Al-Wadia Current Account. Mudaraba Notice Deposit. Mudaraba Scheme Deposit. Cash Waqf. Mudaraba Hajj Savings Deposit. Mudaraba Monthly Savings Scheme. Mudaraba Special Deposit Pension Scheme (5 Years). Mudaraba Monthly Profit Deposit Scheme. Mudaraba Education Deposit Scheme. Mudaraba Home Saving Scheme. Mudaraba Millinery Deposit Scheme. ATM Service. Locker Service. One Line Banking

* Deposits Accepted by SIBL Mudaraba saving Deposit (MSD) 6

These are profit bearing deposit accounts. The drawings are restricted in respect of both the amount of withdrawal and the frequency there of 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.

* Special Saving Scheme

Mudarabah Hajj Saving Scheme Hajj is one of the basic pillars of Islam- the complete code of life. SIBL has introduced a scheme in the name & style Mudaraba Hajj Saving Scheme to facilitate the intending Muslims to perform Hajj properly at appropriate age. This is purely a saving scheme for Hajj. Any Muslim intending in perform Hajj by building up deposit required for meeting Hajj expenses will select one of the 20 alternative choices based on duration of period from 1 year to 20 years for building- up savings by monthly installments under this scheme. Mudarabah Education Scheme SIBL being encouraged by the success of the Mudaraba deposit accounts, has introduced another savings scheme namely Mudaraba Education Scheme Mudarabah Millionaire Scheme People of Bangladesh are the followers of Islam. They are mostly interested to make interest free deposits. Taking these facts into consideration SIBL a joint venture Islamic bank introduced a monthly installment based "Mudaraba Millionaire Scheme" Rules and regulations of this scheme: Tk. 550/-, Tk. 1050/- or Tk. 2050/- is taken as monthly installment under Mudaraba principles of Islamic Shariah. Mudarabah Special Savings (Pension) Scheme Any Bangladeshi person aged above 18 yrs and having sound mental condition can may open this scheme. To open this account there must be a signature of a valued introducer. Parents or legal guardians can open this scheme in the name of their underage children.

Mudaraba Monthly Profit Deposit Scheme The features of this scheme are as follows: 1. Tk. 1, 00,000/-, 1, 10,000/-, 1, 20,000/- or 1, 25,000/- or any amount multiple can be deposited under this scheme.2. 2. The duration of the amount should be for Five years. 3.Profits shall be distributed under this scheme as follows: a. 1,00,000/- Tk. 900 (net)b. 1,10,000/- Tk. 1000 (net)a. 1,20,000/- Tk. 1,100 (net)b. 1,25,000/- Tk. 1150 (net)4. 4. The payable profit will become due after 1 month of deposit. But the amount will be deposited to account in the last week of the month.5. 5. Generally, a depositor cannot withdraw the amount before 5 years. But, in unavoidable circumstances the depositor can withdraw the amount and in that case the depositor will have to submit the duly filled application form of the scheme. Mudaraba Term Deposit Mudaraba Term Deposit is one, which is repayable after the expiry of a predetermined period fixed by him. The period varies from 1 month to 1 year or above. These deposits are not repayable on demand but they are withdrawing able subject to a period of notice. Hence, it is popularly known as Mudaraba Time Deposit or Time Liabilities. Normally the money on a fixed deposit is not repayable before the expiry of a fixed period. In case of MTDR Account the Bank needs to maintain a cash reserve. So SIB offers a high interest rate in MTDR accounts. The Interest rates followed by SIBL Al Wadiah Current Deposit 1. ALWADIAH Current Deposit A/cs are opened proper introduction with minimum initial deposit fixed by the Bank.2.

2. ALWADIAH Deposit is accepted on ALWADIAH principles which mean alAmanah with permission to use. According to this principle Bank can use the fund of the account along with other funds as per Shariah at bank's own risk. Accountholder(s) will not share any profit/loss. 3. The Law and regulation of Bangladesh, usual customs and procedures common tobanks in Bangladesh including Islamic Banking Principles shall apply to and govern the conduct of account opened with the Bank.

Takaful Islami Insurance Ltd.

