Welcome to our PresentationOn

Credit Management and Financial performance of Islamic Finance and Investment Limited.

General ObjectiveThe prime objective of the report is to “Credit management and financial Performance Evaluation of Islamic Finance and Investment Limited”

Specific ObjectivesTo identify and assess the impact of the present performance of IFIL

To know the credit management system applied in IFIL

To calculate the financial ratios and identify the areas of concern.

To know their business performance over the year.

To know their products and services

To know the issues that they follow while disbursement

To identify the findings and raise possible recommendations for IFIL.

Objectives

Islamic Finance and Investment Ltd. is a financial institution incorporated in

Bangladesh on February 27, 2001 as a public ltd. Co. under the company

act, 1994. The company obtained its license from BB on April 12, 2001as

required under section 4(1) of the financial institution Act, 1993. The

company went for public issue in 2005 and its shares are listed in both Dhaka

Stock Exchange ltd. and Chittagong Stock Exchange ltd.

About Islamic Finance and Investment Ltd

Strategic objective

To introduce new products and services with Islamic values through diversification and customization of existing products and services to ensure maximum market coverage.

To provide employees with high motivation, extensive opportunities for learning and career development, competitive pay and benefits and congenial environment where diversify is valued.

To create sustainable economic value for stakeholders.

To conduct business in a socially responsible manner under Islamic principle.

To elevate ethical and business standard with high corporate governance.

Products and services at a glance

Investment products Deposit products Corporate service

Musharaka Mudaraba Term Deposit Scheme Loan Syndication

Mudaraba Mudaraba Term Deposit Scheme (Monthly Profit)

Corporate Advisory Services

Murabaha Mudaraba Pension Deposit Scheme Guarantee Issue

Ijahrah (lease) Mudaraba Hajj Deposit Scheme

Hire Purchase Sherkatul Melk (HPSM) Mudaraba House Owning deposit Scheme

Bai Muajjal Mudaraba Mohor Deposit Scheme

Bai-Salam Mudaraba Special Deposit Scheme, and so on

Bai-Istanza

Credit Management

Credit management is a dynamic field where a certain standard of

long-range planning is needed to allocate the fund in diverse field

and to minimize the risk and maximizing the return on the invested

fund. Continuous supervision, monitoring and follow-up are highly

required for ensuring the timely repayment and minimizing the

default

Principles of Sound Lending

The basic lending criteria can be considered as eight main headings, as follows:

Principle of Safety

Principle of Liquidity

Principle of Purpose

Character and ability of the borrower

Principle of Security

Principle of profitability

Source of repayment

Principle of National Interest

Credit approval system

Client IFIC

Preparation of Proposal by the Credit Officer

Endorsed/ Signed by Branch Credit Committee

Evaluated by the Head Office Credit Committee

Evaluated By Managing DirectorExecutive Committee: Approves

or rejects the proposal

Loan Documentation

Disbursement

Continuous Follow up till adjustment

Figure: 3.5.1 Credit Appraisal Systems

Loan Application

Business Performance

Year Taka in

Million

2004 2005 2006 2007 2008

Sanction 850 953 879 955 1316

Disbursement 608 874 663 678 1053

Deposit 744 1057 1100 1264 1635

Outstanding

Investment

953 1637 1895 2152 2615

Financial Performance

2004 2005 2006 2007 2008

Total Operating Revenue 240 186 250 291 345

Non Operating Income 8 14 8 10 9

Profit Before Tax 25 52 54 61 62

Profit After Tax 18 49 49 51 56

Total Assets 1017 1769 1997 2270 2755

Share Holder’s Equity 170 319 343 360 376

Paid up Capital 147 261 274 274 274

Current Assets 334 633 809 997 1258

Current Liabilities 402 654 1031 1003 1120

Financial Ratios

2004 2005 2006 2007 2008

Debt Equity Ratio 3.52:1 3.24:1 1.88:1 2.58:1 3.29:1

Return on Average Assets (%) 2.12 4.61 2.65 2.40 2.49

Return on Average Equity (%) 14.49 20.23 15.06 14.55 15.43

Profit Margin on Operating Income (%) 7.60 26.64 19.93 17.56 16.47

Capital Adequacy (%) 33.04 32.93 44.16 30.31 22.68

Current Ratio 0.83:1 0.97:1 0.78:1 0.99:1 1.12:1

Net Worth to Total Assets (%) 19.79 29.17 17.21 15.88 13.65

Earning Per Share (After Tax) 18.22 27.84 18.18 18.65 20.68

Price Earning Ratio (P/E) - 10.92 10.56 11.21 16.32

Dividend Pay out-DP - 0.54 0.69 0.80 0.77

Dividend 10% S 5% S-10% C 12.50% C 15% C 16% S

Right Issue 1:1 - - - -

Facility wise disbursement

Year Taka in Million2004 2005 2006 2007 2008

Lease 400 605 460 380 562HPSM 187 155 128 230 322Bai Muajjal 21 114 75 69 169Total 608 874 663 679 1053

Sectoral Disbursement of Investment for the Year 2008

Sector AmountTaka in Million

%

Taxicab 39.04 2Other Transport 220.37 9Cargo Vessels 75.45 3Textile / Garments & Accessories 621.59 26Printing & Packaging 14.24 1Medical, Pharmacy, Chemical & Cosmetics

66.93 3

Power Generators 69.28 3Agriculture 1.12 0Others (Lease) 339.83 14Real Estate 696.80 29Information Technology 0.89 0Others (HPSM) 73.76 3BAIM 187.57 7HDS 3.18 0Total 2410.05 100.00

Sectoral Disbursement of Investment for the Year 2008

Amount (Taka in Million)

