Diversification of Investment of Islamic Banks.ppt

Investment Related materials

1. Diversification of Investment
through Prioritizing CMSME,
Retail and Consumer
Investments

2. Current tougher scenario of
IBBL Investment portfolio
 IDR at maximum level crossing assigned limit
 Crisis in maintaining fixed CRR and SLR
 Various embarrassing media report on IBBL investment
 Reduction of deposit to Tk.1410 billion in Dec 2022 from
Tk.1530 billion in October 2022
 Depreciation in LC opening and LC bill payments

3. Globally recognized as Growth Engine in developing countries.
Bangladesh Government considers CMSME as the “thrust
sector” for poverty alleviation, employment generation,
sustainable industrialization and overall development of
citizen's living standard.
CMSME sector helps alleviate poverty, engages local workforces,
increase income level of rural people, produce import substitute
and promote agro-industrial linkage across the country.
This sector requires lower energy supply, lower infrastructure
facilities and imposes less environmental risk.
3

4. SMEs contribute about 25% to Bangladesh’s GDP and
have the potential to contribute more.
It also contributes 7.8% acceleration in export growth,
40% of manufacturing output.
SMEs account for 70%-80% of non-agriculture
employment.
It includes enterprises up to 100 workers – employing
31 million people, equivalent to 40% of the country’s
population aged 15 years and above.
4

5. In 8
th
5Y Plan (July 2020 to June 2025), Govt. has marked
CMSME sector as an important medium for poverty alleviation
and inclusive economic growth through generating new
employment.
In SME Policy-2022, GDP target under CMSME fixed to raise
from 25% to 32%.
Different strategies have been formulated to ease the related
laws, rules, regulations and administrative activities to make
opportunities for all.
In National Industrial Policy-2022, CMSME sector considered as
the main driving force to flourish industrialization.
Planned and balanced development of labor-intensive
industries are termed as the engine of growth
5

6. BB declared stimulus package of Tk.20,000 crore for CMSME sector to combat
the effect of COVID-19. Target was Tk.2000 cr under 1
st
phase and distributed
Tk.1734 cr (86%), Tk.2250 cr under 2
nd
phase and distributed Tk.1904 cr (85%).
Now distribution under 3
rd
phase amt. of Tk.2000 cr is going on.
BB further introduced a Credit Guarantee Scheme (CGS) to encourage banks’
financing to CMSMEs. CG facility is provided only against the investment with
no or less collateral in CMS sector, distributed Tk.10.30 cr fvg 14 clients.
BB announced a refinancing scheme of Tk.25,000 Crore for CMSMEs for 3 years
(up to June-2025) to finance @7% profit. Tenor 1 yr for WC and 5 Yr with 6m
gestation for Term Invt. Distributed 12 CR fvg 2 clients. Banks will get 100% re-
finance/pre-finance from BB @2% profit.
6

7. CMSME shall be increased by 1% every year
CMSME O/S - 25% of total Investment
CMS O/S - 50% of CMSME Investment
Women Ent. O/S - 15% of CMSME Investment
Break-up of CMSME portfolio will be:
Manufacturing Sector- Minimum 40%
Service Sector - Minimum 25%
Trading Sector - Maximum 35%
Women Entrepreneurs - Minimum 15%
7

8. Provision 0.25% on SME as against 1% general
Provision for a. SS: 5% (General-20%), b. DF: 20% (Gen.-50%)
CL tenor for a. SS: 6-<8m (Gen:3-<6m), b. DF:18-<30m (Gen.6-
<12), c. BL:30m (Gen.12+m)
Risk Weightage 75% of unrated SME on below Tk.3 million.
Diversification of invt. reducing concentration risk.
Build-up strong network of clients, facilitating CAMELS rating
8

9. Fully secured
Very strong, higher value collaterals
Good earning
Very good recovery
Lowest NPI
9

10. Agriculture is the largest employment sector in Bangladesh,
making up 11.5% of GDP and employing 40.6% of work-forces.
As per Agricultural and Rural Credit Policy and Program for FY
2022-2023, Agri. Invt. Target will not be less than 2.5% of Net Inv.
O/S of 31
st
March of the previous FY.
If any bank fails to achieve the target, unachieved portion of total
Agri-Inv target to be compulsorily deposited to BB's newly
formed ‘BB Agri. Development Common Fund’ (BBADCF) and 2%
profit/interest would be provided for this amount.
Achieving target by Bank will impact opening new branches, AD
branch and exchange house in abroad, CAMELS rating.
10