Introduction Takaful is an alternative form of conventional insurance based on the concept of trusteeship and cooperation inspired by the beliefs of the followers of Islamic teaching. Muslim societies in different parts of the world are now practising Takaful scheme as their own way of sharing financial responsibilities to assist each other. They have invented an Islamic way of mutual assistance to deal with uncertainties of life. Takaful provides mutual financial aids and assistance to those who are members of the Takaful scheme and voluntarily agree to contribute a certain amount of money for that purpose. It is a mutual agreement among the participants of the scheme. This has its origin from the concept of collective sharing of individuals loss. Takaful, is being practised now as an alternate of conventional insurance system and is bounded by Islamic principles, rules and the law of Islam (Shariah). The fundamental basis of Takaful scheme is that its operations do not involve any element which is not approved by the Shariah (Laws of Islam). Therefore, it is necessary that the Takaful operators should establish and maintain Takaful fund for the class or each of the Takaful schemes carried on by the operators. The assets comprised in the fund shall be applicable only to meet such part of the operators liabilities and expenses as is properly so attributable. The assets of the Takaful fund shall be kept separate from all other assets

of the operator. This means that the fund of the entrepreneurs of a Takaful company should not be amalgamated with the Takaful fund created by the participants of a Takaful scheme. When a Takaful scheme is operated on the basis of mutual or on the basis of cooperative principles, any surplus or deficit of the Takaful operation has to be shared by the participants, or the members themselves. But when a Takaful scheme is being operated on commercial basis, the surplus of Takaful operation has to be shared between the operator and the participants in accordance with the principles of Mudarabah. The sharing of such surplus may be in a ratio as agreed between the contracting parties. The participants are entitled to a share of surplus as the providers of the fund and the operators are supposed to have a share of the surplus as the entrepreneur and managers of the fund. Scope In this paper I have described in brief the background of Takaful Insurance as part of Islamic Banking Movement. In the second part the Role of Takaful has been analysed & focused in order to asses how Takaful helps to develop the economy towards balanced growth & prosperity. While assessing the potentiality & prospect of Takaful it has been observed that the major increase in consumption of Takaful will result from the increase in supply of Takaful. It has been suggested that the Government of Islamic countries should have strategic policies to promote & foster the growth of Takaful, for the development of Shariah based just & fair Financial System for the Ummah (Muslim Community). Profile: Takaful Islami Insurance Limited was established in 2002. A group of Businessmen who had earlier launched an Islami Bank in the private sector sponsored the company with 60 million taka. Market size of Bangladesh in the non-life sector was Tk. 1,050 million in 1986. It has grown to Tk. 7975.70 million in 2006. The growth of private sector non-life insurance business was primarily due to the drive given and initiative taken by the private insurers in exploring new avenues while to some extent it was due to increase in project value and commodity prices in the international market. The premium income of non-life private insurers would have been much more had the term Public Property been redefined to give its exact detonations through exclusion from its orbit those undertakings

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which had been setup with foreign loan in the private sector and insurance premium thereon was fully paid by the private entrepreneurs. This provision has been hindering the growth of the private insurance companies, as only the Govt. owned Sadharan Bima Corporation is allowed to insure such Public Property with its present denotation. We insure all traditional lines of non-life insurance businesses viz. Fire & allied risks including flood, cyclone, earthquake, Typhoon, malicious damage, burglary, riot, strike, damage, house breaking, industrial all risks, DOS, machinery break-down, loss of profit, business interruption, CAR/EAR, personal accident including workmen compensation, motor insurance of all descriptions & value, Travel medical & medical insurance including treatment abroad to name a few broad lines. Paid-up capital of the company is Tk.60.00 million and Reserves including capital reserves stood at Tk.64.39 million as 31st December 2007. Total Asset as of 31st December, 2007 stood at over Tk. 2026.86 million. Investment: Companys investment portfolio is well balanced. Position in brief, as of December, 2007, stood as below:
Amount (Tk.) Govt. Bond Shares (at cost) TDR/FDR Fixed Assets Total Tk. 90,00,000.00 Tk. 2,12,10,243.00 Tk. 8,17,00,000.00 Tk. 64,34,004.00 Tk. 11,83,44,247.00