2%

9%

3%

26%

1%

3%

3%

0%

14%

28%

0%

3%8%

0%

Taxicab

Other Transport

Cargo Vessels

Textile / Garments &Accessories

Printing & Packaging

Medical, Pharmacy,Chemical & Cosmetics

Power Generators

Agriculture

Others (Lease)

Real Estate

Information Technology

Others (HPSM)

BAIM

HDS

Allocation of Expenses 2008

Sectors Amount (Taka in Thousand) Percentage

Profit paid on Borrowed Fund 64,796 45%Salaries & Allowance 20,093 14%Other General Expenses 2,399 2%Administrative Expenses 21,070 15%Depreciation on fixed Assets 3,611 3%Provision for Doubtful Accounts & Future Losses 23,354 17%Tax Expenses 5,678 4%Total 3,29,007 100%

Amount (Taka in Thousand) 1,88,006

45%

14%

2%

15%

3%

17%

4%

Profit paid on Borrowed Fund

Salaries & Allowance

Other General Expenses

Administrative Expenses

Depreciation on fixed Assets

Provision for DoubtfulAccounts & Future LossesTax Expenses

Dividend PolicyDividend Policy

The Board of Directors has decided to create a Dividend Equalization Reserve to face

uncertain profit growth and to stabilize dividend payment. It was also a demand of the

shareholders in the previous AGMs. Therefore, a portion of the profit has been

earmarked for this reserve and this will continue in future also. We, however, have tried

to give the honourable shareholders as much as possible. After tax provision of Tk. 56.78

lac, our distributable profit stood at Tk. 5.68 crore. The Board of Directors recommends

16% stock dividend for the year 2008 compared to 15% cash dividend for the year 2007.

Dividend trend for the last few years is given below:

The Board of Directors has decided to create a Dividend Equalization Reserve to face

uncertain profit growth and to stabilize dividend payment. It was also a demand of the

shareholders in the previous AGMs. Therefore, a portion of the profit has been

earmarked for this reserve and this will continue in future also. We, however, have tried

to give the honourable shareholders as much as possible. After tax provision of Tk. 56.78

lac, our distributable profit stood at Tk. 5.68 crore. The Board of Directors recommends

16% stock dividend for the year 2008 compared to 15% cash dividend for the year 2007.

Dividend trend for the last few years is given below:

Dividend Trend

2004 2005 2006 2007 2008

Dividend 10% S 5% C 10% S 12.50% C 15% C 16% S (proposed)

Findings

They have maintain a strong but lengthy process for granting credit to a particular area of investment

In 2005 the company was in boom condition all the ratios such as ROA, ROE, EPS, P/E shows that better position than any of the year.

Current ratio in 2008 is 1.12:1 which is greater than all previous year.

Capital adequate ratio is decreasing which indicates the bank is being greater risk.

By analyzing previous four years financial data we have found that the company was able to generate more operating revenue than its preceding year but their earnings after tax was reduced by on an average of 1.5% than previous year because of cost amount is increased.

They have maintain a strong but lengthy process for granting credit to a particular area of investment

In 2005 the company was in boom condition all the ratios such as ROA, ROE, EPS, P/E shows that better position than any of the year.

Current ratio in 2008 is 1.12:1 which is greater than all previous year.

Capital adequate ratio is decreasing which indicates the bank is being greater risk.

By analyzing previous four years financial data we have found that the company was able to generate more operating revenue than its preceding year but their earnings after tax was reduced by on an average of 1.5% than previous year because of cost amount is increased.

The ratio between Debt and equity, in 2008, is increased to 3.29:1 which represent that they have Tk. 3.29 debt capital in against of Tk. 1 of equity capital, which is better for its cost of capital but at the same time they are in more risk.

One of the major findings is it can not disburse its sanction money efficiently.

Outstanding investment increased to 261.49 crore at the end of 2008 from 215.18 in 2007

Their major expense sector is interest paid to deposit holder which is more than 50% of total expenses.

The ratio between Debt and equity, in 2008, is increased to 3.29:1 which represent that they have Tk. 3.29 debt capital in against of Tk. 1 of equity capital, which is better for its cost of capital but at the same time they are in more risk.

One of the major findings is it can not disburse its sanction money efficiently.

Outstanding investment increased to 261.49 crore at the end of 2008 from 215.18 in 2007

Their major expense sector is interest paid to deposit holder which is more than 50% of total expenses.

Findings

They should reduce their lengthy process in credit granting procedure by maintaining a standard.

Their capital adequacy ratio is decreasing so they should increase it as soon as possible by increasing to optimal equity capital or taking other strategy.

Their current assets are too low to backup the current liability, so they should increase current asset or should reduce the current liability.

They should pay more attention their sanctioning because they can not efficiently disburse its sanction money as result investment can not be placed according to planning.

They should reduce their lengthy process in credit granting procedure by maintaining a standard.

Their capital adequacy ratio is decreasing so they should increase it as soon as possible by increasing to optimal equity capital or taking other strategy.

Their current assets are too low to backup the current liability, so they should increase current asset or should reduce the current liability.

They should pay more attention their sanctioning because they can not efficiently disburse its sanction money as result investment can not be placed according to planning.

Recommendations

In consideration of all economic situations in 2008 the business performance of IFIL is satisfactory. But in 2005 it was more than satisfactory, so they should analyze why they could not retain in such position like 2005.

There investment amount was increased in 2008 than any other previous year but there return on investment was not increased because of higher cost associated with the investment appraisal system.

In consideration of all economic situations in 2008 the business performance of IFIL is satisfactory. But in 2005 it was more than satisfactory, so they should analyze why they could not retain in such position like 2005.

There investment amount was increased in 2008 than any other previous year but there return on investment was not increased because of higher cost associated with the investment appraisal system.

Recommendations

Thank You All