11. Performance of
CMSME, Retail and
Consumer Investments

12. CMSME Target for 2023 :Tk.42,600 Crore with 28% growth
12
Year 202020212022
General Investment (Crore) 101,429117,719137,620
CMSME Investment (Crore) 24,68426,36733,217
CMSME Inv. to General Inv. 24.34%22.39%24.13%
Growth of CMSME over previous
year
18.19%6.81%25.98%
Total Number of CMSME clients 50,51053,18461,295

13. 13
Category O/S on
Dec. 2021
Target
for 2022
O/S on
Dec, 2022
Achievement Growth
over 2021
(%)
Share
(%)
Manufac-
turing
14,59918,67518,391.1998.5% 25.97%
55.37
Service 2,0932,4752,636.42106.5% 25.94%
7.94
Trading 9,67510,55012,188.95115.5% 25.98%
36.69
Total 26,36731,70033,216.56104.78%25.98%
100
Women Ent. 944 1,276968.3575.88% 2.54% 2.92

14. 14
Category 2021 Target
for 2022
O/S on
Dec, 2022
Achievement
(%)
Growth
over 2021
(%)
Share
(%)
Cottage 306 523 1430.98 274% 368%
4.31
Micro 3,365 4,4626476.70 145% 92% 19.5
Small 12,45316,26914003.72 86% 12%
42.16
Medium 10,24210,44511305.16 108% 10%
34.03
Total 26,36631,70033216.56106% 26% 100

15. 15
Year 202020212022
General Investment (Crore) 101,429117,719137,620
RCREID Investment (Crore) 8,97310,07010,799
RCREID Inv. to General Inv. 8.84% 8.55% 7.85%
Growth of CMSME over previous
year
2.97%12.22%7.23%
Total Number of clients 63,16768,97874,927
RC&REID is handling 16 special schemes under 04 priority & diversified sectors viz.
housing (75%), retail business (15%), transportation (6%) & consumer (4%).

16. 16
Sl Exposure in the Sectors Amount
(Crore)
Share of Sectors in
RC&REID Invt.
1Housing Investment (Consumer
+ Commercial + R/E)
8135 75.32%
2Retail Business 1523 14.10%
3Transport 766 7.09%
4Other Consumer Investment 375 3.49%
Total Investment 10799 100%

17. Setting monthly
achievement goals for 2023
and devising strategies
there against

18. Annual Target of RC&REID
Schemes for 2023
18
 
Type of
Branch
No. of new clients to be inducted and amount
HIPHIPGEPGNB
P
Shwapno
Kutir
Bai-
Muajjal
Developer
TIS CISISD SBIS HDS Shwap
no
Bonon
MIIS SPIS Total
Corp. /A ctg
Branch (103)
Client6036 0 36 6 12121230 40 4830 40
Amt3601800 54 120 36241060 8 12 9 4
Urban Br,
(171)
Client482412 24 3 6 6 6 36 30 3630 30
Amt1449612 36 60 1812 4 72 6 9 9 1.8
Rural Br,
(120)
Client181824 12 - 2 2 3 24 20 2430 24
Amt486018 18 - 12 4 2 48 4 7 9 1.2
G. Total
(394 Br.)
Client16548997249329252 1131 2502250226221212611650139801182012130111167
Amt6746442156421213878226208226500419542425223303615354686420012 cr

19. Compliance must be ensured towards:
Complying due diligence and following systematic
approach for investment appraisals needs must be
ensured
Evaluate in line with the set target.
Quality and eligible collaterals to be obtained to
reduce provision requirement and to secure
investment exposure
Avoid investment fvg. bad/risky, rough attitude
investment clients

20. Compliance must be ensured towards: Contd.
Ensuring ECAI rating of all eligible investment clients
and proper posting of the same in eIBS to reduce
capital requirement
Ensuring Sharia’h compliance in all investment
operations;
Recovery of stimulus investment to be ensured to
claim profit subsidy from Bangladesh Bank;