Claim Settlement: Client's service and prompt settlement of claims are the key to the success and growth of the company. Claims are settled immediately on completion of the required formalities by the insured and the surveyors. The company has settled claims of over Tk. 1307.52 lac since it started operation in 2001 till 2007. The gross premium earned and gross claims settled during the last 5 (five) years stood as under:
(Taka in lac) 2006 496.65 2007 751.77 2008 1048.62 2009 1343.75 2010 1626.78

Gross Premium Earned

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Gross Claim Settled

73.56

85.40

173.74

200.95

624.67

Re-Insurance arrangement: Company's portfolio is adequately reinsured both at home and abroad. Fire and allied risks are covered by surplus treaties and facultative, Marine Cargo risks are also covered by surplus treaties and facultative, Motor risks are covered by 1st layer XL treaties. Engineering and Misc. risks are covered by surplus treaties and facultatively. The company has also cover for fire and marine cargo own retained portfolio. Company's gross premium income, reinsurance session and net premium retention for the year were as under:
(Taka in lac): Fire 717.99 350.72 367.27 Marine 665.04 131.97 533.07 Motor& Misc 243.73 137.00 106.73 Total 1626.76 619.69 1007.07

Gross Premium Re-insurance Cessions Retained Premium

Potentiality and Prospect of Takaful Industry In the contemporary Islamic countries, role and importance of Takaful has not been duly recognized by the policy makers. Even the growth of conventional insurance is not very satisfactory. If we look into the present scenario of the insurance sector of the Developing-8 (D-8) member countries, we find a dismaying picture. The following tables show insurance density of D-8 member countries and middle east oil rich countries.
TABLE-A INSURANCE DENSITY OF D-8 ISLAMIC COUNTRIES Country Bangladesh Egypt Indonesia Iran Malaysia Nigeria Pakistan Turkey Population (million) 135 65 210 68 23 107 132 64 Per capita GDP $ 1,260 $ 2,900 $ 3.770 $ 5,200 $ 10.750 $ 1,380 $ 2,300 $ 6,100 TABLE-B Per capita Premium Non-Life Life $0.6 $0.7 $9 $2 $8 $6 $ 23 $3 $ 62 $ 78 $7 $1 $2 $1 $ 21 $4 Total $1.3 $ 11.0 $ 14.0 $ 26.00 $ 140 $8 $3 $ 25

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INSURANCE DENSITY OF MIDDLE EAST Country UAE Qatar Lebanon Kuwait Oman Saudi Arabia Syria Population (million) 2.6 0.6 4.3 2.1 2.5 20.5 15.8

ISLAMIC COUNTRIES Total $ 310 $ 260 $ 112 $ 93 $ 66 $ 38.1 $ 16.6

Per capita Premium Life Non-Life $ 58 $ 252 --$ 260 $ 19 $ 93 $ 16 $ 77 $ 14 $ 52 $ 0.6 $ 37.5 $ 0.1 $ 16.5

Need for cooperation between Takaful Insurance Operators and Islamic Banks. Banking and Insurance are the two fundamentals of modern trade & commerce. Banking provides safeties to the depositors and plays a vital role for development by financing the surplus fund to the deficit groups. On the other hand, Insurance provides safeties for the people as security against accident, calamities and pathetic situation. Modern trade and commerce can not be conceived without involvement of Banking and Insurance. But, the conventional system of Banking and Insurance, which are based and linked up with interest, can not be adopted by the Muslims as a Shariah compatible system. But, trading and equity financing as well as the principle of compensation and group responsibility are widely accepted in Islam. Further, there is an intrinsic and inherent relation between Islamic Bank and Islamic Insurance. It is a precondition for the success of Islamic Bank to cover its risk by a system accepted in Islam. This is possible by adopting the system of Islamic Insurance. On the other side, progress of Islamic Insurance depends on a healthy growth of Islamic Banking. Due to inherent Shariah principles which are universal in character, the Islamic Banking and Takaful business would be more appealing in the coming years for both the Muslim and non-Muslim communities. There is tremendous possibility for the growth of Islamic Banking and Islamic Insurance. But, there is still lot of problems and hindrances to run the Islamic Bank and Islamic Insurance, some of which are as under:

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1. Absence of appropriate legal framework for carrying out Islamic Banking and Insurance operations in most of the Islamic countries. 2. Shortage of trained manpower to conduct business complying with Shariah Rules. 3. Absence of Shariah based securities. 4. Shortage of support institutions. 5. Absence of good relationship among the Management, entrepreneur and the Controlling & Legislative Authority. 6. Lack of public awareness. 7. Ignorance of the mass people about Shariah principles and practices in business & commerce. 8. Predominance of Secular Western Capitalistic Economic System. 9. Lack of support from Government mechanism. Islamic Banks have already attained considerable success in the Banking sector. It is just beginning of Takaful business and it is likely to flourish in the Insurance sector in coming days. To attain the desired level by both the Islamic Bank and the Islamic Insurance, a strong relationship need to be built up between the Islamic Bank and the Islamic Insurance throughout the world. The following actions may be taken jointly by the Islamic Banks and Islamic Insurance Companies for their mutual growth and expansion and to face the challenges : 1. Efforts should be made to change the legal framework for conducting banking and insurance operations according to Islamic Shariah. 2. Sufficient training and research institute having logistics of modern technology may be established to train up the manpower. 3. To create public awareness; seminar, symposium etc. both national and international level may be organised. 4. Islamic Money & Capital Market should be developed. 5. Central Shariah Council should be set up both for Islamic Banks and Islamic Insurances. 6. Like Malaysia, both the Islamic Banks and Islamic Insurance Companies should be regulated by the same Regulatory Authority.

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7. Cordial and harmonious relationship between Islamic Banks and Islamic Insurance Companies should be developed. 8. Efforts should be made to establish more Islamic Insurance Companies and Islamic Banks. Islamic Banking and Islamic Insurance system have tremendous potentiality and prospect. The successful launching and operation of Islamic banks and insurance has established the fact that banking and insurance without interest is feasible, viable, competitive and sustainable on the face of competition from the conventional interest based system. The gradual and successful globalisation of Islamic Banking and Islamic Insurance coupled with growing awareness of the people about its financial and social benefits makes it clear that the current century is going to be the century of Islamic banking and insurance vis-a-vis complementation of Islamic ideals for the betterment of the people at large and establishing equity & justice for all. By now Takaful like Islamic Banking has become a viable reality. Due to inherent Shariah principles which are universal in character, the Takaful business would be more appealing in the coming years for both the Muslim and non-Muslim communities. It is no denying of the fact that Takaful (Islamic Insurance) has bright prospects and potentialities as a financially viable and competitive alternative insurance for the Muslim countries. Most of the Muslim countries having Islamic Banks have also helped to create takaful as a necessary complementary to Islamic Banking because Islamic banking can not be fully Shariah based unless there are Takaful to take their insurance business. Takaful like Islamic Banks have proved its viable reality and having its strides of expansion in almost all the Muslim countries. The Governments of these countries ought to have strategic policies to promote and foster the growth of Takaful. Concluding Remarks A dramatic rise in the demand for Takaful Insurance is being predicted by market observers, as the population of Islamic countries becomes more financially sophisticated and more determined to invest in Shariah compliant products. Moreover, due to the ethical nature of the products Takaful ought to be attractive to both Muslim and non- Muslims. It

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is obvious that the potential demand for Takaful products is very large and the Takaful Industry is now poised for a Global take off. The Global Takaful Industry is small in comparison to Conventional Insurance counterpart. Therefore, the market needs to gain worldwide brand recognition and exceed performance standard set by the Conventional Insurance Industry. It is nice to note that Takaful operators are increasingly starting to realize that the ethical guidelines and transparency of their products underpin their offering appeal to both the Muslims and more importantly the larger non-Muslims communities. The Takaful Industry is fast evolving and entering a stable development phase. However, only a few National Regulators have enacted a Takaful framework for the industry. Malaysia & Bahrain are leading examples of having progressive Takaful Regulation. Recently, Saudi Arabia & Pakistan have also established Regulatory Framework for Takaful business. It is heartening to note that the Govt. of Bangladesh is actively considering enacting a separate Takaful Act. This will certainly help to grow nascent Takaful Industry of Bangladesh.

Bibliography
1. http://www.google.com.bd/ 2. http://www.takaful.com.bd/ 3. http://www.siblbd.com/

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